Huge fail. People simply aren't rational actors. What about the case where an actor buys what he wants to buy, but that's not what he needs? You may want cigarettes and lottery tickets, but to say that you benefit from buying them, because otherwise you wouldn't buy them is stupidity.

To clarify, I'm distinguishing the transient benefit of "yay, I got what I wanted" from a productivity-enhancing benefit.

Who are you to say what he needs? Obviously by your values, the cigarettes aren't "correct", but it's really not your life to live.

Anyway, I think that Godin has it right as far as he goes. However, a market cannot function where there's no reasonable expectation of property rights. I mean, you're not going to risk investing in the drip irrigation system if you're afraid that the local warlord is going to just shake you down for any money you make, and maybe even rape your daughter in the process. And you're less likely to enter into a contract to partner with someone else if there's no court system to enforce the contract.

This is why so much of the aid to places like those in Africa, where there is no effective protection of property and no established system of enforcing contracts, at least for the little guy, is an abject failure. Much of it winds up being absorbed by the parties other than those for whom it was intended, and in fact makes the problem worse by strengthening those local bullies.

Godin is right, but before his solution can be pursued, we need to stop providing the sort of aid that so frequently perpetuates the bad system.

[EDIT: fix grammar error]

I'm not moralizing. Godin was talking specifically of getting further ahead financially, rather than falling further behind. There are many things that people want to spend money on that actually put them further behind.

To get further ahead financially, you either need to save your money now, or spend it on something that will pay off +ve, later (while not experiencing bad enough cash flow that you die before the expected benefit). This is simple arithmetic.

Many, many projects or expenditures fail to live up to their initially expected benefit. Beyond that, at any moment, we're not aware of all the investments we could make, nor are we certain of their outcomes. So, it's foolish to write, as Godin does:

"When someone in poverty buys a device that improves productivity, the device pays for itself (if it didn’t, they wouldn’t buy it.)"

I like the rest of the piece, I was just pointing out the obvious flaw in his uncritical, simplistic, free-market claims.

EDIT> You seem to be reacting emotionally to the smoking issue. What about this example instead?

Suppose someone offers to sell some poor sod a supposedly productivity-enhancing perpetual motion machine, and the potential buyer believes it will work.

Is it incorrect for me, as a third party, to say that this would be a foolish investment (from the perspective of increased finances/productivity)? After all, it's not my life to live. Who am I to interfere?

Since you say "perpetual motion machine", I assume that you're saying that the purchaser is being defrauded, since we know that there's no such thing as perpetual motion.

But that's exactly the second point I was making in my first response. For a market to work, there needs to be some protection of the sanctity of a contract. When the buyer discovers that all he's got is snake oil, when he contracted for something real, he should be able to seek restitution. Without this, the market's not going to get off the ground.

Or, perhaps it hasn't really been tried. I would challenge you to cite an area where the market really is free. I don't think there's any industry for which you could make this claim. But the areas that have come closest are also the ones that have shown the greatest advances, and the most productivity.

While I'm afraid of derailing off the topic of solving poverty, I think it's important to point out how the free-market fallacy is central in the current healthcare debate. Those in favor of universal healthcare argue that the free market system has failed. The funny thing is, the current healthcare industry is just about the least free market in America. In particular, bizarre insurance regulations, following salary controls (put into place by FDR, but doesn't it sound familiar today?) set up an environment where it's virtually impossible for an individual to obtain health insurance, with insurance now being almost entirely provided by either the employer or the government. This wasn't because of the free market -- it's because of meddling of government.