[Paleopsych] NYT: U.N. Aims to Cut Poverty in Half as Experts Wonder How to Measure It
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The New York Times > Business > World Business > Economic Scene: U.N.
Aims to Cut Poverty in Half as Experts Wonder How to Measure It
By ALAN B. KRUEGER
ONE of the United Nations' top goals is to cut in half the proportion
of people living in extreme poverty by 2015, compared with 1990. The
World Bank is responsible for keeping track. Accurately monitoring
poverty is essential for knowing whether the goal is achieved and
whether antipoverty strategies are working.
But measuring poverty is difficult for a particular country, let alone
the world. The movie star Angelina Jolie challenged celebrities at the
World Economic Forum in Davos, Switzerland, last week to know
"absolutely what they're talking about" when it comes to poverty, yet
even experts would have trouble meeting her standard. Knowing the
extent of the rise or fall of worldwide poverty is difficult because
poverty is not easy to define or measure.
First, establishing a poverty line - or level of consumption below
which one is considered impoverished - involves an element of
arbitrariness. For many poor families, not having enough money amounts
to not having enough food. But there is no particular threshold level
of income or expenditures above which people automatically become
fully functioning, nourished members of society.
"Poverty lines are as much political as scientific constructions,"
said Angus Deaton, a Princeton economist and expert on economic
development. In such places as different as the United States and
India, the poverty line was initially set with reference to minimum
standards of food consumption. Yet over time, Professor Deaton noted,
the poverty lines in both countries were adjusted to keep pace with
overall price inflation, not the price of food or the share of food in
the average family's budget. Despite straying from its original
conception, the poverty line survived because of its political and
The U.N. has set the line for extreme poverty at living on less than
$1 a day. This threshold has obvious rhetorical appeal and surely
qualifies as extreme poverty by any standard in developed countries;
it is also not far off the poverty line used by many of the poorest
Once an international poverty line is set, it must be converted to
local currencies. This is trickier than it sounds. Currency exchange
rates are inappropriate because most of the items that the poor
consume are not traded on world markets. Living expenses are much
lower in rural India than in New York, but this fact is not fully
captured if prices are converted with currency exchange rates.
To convert the $1 poverty line into foreign currencies, the World Bank
uses indexes of "purchasing power parity." Simply put, these indexes
reflect the cost of buying a standard bundle of goods in each country.
Although it is desirable to use purchasing indexes, they are not
available for all countries and are skewed toward representing the
purchases of the wealthiest households, not the poorest, when they are
available. Another problem is that the bundle of goods that poor
families actually buy varies from country to country because of
differences in tastes and availability.
Thus, the $1 poverty line is best viewed as an approximation.
Once the poverty line is set in local currency, the consumption of a
representative sample of households must be compared with the line to
determine the percent of people getting by on less than $1 a day.
(Each household's consumption is spread equally among its members,
another leap of faith.)
Again, this is harder than it sounds. The World Bank typically relies
on whatever government surveys that countries routinely produce.
But there is no uniform standard in the way countries collect and
process their data, which is important because the poverty rate is
sensitive to how consumption is measured.
Consider India, home to 33 percent of the world's poor - or 20
percent, depending on how the data are collected.
India was a pioneer in social surveys and has one of the best
government statistical agencies in the world. Still, uncertainty
shrouds the level of poverty in India. In one experiment, India's
national survey organization asked half of the households it surveyed
to report their spending on certain items over a 30-day period and
half over a seven-day period. Households reported 30 percent higher
food consumption per day in the shorter interval, enough to cut the
poverty rate in half. It is not certain which measure is more
accurate, although follow-up work points toward the longer interval.
Perhaps the best one can hope for is consistency of measurement within
countries to detect changes in poverty over time. But continuing past
practices can prolong the use of misleading poverty counts that are
not comparable across countries. Clearly, there is a need for Latin
American countries, which usually measure poverty by income rather
than consumption, to collect reliable household consumption data
because consumption is a better measure of living standards.
The herculean measurement problems aside, careful research by Shaohua
Chen and Martin Ravallion of the World Bank indicates that much
progress has been made toward the goal of halving poverty in China and
India. But, they found, little progress has occurred in Latin America
and Africa, and the former Soviet states are slipping into deeper
poverty. Because China and India accounted for 60 percent of the
world's poor in 1990, the goal of halving poverty may be achieved a
decade from now, even while many regions see no progress.
Despite the progress in China and India, 18 percent of the world's
population still somehow survives on less than $1 a day.
The United Nations has recently held a number of brainstorming
sessions to gather proposals for the secretary general's report to the
General Assembly on achieving the development goals, which will be
delivered next month.
An essential prerequisite is to improve poverty statistics and ensure
Although the process of setting a poverty line is necessarily
political, the task of measuring poverty should be insulated from
political influences. The World Bank, however, is an inherently
Yet no other international body currently has the expertise or
resources to monitor worldwide poverty, so it is important for the
next president of the World Bank to value and protect the impartiality
of the statistical and research staff. The U.N. could also help by
working with statistical agencies around the world to develop uniform
standards for poverty surveys and then to ensure that their data are
adequately documented and publicly archived. To this end, the U.N.
could restart its Household Survey Capability Program, which supported
statistical offices in developing countries in the 1980's.
This may not be a cause that celebrities are ready to line up for, but
improving poverty data will put the world in a better position to
monitor progress and evaluate poverty reduction strategies by the time
the poverty line is moved up to $2 a day.
Alan B. Krueger is the Bendheim professor of economics and public
affairs at Princeton University. E-mail: akrueger at princeton.edu
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