Schrödinger’s cat and the fall of African poverty

Poverty doesn't fall until we realize it's falling.

Poverty doesn't fall until we realize it's falling.

A new working paper by income-estimation guru Xavier Sala‐i‐Martin (who still has the best homepage of any academic economist out there) and Maxim Pinkovskiy. The headline-worthy claims are all in the abstract:

The conventional wisdom that Africa is not reducing poverty is wrong. Using the methodology of Pinkovskiy and Sala‐i‐Martin (2009), we estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970‐2006. We show that:

  1. African poverty is falling and is falling rapidly.
  2. If present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time.
  3. The growth spurt that began in 1995 decreased African income inequality instead of increasing it.
  4. African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral‐rich as well as mineral‐poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below‐ or above median slave exports per capita during the African slave trade.

This is potentially exciting stuff which could do a lot to defeat the notion that African nations are permanently trapped in poverty, as well as underscore the importance of economic growth as a necessary (but perhaps not sufficient) mechanism for improving the lives of the poor.

I haven’t read the paper in detail yet, so I can’t make specific comments about its assumptions, but there are general reasons we should be wary about getting too excited. Some of the data use the infamous Penn World Tables, a series of GDP and purchasing power parity (PPP) estimates, which are constantly being revised and are often accused of being unreliable.

The accepted facts about poverty and income distribution around the world can change quite quickly when the basic assumptions behind the data and the functional forms evolve. It was only a few years ago when World Bank revisions dropped several million people back into poverty. The art of poverty estimation is like a strange, warped example of Schrödinger’s cat, where many possibilities exist but we are unable to let the waveform collapse on a definitive result. This makes it particularly tricky for organisations to make precise statements about targeting the poor when we don’t even know how many there are (not that these concerns give them any pause).

Still, Sala‐i‐Martin knows this stuff better than most. His assumptions are out there. Now is the time for those assumptions and their implications to be debated, not for the pundit war which will inevitably happen.

It would also be nice to see some positive media coverage, although I don’t expect that will happen.

3 thoughts on “Schrödinger’s cat and the fall of African poverty

  1. Ranil Dissanayake

    March 3, 2010 at 6:18am

    Really good points here. Poverty estimation is partly so contested because it’s political: it’s on the basis of poverty estimation rather than economic growth and development that most aid agencies get their funds.

    I have a similar problem with employment stats for Africa – they’re virtually meaningless in most cases because international definitions of unemployment do not make sense in most African contexts.

  2. Beauty

    March 3, 2010 at 10:47pm

    Just the same way Professor Jeffrey Sachs is widely considered to be the leading international economic advisor of his generation and Africa´s best friend and foe. Extreme poverty (used to be just poverty) is not falling and is not falling rapidly as for example in Niger Republic, “simple words humanitarian workers in Africa use often but dared not speak in this impoverished nation: hunger, starvation” as evidence.

    How can the stats work in places where accountability and control are simply hollow words in the face of death as Sala‐i‐Martin agreed? His assumptions are just that but it is almost criminal to come up with media hugging statements like “If present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time.”

    The MDGs arrived dead since the planners did not get the buy-in from those African leaders and other keeping Africa poor. Perhaps we should begin at the beginning. How many near accurate population census exist in Africa? So, how can we control what we did not measure? Go figure.

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