The importance and limitations of measurement

The importance and limitations of measurement

Chapter 2 observed that the human development approach was multi- dimensional, and that the selection of valuable capabilities will be done again and again, so that relevant capabilities are used in each context. Traditionally, poverty and inequality have been measured in the space of income. However, those advancing human development often wish to undertake quantitative analyses of achieved functionings in addition to income or consumption. The development of quantitative multi-dimensional measures of poverty and inequality is a new but rapidly-developing area and this chapter will provide some introduction to it.

Importance Numbers, as Székely (2006) observed, can move the world. Good measures

allow us to compare poverty and inequality across time and between groups, and contribute to policy design. The collection and summarizing of data in aggregate measures is part of an informed, rigorous and pragmatic approach to policy. This has been called ‘evidence-based policy-making’ by the Human Development Measurement: A Primer (Human Development Report Office, 2007).

Given how measurement affects policy analysis and formulation, decisions regarding whether one or multiple dimensions are considered, which indicators are used, and how the data are aggregated, are important because they influence who benefits from responses to poverty and inequality. Moreover, measures of poverty and inequality are important tools for advocacy. One strong motivation for undertaking data analysis is to support the formulation of more effective policy. Sound policies are grounded in sound analyses.

Yet because human development and the capability approach move beyond the metric of income, their measurement raises particular challenges. In the quote below Sen articulates well the challenges of developing a measure of capability living standard. The same tensions apply to measures of capability poverty, or indeed inequality.

There are two major challenges in developing an appropriate approach to the evaluation of the standard of living. On the one hand, it must meet the motivation that makes us interested in the concept of the living standard, doing justice to the richness of the idea… On the other hand, the approach must be practical in the sense of being usable for actual assessments of the living standard. This imposes restrictions on the kinds of information that can be required and the techniques of evaluation that may be used.

These two considerations – relevance and usability – pull us, to some extent, in different directions. Relevance may demand that we take on board the inherent complexities of the idea of the

POVERTY AND INEQUALITY MEASUREMENT

living standard as fully as possible, whereas usability may suggest that we try to shun complexities if we reasonably can. Relevance wants us to be ambitious; usability urges restraint. This is, of course, a rather common conflict in economics, and while we have to face the conflict squarely, we must not make heavy weather of it. (Sen, 1987, p20)

For this reason, in addition to quantitative measures, on which this chapter focuses, human development also seeks the rich insights that arise from qualitative interviews, participatory analyses, life histories and ethnographic research. These qualitative techniques are often used alongside quantitative techniques at every stage – in the selection of dimensions, in the triangulation of findings, in the identification of research hypotheses, and in the mobilization of a local response to deprivation. They provide powerful keys to understanding the causes of poverty, as well as methods of coping with adversity. Human development analyses are more accurate, powerful and locally effective when they combine quantitative measures with participatory and qualitative research. 1

Limitations At the same time, the goal is not to measure poverty – but to reduce it. And

too often interest in measurement seems to supplant practical action. This is in part because in some places more attention is placed on poverty measurement than causal analysis, or political response. Harris (2007) argues that mainstream poverty research has generally failed to address the dynamic, structural and relational factors that give rise to poverty. He warns of the risk that poverty research depoliticizes what is essentially a political problem.

Green and Hulme (2005) advance a similar argument. Poverty, they argue, is often conceptualized in such a way that it is not seen as the product of social relations. The technical measurement of poverty can seem to dissociate it from the social processes of the accumulation and distribution of wealth. Then, the profoundly political task of counting the poor is made to seem scientific and the value judgements which Sen argues should guide poverty measurement, are not explicitly faced. The political aspects need direct attention.

It might be relevant in this regard to re-invigorate aspects from the early developments of economic theory. The study of (the laws that governed) the distribution of wealth among landlords, capitalists and labourers was of primary importance, as can be seen in the work of Ricardo (1817) and Marx (1867). Indeed, such tradition was continued in many distributional studies later on, in what is called the study of functional income distribution. Those analyses report what percentage of the total income (or gross national product) generated in an economy goes into rents, profits and wages in return for the different factors of production. Although such studies may help to ‘unveil’ underlying social relations, they provide a partial picture of distributional issues, since households or individuals may own more than one factor of

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production. That is probably why the study of the personal income distribution, which looks at what each person in a distribution earns regardless of the source from which it was obtained, gained increasing attention and eventually displaced the former approach. Ideally one should consider all distributional issues and look for unifying frameworks. 2

In summary, we understand that quantitative poverty and inequality measurement is – although important – limited. It is just one building block of distributional analysis and policy design and implementation. Furthermore, poverty measurement needs to be accompanied by analyses of the social processes, structures and relationships that create poverty (and, we might add, by practical and political action to confront poverty). Thus while the remainder of this chapter focuses enthusiastically on inequality and poverty measurement, it does so fully recognizing the limitations of this task, and the need for complementary methods both of research and of action.