Monday, September 10, 2012

Politicizing the numbers

We know two things about most aggregate economic indices.  First, they are never simple.  Second, many of them are controversial and politicized.  The official poverty rate is a prominent example.  It can be fiddled up as well as down.

Many economists advocate consumption-based, as opposed to income-based, poverty measures.  This recent paper by Bruce Meyer and James Sullivan, two researchers who have spent serious effort on the question for some years, concludes:
Official poverty statistics suggest that poverty has increased over the past forty years. This claim is inconsistent with our results which show substantial improvements in income based poverty over the past forty years and even larger improvements in consumption based poverty, especially in the last decade. These poverty results are corroborated by other indicators of well-being for those with low income such as increases in car ownership and evidence of improved living conditions including larger living units that are more likely to have air conditioning and other features. While the deficiencies in the official poverty measure have been the subject of much previous research, most poverty scholars still rely on the official measure as the definitive measure of trends in poverty and draw important conclusions based upon it.
These views have been around for some time. But there is inevitable opposition to "defining poverty down".  The safety net is not adequate; we "need" a new and better net.  That goes with the idea of defining economic success and prosperity down.

At the other end of the spectrum, this week's Economist includes "Argentina's dubious poverty line ... rumbling stomachs, grumbling citizens".  This sounds like North Korea and the other economic failures.  Our people are well-fed, thank you.  This is all about defining political failure down.

Nothing new here.  Political agendas intrude on scoring and counting.