Possible solutions to some puzzles in international statistics

Hunger in the human species: Problems and possible solutions

Matt Berkley

Draft

26 September 2004

Revised 1 October 2004

Contents

Summary

A. Introduction

B. Five suggested axioms for social scientists

C. Two overarching problems in development economics

D. Ten confusions in development economics

E. The real problem is structural bias

F. What makes the author think that these are serious problems?

G. Four puzzles in international statistics

H. Responsibility and accountability of elected officials

I. Four suggested solutions to world hunger

J. Economists and prosperity

K. A personal note

Summary

This article argues that the aim of "poverty reduction" is fundamentally flawed. In traditional economic theory, in a country where the poor survive longer, economists must other things being equal say the poor have done "worse".

The article examines some puzzles in international statistics, and argues that the solutions can be found in errors by social scientists.

It comments on the philosophy and theory of social science used for policy recommendations in international lending, and identifies responsibility of politicians for errors in public pronouncements.

The article argues that economists' descriptions of research methods have been inadequate, in ways which are easy to see once the detail is described clearly.

It also argues that economic policy decisions by rich countries have been made on the basis of elementary confusions concerning the true meaning of statistics.

Some remarks are presented concerning possible future action to improve the lives of people who cannot afford enough food.

Economists traditionally treat statistics about the economy as referring to changes for real people. But if people live longer, the economists say they have done worse! Economists have here confused cross-sectional statistics (about the economy) with longitudinal statistics (about people over time). In philosophical terms, they have confused "average utilitarianism" with "the greatest good for the greatest number".

"Poverty" is vague, and "reduction" is morbidly ambiguous.

A better solution would be to specify the aims of policies.

Specifying, for example, "better food for hungry people" would help focus attention on the solution rather than the [traditionally unspecified] problem.

The second problem with economists' statements on poverty is that for countries where most people live there are no estimates of need from year to year. Economists sometimes make statements as to how well or badly people have done. But this is done without addressing the question of what people need. The available statistics are therefore not poverty statistics.

The article argues that if the aim is to help poor people, it is better to trust sources of information other than macroeconomists in devising policies. What is measured by economists currently in international studies of countries where most humans live cannot rationally be described as poverty, if poverty is unmet need. That is so because none of the following are estimated: food needs, other needs, food prices, other prices, or survival rates.

Economic theory in the international studies also confused

- inflation with the cost of living (the cost of living depends on what you need); and

- expenditure statistics with consumption (in reality to know about consumption you would need to look at not only the money but also at food prices).

These confusions by economists may help explain several puzzles in international statistics:

1) why Cubans, Sri Lankans and Keralans have lived a long time despite economists saying they were very poor;

2) why Millennium Goal Indicator 1 has been reported as significantly ahead of most of the others (we might expect people to eat better if they are getting richer, and health to improve if hungry people eat better: so why are health indicators not in line with economic indicators?);

3) why global health goals are not being met (perhaps the wrong economic policies are being promoted).

The article considers questions concerning the accountability of politicians in their capacities as board members of international organisations, and responsibility for scrutiny of their actions as such board members.

It also makes some suggestions in relation to the aim of increasing consumption adequacy among people who cannot afford enough food.

A. Introduction

The author of this document is not an economist.

Two problems with most economists' recommendations on how to make people's lives better are:

One, they leave out the benefit of living. Two, they leave out the cost of living.

This article argues that the aim of "poverty reduction" is fundamentally flawed. In traditional economic theory, in a country where the worst-off survive longer, economists must other things being equal say the poor have done "worse".

A better solution would be to specify the aims of policies: "poverty" is vague, and "reduction" is ambiguous. Specifying, for example, "better food for hungry people" would help focus attention on the solution rather than the [traditionally unspecified] problem.

The article also argues that if the aim is to help poor people, it is better to trust sources of information other than economists. What is measured by economists currently in international studies of countries where most humans live is not poverty. It cannot be poverty if poverty is unmet need, since none of the following are estimated: food needs, other needs, food prices, other prices, or survival rates.

The first problem is that in standard economic theory there is no benefit for people in living longer.

The second is that there are no estimates of need. The theory behind economists' large-scale statements as to how well or badly people have done does not address the question of what people need. The available statistics are therefore not poverty statistics.

B. Suggested axioms for social science

Some fundamental principles such as the following are necessary for social scientists.

Axiom 1: It is not possible to aggregate outcomes for people during any period without knowing how many survived.

Note on axiom 1: To claim to do so is to commit a cross-sectional fallacy, confusing cross-sectional with longitudinal statistics. To fail to mention survival rates in statements about "average outcomes" is a fundamental mistake.

One classic error of reasoning is to claim to infer the "average" outcome without knowing how many people survived the period. This error appears in all economists' studies of "distribution" where the authors claimed to know "average benefits" of policies to "poorest fifths". Another is to use the proportion in poverty as an outcome measure.

I describe these as errors of reasoning rather than fact, because there are other complications with the idea of a "poverty statistic" which make the concept of dubious value. A reasonable case might be made for the following idea: economic needs depend on non-economic factors. For example, if you live in a nice place, or otherwise have a nice life, you may need less economically to have the same standard of living (in terms of niceness, not in terms of what is "good" for you, which is more complicated).

Axiom 2: It is not possible to infer how much people ate from expenditure data without knowing food prices.

Note on axiom 2: A household's needs for money cannot be estimated without looking at the prices faced! This error also appears in the studies of "distribution".

Axiom 3: Economic gains and losses cannot be assessed without reference to the level of need at the start and end of the period.

Example of related error in economics: An inflation rate does not tell a researcher the cost of living.

Notes on axiom 3:

i) The cost of living is dependent on both prices and quantities needed.

ii) It is not possible to infer consumption adequacy without delineating consumption needs.

iii) It is not possible for an economist to infer a poverty trend without knowing the proportion of children's meals required.

iv) Many "needs" are matters of opinion, since circumstances vary. However, in some countries, people may spend more on rent while in others they may tend to live on their own land. To ignore such needs is to fail to examine the most basic elements of poverty, which is unmet need, or inadequacy of resources to fill need.

Axiom 4: It is inaccurate to refer to economic "gains" without reference to levels of assets or debts.

Note on axiom 4: In relation to persons deemed the "poorest" land ownership may make the difference between life and death in a crisis. To claim to measure economic poverty or prosperity or riches without reference to assets makes little sense. Debt levels may determine basic needs for money, and interest can be very expensive.

Axiom 5: How "good" or "bad" a policy is for people is not a scientific matter.

C. Two overarching problems

Overarching problem 1: Statistics about the economy are not statistics about people

The first problem with economists' claims about global poverty is that it is not possible to aggregate outcomes for people without knowing how many survived the period.

Cross-sectional statistics are statistics about people alive at different times.

Longitudinal statistics are statistics about people as they go through their lives.

"Poverty reduction" is ambiguous, since if the number of poor people falls, this does not mean that the poor people got richer.

In that respect, economists worldwide have confused not only cross-sectional with longitudinal statistics, but also "classical utilitarianism" (the idea of maximising good for the greatest number) with "average utilitarianism" (the idea of maximising the average at a later date".

The economists did not realise that in a country where people live longer, the resources are shared among fewer people during any period. Common sense says that people do better, other things being equal, if they survive longer. But also in economic terms, people have more use of resources if they live longer. They are more prosperous.

There is no objective solution to the longevity issue, since the relative worth of life versus money is a matter of opinion.

So the question of how serious the economists' error has been cannot be answered in a scientific way, even where survival data are available.

Overarching problem 2: Claiming to measure poverty without looking at the cost of living

The second problem is that poverty is a state of need, but the theory behind the economists' claims failed to define needs.

Whether or not poverty can be quantified is a reasonable question to ask. It is perhaps equivalent to the question whether prosperity can be quantified.

What is perhaps unreasonable is for someone to claim how much better or worse the poorest people did under a policy without any reference to

a) survival rates

b) food prices

c) other prices

d) food needs or

e) other needs

f) changes in assets

g) changes in debts.

It is important to understand what economists refer to when they talk about "income". It is a shorthand word for something more complex. In respect of countries where most humans live, the statistics often refer to a) consumption expenditure and/or b) the monetary value of food eaten.

From these statistics, economists have claimed "average benefits" of x% with a policy, or that y number "rose out of poverty".

But these statistics about money cannot tell a researcher about food. Economists have not yet compiled food prices for the target group in each country. Nor have they compiled prices for anything else which the target group need.

Let us be clear on this. The fact that someone spends 1% more does not mean that they bought 1% more.

What about people who grow their own food? If the economist sees the money value of their food go up 1%, does that mean they ate 1% more? No.

Do the economists have some reason to ignore this inflation problem? Apparently not. The present author found almost no reference in the academic literature to the fundamental problem that economists have assumed that no policies affect food prices differently from other prices.

The economists appear simply to have confused inflation in the economy with inflation for the target group.

As far as I can determine, no economist has estimated either food price inflation or any other price inflation for the poorest people under different policies.

Therefore, it would seem that economists cannot know which policies resulted in more food for the hungry or malnourished.

That is the inflation problem, one part of the general cost-of-living problem.

The next part of the cost-of-living problem is this. The statistics are per capita statistics - per person. Why is that a problem? Because the proportion of children varies between countries, and globally it is going down. Adults need more food than children.

Suppose the FAO are right that the proportion of hungry children is falling per hungry adult, due to falling birth rates. They make this assumption for their global hunger reports (which are not very good for other reasons, including the longevity error).

Other things being equal, a World Bank dollar per day is not enough in 2004 to feed people at the same level as in 1990.

The present author was unable to find any reference to this problem in economists' discussions of the trend in world poverty up until the end of 2003.

A third problem with treating inflation as showing the cost of living is this: How much you need does not only depend on your size. It also depends on the weather, on your need for rented accommodation, transport, and other factors.

The ten statements listed below may appear bold. But to this author, they appear to be true. They are certainly true of the statements by World Bank spokespeople to the media during the last few years. It is beyond contention that Chief Economists of the World Bank have made claims to the media concerning the economic effects of policies on poor people, and concerning the global progress of poor people, without reference to survival rates, food prices, food needs, other needs or assets or debts.

There are certainly economists who understand that assets are important to people. Some economists have recognised their fundamental mistake about longevity.

D. Ten confusions in development economics

1. To confuse inflation with the cost of living is standard practice in development economics.

2. To confuse "the average went up 1%" with "on average people had rises of 1%" is standard in development economics, even though the first is affected in the wrong direction by changes in longevity.

3. To confuse consumption expenditure (money) with consumption (food) is standard in development economics.

4. To confuse the (luxury-dominated) inflation rate with the inflation rate for hungry people is standard in development economics.

5. To confuse "poverty reduction" with "poverty alleviation" is standard in development economics.

6. To confuse "income rises" with "real income rises" is standard in development economics.

7. To confuse "income rose 1%" with "expenditure rose 1%" is standard in development economics.

8. To confuse the fall in the proportion of poor people with the degree of benefits to poor people is standard in development economics.

9. To confuse expenditure rises with economic gains (while ignoring changes in assets and debts) is standard in development economics.

10.To confuse World Bank data on consumption expenditure with poverty statistics is standard in development economics.

We might add that there are more dimensions to human welfare than financial. But the point is that the economists have not even got the financial part right.

E. The real problem* is structural bias

(* in the financial part of economists' analysis)

The problem with these confusions is not simply that they introduce elements of unreliability into economists' statements.

The problem is that they introduce structural biases into the conclusions.

(Note: These are not errors of data analysis, or data availability.

They are problems of inaccurate description of research results.)

Logically, using these methods, an economist would say

i) that a country which keeps luxury prices low has helped the poor to eat more;

ii) that a country which keeps food prices from rising fast has not helped the poor as much as it really has; and

iii) that a country which helps the poorest survive looks as if it has "failed to reduce poverty".

It could be that none of these mistakes matters, because the statistics generally move in the "right" directions. But what is certain is that the economists do not know how much more, or more adequately, the poorest people ate under each policy. What is also certain is that there are going to be cases where these methods give the wrong answer, and economists cannot know what the circumstances are.

F. What makes the author think that these are serious problems?

Two things.

First, the author was unable to find in the academic literature or from conversations with officials and senior academics reasons why these might be considered minor problems for economists' policy advice - or for the perceptions built up over many years by economists and politicians as to which policies had which effects on consumption patterns among the poorest people on earth.

In respect of the longevity error, the leading academics had not written about the problem at all before the author began raising it with them.

Broadly, the same appeared to be true of the children's meal requirements error.

Broadly, the same appeared to be true of the food prices error.

The same appeared to be true of the confusion between the inflation rate and the cost of living.

Where people have ignored a problem, they cannot in general know whether it is small or big.

Note: The longevity error is not quantifiable in any case, since the value of life is not objectively measurable. How important survival is to people is a moral and therefore a political matter, not a scientific one.

Second, the confusions provide neat, if partial, solutions to:

G. Four puzzles in international statistics

Puzzle 1: Why do Cubans, Sri Lankans and Keralans live a long time despite economists saying they are very poor?

A partial solution to this puzzle is in the question. In countries where people live a long time, the resources are shared among fewer people during any period.

Therefore, they are better off economically, other things being equal, than in other countries.

In countries where poorer people survive longer, the average falls because of this.

In countries where retired people survive longer, the average falls because of this.

The statistical effect on the economic figures may be small. But it is undeniable.

Plausibly, in countries where people live a long time healthy food is cheap and needs are few: the cost of the necessaries is low.

It is important to understand how economic statistics ("gross domestic product", "average income") are derived. The raw figures are deflated by a price index (inflation rate). The important thing to understand is that national inflation rates are disproportionately affected by prices of luxury goods. It is the total amount spent on a type of item which determines how influential it is in the overall inflation rate.

Let us say that in a small country £1 million is spent on cake, and £1 million on bread. Even if only a few people eat cake, cake prices influence the overall inflation rate (and so the "income" statistics) as much as bread. The inflation rate for bread is not reflected properly in the overall rate.

If cake prices fall, the economist says "the poor have got richer!", and the World Bank says "the policy was good for the poorest!", and the British Government Target Strategy Paper (2000), or background document for the White Paper (2000), or the Cabinet Office report "Adding it Up", says "the policy reduced poverty". In reality the economists do not distinguish between inflation rates for people who buy different things. In respect of people who grow their own food, national statistical offices look at the food which people eat, then value it in money. The economists then look at the money value and adjust it by the national (wrong) inflation rate! They then say that people did x% better or worse. The original consumption data - the actual food amounts - were measured in the surveys, but the economists take the inferred money values and then infer from the luxury-dominated inflation rate how much food was eaten!

All this is really to say that the economists do not distinguish between inflation for necessary and unnecessary goods. A flippant person might say that in a country where prices rise for luxury goods for the minority, the economist worries about inflation more than the people do on average; and that in a country where prices for basic goods rise for the majority, the economist worries less about inflation than the people do on average. Since some goods are more necessary for survival than others, and governments have different priorities in respect of keeping people alive, it is not surprising that economic statistics (as adjusted for the national figures) do not correlate very well with life length.

GDP will go up if the government pays people to do useless jobs - such as economists pretending to have data on poverty when they do not have food prices. GDP will go up if the government encourages people to take commuting jobs which increase transport costs. If you take one of these jobs and pay a bus fare, the economist counts the bus fare portion of your wages twice - once as a benefit to you (which it isn't) and once as a profit to the people running the bus (which it is). Child care is another example of this kind of extra expense. So is rent, if in the old days people lived in a village on the family land and now live in the city. (This kind of double-accounting by economists may help explain not only why income is not well correlated with life length, but also why people do not always report being happier with more GDP. We can note also the time-cost of commuting. Many people may feel that they have enough money but not enough time).

GDP or "average income" as adjusted by economists does not take into account

survival rates

the trend in prices of goods deemed necessary

food needs

other needs

changes in assets

changes in debts.

So there are quite a few areas where economics (at least the economic results as reported from official sources and the macroeconomists who use similar methods) cannot reasonably be said to measure economic gains and losses.

Without looking at prices of basic goods, and needs, and asset and debt levels, an economist cannot reasonably be said to have measured prosperity even in the most narrow sense. One reason why life length is sometimes badly correlated with economists' claims of prosperity is that prosperity is not what economists measure. If you own your own land, you do not need to pay rent; and you have something to sell if bad times come. If you have debts, you pay interest. Neither of these cases is dealt with by the theory behind economists' claims from "income" (often in reality expenditure) statistics. It may be that people in countries where they live a long time have fewer debts. It may be that landlessness has been prevented, so that people are in fact more prosperous than they look. It may be that there is less waste by governments in those countries.

Other puzzles explicable at least partially in terms of economists' mistakes are:

Puzzle 2: How can the World Bank report success for the poorest, while the FAO reports failure for the hungry?

(Are they not mostly the same people?)

It is relevant here to note that the survey data for both are similar in origin. (The FAO do not estimate hunger, or consumption: they infer hunger levels from national food balance sheets combined with income/expenditure surveys).

Partial, undeniable solution to puzzle 2:

The FAO do adjust crudely for food needs of hungry people (see L.Naiken account of FAO methodology in FIVIMS documentation). The Bank do not (see Chen and Ravallion documentation).

The FAO assume that hungry people's needs have gone up, because there are not so many children per adult: birth rates have gone down.

The Bank (and all economists making statements about the progress of the poorest people in the world) have assumed that the food needs of the poorest have been the same throughout history.

The FAO and the economists cannot both be right.

Note a): The FAO are mistaken for other reasons: they make the assumption that the faster the number of hungry people falls the better they have eaten, which is wrong.

Note b): It may be that the poorest people are living longer or shorter lives than before. If they are living longer lives and having fewer children, then someone might say the problems cancel out under some circumstances. We don't know the numbers, and in any case it is not clear how many more children would have to "cancel out" the effects of earlier deaths.

Note c): Martin Ravallion of the World Bank co-wrote an article in the Royal Economic Society's Economic Journal in 1995 advising economists to look at children's food needs before talking about poverty. It made the point that smaller families are less efficient per person. Dr Ravallion ignored his own advice for his statements on global poverty which informed the World Bank's official claims. The fact that this makes the World Bank look better may be a coincidence. (Title: "Poverty and Household Size").

(It is also worth noting here that Martin Ravallion wrote a World Bank working paper in 1996 (Issues in Measuring and Modeling Poverty) in which he mentioned the fact that poverty is less if poor people die. Despite this, he and Chief Economists persisted in claiming up until 2004 the level of "gains" to poor people without knowing survival rates.)

To halve the proportion of people under a consumption line is not to halve the proportion of people under a consumption-adequacy line. And so, even in the absence of other problems, this World Bank method would not measure a halving of world poverty, but exaggerate success somewhat.

The notion that the proportion of children among the poorest people will not have varied between 1981 and 2015 is perhaps implausible given the fact that it is the aim of UN agencies to reduce population increases and increase birth control.

Puzzle 3: How is it that Millennium Goal Indicator 1 has been reported as significantly ahead of most of the others?

A puzzle because if the poorest people are eating more, we might expect them to be more healthy. The World Bank implies that the poor are getting richer, and this would seem to entail that they are eating better.

Undeniable partial solution: As above (children's food needs mistake by the Bank); plus perhaps the other confusions by economists over inflation, assets, debts and so on. Other factors (culture, education and so on) may well of course have effects as well.

Puzzle 4: Why are global health goals are not being met?

This is a different puzzle from number 3.

Puzzle 3 is "what is the reason for the discrepancies in the statistics?"

Puzzle 4 is "why are health policies failing?"

Plausible solution to puzzle 4: Perhaps both the aims and methods of lender countries are the wrong ones.

The aim of "poverty reduction" in the economist's sense, rather than poverty alleviation, is philosophically and theoretically mistaken, and some might say morally mistaken as well. Economists do not know survival rates of the poorest people.

The methods (economic policies) have undoubtedly been based on misdescription of past statistical trends. The list of confusions is above, and a list of axioms for future reporting of economic statistics by academics, civil servants, international civil servants, politicians and campaigners is above.

Aiming to help the poorest by increasing "income" without looking at food prices or assets or debts or food needs appears to have no philosophical or theoretical basis.

Note that the word "income" is a shorthand term used by economist to represent three things: 1) income 2) consumption expenditure and/or 3) the value of food eaten.

It is not clear from where came the idea that "income" measures prosperity, or why anyone should believe it.

What is certain is that

i) statistics do not indicate success on health goals

ii) progress on health goals is not always well correlated with economists' reports

iii) economists have been deeply confused about what they were reporting.

H. Responsibility and accountability of elected officials

i) Accountability of World Bank Governors for errors in pronouncements and policy advice

There is a common view that the World Bank is unaccountable.

That view appears to be mistaken.

The policies of the Bank are in the hands of its Governors.

Governors from democracies are accountable to voters.

ii) Voting power and responsibility for policies and Bank staff statements

The institutional structure of the World Bank is such that lender countries have voting power in proportion to financial input.

The influence of the United Kingdom (with under 1% of the species in headcount terms) is much more per head of population than, say, India.

Responsibility for mistaken statements by staff of the Bank therefore lies largely with Governors from lender countries.

Responsibility for policies made on the basis of errors in the description of statistics also lies largely with Governors from lender countries.

iii) British Governors

The British Governor of the World Bank is the Secretary of State for International Development.

The Alternate Governor is the Chancellor of the Exchequer.

The British Governor of the International Monetary Fund is the Chancellor of the Exchequer.

The Chancellor has been Chair of the IMF's main decision-making body for several years.

The Millennium Goals were agreed by the Organisation for Economic Co-operation and Development, the IMF, the UN and the World Bank.

Note: The Development Assistance Committee of the OECD is a body for which similar considerations must apply as in the case of the global financial institutions: since elected politicians are on the Committee, it would seem that they are answerable for actions in the name of their voters.

iv) Responsibility for reporting errors

It would seem that where they have been informed of errors in World Bank statements about global poverty, and about the effects of different policies on the world's poorest people to the Bank, the Governors are responsible for informing staff at the Bank and other governors.

To know of errors and not to share that knowledge with other Governors or senior Bank staff with a view to the errors being corrected could be construed as failing in a public duty.

v) Responsibility for oversight of British teaching of social science

It would seem that this responsibility would lie with the Education and Skills Select Committee of the House of Commons.

vi) Responsibility for oversight of British board members of international bodies

It would seem that responsibility for oversight and scrutiny of the actions of the British Governors of the World Bank and International Monetary Fund must lie with

a) the International Development Select Committee of the House of Commons

and/or

b) some other public body or bodies (such as the Treasury Committee)

c) no-one.

I. Four suggested solutions to the problem that a self-described intelligent species cannot, despite the stated intentions of its most powerful elected officials, feed itself

Solution 1. A new emphasis on survival as a measure of success.

The statistics with which we measure success are determined by our aims.

Therefore an emphasis on survival in measures of success is equivalent to promoting the aim of helping poor people would be to keep them alive longer.

(It is not clear to this author why anyone who claims to wish to help hungry people might oppose such an aim).

The above is not to say that longevity is the most important thing about human existence in any or all circumstances.

It is, however, true that even with the best data on food prices, it is not possible to infer the adequacy of the food (quantity and quality) without reference to survival rates.

Without data on survival rates, economic statistics are of little use in inferring consumption adequacy.

There are two parts to the equation for prosperity: the quality of a life, and its length.

Only one is measurable.

Solution 2. A replacement of the term "poverty" in the vocabulary of governments by more specific terms with more meaning.

Without data on:

food prices,

food needs,

other prices and

other needs, and

changes in assets and

debts,

economic statistics are of questionable use in inferring either prosperity (surfeit) or poverty (need).

The idea of collecting food prices may seem attractive, but it is not clear how, without estimates of survival, food needs, other needs, assets and debts, an equivalent standard of "poverty" could be inferred in different places or at different times.

The present author is strongly of the opinion that such an enterprise would be too complex to be practical or useful.

That opinion has been arrived at after consideration of the existing failures by governments and economists even to recognise the implications of having omitted survival rates, food needs, food prices, other expenditure needs, assets and debts.

Part of the author's reasoning is this: If the economists could not even describe their existing statistics accurately, and seemingly did not understand the basic elements of extreme poverty, how could they be trusted with something more complex?

The solution to hunger in the human species does not, I think, in making something which politicians can easily claim not to understand into something even more complex.

We might also note here again the successes of Cuba, Sri Lanka and Kerala in health.

Those governments did not need highly-paid mathematicians to help the poor to live longer. Incidentally, the idea of gathering food prices is somewhat too complex in any case. Survey data already look at consumption levels and then value the food.

To a) look at the money value of food and then b) gather prices and then c) convert the money back to food amounts is the long way round. A simpler way would be to estimate consumption from the surveys in the first place. But there are problems with estimating consumption adequacy from consumption.

It is not just the quantity of food which matters. It is certainly not just the quantity of calories which matters (a common reference point). It is also the quality of food.

To determine the quality of food, some outcome measure is necessary. And this brings us back to life length.

The quality of food is not always uncontentious: Western scientists decided that coconut oil, which is plentiful in both Kerala and Sri Lanka, is bad for people. That opinion seems to have been wrong.

But it is very complex to decide the value of food in different places. It is a task for a nutritionist, not an economist. And I am not sure that there are any easy answers except in terms of outcome measures (how healthy people are and how long they live). So in a sense we might as well use health indicators. The alternative is to assess people's diets in terms of freshness, vitamins, calories, proteins, essential fatty acids, balance and so on - yet another potentially endless task.

It is my impression of economists that some mathematicians like endless tasks. In my reading about what economists call "poverty measurement" I see professors calling for more and more complexity. The complexity involved in adjusting for children's food needs is great. Add to that the complexity of working out economies of scale (households with more people are more efficient) and we end up with vastly complex equations. How to add up the nutritional value of each item of food in each country?

What about the value of water consumption? Here again, what matters to people is the outcome. Unhealthy water is worth less. How to compare the value of food and water across countries - let alone variables such as rents, services, commuting costs and so on - is a vast question.

Solution 3. A rapid move towards the correction of past statements concerning the progress of people described as extremely poor, and the reassessment of policies devised on the basis of such statements.

Erroneous statements include many from the World Bank:

- the Chief Economist announces in 2004 that "400 million rose out of poverty in China since 1981" without the Bank compiling data on the price of rice - and without adjusting food needs for the one-child policy! [Estimating economic need without estimating food needs!]

- the Chief Economist announces that a policy gives "average benefits" of x% without data on food prices, or food needs, or asset changes, or debt changes, or survival rates;

and from many of the Bank's critics. The confusions I note above are standard in macroeconomics.

Solution 4. A rapid move towards replacing the ambiguous language of "poverty reduction" with clear and specific and meaningful statements about statistics, described accurately without value judgements or unfounded inferences about the level of need.

Axioms for the use of economic statistics appear at the beginning of this article.

It is self-evident that economic statistics without prices of staple foods are not statistics on extreme poverty.

It is self-evident that economic statistics without survival rates do not tell a researcher average outcomes.

In reality, the source of global statements on the progress of people deemed extremely poor are survey data on

1) income and/or

2) consumption expenditure and/or

3) the money value of people's self-grown food.

For one thing, they have been adjusted using the wrong inflation rates.

It is inaccurate to describe these statistics as showing "income poverty" or "gains".

It is inaccurate to describe the economic statistics as referring to longitudinal trends for real people.

It is inaccurate to describe the World Bank statistics using an international dollar as "poverty statistics". There are no global food prices for the target group for any year; there are no survival rate data for the target group for any year; there are no estimates of amounts needed in any year, due to changing food needs, changing needs for rented accommodation, changing needs for expenditure on debts, changing needs for savings to offset landlessness, or anything else.

It is inaccurate to refer to the statistical results of studies of the numerical distribution of "income" as if they represented consumption amounts, or consumption adequacy (consumption poverty), or "income poverty" without estimating necessary expenditure.

It is the tradition among macroeconomists to confuse income with profit.

It is inaccurate to describe the target group as "people living below a dollar a day". The "dollar" here is a World Bank dollar, not a real dollar. In national buying power, it is worth a fraction of a real dollar. In buying power for basic goods, its value is apparently not known to anyone. But it does not appear to be worth what a backpacker from the United States could live on with a dollar a day in a target country. A sensible guess might be that it is worth four times less than that.

A statement about survival rates is open to misuse in fewer ways than are economic statistics.

J. Concluding remarks: economists' statements concerning prosperity are dubious as well

Many of the errors above apply equally to economists' and governments' statements about prosperity among people who are not usually considered poor. The idea that additional items of expenditure (such as commuting costs) should not be counted against income is absurd. The idea that debts and assets are not part of economic gains and losses is absurd. The idea that most people are better off dead is absurd. The idea that no matter how long or short working hours, people are equally well off is absurd. The idea that money measures, with all these fallacies of reasoning and misdescriptions of data, can measure human welfare with no reference to the quality of life is absurd.

Governments like taxable income, and civil services like to increase it.

The central idea which many people with money like is the idea that when they get richer, the poor automatically get richer as well. This is the idea that politicians like to promote, saying that they have evidence that it has been true in the past. Unfortunately, successive Chief Economists of the World Bank, making the most high-profile announcements in this area, have not realised the difference between cross-sectional and longitudinal statistics, and the fact that adults need more food than children, and the fact that if you don't know how a policy affected food prices you don't know how it affected people who can afford little else.

The central idea which governments and civil services like is that when they receive more money, the people are better off. People perhaps naturally believe what they see around them, and assume that things are the same elsewhere. If there is more money coming into the Treasury, then a government may think that the people have more money spare. But that does not follow. Income is not profit, and inflation does not measure the cost of living. Inflation does not measure the cost of living, because a) income is not profit (needs for expenditure may rise) and b) inflation is disproportionately affected by prices of unnecessary goods.

Ultimately the cost of living is not something which can be measured, since that would necessitate specifying an equivalent life at another time or in another place. Since the combined benefits and costs of climate, culture, working conditions, and various physical, emotional, intellectual, and spiritual wants are not measurable, all comparative statements in this general area are laden with subjectivity. The benefit of living longer is not measurable against any other benefit while alive. No single number could measure prosperity even if there were some objective way of measuring prosperity while a person was alive.

There are two parts to the equation for prosperity: the length of life, and its quality. Only one of these is measurable.

K. A personal note

Perhaps we all try to convince ourselves on occasion that the picture which the world presents to us at this moment confirms our pre-existing notions of it.

It may be that the problems which I have identified above in the use of statistics in social science are minor, in the sense that they do not matter to the happiness of any human.

To me, the above picture (of puzzles partially solved by reference to social scientists' errors) makes sense. It also makes sense to me that the burden of proof should be on the scientist, not on the person who points out gaps in the scientist's argument.

For the reasons given above, economists who have made use of international data do not know what their statistics are telling them about consumption levels in different countries, or consumption adequacy.

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