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A Nobel for economic measurement


A Kenyan woman farmer at work in the Mount Kenya region.

There are limits to what measuring poverty can do, argues Maggie Black.

The 2015 Nobel Laureate for Economics was announced the other day. It has been awarded to Angus Deaton, a Scot, who is Professor of Economics and International Affairs at Princeton. So for a few days, his views about health, wealth and poverty gained attention. He is keen on doing things to assist the world’s poor.

Deaton got his Nobel for developing a new way of measuring poverty, factoring in how people spend their resources. He argues that if consumption is not understood, policies to reduce poverty will be less effective. Suppose that, when incomes rise, poor people do not spend more on food. Apparently they do, so no need to favour food aid over better pay – for example.

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No doubt Professor Deaton deserves his prize. But I often wonder whether all the effort spent measuring poverty, including setting ‘poverty lines’ and agreeing dollar parity values, plus debates about whether ‘extreme poverty’ means $1, $2 or $4 a day in no matter what subsistence setting, are a side-track.

These efforts, now an industry of their own, have been boosted by the ‘Goals’. This started with the Millennium Goals, now replaced with the Sustainable Development variety known as the ‘SDG’s’. There are many more SDGs, and they are much vaguer – providing the number-crunchers with new fodder. Lucrative fodder, too.

Sometimes it seems as if more people are in the business of measuring progress (or lack of it) towards ‘the Goals’ than actually trying to do something about the poverty itself.

A colleague at a UNICEF workshop once wisely suggested that we stop trying to establish measurable indicators of child rights violations as it was fruitless: ‘The measurable should not drive out the important’. Today, anything in the international development business that isn’t measurable doesn’t have a hope. Measurement, by ever more refined and arcane means, has become a substitute for action.

Of course measurement has its place. You can measure how many children are in school, how many have been immunized. You can also measure service delivery: health centres equipped, teachers trained. All this has a contribution to make, so it’s worth having ‘Goals’ for these contexts.

Unfortunately an impression has developed that if you can improve these ‘indicators’ and similar others you will sort out poverty. This is an illusion. Poverty is a horrible thing having many components. Domestic violence, for example. Family breakdown. Children thrown out of the home and accused of witchcraft. Gangs, rackets, vicious landlords, exploitative employers, constant hunger pains, personal degradation. How to ‘measure’ those?

Just sticking to the economics, it is hard to measure the ‘poverty’ of people living at semi-subsistence. Many of the so-called poor live well-fed and personally satisfying lives, but their ‘wealth’ cannot be captured by assessing their cash income or consumption. Their assets are harvested from the environment, from land or fishing grounds they don’t ‘own’ or trade, so neither resource base nor product gets counted.

Even in town, where everyone is in a cash economy, people at the margins still survive by a host of small transactions invisible to economic instruments however sophisticated. Count pay rates, expenditure patterns, food basket prices and service costs all you like, you won’t understand their lives.

Professor Deaton argues for building capacity in poor world governments so they can deliver better and fairer services and thereby reach the poor. There I thoroughly agree with him. So I hope, and trust, that many good things besides measurement will come out of his Nobel award.

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