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Measuring Poverty: A New Approach
Second, while it is surely not easy to arrive at a specific concept or measurement of economic deprivation (see below), the same problem applies to other kinds of deprivation, and the notion of economic deprivation has the advantage that policy makers and the public have experience with its measurement and intuition about its interpretation and movement over time. Third, since many public programs and debates pertain to the economic sphere of life, it is important to have a time-series measure of economic deprivation. If a broader concept for the official "poverty" measure were adopted, there would still be a need for a measure to track the effects of programs and policies on the economic domain.
The nation's understanding about and commitment to the alleviation of poverty has been informed for many years by the official measure of economic deprivation. We think the function of that measure should be retained much as it is now. If the current measure were internally consistent and not flawed, in ways we describe below, we would be inclined to recommend its continuation. But we do find it unacceptably flawed for its important uses with respect to government policies and programs, academic research, and public understanding; thus, we recommend a new measure, but one that retains the concept of economic deprivation as the core notion of poverty.
This concept of poverty must be distinguished from "welfare" and "well-being." Poverty is a circumstance, defined by a set of specific conditions that are considered to reflect economic deprivation. One is said to be ''in poverty" if those conditions are met (i.e., if one's resources are below a threshold level for needed economic consumption) and "not in poverty" if those conditions are not met. Welfare is a term for certain government assistance programs or the resources that are transferred by those programs, such as Aid to Families with Dependent Children. More generally, the term welfare is sometimes used to mean well-being, which is a much broader term capturing the overall condition of a person. In contrast, "economic poverty" refers to a circumstance defined by a low level of material goods and services or a low level of resources to obtain those goods and services. This distinction is maintained by the concept of poverty that we use here.
While we use economic deprivation as the underlying concept of poverty and devote most of this report to its definition and measurement, we acknowledge that it is not easy to specify in a precise manner what it means to be economically deprived, even in a narrow sense. The general idea certainly seems intuitive and transparent. For instance, Adam Smith as far back as 1776 linked economic poverty to the want of "necessaries," which he defined as "not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without." Commonly, such a concept is translated into a dollar level that is deemed adequate to obtain necessary goods and services. The official U.S. poverty measure