Re: Postrel on liberalization

[Diego Miranda <miranda@xxxxxxxxxxxxxxx>]

On Sun, 25 Aug 2002, Alan G Isaac wrote:

> Henry,   As I already indicated, not even a mediocre
> economist would overlook such an obvious point, and
> Sala-i-Martin is no mediocrity.  But since your suspicions
> run so deep, you can also turn to the papers.  From the
> "Rise" paper p.17:

If it serves to make an ideological point, many a mediocre economist has
often used nominal figures to convince a non-informed reader.  Take for
example the analysis about the 'explosive' growth of spending in Arngetina
since the late 1990s, or the 'evident' missalignment of relative prices
that finally resulted in devaluation.  In any case, Sal-I-Martin says

>     We use the conventional definitions of absolute poverty:
>     less than one dollar per day. The original definition is due
>     to Ravallion et. al (1991). These researchers used
>     “perceptions of poverty” in the poorest countries to place
>     the poverty line at $31 per month.

which is indeed an arbitrary measure, as also are a 2 dollars, a 4
dollars,or a .66 dollars per day 'poverty lines.'

Not only are these fake poverty lines set arbitrarilly  to suit a
particular taste for policy, but they are hardly  comparable accross
countries, even if you use 'constant' 1985 values.  First, the value of
the basket  of goods and services that makes up a poverty line varies from
country to country. Second, even if you were to accept that due to lack of
data you could do without calculating such basket, any other
arbitrary 'poverty line' should at least be PPP adjusted, which is not the
case in this piece.



Later , the definition
>     was changed to $30.42, and it then was rounded off to $1 per
>     day. The $1/day line was later adopted by the World Bank as
>     the “official” definition of“absolute poverty”. For some
>     reason, another poverty line mysteriously appeared in the
>     literature that doubled the original figure to two dollars
>     per day. The United Nations some times uses four dollars per
>     day. Of course, if one is allowed to raise the poverty line
>     arbitrarily, then one is bound to find that all persons in
>     the world are poor. In this paper we will stick with the
>     original definition of poverty and we will also analyze the
>     $2/day line.
>     It should be noted that all these definitions are expressed
>     in 1985 values. Since the Summers and Heston data are
>     reported in 1996 dollars, the annual incomes that define
>     $1/day and $2/day poverty in our data set are $532 and $1064
>     respectively.
>
>
> Cheers,
> Alan
>