The Economics of Poverty by Martin Ravallion: Why Practitioners Should Read this Book

Priyanka Sunder

06 Jul, 2016

ACFID’s departing Senior Policy Advisor Priyanka Sunder is excited by renowned povery expert Martin Ravallion’s latest book because it closes a gap in current poverty analysis by showing how economic concepts can be used by practitioners as a tool to fight poverty.

With a career spanning over 30 years, Martin Ravallion is arguably the world’s preeminent expert on poverty. He spent decades as the leading economist on poverty for the World Bank. He is known for his pioneering work developing the ‘$1 a day’ poverty line. That measure – now inflation-adjusted to $1.90 – remains the global benchmark for poverty, as demonstrated by its prominence throughout the Sustainable Development Goals.

Earlier this year, Ravallion published his much-anticipated book The Economics of Poverty: History, Measurement and Policy which brings together decades of empirical work on economics and poverty – much of it generated by Ravallion himself. The book is eminently useful reading traversing the history of poverty reduction efforts (Part 1), the challenges of data and measurement (Part 2) and the long-standing policy debates on how to reduce poverty and inequality (Part 3).

Critically for practitioners, it examines the fundamental intersections between research, policy and programming. In an ideal world, development policies would be informed by rigorous economic analysis and strong feedback loops would exist between empirical research and development programming. In practice, however, economic research and field-work are often disconnected from the work of NGOs and practitioners, while economic policy debates are slow to influence development programming on the ground.

Ravallion’s book goes a long way to bridge this divide by linking economic concepts with real challenges for poverty policies and programming. Ravallion explicitly writes with practitioners – rather than solely academics – in mind, in the belief that development economics should be used as a ‘tool for understanding and fighting poverty.’ This blog aims to complement this goal by highlighting five key points relevant to the work of NGOs and practitioners – with the hope that most readers will ultimately turn to the book itself.

1. What do we mean by poverty and welfare?
Ravallion is refreshingly honest about the limitations of economics in capturing the human experience, particularly in the context of poverty. He points out that economists tend to assume that a person’s welfare ‘depends solely on her personal command over commodities.’ Ravallion analyses the weaknesses of utility and household consumption as central measures of individual welfare. Both measures gauge welfare based on the market goods and services poor people consume, ignoring the non-market characteristics critical to a person’s wellbeing such as discrimination or poor social standing.

This is music to the ears of practitioners who are often frustrated by the narrowness of popular welfare measures. Ravallion calls for economists to also consider alternate welfare measures to paint a fuller picture of the wellbeing of one person compared to another. He discusses, among others, nutritional indicators, social effects on welfare and self-assessments of welfare and Amartya Sen’s work on the intrinsic value of people’s capabilities to function.

2. Measuring poverty is very difficult
Ravallion provides a comprehensive analysis of the difficulties of measuring poverty. This is important guidance for practitioners who often have to temper the data demands of donors (and the public). Ravallion discusses the challenges of household surveys as the dominant source of poverty data and the limitations of household-level data. He also identifies some drawbacks of impact evaluation, many of which are experienced by practitioners, such as the ethical issues with randomised implementation of development programs. The book also provides a (highly-readable) overview of evaluation methods in practice.

3. Are the poorest being left behind?
Ravallion finds that existing measures of poverty tend to count the number of people living in poverty. For example, the poverty headcount ratio, the most commonly used measure, calculates the proportion of the population with household income equal to or below the poverty line. These measures have led us to conclude that, as the number of people living in poverty has fallen over the last decade, global poverty must be in decline.

Ravallion argues, however, that these measures are insensitive to changes in the depth of poverty of those below the poverty line. They do not detect whether the poorest are in fact getting poorer under existing policies, if their numbers stay the same. Ravallion calls for a consideration of the consumption floor – the typical level of living of the poorest in a given society – as a key measure of progress against poverty. Ravallion’s work is critical for NGOs, particularly as it measures whether the poorest are being left behind by current poverty reduction efforts. In a recent paper, Ravallion further investigates this question and finds that there has been little progress in raising the consumption levels of the poorest.

4. Should we care about relative or absolute poverty?
Ravallion discusses the meaning of absolute and relative poverty, how they are measured and their relative merits. He devises a useful rule of thumb: in high-income countries, relative poverty tends to be of more use, while in low-income countries absolute poverty is more relevant. Interestingly, Ravallion posits that your position on the age-old question of whether economic growth is good for the poor will turn on your views on relative versus absolute poverty. Proponents of globalisation, he says, are likely to be ‘absolutionists,’ more concerned with whether the wellbeing of the poor has improved. This bears further consideration by Australian practitioners, particularly the aid program’s emphasis on economic growth as the core driver of poverty reduction.

5. It takes time to make people care
Ravallion provides an exceptional account of the history of development thought, skilfully navigating the shifts in attitudes and policies over time. He begins with early poverty reduction efforts, which were born out of a desire to protect the property rights of the rich rather than out of compassion for the poor, through to today when the ‘desire to end poverty is stronger than ever.’ This is hopeful reading, particularly for Australian practitioners. Ravallion reminds us that despite transient political speed-bumps here in Australia, the world remains on an inexorable positive trajectory towards eliminating poverty. 

  • Priyanka Sunder
    Priyanka Sunder

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