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June 20, 2009

Comments

tom s.

Very well said.

Also, the common-sense notion of "absolute" poverty (income below a fixed amount X) that Moore likes so much gives no unique ranking. If X = 31 then A and B are poorest, if X = 24 then B is the poorest, if X = 10 then C is the poorest.

Jimmy Hill

Good analysis.

Charles Moore's mistake is suggesting that relative poverty and inequality are the same thing.

Instead, what this makes clear, is that relative poverty is a rather crude and cumbersome measure of inequality. By fiddling with where the poverty line is drawn it is possible to make measures of poverty move more or move less in line with other measures of inequality.

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I could just as easily measure inequality as being the fraction of the population with less than 60% of the median income. This would be exactly the same as your definition of relative poverty.

So what is added by introducing the concept of relative poverty?

It seems to me that what is added as the ability to manipulate and confuse other people and their moral intuitions, by taking about poverty without specifying whether you are talking about relative or absolute poverty.

You could, for example, honestly declare that “poverty” is more common in modern Britain than in Society X, even if all the people of X have only the minimum required to sustain human life. After all, there can hardly be anyone in Society X who has less than 60% of the minimum required to sustain human life.

If you had said that Britain was more unequal than Society X, it would be obvious that you had said nothing about whether the British were materially better off than the people of X. By saying that “poverty” is more common in X you can mislead people into thinking that many people in Britain are worse off than the people of X, even if everyone in Britain is richer than everyone in X.

(And if challenged you can, if absolutely necessary, cover yourself by saying “Oh, I was talking about relative poverty”.)

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It occurs to me that I mistyped my second-to-last sentence. It should have read:

"By saying that “poverty” is more common in Britain you can mislead people into thinking that many people in Britain are worse off than the people of X, even if everyone in Britain is richer than everyone in X."

tomslee

The idea of "relative poverty" was not introduced recently by a cabal of social workers and other do-gooders. Here is Adam Smith on necessities:

"By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but what ever the customs of the country renders it indecent for creditable people, even the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-laborer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into, without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England."

tomslee

ad - poverty is all about comparison. I'd rather be "poor" in Canada now than rich in 14th C England or middle-class in Rwanda 20 years ago, but that does not make the idea "absolute".

Stuart

Tomslee: "Poverty is all about comparison"
Um, is it? I always assumed that being in poverty meant not being able to afford reasonable housing, food, clothing, and utilities. Which are fairly absolute terms, really.

I don't know where the 60% figure came from - it seems fairly arbitrary. Where I live, it's probably not far off the mark (on the low side if you've got kids, mind). In London, I imagine the poverty line to be well above 60% of the national median income; in rural Wales, say, it might well be less. All in all, it seems a bit naff.

Miguel Madeira

"I could just as easily measure inequality as being the fraction of the population with less than 60% of the median income."

No, you can't.

Imagine a society with 100 people:

1 earns 100.000 and all other 99 earn 1. This is a very unequal society (1% of the population has 99,9% of the income).

However, the fraction of the population with less than 60% of the median income is... 0%: the median income is 1, and nobody earns less than 1.

tom s.

Stuart: "reasonable housing, food, clothing, and utilities. Which are fairly absolute terms, really."

Depends on how you define "reasonable". Reasonable housing for my grandparents didn't include hot water, reasonable housing for our generation does. How many shirts does one man own before they have reasonable clothing? Is air conditioning included in "utilities"?

Stuart

Tom s: Yes, I realised this as I wrote it. I guess 'reasonable' = fit for human habitation and consumption. You could make more exact definitions, but that's what it comes down to. Although given that I'd include 'internet connection' as a required utility...

I guess my (poorly made) point was that references to median income are a really weird way to determine any sort of poverty - as the various samples above (particularly Miguels!) show.

Surely a better measure would be to work out how much it costs to live at a certain standard, in a given area. I think the Rowntree Foundation did this a while back? Although I think they just did a national average - Yes, it's here.

You could argue with some of their figures, but the basic approach seems sound... Certainly preferrable to the current definition of 'relative' poverty.

Laban Tall

Aren't you nit-picking here ? I doubt very much that CM meant that poverty and inequality actually were the same thing, merely that they are related (without reading his article, I'd hazard a guess that the point he was trying to make is that attacks on poverty are very often thinly disguised attacks on inequality). The relationship is dependent on the definitions of inequality and poverty, but for all three of your examples, the easiest way for a government to reduce poverty would be to get rid of the wealthy, or at least get rid of a chunk of their income.

Maybe this is how Gordon, with his new £150K tax rates, intends to reduce poverty. He tried giving them more of other peoples money, reducing their absolute poverty, and that didn't work.

The one thing you can be sure he won't try is reducing the amount the State takes from the poor, even though it then gets given back via credits etc. It seems crazy that people on minimum wage (what, about 12k pa ?) are taxed when their income reaches half that level.

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"However, the fraction of the population with less than 60% of the median income is... 0%: the median income is 1, and nobody earns less than 1."

Which means, by Chris's definition, that your society has no poverty at all. Even if 99% of the population is starving to death.

If Chris can define "poverty" in such a way that your society contains no poor, I can define inequality in the same way, so that it is not unequal. Why is Chris's definition better than mine?

As I said, talking about "relative poverty" instead of "inequality", is purely a matter of propaganda.

Winstanley

Tomslee's Adam Smith quotation has taken it from my mind.

An adecuate notion of poverty should take into account the kind of social expectations that the culture in question place on people. This is the cornerstone of Smith's moral and political theories and yet economists and political scientists seem to forget it.

Although I understand the need for a common measure for comparing societies, I am not too sure that the concept of relative poverty is free from problems or that it is altogether independent from equality. It is not a universal, culturally neutral concept, and it is fundamentally linked with equality.

For an ancient Greek his poverty relative to that of kings is worthile bearing because it is shared with his fellow citizens, because he values the free way of life above that of living among courtiers.

But poor in the industralized world is one who cannot afford decent food AND so-deemed "basic" entertainment and so on at the same time. Poverty is a social problem here precisely because of inequality, otherwise it is not.

Is this an unquantifiable matter of choice we shouldn't morolize about? Maybe, but it is definetely part of its meaning. Orwell makes some good points in Road to Wigam Pier about this with regard to the English working class.

To make my point, the --yes, somehow romantic-- 18th c. american yeoman living entirely of his 1 acre farm might be poorer in this sense than a 21st c. minimum wage earner hardly paying for anything more than his 32 inch tv screen in a grotty poluted place. But this puts the word poverty into perspective.

the last http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2009/06/real-freedom-unhappiness.html post is somehow relevant here.

Karl Jackson

For the cost of a minimum standard of living in Britain, according to the consensus view of members of the public, see here:

http://www.minimumincomestandard.org/

Neil

Ah come on Chris, Spectator writers get paid to drag the goalposts around the field - and you wouldn't want those buggers doing real jobs, would you?

Imagine one of them driving a bus - "Well we are told that left is the correct way to turn at this junction, but *is it*? Would my shift not come to an end quicker if I turned right? Is the prescribed route really the best one?" and so on and so on and so on.

Cleanthes

Neil,

"pectator writers get paid to drag the goalposts around the field "

?????????????????????????????

If everyone in a society sees their income rise by a given % across the board, everyone is richer, everyone is better off, everyone is more comfortable and yet you get to say that "there is no change in relative poverty - something must be done".

Relative poverty is the very peak of achievement - the "ne plus ultra" - of goalpost movery. That is the whole point.

lvtfan

When everyone, or some significant portion of "everyone" receives more income, the price of land will rise to consume most of it, and their well-being will not have improved.

The only way to set us reasonably equal is to take rent out of the private sector and let it serve as the basis of our public spending. Doing so turns it into an instrument moving us toward equality rather than inequality.

Not new. Winston Churchill described the phenomenon 100 years ago. (See "The People's Land," at, e.g., http://www.wealthandwant.com)

And while there, you might explore some of the cost of living data provided by the Self-Sufficiency Standard studies in the US -- a methodology for computing a barebones cost of living for working families. I'm not aware of anything similar for the UK: the SSS is cued to local costs, and includes childcare and transportation (except for the purchase of a car, which seems a bit odd; it covers the cost of keeping it on the road, but not purchasing it). It doesn't have any allowance for "cultural participation." -- that would be considered a frill under the SSS methodology!

Neil

"If everyone in a society sees their income rise by a given % across the board, everyone is richer, everyone is better off"

The cost of living stays the same, does it?

Fascinating.

John

Good work, Mr. D.

Moore might assume normal distribution of earnings, which, of course, is crap.

Stuart

Neil: that would depend on how demand/supply changes, obviously. If everyone is richer, it implies everyone is more productive, so there are more goods available... the cost of living does not, necessarily, have to rise.

Neil

Whoop! Whoop! Circular reasoning alert!

Payday Loans

Good analysis! Your table shows that there's no or little difference between poverty and inequality. This now becomes 'inequality in measuring the poverty'!

Hugo

Chris,
You are correct. However, you and Charles Moore should still both agree that relative poverty measures are pretty useless/irrelevant compared to absolute poverty. Someone earning less than 60% of the median income is neither necessary nor sufficient to be a problem. Relative poverty is a red herring. Absolute poverty, on the other hand, is a problem.

Hugo

Also, isn't 60% of median income a measure of inequality. Granted, it's a pretty poor one compared to the Gini coefficient, but that's to be expected because the whole point of it is to hijack the language of poverty to promote equality.

Payday Loans

So not a lot in it then! Hmmm. Very interesting - what a great post.

Payday Loans

This was really interesting to read

Payday Loans

I love the table you have posted showing little difference between the two

breitling

This is just one idea, and perhaps displays no more than my limited imagination. If there are better ideas out there, that amount to more than "implement something called "market socialism" and then - alacazam! - full employment!" then I'd love to hear them. http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html

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