Five axioms, four puzzles and four suggestions on hunger in the human species

Matt Berkley

Draft for correction, revised 27 October 2004

Summary

1. This article proposes five axioms for the social sciences.

2. Partial solutions to four puzzles in international statistics may lie in errors of reasoning by social scientists.
   The puzzles include:
   a) why some countries have high life expectancy and low GDP per capita;
   b) discrepancies between World Bank, FAO and WHO reports of progress on Millennium Goal 1.
   
   
3. Relevant errors include:
   a) claiming to measure aggregate outcomes without measuring survival rates;
   b) confusing expenditure with consumption (failing to measure relevant prices); and
   c) confusing income with profit (failing to assess necessary expenditure).
   These errors suffuse economic policy assessments based on international comparison.
   
   
4. The problem is not general unreliability, but a tendency towards bias. For example, economists have not yet compiled international prices of staple food. Policy assessments therefore have a tendency to discriminate against governments which make food cheap. If luxuries become cheap, macroeconomic indicators give the illusion that the poorest have got richer. If a country carries out land reform, the macroeconomist does not register the asset acquisition as an economic gain. This runs counter to the popular concept of wealth. The concept of a capitalist system of economics which fails to register capital gains is puzzling. A country which saves the life of anyone in the majority on below-mean income thereby reduces GDP per capita, and the economist thinks the people have done worse on average.

5. An inevitable result of the mistake concerning longevity appears to be that macroeconomic claims as to the prosperity of peoples, even in the absence of other problems, need correction. In a country where people live longer, the resources are shared among fewer people during any time period. The following therefore appears undeniable: other things being equal people in countries where they live longer should be classed as richer. How much richer is a matter of opinion.
   
   
6. In practice, the difficulty of conceptualising and measuring the various aspects of prosperity may mean that it is futile to try to quantify it. Is poverty measurable? The article suggests that it is not.

7. The article identifies responsibility of politicians for a) errors in public pronouncements and policy decisions, and b) scrutiny of government action or inaction over errors.

8. The article suggests that hungry people might be better served by a) the adoption of more accurate language in the specification of policy aims and the reporting of research results; and b) a re-examination of the evidential case for specific policy choices. In other words, economists and politicians have given inaccurate accounts of the evidence on economic poverty.

Contents

A. Introduction

B. Five axioms

C. Two overarching problems in development economics

D. Ten confusions in development economics

E. The real problem is structural bias

F. What makes the author think that these are serious problems?

G. Four puzzles in international statistics

H. Responsibility and accountability of elected officials

I. Four suggested solutions to world hunger

J. Economists and prosperity

K. A personal note

A. Introduction

The language of this document is more direct than that of academic papers. It is an attempt to make sense of international statistics.

The observations below stem largely from the author's reactions to economic research documents. The texts of the documents seemed not to reflect the content of statements to the press.

For instance, a policy document from the World Bank resulted in the following reactions:

"The authors cannot know the average outcome for the poorest people, because they do not know survival rates";

"The authors show no signs of having assessed the purchasing power of poor people's money".

In brief, two problems with the theory behind international studies of "poverty" are: One, it left out the benefit of living. Two, it failed to estimate the cost of living.

Economists traditionally treat statistics about the economy as referring to changes for real people. But if people live longer, the economists say they have done worse. Economists have here confused cross-sectional statistics (about the economy) with longitudinal statistics (about people over time).

In philosophical terms, they have confused "average utilitarianism" with "the greatest good for the greatest number".

What is measured by economists in international studies of countries where most humans live cannot rationally be described as poverty, if poverty is unmet need. That is so because none of the following are estimated: food needs, other needs, food prices, other prices, or survival rates.

We might say that in official documents "poverty" is vague, and "reduction" is morbidly ambiguous.

Economic theory in the international studies confused inflation with the cost of living (the cost of living depends on what you need); and expenditure statistics with consumption (in reality to know about consumption you would need to look at not only the money but also at food prices).

The existence of such confusions may help explain several puzzles in international statistics:

1) the life-money puzzle: why Cubans, Sri Lankans and Keralans have lived a long time despite economists saying they were very poor;

2) the FAO-Bank puzzle: how the World Bank ended up reporting good progress for the poorest while the FAO reported bad progress for the hungry;

3) the overall Millennium Goal puzzle: why Millennium Goal Indicator 1 is significantly ahead of most of the others.

If malnourished people get richer, we might expect them to eat better. If they eat better, we might expect their health to improve. So why are health indicators not moving with economic indicators?;

4) the health puzzle: why are global health goals not being met?

B. Suggested axioms for social scientists

Some fundamental principles such as the following may seem to a reader to be both self-evident and necessary. See sections F and G especially for why the author thinks it is a serious matter that social scientists violated them.

Axiom 1 (Survival axiom)

It is not possible to aggregate outcomes for people during any period without knowing how many survived.

Notes on axiom 1: To claim to have aggregated outcomes in such a case is a cross-sectional fallacy. It is to confuse cross-sectional with longitudinal statistics.

One classic error of reasoning is to claim to infer the "average outcome" without knowing how many people survived the period. This error appears in all economists' studies of "distribution" where the authors claimed to know average benefits of policies to people in poorest fifths.

Another error is to use the proportion in poverty as an outcome measure for poor people as if it were an aggregate outcome measure. It is not; it is a selective statistic.

Axiom 1 is necessary to state because the errors have been widespread among economists and statisticians. Classic forms of this error appear in World Bank documents such as "Growth is Good for the Poor" (which claims to know the "average benefit" of policies without considering survival rates) and "How did the World's Poorest Fare in the 1990s?" (which is not possible to assess without survival rates).

Even where survival rates are known, the notion of an "average outcome" makes little sense where survival rates vary. The problem of the "value" of life is a philosophical problem with no solution. It is a moral matter - a matter of opinion.

The solution is for social scientists to provide accurate descriptions of their data trends, and not to infer longitudinal trends without grounds for doing so.

Where survival rates vary, there is no aggregate longitudinal trend. There are outcomes for survivors, and outcomes for the rest.

Axiom 2 (Price axiom)

In order to estimate consumption amounts from financial data, relevant price information is necessary.

Note on axiom 2: Quantities of goods cannot be estimated from financial statistics without looking at the prices faced.

This axiom needed to be stated because economists claimed from studies of "distribution" how much worse or better poor people did better or worse under different policies. The distribution of income (for families who do have incomes) is only part of the equation. The distribution of costs is another essential part.

Axiom 2 is necessary to state following repeated claims from macroeconomists in governments, the World Bank and universities to have data on extreme poverty in the species and/or under different policies, without looking at the price of food.

Axiom 3 (Requirements axiom)

In order to estimate economic gains and losses to a person, it would be necessary to know their level of need at the start and end of the period.

Notes on axiom 3:

i) An inflation rate does not tell a researcher the cost of living. The cost of living is dependent on both prices and quantities needed.

ii) It is not possible to infer consumption adequacy without specifying consumption needs.

iii) It is not possible for an economist to infer a poverty trend (trend in unmet need) without estimating the proportion of children's meals required.

iv) In some countries, people may need to spend more on rent while in others they may tend to live on their own land.

v) Many needs are matters of opinion, not science.

Axiom 3 is necessary to state as a result of the widespread practice among economists of using per capita figures (such as the World Bank's claims concerning global poverty) despite the fact that the proportion of children varies across countries and times; and failure to estimate needs.

On September 18, 2001 David Dollar, who became Director of Developmental Policy at the World Bank, gave a speech at the Cato Institute in Washington DC. In that speech he claimed to have measured how people's nutritional levels changed under different policies. This claim was entirely untrue. First, he did not know about longitudinal trends: he did not know about survival rates. Second, he did not know about food prices under different policies. Third, he did not know about quantities needed, of food or anything else. He did not know how many people were children, or about needs for expenditure on rent or fuel, and so he had not measured consumption or consumption adequacy. Nor did he know the quality of the food: he mentioned having measured the amount of protein people had eaten. Perhaps Dr Dollar was in shock after his country was attacked. But substantially the same mistakes appear elsewhere in his writings on policies and poverty.

Axiom 4 (Wealth axiom)

Economic wealth includes assets and freedom from debt.

Note on axiom 4: For people with the least economic resources, land ownership may make the difference between life and death in a crisis.

Debt levels may determine a person's basic needs for money. Interest can be expensive.

Wealth may also include environmental assets.

Axiom 4 is necessary to state following repeated claims from World Bank staff and others to have measured "average benefits" to people under different policies, and "gains" and "losses" to poor people, for example from 1981 to 2001.

Landlessness is a known problem. Land reform sometimes takes place. People borrow in crises.

Axiom 5 (Axiom on the boundaries of social science)

How "well" or "badly" people fared is not a scientific matter.

C. Two overarching problems in development economics

Overarching problem 1 (Macroeconomics is a cross-sectional science):

Statistics about the economy are not statistics about people

The first problem with economists' claims about global poverty is that it is not possible to aggregate outcomes for people without knowing how many survived the period.

Cross-sectional statistics are about people alive at different times.

Longitudinal statistics are about people as they go through their lives.

"Poverty reduction" is ambiguous, since if the number of poor people falls, this does not mean that the poor people got richer.

In that respect, economists worldwide have confused not only cross-sectional with longitudinal statistics, but also "classical utilitarianism" (the idea of maximising good for the greatest number) with "average utilitarianism" (the idea of maximising the average at a later date".

The economists did not realise that in a country where people live longer, the resources are shared among fewer people during any period. Common sense says that people do better, other things being equal, if they survive longer. But also in economic terms, people have more use of resources if they live longer. They are more prosperous.

There could be no objective solution to the longevity problem, since the relative worth of life versus money is a matter of opinion.

So the question "how serious has the economists' error been in real-life studies?" cannot be answered in a scientific way, even where survival data are available.

The size of the economists' longevity error is a matter of opinion.

Overarching problem 2: Income is not profit, and nor is expenditure.

Some influential economists have claimed to measure poverty without estimating the cost of living.

The second problem is that poverty is a state of need, but the theory behind the economists' claims failed to define needs.

Whether or not poverty can be quantified is a reasonable question to ask. It is perhaps equivalent to the question whether prosperity can be quantified.

What is perhaps unreasonable is for someone to claim how much better or worse the poorest people did under a policy without any reference to the following:

a) survival rates

b) food prices

c) other prices

d) food needs or

e) other needs

f) changes in assets

or

g) changes in debts.

It is important to understand what economists refer to when they write about "income". It is a shorthand word for something more complex. In respect of countries where most humans live, the statistics often refer to a) consumption expenditure and/or b) the monetary value of food eaten.

From these statistics, economists have claimed to find "average benefits" of x% from a policy, or that y number "rose out of poverty".

But these statistics about money cannot tell a researcher about food. Economists have not yet compiled food prices for the target group in each country. Nor have they compiled prices for anything else which the target group need.

Let us be clear on this. The fact that someone spends 1% more does not mean that they bought 1% more.

What about people who grow their own food? If the economist sees the money value of their food go up 1%, does that mean they ate 1% more? No.

Do the economists have some reason to ignore this inflation problem? Apparently not. The present author found very little reference in the academic literature to this fundamental problem: economists have assumed policies always affect food prices the same as other prices. When approached on this subject, professors of economics could only agree that it was a problem.

The economists appear simply to have confused inflation in the economy with inflation for the target group.

Economists have not yet estimated inflation for the poorest people under different policies.

Therefore, it would seem economists cannot know which policies resulted in which increases or decreases in consumption for hungry or malnourished people.

That is the inflation problem, one part of the general cost-of-living problem.

The next part of the cost-of-living problem is this. The statistics are per capita statistics - per person.

Why is that a problem? Because the proportion of children varies between countries, and globally the proportion of children is going down. Adults need more food than children.

Suppose the FAO are right that the ratio of children to adults is falling in their target group, due to falling birth rates. The FAO make this assumption for their global hunger reports (which are not very good for other reasons, including the longevity error).

Other things being equal, a World Bank dollar per day is not enough in 2004 to feed people at the same level as in 1990.

The present author was unable to find any reference to this problem in economists' discussions of the trend in world poverty up until the end of 2003. Again, when professors of economics were approached they merely agreed that it was a problem.

A third problem with treating inflation as showing the cost of living is this: How much you need does not only depend on your size. It also depends on the weather, on your need for rented accommodation, transport, and other factors.

The ten confusions I list below may appear to amount to a bold claim. Certainly, World Bank statements to the media, and DFID statements to Parliament during the last few years have been based on these confusions. The people making the statements include Chief Economists, the President of the World Bank and British Governors of the World Bank.

They have made claims concerning the economic effects of policies on poor people without reference to survival rates, food prices, food needs, other needs, assets or debts. That is perhaps not the way people would assess their own progress, and it is not clear why people might think it a suitable way of assessing the progress of anyone else.

They have made statements concerning the overall progress of poor people in the world, without reference to survival rates, food prices, food needs, other needs or assets or debts.

There are certainly economists who understand that assets are important to people. Some economists have recognised their fundamental mistake about longevity.

D. Ten confusions in development economics

In relation to international macroeconomic studies of the distribution of income/expenditure/monetary value of own produce, it appears to be standard in development economics to confuse:

1. Inflation with the cost of living

2. The average rose 1% with on average people had rises of 1%

3. Consumption expenditure with consumption

4. National inflation rate with inflation rate for poor people

5. Poverty reduction with poverty alleviation

6. Income rises with real income rises

7. Income rose 1% with expenditure rose 1%

8. The proportion of low spenders with economic gains to poor people

9. Expenditure rises with economic gains

10. World Bank expenditure data with poverty statistics

We might add that there are more dimensions to human welfare than financial. But the point is that the macroeconomists have not even got the financial part right.

Notes: Cost of living = prices x quantities required. Not just prices.

Average income, perhaps especially in poorest fifth, is influenced in wrong direction by survival.

National inflation rates are mathematically dominated by unnecessary goods.

Economic gains include changes in assets and debts.

E. The real problem* is structural bias

(* in the financial part of macroeconomists' analysis)

The problem with these confusions is not simply that they introduce elements of unreliability into economists' statements.

The problem is that they introduce structural biases into the conclusions.

(Note: These are not errors of data analysis, or problems of data availability. They are problems of the inaccurate description of research results.)

It is important to understand that economists do not just look at one country at a time. The relevant question is whether the policy advice is based on plausible assumptions in comparisons between countries.

Logically, using these methods, an economist would say

i) that a country which keeps luxury prices low has helped the poor to eat more;

ii) that a country which keeps food prices from rising fast has not helped the poor as much as it really has; and

iii) that a country which helps the poorest survive looks as if it has "failed to reduce poverty".

Someone might say "maybe none of these mistakes matters, because the statistics generally move in the "right" directions".

But we have to realise that what we are looking at are general theoretical errors: misdescriptions of numbers. Where the "income share of the poorest fifth" rose 1%, the economist does not know whether this is due to falls in the prices of luxury goods, or to rises in consumption among the people in the "poorest fifth", or excess deaths of people in the poorest fifth; food prices may have risen 50% or fallen 50%. The macroeconomist cannot tell what has happened to those people's consumption.

What is certain is that the economists do not know how much more, or more adequately, the poorest people ate under each policy. What is also certain is that there are going to be cases where these methods give the wrong answer, and economists cannot know what the circumstances are.

We also have to realise that the general theoretical errors underlie economists' claims that particular policies help poor people by certain amounts. To assume that all policies affect food prices in the same way seems strange.

These are structural biases, in that if countries save the lives of the poorest they get penalised; if they subsidise food they get penalised.

Even supposing economists knew that none of these things had been problems in the past, that would not mean it was reasonable to ignore the problems in the future. But in any case, it is easy to think of past situations where poor people have died in large numbers, and food subsidies are not unheard of.

So we know that there is a tendency in these methods of describing data towards discounting the effects of food subsidies and survival of the poorest people; we know that there is a tendency towards discounting the effects of landlessness and debt. We know that there is a tendency towards discounting the effects of changes in prices of basic services.

F. What makes the author think these are serious problems?

Two things.

First, economists have not been very aware of the problems.

I was astounded to find any economist, let alone the World Bank, using statistics which would look better if the poorest died as the basis for policies to help the poorest. But it emerged that this was how macroeconomists usually went about their business. When I raised this with well-known professors, they either did not reply or made it evident that they had not thought about the problem as a general theoretical problem.

I was astounded to find any economist would assume inflation rates for the poor and rich were the same under all policies. This also is standard in macroeconomics.

Broadly, the same appeared to be true of the children's meal requirements error. I was unable to find any economist who had made the point about the World Bank "halving poverty" statistics being wrong through failing to estimate food needs.

The same appeared to be true of the confusion between the inflation rate and the cost of living. In the academic literature on poverty and policies, this seemed not to feature.

Where people have ignored a problem, they cannot in general know whether it is small or big.

Note: The longevity error is not quantifiable in any case, since the value of life is not objectively measurable. How important survival is to people is a moral and therefore a political matter, not a scientific one.

The second reason why I think these are serious problems for economists' policy advice is that the existence of the confusions provides neat, if partial, solutions to:

G. Four puzzles in international statistics

Puzzle 1 (the longevity-GDP puzzle)

Why do Cubans, Sri Lankans and Keralans live a long time despite economists saying they are very poor?

1. A partial solution to this puzzle is in the question. In countries where people live a long time, the resources are shared among fewer people during any period.

Therefore, they are better off economically, other things being equal, than in other countries.

In countries where poorer people survive longer, the average falls because of this.

In countries where retired people survive longer, the average falls because of this.

The statistical effect on the economic figures may be small. But it is undeniable.

2. Remember that economists' inflation rates are biased in favour of the minority. Plausibly, in countries where people live a long time, healthy food is cheap and needs are few.

It is important to understand how economic statistics ("gross domestic product", "average income") are derived. The raw figures are deflated by a price index (inflation rate). The important thing to understand is that national inflation rates are disproportionately affected by prices of luxury goods. It is the total amount spent on a type of item which determines how influential it is in the overall inflation rate.

Let us say that in a small country £1 million is spent on cake, and £1 million on bread. Even if only a few people eat cake, cake prices influence the overall inflation rate (and so the "income" statistics) as much as bread. The inflation rate for bread is not reflected properly in the overall rate.

If cake prices fall, the macroeconomist says "the poor have got richer", and the World Bank says "the policy was good for the poorest!", and the British Government Target Strategy Paper (2000), or background document for the White Paper (2000), or the Cabinet Office report "Adding it Up", says "the policy reduced poverty".

In reality the economists have not distinguished between inflation rates for people who buy different things.

What about people who do not have an income and/or grow their own food?

In the case of people who grow their own food, national statistical offices look at the food which people eat, then value it in money. The economists then look at the money value and adjust it by the national (wrong) inflation rate. The World Bank scientific method is to then say that people did x% better or worse.

This is especially odd because they could find out from the surveys how much people consumed (if the surveys were reliable and comparable, which is doubtful). The surveys measured the food amounts and then gave the food a money value. The economists looked at the money value assigned to the food. The problem is that that money value was adjusted by the luxury-dominated inflation rate. The economists then implied they know how much food people ate, which is not only the long way round, it is the wrong thing to say about the money.

Macroeconomists have not adequately distinguished between inflation for necessary and unnecessary goods.

A flippant person might say this:

"In a country where prices rise for luxury goods for the minority, the economist worries about inflation more than the people do on average; and that in a country where prices for basic goods rise for the majority, the economist worries less about inflation than the people do on average."

Some goods are more necessary for survival than others. Governments have different priorities in respect of keeping people alive. So it is not surprising that economic statistics do not correlate very well with life length.

GDP will rise if the government pays people to do useless jobs - such as economists spending time adding up the wrong numbers.

GDP rises if people take more addictive drugs - alcohol, nicotine - and have earlier deaths (the Economist magazine has noted this point in the past, without noticing the implication concerning statements about how well or badly people have done: the difference between "the average gain" and the "change in the average").

GDP will rise if the government encourages people to take commuting jobs which increase transport costs.