Poverty
Chapter 2 - Society
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Welcome to the Poverty page
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In 1776, Adam Smith argued that poverty is the inability to afford "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."
In 1958, John Kenneth Galbraith argued, "People are poverty stricken when their income, even if adequate for survival, falls markedly behind that of their community."
In 1964, in a joint committee economic President's report in the United States, Republicans endorsed the concept of relative poverty: "No objective definition of poverty exists. ... The definition varies from place to place and time to time. In America as our standard of living rises, so does our idea of what is substandard."
In 1965, Rose Friedman argued for the use of relative poverty claiming that the definition of poverty changes with general living standards. Those labelled as poor in 1995, would have had "a higher standard of living than many labelled not poor" in 1965.
In 1967, American economist Victor Fuchs proposed that "we define as poor any family whose income is less than one-half the median family income." This was the first introduction of the relative poverty rate as typically computed today
In 1979, British sociologist, Peter Townsend published his famous definition: "individuals... can be said to be in poverty when they lack the resources to obtain the types of diet, participate in the activities and have the living conditions and amenities which are customary, or are at least widely encouraged or approved, in the societies to which they belong (page 31)."
Brian Nolan and Christopher T. Whelan of the Economic and Social Research Institute (ESRI) in Ireland explained that "poverty has to be seen in terms of the standard of living of the society in question."
Relative poverty measures are used as official poverty rates by the European Union, UNICEF and the OECD. The main poverty line used in the OECD and the European Union is based on "economic distance", a level of income set at 60% of the median household income.
| Source |
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| Wikipedia - 2026 |
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Core ideas
Poverty line
The international poverty line, which is used to measure extreme poverty in low-income economies, is set today (2025) at $3.00 per person per day. According to the latest data, around 1 in 10 people globally are estimated to be living in extreme poverty, a significant share of whom are in Sub-Saharan Africa or fragile and conflict-affected situations.
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| June 2025 Update to Global Poverty Lines |
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| The update results in a new international poverty line of $3.00 per person per day |
| https://www.worldbank.org/en/news/factsheet/2025/06/05/june-2025-update-to-global-poverty-lines |
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Nearly three-quarters of the world’s population now lives in middle-income countries. Yet almost one in five people around the world today live on less than $4.20 per day, the poverty line for lower-middle-income economies, and nearly half the global population lives on less than $8.30 per day, the poverty line for upper-middle-income economies.
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Stress and poverty
There is strong empirical support for the notion that poverty gets “under the skin,” meaning that the experience of poverty can lead to long-lasting biological changes in individuals.
Childhood poverty is linked to both increased activity in threat-detecting brain circuitry and decreased activity in self-regulatory circuitry. When a child is extra vigilant to potential threats in the environment at school (e.g., remarks from a teacher or classmate, or a sense of being “behind” her peers) and lacks the tools to reason through and regulate that sense of threat, she is unlikely to be able to focus optimally on learning in the classroom.
Importantly, the same neural mechanisms may confer children growing up in adverse circumstances with “hidden talents” that facilitate their ability to function in harsh, unpredictable environments, including enhanced social perception, attention shifting, and creativity.
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| Disrupting links between poverty, chronic stress, and educational inequality - M. Harms - Science of Learning - 2023 |
| https://www.nature.com/articles/s41539-023-00199-2 |
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Poverty and the all-consuming fretting that comes with it require so much mental energy that the poor have little brain power left to devote to other areas of life, according to the findings of an international study.
The mental strain could be costing poor people up to 13 IQ (intelligence quotient) points and means they are more likely to make mistakes and bad decisions that amplify and perpetuate their financial woes.
Eldar Shafir, a professor of psychology and public affairs at Princeton who worked on the research team, said it was not stress in general, but financial worries in particular, that led to a reduced ability to make sound decisions. "The poor are often highly effective at focusing on and dealing with pressing problems," he said. "But they don't have leftover bandwidth to devote to other tasks".
| Content source |
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| Scarcity and cognitive function around payday: A conceptual and empirical analysis - CSAE Working Paper WPS/202004 |
| https://www.journals.uchicago.edu/doi/abs/10.1086/709885?journalCode=jacr#:~:text=It%20is%20of%20course%20plausible,scarcity%20could%20diminish%20cognitive%20function. |
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