$1.25 a day

The famous “dollar a day” international poverty line was developed in the early 1990s by World Bank economists. One of these, Martin Ravallion, is back with an updated analysis using new and better data.

The new answer: $1.25 a day.

How many more people are now poor by this definition? I’d hazard 0.5 billion. That brings a new perspective to margin of error. It’s as good an argument as any I’ve heard for taking in confidence intervals rather than point estimates.

Of course, confidence intervals don’t sell well in the UN. Nor will $1.25, I bet. A dollar a day has a nice ring to it, and even as the value of the dollar plummets, the number is likely to stick.

But what does it mean to be “poor”? The international poverty line reflects what it takes to get by in some of the poorest of the poor nations. Think Malawi, for example.

This is clearly a conservative estimate of global poverty. By the standards of U.S. or even Chilean poverty, a great many more of the world’s population are impoverished.

This raises the interesting question of how poverty lines vary across countries (and why). This the authors address. The most interesting graph relates poverty lines to average consumption across 88 countries with data:

For a range of (low) consumption levels, the national poverty line does not seem to change much. That’s like the move from a Malawi up to a Thailand, I would guess. Beyond some consumption point, however, poverty lines start to rise with average consumption. The ratio actually reaches 1:1 in the richest nations.

What’s happening at that point? The authors suggest that social norms may have something to do with it:

[A]s living standards rise generally, there is also a change in the prevailing notions of what (food and non-food) consumption needs should be met if one is to not be deemed “poor;” people are expected to be able to afford more expensive calories (more meat and vegetables and higher quality foodgrains), have more varied diets, and be better clothed and housed.

By this view, poverty is a socially-specific concept, whereby the consumption needs for escaping poverty in a given society depend on what people generally consume in that society.

That might be true, but I’d guess that politics happens. After some income level, poor people are able to (1) get an education, and (2) think further than their next meal. That changes dynamics at the ballot box.