Posted: July 30, 2010 in Bubba posts

Social entrepreneurship is often viewed as a mean to fight poverty by generating both social and economic value. But what is poverty and (in particular) how can we measure changes in poverty rates? For example, is an absolute approach to prefer compared to a relative measure, and what is the best base for calculating poverty, income or consumption? These are some of the questions discussed in a recent paper by Meyer and Sullivan. They conclude: ”

“A disposable income based poverty measure better reflects the resources available for consumption than the official poverty measure. However, there are important limitations to the Census valuations of nonmonetary resources including health insurance, housing subsidies, and owner occupied housing. Given these limitations and the fact that consumption better captures well-being, rather than measuring the resources available for consumption, it may be preferable to measure consumption directly. A consumption based poverty measure would more accurately capture changes in well-being and the effects of anti-poverty government policies. Going forward, consumption measures will reflect the loss of housing service flows if home ownership falls or the decline in consumption that might be required to repay debts, both of which would be missed by an income measure.”

What is clear is that poverty is much more difficult to measure than it is to understand. Still, those talking about social outcomes and social impact seldom engages in these discussions.



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