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appraising a complex situation with a single variable.13   

The formulation of the Millennium Development Goals appears to have embodied a recognition of the fact that material well-being cannot be described by a single variable.  However, implicitly the MDGs accept the concept that poverty is defined in terms of income.  The first goal of the MDGs is to “eradicate extreme poverty and hunger,” while the poverty part of the goal is to “reduce by half the proportion of people living on less than a dollar a day.”  The multiplicity of goals in the MDGs – concerning education, gender equality, child mortality and other measures of health, environmental sustainability, and “a global partnership for development” – are apparently components of development, but they are not measures of poverty.  (See Appendix B for a full listing of the MDGs.)  This distinction may seem to be semantic nit-picking, but it underscores the continuing lack of clarity over conceptual issues that lies at the basis of economic strategies in and for low-income parts of the world.  Nonetheless, the fact that the MDGs include a set of goals that are not simply income is an important and positive step away form a single-minded focus on income.

III. Poverty as a Relative Concept

The problem with the MDGs, as with the HDI and many other conceptualizations of poverty, is that they ignore – or virtually ignore – issues of income distribution.14  The dollar-a-day definition of extreme poverty is, as just pointed out, a primary basis for the MDGs, and the income component of the HDI includes only the per capita level of income in a country.  The MDGs do include the promotion of gender equality and empowerment of women, and the UNDP has begun calculating and publishing, along with the HDI, a gender development index.  But, as important and valuable as the focus on gender equality is, it is not the same as a general consideration of inequality issues and does not alter our understanding of poverty.15  

Absolute poverty, whatever precise definition one uses, is wide-spread in the world, and creating conditions that move people – or, better yet, conditions that allow them to move themselves – from less than one dollar a day or less than two dollars a day to some higher material level is extremely desirable.  In examining the dispute over how to define

13 These sorts for problems are by no means unique to economics.  Consider, for example, the effort to sum up human intelligence with the IQ measure.  As with economic well-being, it is now recognized that human intelligence has several dimensions the totality of which cannot be captured by a single index. See, in particular, Gardner (1983).

14 Elizabeth Stanton (2006) has presented a recalculation of the HDI based on taking into account the distribution of income, health, and schooling/literacy.  It is a most useful exercise and demonstrates how rankings change when distribution is examined.

15 Indeed, it is not only mathematically possible for gender equality to improve (as measured, for example, by the wage gap between men and women) while at the same time the overall distribution of income becomes more unequal, but this is precisely what has happened in the United States, and perhaps other countries, in recent decades.

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