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Market Failure: Poverty and Income Inequality

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Listed below are several summary statements from the 2010 Census report:
- The official poverty rate in 2010 was 15.1 percent—up from 14.3 percent in 2009. This was the third consecutive annual increase in the poverty rate. Since 2007, the poverty rate has increased by 2.6 percentage points, from 12.5 percent to 15.1 percent.
- In 2010, 46.2 million people were in poverty, up from 43.6 million in 2009—the fourth consecutive annual increase in the number of people in poverty.
- Between 2009 and 2010, the poverty rate increased for non-Hispanic Whites (from 9.4 percent to 9.9 percent), for Blacks (from 25.8 percent to 27.4 percent), and for Hispanics (from 25.3 percent to 26.6 percent). For Asians, the 2010 poverty rate (12.1 percent) was not statistically different from the 2009 poverty rate.1
- The poverty rate in 2010 (15.1 percent) was the highest poverty rate since 1993 but was 7.3 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available.
- The number of people in poverty in 2010 (46.2 million) is the largest number in the 52 years for which poverty estimates have been published.
- Between 2009 and 2010, the poverty rate increased for children under age 18 (from 20.7 percent to 22.0 percent) and people aged 18 to 64 (from 12.9 percent to 13.7 percent), but was not statistically different for people aged 65 and older (9.0 percent).2

Source: http://www.census.gov/hhes/www/poverty/data/incpovhlth/2010/highlights.html

I need help to select any four of the six summary statements and explain in detail the significance and possible causes of each item. Identify possible economic policies that may explain these items and/or those which could be used to deal with the problems or situations described.

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Solution Preview

The statements I chose:
- The official poverty rate in 2010 was 15.1 percent—up from 14.3 percent in 2009. This was the third consecutive annual increase in the poverty rate. Since 2007, the poverty rate has increased by 2.6 percentage points, from 12.5 percent to 15.1 percent.
- The poverty rate in 2010 (15.1 percent) was the highest poverty rate since 1993 but was 7.3 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available.
- The number of people in poverty in 2010 (46.2 million) is the largest number in the 52 years for which poverty estimates have been published.
- Between 2009 and 2010, the poverty rate increased for children under age 18 (from 20.7 percent to 22.0 percent) and people aged 18 to 64 (from 12.9 percent to 13.7 percent), but was not statistically different for people aged 65 and older (9.0 percent).

My response:
The four concepts above really say the same thing: in an age that was supposed to be one of peace and plenty, with a scientific, computerized society and an endless number of welfare programs and new technologies, poverty, discontent and insecurity are not just increasing, but have reached rates that have not been seen before.

Let's list the possible causes of this, that is, what makes 2013 different from 1932.

Debt. Massive, massive debt. The private sector's debt is about $20 trillion, while the government debt (that is, all governments in the US), is about $18 trillion. The economy is not recovering because too much money is owed. No one will consume when their credit is tapped out.

Market failure: specifically, the debt mentioned above. In the 1980s and 1990s, credit cards were available to anyone, for any reason. In order for the system to keep moving, people had to spend. They had to spend more than they had, or else overproduction, followed by mass unemployment, would result. But this debt, eventually, will become unrepayable, and the consumption would stop. This is irrationality and at the time, it was known to be such. This is market failure at its most fundamental. The assumption of rationality was ...

Solution Summary

Market failures for poverty and income inequalities are provided.

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