Future data use at the Bank

Submitted by Matt Berkley on Wed, 2012-10-10 15:43.

Dear Professor Basu,

Perhaps I might ask similar questions on your own approaches to data.

A first two could be the following:

Will the Bank make clear to recipients of statements about global poverty whether it has estimated food needs per person?

The FAO, in contrast to the Bank, made such estimates from the start of MDG monitoring, to adjust survey data (from the same surveys used by the Bank) for increasing food need per person as birth rates fell. The discrepancy may provide a partial explanation for the difference in reported MDG indicator trends.

Secondly, will the Bank make clear to recipients, including politicians, of statements on global poverty since 1990 whether it has estimates for initial prices faced by the poor?

Thank you.

Yours sincerely,

Matt Berkley.

http://blogs.worldbank.org/developmenttalk/perspective-from-a-new-world-bank-chief-economist#comments

I wrote,

“[Chen and Ravallion] are claiming to have absolute poverty measures going back thirty years, while not knowing about prices faced by the poor or any changes in need, leaving aside looking at assets or debts.

Why?”

“evenly distributed …(so that the poor also experienced a small increase in incomes and income poverty falls).”

May I ask why I should assume income poverty falls as a result of a rise in income?

Does that not confuse income and profit?

Economic prosperity, of yourself or anyone else, clearly depends on assets, debts, relevant prices, and consumption need. We could also mention shared assets and shared debt.

But even absolute income poverty on its own depends on relevant prices and needs.

Similarly, Dr Ravallion, now acting Chief Economist at the World Bank, has claimed to have “absolute poverty measures for the developing world” by looking at spending statistics (mixed with in a minority of cases income) adjusted for CPI inflation.

Why?

He has not estimated either prices for the poor or what they needed. So why would anyone think he has measured consumption poverty (ie shortfall from what people need to consume), let alone economic poverty? He does not even know consumption amount, in the ordinary sense of that word (if they want to help the poor or anyone else economists might consider using the more accurate term “spending” rather than the misleading “consumption”).

To give one example about need, as I said in 2003:

Falling birth rates mean rising food needs per person. The FAO adjust for that in their global monitoring but the World Bank do not.

The divergence between MDG indicators on poverty and hunger may be due in part to this discrepancy.

In the past Dr Ravallion has erroneously implied that a) I did not know his method and b) I believed the $1.25 a day is not adjusted for inflation at all – despite my having specifically referred to food prices or prices for the poor.

http://aidwatchers.com/2009/10/the-perils-of-not-knowing-that-you-don%E2%80%99t-know-2/#comment-6836

http://economix.blogs.nytimes.com/2009/10/02/in-defense-of-forecasting/#comment-53109

http://gulzar05.blogspot.co.uk/2009/10/poverty-reduction-in-india-china-and.html?showComment=1256466176306#c4741172020664106022

Dr Ravallion has also said he has used the most appropriate available inflation statistics.

Best does not entail adequate.

So that is irrelevant unless he can show why he should infer adequacy levels from spending.

Even though some work has been done by Deaton and Dupriez on the 2005 international price comparison data to look specifically at items bought by the poor, the work did not look at prices the poor actually faced for those items – and we do not know those item prices for previous years. So we don’t really know what the poor who bought things actually received.

It is also the case that for the latest global update, Chen and Ravallion have looked at food price changes for a few years at the end of the period.

But they are claiming to have absolute poverty measures going back thirty years, while not knowing about prices faced by the poor or any changes in need, leaving aside looking at assets or debts.

Why?

Last year I asked Mr Green, then head of research for Oxfam, whether he thought there were risks in inferring poverty from spending. I gave some detail he asked for.

Is it wise to make policy on the basis of outcome statistics like this?

http://www.oxfamblogs.org/fp2p/?p=6619#comment-61380

Other references:

http://www.mattberkley.com

http://www.parliament.uk/documents/lords-committees/economic-affairs/DevelopmentAid/FINALevidencevolumedevaid.pdf ,
page 62 and following.