Economy 4.0

On the Air: Poverty in the Next Dimension

David Brancaccio Nov 4, 2010

Occam’s Razor is the principle that the simplest explanation is tends to be the best. When it comes to measuring severe deprivation around the world, it may be time to throw out the razor.

The United Nations today released its 20th anniversary Human Development Index an in-depth assessment of how folks are doing in all corners of the globe. For the first time, the UN embraced a new way to measure poverty. The old, Occam’s Razor method of measuring poverty was to simply calculate how much money people live on in a day. A fourth grader could do the math. $1.25 a day or less, that was considered the definition of really poor.

Now the UN has embraced a new way to evaluate poverty that is, dare I use the adjective, richer. It delivers more of a portrait of poverty and less of a sketch, although it does have a clumsy, UN-style name, the MPI or Multidimensional Poverty Index. A household’s income is still an important component. But so is education: Does anyone in a household have five or more years of formal education? Has anyone lost a child in the family? Is there fuel for cooking? A toilet? Does their dwelling have a floor or is it simply dirt?

The data yields interesting results. In, for instance, Ethiopia, 39 percent of people are very poor by the old standard. Use the Multidimensional Poverty Index and an even more dramatic 90 percent are listed as poor. Some countries, it is the other way around. In Tanzania, 89 percent earn less than $1.25 a day, but 65 percent fall into MPI’s standard of poverty. Tanzania, despite its poverty, has managed to deliver social services and education to many of its people. Uzbekistan is an even more dramatic example of low incomes not telling the whole story: 46 percent of the Uzbek population lives on $1.25 or less, but only 2 percent fall into the MPI-type poverty.

This new, more refined index of poverty should allow government officials to do a better job understanding and, hopefully, addressing the many different deprivations that so many are forced to face. And how many is that? The UN calculates that 1.75 billion people in this world are terribly poor according to their new calculation, more than half a billion people more than the old way of defining this condition. That is clearly a terribly high number, by any standard.

Photo: Kibera, Kenya. (David Brancaccio 2007)

Listen to the full story, ‘Income inequality pushes U.S. down in well-being ranking’:


We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.