Poverty Highlights

Due to an excessive work load, this weeks’ newsletter will highlight a collection of earlier articles on the topic of Poverty.

Bolivians feel poor, but not that poor(L. E. Andersen)

According to official estimates, there are at least 3 million extremely poor people in Bolivia (about 38% of the total population). Judging from their very low incomes, they shouldn’t be able to buy even the minimum basket of subsistence goods. The majority of people in this group does not have electricity in the house, and thus none of the convenient inventions that run on electricity. Still, only a minority of them (18.5%) actually feel extremely poor (Continue reading…)

Poverty on a 62-foot yacht in the Pacific Ocean (L. E. Andersen)

Most of the people who write about poverty have never themselves been poor (including myself). This is not so strange, since the poor are too poor to write, even if some of them have the ability. They do not have the surplus of energy and time alone that is required to sit down and write to record or transmit their feelings, thoughts and ideas. They do not write blogs or diaries and they virtually never get hired as consultants to study poverty.

Might it be the case that the ones writing about poverty don’t really understand it? (Continue reading …)

Do Your Aid Projects Hurt the Poor? (L. E. Andersen)

There are many aid pessimists, like me, who would much rather be aid optimists. However, the empirical evidence on the effectiveness of foreign aid is depressing, especially in poor countries where aid constitutes a significant share of GDP, as in Bolivia and Nicaragua.

Any particular aid project is unlikely to actually hurt the poor – at worst it may be ineffective and a waste of time and money. However, a continuous series of thousands of aid projects have the capacity to change the behavior of both individuals and government, and often in unanticipated and undesirable ways. (Continue reading…)

The First Principle of Development: It has to come from within (L. E. Andersen)

There are many ways for a country to develop, but there is no way to develop a country: Development has to come from within.

Just as you cannot help a child develop by doing his homework, giving him all the toys and candy he wants, and protecting him from all potential dangers, you cannot help a country to develop by giving it money, writing its poverty reduction strategies, or protecting it against basic market forces. (Continue reading…)

Envy, Black Magic, Growth and Inequality (L. E. Andersen)

It has been reasonably well-established in the literature that not only absolute income levels matter for the level of happiness, but also relative income levels. You don’t like to see too much poverty around you (thus the case for altruism), but you don’t like to see rich, ostentatious people either (causing envy). This article is mostly about the latter.

If you can’t increase your own income (for example because of low social mobility), then you can theoretically improve your happiness by reducing other people’s incomes. This would explain such unconstructive behavior as vandalism and black magic. (Continue reading…)

Gross National Happiness (By Lykke E. Andersen)

Economists, especially development economists, almost always measure the level of well-being in a society by per capita income, noticing that this simple economic measure is highly correlated with most other indicators of development they can think of (life expectancy, child mortality, income equality, education levels, etc.).

However, whereas income per capita correlates highly with a large variety of social indicators of development, it does not seem to explain happiness, or subjective well-being, very well. According to Lears’ Quality of Life Index (1), for example, people in Nigeria on average feel happier than people in Austria, despite the fact that per capita incomes (adjusted for purchasing power) are about 29 times higher in Austria and child mortality about 40 times higher in Nigeria (Continue reading…)

Lykke Andersen is the Director of the Center for Economic and Environmental Modeling and Analysis (CEEMA) at INESAD.