Measure impoverishment, not poverty – Prof Sir Angus Deaton

Decades of economic measurements introduced to determine destitution levels have shown how difficult it is to identify reliable markers of poverty across societies and regions. Is it time to think beyond material lack in defining poverty? Should economists look to other relevant determinants for measuring the living standards of poor people?

These were questions explored by renowned economist and guest speaker Professor Sir Angus Deaton in the first annual Francis Wilson Memorial Lecture at the University of Cape Town (UCT).

Professor Deaton is a senior scholar and the Dwight D Eisenhower Emeritus Professor of Economics and International Affairs at the Princeton School of Public and International Affairs and the Economics Department at Princeton University. In 2015 he was awarded the Nobel Memorial Prize in Economic Sciences for his analysis of consumer consumption, poverty and welfare.

His current research studies the determinants of health in rich and poor countries and on the measurement of poverty and inequality in the United States (US), India and around the world.

The lecture, titled “The Politics of Numbers: Economists confront poverty and inequality”, was hosted on 3 July in partnership with the Southern Africa Labour and Development Research Unit (SALDRU) and DataFirst in the School of Economics, Faculty of Commerce.

Professor Deaton crafted the lecture as a tribute to the late Emeritus Professor Francis Wilson, the founder of SALDRU in 1975. Emeritus Professor Wilson had a long and distinguished career at UCT and made major contributions to economics in the areas of poverty and inequality. He died on 24 April 2022.

Long association and friendship

Deaton and Wilson met in the early 1980s and shared a close cross-continental working relationship and friendship over more than 40 years.

“Francis was a very precious person to me,” Deaton said.

Tracing the successes and failures of poverty measurement instruments in the US and across the world from the 1960s, Deaton asked whether the focus should be shifted from poverty to impoverishment, as philosopher Gordon Graham argued. The latter is a more nuanced gauge of what it means to be poor, living on the ‘poverty line’.

“… surveys can be manipulated – or the data hidden – for political ends, offering wide scope for mischief.”

“These are not alternative approaches that find different ways of measuring poverty, or material poverty; they measure different things, which are relevant for thinking about the living standards of poor people,” said Deaton.

“There are poor people who live very good lives.”

Official measures of national poverty over the decades from the 1960s had reflected serious data problems, he said. They were too technical, and ignored factors such as non-cash income, regional differences in the cost of living and the social aspects of poverty: vulnerability, lack of respect and dignity, and social exclusion. Income alone is not the best indicator of poverty, but the first step to identifying the poor.

And as history in the US and other countries has shown, surveys can be manipulated – or the data hidden – for political ends, offering wide “scope for mischief”, said Deaton.

“In many ways it’s the breakdown of relationships that is harming people in the US today, not just for the poor but for the working class …”

Indian economist and philosopher Amartya Sen had added an important facet to thinking about the problem with his capabilities approach to development economics. It emphasises people’s capability and the tools they use to achieve meaningful lives, and offers an alternative approach to welfare economics. Value is given to three vital things: people’s achievements, experiences and relationships.

“And as you know, our individualistic approach and economics tend to ignore that last one,” said Deaton. “In many ways it’s the breakdown of relationships that [is] harming people in the US today, not just for the poor but for the working class, many of whom are at least newly impoverished by the deindustrialisation of many American towns.”

Deaton and his wife, renowned economist Anne Case, published a New York Times bestseller on the topic in 2020, Deaths of Despair and the Future of Capitalism, describing how the flaws in capitalism are fatal for the US's working class.

‘Scope for mischief’

Tracing the recent history of poverty surveys and their “exotic variants” in the US, Deaton said that global poverty measurements could also be severely compromised by politics, as was the case in India in 2019 when claims emerged that the Narendra Modi government had hidden poverty data.

When he met Wilson, the Living Standards Measurement Study (LSMS) had just begun at the World Bank. Wilson had already published his book Uprooting Poverty: The South African Challenge, co-authored with Dr Mamphela Ramphele.

Deaton worked especially closely with Wilson and was a key advisor to him during the 1993 Project for Statistics on Living Standards Development (PSLSD), South Africa’s first nationally representative household survey, conducted under the auspices of SALDRU.

“And I knew very little about South Africa. Francis was my teacher.”

Deaton later used its information to highlight the importance of South Africa’s old-age pension for improving welfare, in a series of seminal articles with Case.

“Francis was very keen on the fact that non-measurement was non-recognition, and under apartheid, many were excluded. And so, this documentation of the living standards of ordinary people was the first step to action. But only the first.

“And it was Francis who made the important step from LSMS to the PSLSD. He brought in others with this incredible infectious enthusiasm the man had, and the survey really was his. He owned the survey with his amazing dedication and energy. And unlike many LSMS surveys, this was an inside job. It was South African-owned, or Francis's own, from the beginning. That was why it worked.”

It wasn’t an international template (unlike those used by the World Bank), said Deaton, but something that was really rooted in South African conditions.

“It really couldn't have been done by anyone except for Francis, who'd done the previous work and who'd been involved in this for so many years.”

Deaton also spoke of the enormous value that DataFirst, founded in 2001, had added to the push for sound, open-access information, and the technical measurement skills that outgoing SALDRU director Professor Murray Leibbrandt and DataFirst director Professor Martin Wittenberg have developed, and in turn passed on.

“But are we capable of letting those technical and measurement skills overcome our political prejudices? Or put in Francis’s words, do ‘our minds on ice’ control our ‘hearts on fire’? Or does the fire melt the ice?”

“Then we asked the question, why then are they dying in droves? Why are they killing themselves through suicide, drugs and alcohol?”

What of alternatives in poverty measurement?

“Everyone knows official poverty measures are all screwed up. People are presenting political judgements disguised as science. These destroyed the poverty measurement systems in the United States, even though there has been serious debate within academia and government agencies. There’s a famous quote by former president Ronald Reagan in his 1988 state of the nation address, that ‘… some years ago, the federal government declared war on poverty – and poverty won’.

“Many people on the right still love this quote, claiming that all the money government spends on poverty does nothing. On the right, people say there is no poverty in the US except for a few people whose self-defeating and self-limited behaviour brought their own poverty on themselves … The right now has its own set of public measures.”

Returning to his previous remarks about what makes lives worth living, Deaton said, “Anne and I have been working on mortality very heavily. Mortality is not a substitute for poverty measurement, it's really a different thing. But in these debates, where the right is saying, you know, the poor people and everyone in America are really doing so well. Then we asked the question, why then are they dying in droves? Why are they killing themselves through suicide, drugs and alcohol?”

Francis Wilson Memorial Prize

In her thanks at the end of his lecture, Wilson’s widow Lindy expressed her gratitude to Deaton “for immediately saying yes to giving this fabulous lecture in memory of Francis”.

Afterwards, the first two awards of the Francis Wilson Memorial Prize for Data-Driven Research were announced by Taryn Dinkelman, Professor of Economics at the University of Notre Dame, who chaired the adjudication committee.

The prize for best article published in a peer-reviewed journal in the past two years was won by SALDRU’s Professor Vimal Ranchhod (with co-author Dr Miquel Pellicer) for his paper in the Journal of Development Economics, “Understanding the effects of racial classification in apartheid South Africa”.

The student prize for best chapter from a master’s or doctoral dissertation was won by Dr Rifqah Roomaney of the University of the Western Cape, for her thesis, “Burden of multimorbidity in South Africa: Implications for health policy and service delivery”.