Tyranny of numbers

In his perceptive comment on my previous post, Ali asks an excellent question:

“Is there a reliable relationship between calorie intake and a person’s income? Does spending less on food really mean earning less money? How about assets (house, car, …) that individual owns? Is this method consistent over years considering the change in the food items of the basket?”

The answer is yes at low levels of income, but the relationship becomes less reliable as a country’s income increases; in rich countries the direction of the relationship sometimes reverses –the poor consume more calories and are therefore more likely to be overweight–for a range of incomes. If you take any of the high-threshold poverty measures that are used in Iran, you will have trouble convincing most poverty experts outside Iran that they are poor by developing-county standards.

The fact that Iran’s poor are hard to identify by simply counting calories can be seen in a number of facts.     To start with, rural people, who are by overall expenditures measures are poorer than urban people, consume on average more calories.  In terms of living conditions they seem quite comfortable compared to how the poor live in other developing countries.  

Taking Souri’s poverty line and the 2007 expenditure survey that he has used to identify the poor, readers will be surprised to find who the ($10 per person per day) poor are.  About 70 percent own their homes and live in homes with on average of 1.9 persons per room (1.7 in urban areas), and 17 square meters of living area per person.  About 97% live in homes with a refrigerator (urban and rural), thanks to cheap electricity.  About 42% of the “poor” in urban areas live in homes in which at least one person owns a cellphone, and 12% in homes with a car.  And, by the way, these are not Grameen cellphones used in business to escape the $1 per day poverty in Bangladesh–these are consumer items!  About 95% of the poor (rural or urban) live in homes with a television (91%  with a color TV!) and 10% in a home with a computer!  I could go on and on, but you get the picture.  If all that these people need is more calories, they know what to do.  Changing expenditures is a more straightforward solution than changing president! 

The debating poverty at election times is to be expected.  We heard cries of high and rising poverty in 2005 and now we hear them in 2009.  There are problems, though, with exaggerating the situation.  First, by assuming a high poverty line and dramatizing the extent of poverty, we group a large section of the lower middle class with the poor. This may conceal the real poor from view and diminish their chances of being heard.  Their needs are not the same as people with cars and refrigerators; they need support for better nutrition, medical attention, and other basic needs.  Second, by simplifying the politics of poverty to the great man theory, we set the stage for voter disappointment with Iran’s nascent (and imperfect) electoral politics.  There is a danger that people will come to believe that solutions to their economic problems are achievable in the near future and by getting the right man in office.  A country with very high expectations from its elected officials expectations can be difficult to govern.

I keep mentioning developing country standards because that is, after all, what Iran is, a low productivity developing country.  It makes no sense to adopt standards that are used in much more productive countries such as the US or Switzerland.  To reduce the number of the poor, besides an equitable distribution of income, you must have many productive people who can support the unfortunate few.  Saying that Iran has oil and abundant natural resources does not make adopting high standards of consumption any more sensible because oil income in Iran is probably less than $500 per person this year (it was about $1000 last year), or $1.50 per day, which does not even give everyone enough to cover the $2 per day poverty line much less the lofty standards adopted by poverty analysts in Iran.

If the debate on poverty were to turn 30 degrees in the direction of productivity, it will be a huge step forward in the direction of understanding what is wrong with our economy and what Iran’s presidential candidates should be talking about.

Next time I bring up the subject of poverty, I hope to answer the next part of the question Ali has asked: Is the calorie method of calculating poverty useful for comparison of poverty over time? Does it provide consistent results?