Counterfactuals in Life History Livelihood Studies of Poverty
Abstract
A modern trend in the literature on poverty has been to extract life histories of the poor. These detailed narratives obtained through interviews have a weakness. They do not elucidate the counterfacutals in the life history, that is what would have happened if some factors were different and therefore do not give a good indication of the appropriate policy to be undertaken to provide escape routes from poverty. We outline an approach that can be used to show the alternatives through financial modelling in spreadsheets of alternative senarios. Therefore advice and intervention can be structured by poverty eliminating organisations.
Argument
Life histories, or a narrative of the history of a poor person are frequently created by academics interested in understanding poverty. These are normally part of a larger livelihood analysis often combined with panel and cross sectional data to bring out qualitative facts. They also have the advantage of communicating the difficulties of the poor as well as giving tried and tested escape routes from deprivation.
They do not however give an indication of what would have happened if different courses and decisions were taken. This is known as the counterfactual. The term comes from the philosophy of physics and is used to understand the contradictions and problems of quantum mechanics. It’s application comes from the study of history. In order to suggest that say a country has had growing inequality due to liberalisation it is necessary to know what would have happened otherwise. It is certain that this is not something that can be found objectively, that can be measured with accuracy, however, an indication of the likely outcome could be found using a method used by financial analysts. In the financial world, practioners often need to find out whether a project would be viable under different senarios. In order to make an assessment of this they use spreadsheet models of the financial aspects of a project and run this under different assumptions.
We argue that this could be a useful way to expose the counterfactuals in the life histories of the poor. Simply, a model of the assets, income streams and outgoings are taken with the life history interview. An indication of possible income streams and asset accumulation is found by sampling regions with those opportunities that are accessible to the poor person who is being studied. It might be possible to find out that certain forms of education produced positive alternative life histories, though this would alter the outgoings and short term income of the subject. New ideas to find escape routes from poverty could come about.
Alternative viewpoints
The limitation and thus the thrust of future innovation in poverty research is to assess the macro impact of alternative life history strategies. That is for example, if everyone was to become a doctor then there would be oversupply and thus many unemployed, whereas the individual decision to become a doctor would improve the life history of the individual as well as her/his community. The need to niche (each person doing different things to make money) is therefore apparent from this statement, thus policy drawn from counterfactual life history analysis requires a heterogenous policy outcome. This means that policy must find many different sources of incomes and assets for the poor with care taken that the collective result is not self-destroying.
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