The American Economic Association awarded a 36-year-old professor from Harvard University its highest honor, the John Bates Clark medal. This prestigious award, handed out every two years has boasted some notable honorees including Stephen Levitt, Paul R Krugman, Lawrence H. Summers, Milton Freidman and Paul A. Samuelson.

The most recent recipient of this award was Susan Athey. Noted for her analysis of how people react to uncertainty when faced with increasing levels of change, often while engaged in auctions Professor Athey was the first woman to receive the award. But she was certainly not the first to deserve it.

Mollie Orshanksy, had she not been pigeonholed at the Social Security Administration as a statistician may well have been qualified for such prestige. Her research into poverty thresholds for the SSA opened the eyes of policymakers to the possibility that poverty can be measured and not simply debated in some sort of abstract form.

The index she developed was based on nutritionally adequate food plans from statistics gathered by the Department of Agriculture. Enough information had been gathered to suggest that, after-tax spending on food consumed about a third of the average family’s income. Mollie took this information and developed 120 different thresholds in the hope of encompassing every possible combination of poverty.

Pinpointing a solution to poverty has been elusive. In her 2001 book titled “Poverty Knowledge” Alice O’Connor wrote that to understand what poverty was required “a commitment to using rational empirical investigation for the purposes of statecraft and social reform; a belief that the state, in varying degrees of cooperation with organized civil society, is a necessary protection against the hazards of industrial capitalism and extreme concentrations of poverty and wealth”. It was her hope that a capitalist economy could be maintained but that it needed to be applied “for the common good.”

The attempt to define poverty, as Ms. O’Connor wrote has “been subject to varying interpretations, to internal conflict, and to revision over time” that has, as far as the public debate is concerned, “defined poverty knowledge as a liberal as well as a scientific enterprise, starting with the efforts by Progressive-era social investigators to depauperize thinking about poverty--to make it a matter of social rather than individual morality--by turning attention from the "dependent" to the wage-earning poor.”

Trying to determine who is poor has created a political divide. The Orshansky index did not calculate the added costs of such economic burdens as housing, the costs of employment, which included transportation and childcare and the affordability of healthcare. Mollie’s simple equation served a purpose in helping solve one of the more perplexing challenges of her day: how to assure proper nutrition.

Her belief in this method was based on her own personal experience with poverty and the hope that, given the proper guidelines, a household could adequately feed its members. Her experience with Home Economics led her to focus on proper feeding as a way to change what was, up until that time, a difficult problem to measure and a doubly troublesome phenomenon to solve.

Although Mollie succeeded in drawing attention to the problem and her solutions actually halved the poverty rate of the time, it did not eliminate the poor. Since then, the number of poor in America tallied, as a percentage against the total population has remained steady. In other words, as the population has grown, so has the number of impoverished.

How is that possible? When you consider the useless debate over which economic expansion has proved more beneficial to the impoverished: the Clinton years (low inflation accompanied by the post-Cold War peace dividend) or the Bush years (tax cuts and deficit spending), neither succeeded in changing anything. Mollie had hoped that her index would ultimately influence policy.

Even as measurements of inflation and gross domestic product (GDP) have improved, the Census Bureau still relies on Mollie’s formulation. Liberals use to demonstrate the need for social reform; conservatives suggest that all economic boats will rise. Neither is right and to further complicate matters, neither group is necessarily wrong.

Poverty depends on where you live (urban living, which tends to be closer to jobs and services vital to survival and support is more expensive that rural locales), what you earn (or as some would have it, what you spend which suggests that poverty for some households is transitory) and how current policies are calculated (recommendations to the Census Bureau have included changes that reflect taxes, benefits, child care, medical costs, and regional differences in prices).

Excluding comparisons to other industrialized and developing economies is important in the formation of good policy. At what point do 34 million people of whom 13 million are children make for an acceptable poverty limit? Is the poverty that these people experience chronic or temporary, environmental or congenital?

Longitudinal surveys of income conducted over a period of three years often suggest that poverty is not static phenomenon. Information such as this is absent from traditional census based surveys, which usually focus on a much broader picture. Poverty observed in these types surveys can often spot changes in a month-to-month format.

While the Office of Budget and Management should offer methodologies for measuring who is poor, one need look no further than Adam Smith. In his “Wealth of Nations” he pointed to the ever-shifting landscape of necessaries, a measure of what is needed now to subsist as compared to what may have been considered a luxury a mere generation before.

Determining who is poor is almost as important as why and could affect policies on health insurance, immigration law, job quality and ultimately, education.

While Mollie’s index did bring the poor in clearer focus, it failed to offer a meaningful way of solving the problem. Perhaps using some percentage of the median income might be more useful in highlighting their plight as John Cassidy of the New Yorker suggested.

Circular debates about income gap and the quest for universal health insurance all skirt the larger issue of why we tolerate the existence of poverty. The late Ms. Orshansky had simply found a way to identify the poor. It is up to us to fix the problem not find a better measure.

© 2007 Paul Petillo
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