Lant Pritchett of the Center for Global Development argues that the idea of “extreme poverty” — that global poverty-fighting efforts ought to focus on lifting people above a “dollar a day” standard — is deeply flawed, and that policymakers should instead rely on a $10 dollar a day (or, elsewhere, a $15 dollar a day) poverty standard. Using an extreme poverty yardstick, the world has made a great deal of progress in recent decades as a growing number of countries have taken advantage of the opportunities created by globalization. One 2002 study found that the dollar a day standard for income (as opposed to consumption) implies that only 6 percent of the global population is poor. Using Pritchett’s preferred yardstick, we still see progress, yet 5 billion of the world’s 7 billion people would be considered poor. Pritchett’s central argument that a “dollar a day” standard is arbitrary, and that it shifts focus away from those who live between the dollar a day and the $10 dollar a day mark, people who would be considered unacceptably poor by the standards of the affluent market democracies. The heart of Pritchett’s objection can be found in a paper he published a decade ago — a higher poverty standard will tend to justify a broader array of poverty-fighting interventions than a lower poverty standard.
Pritchett is also the intellectual leading light behind the new open borders movement, a central text of which is his 2006 monograph, Let Their People Come. My sense is that his advocacy for a higher poverty standard and his support for open borders are closely related. Conversely, my skepticism about open borders has made me more sympathetic to some of the arguments Paul Collier raises in his controversial new book Exodus, which raises a number of issues migration advocates tend to ignore, e.g.:
Migrants capture the lion’s share of the large productivity gain from migration, and this handsomely repays the initial investment in the costs of the journey. But are there any continuing costs of being an immigrant in a culturally somewhat alien environment? As with the net effect on host populations, data permitting, we can use happiness as an integrating measure of economic gains and social costs. Whether happiness is a good measure of well-being is currently controversial. Research finds that above a modest income threshold increases in income do not generate sustained increases in happiness, although they do have transient effects: if you win the lottery you feel happier. But the warm glow fades away after a few months. If we apply this to migration, for the typical migrant from a low-income country to a high-income country, the income gain is overkill. Income increases from well below the threshold to well above it. According to the economics of happiness, the first few thousand dollars would increase happiness, but the remainder would be slack. Above the threshold by far the most powerful determinants of happiness appear to be social: marriage, children, and friends are the stuff of happiness, not the size of a paycheck. Migration has clear effects on these social characteristics, but they are negative. Families are separated, and the migrant spends his life in a culturally alien environment. He may tune in to the radio from his home country, surround himself with friends from the diaspora, and return home annually, but day by day the absence from home may tend to make him less happy. If we accept that happiness is a usable proxy for the quality of life, a convenient feature for our purposes is that it subsumes both the effect of higher income and any nonmonetary psychological costs: it gives us the net effect of opposing forces.
Collier goes on to consider the so far very limited research of migration on subjective well-being — a study on research from Tonga to New Zealand and a separate study on rural-to-urban migrants in India:
A tentative inference from these studies is that migrants incur substantial psychological costs that may be broadly commensurate with their large economic gains. The implications of this inference may appear to be far-reaching. The massive productivity gains from migration that so excite economists and that migrants capture appear not to translate into additional well-being. Migration does not deliver the anticipated free lunch, or rather the free lunch comes at the price of indigestion. But these implications themselves need to be qualified. Even if the psychological costs of migration turn out more generally to be consistent with these initial studies, migration might nevertheless eventually raise well-being. In the case of rural-to-urban migration within the same country, a reasonable presumption is that the children of migrants grow up without the nostalgia of their parents: for them the city is home. This second generation and subsequent ones not only have higher incomes than they would have had their parents remained in the village, but, since they themselves do not suffer offsetting psychological costs, they are also happier than they would be had their parents stayed in the village. Rural-urban migration thus conforms to the nineteenth-century narrative that migrants move for the benefit of their children rather than themselves. Urbanization is essential for opening the opportunities that enable the mass escape from poverty. The psychological costs borne by migrants may well be enormous, wiping out the income gains that accrue to them, but they are unavoidable costs of progress and so have the status of investments.
But for international migration from poor to rich countries, both the income gain and the cultural dislocation are an order of magnitude greater than those of rural-urban migration. Whether the psychological costs are for a single generation or persist depends upon whether subsequent generations feel at home or continue to feel dislocated. Whereas the costs of rural-urban migration are highly unlikely to persist beyond the first generation, in some situations the descendants of migrants might continue to feel alien. In the worst-case scenario, continuing psychological costs would offset the gains for several generations: migration would not be an investment, it would be a mistake.
One concern about adopting a radically higher global poverty standard is that it might stack the deck in favor of poverty-fighting interventions that greatly reduce income poverty while potentially increasing the psychological costs associated with displacement, e.g., migration from poor to rich countries. Pritchett is absolutely right that any global poverty standard is subjective, and if we’re going to adopt a global standard for illustrative purposes, it’s not clear that we ought to adopt a standard built around the world’s most affluent countries rather than, say, a more representative sample of countries. Moreover, it might make more sense to focus on subjective well-being, which is influenced by factors like the strength of family ties and cultural displacement.