Why is poverty and economically interesting topic, and what are the causes of its existence and persistence?

Poverty is the inability of an individual or family to command sufficient resources to satisfy basic needs. Understanding the causes of poverty and why it persists is so important for economists, as it aids our understanding of how policy intervention in developing economies can be used most effectively. Poverty leads to other developmental problems such as high fertility, poor human capital investments and environmental degradation, and thus being able to measure poverty is of great use to us as economists. Indeed the classic method of measuring poverty is by constructing a poverty line of income, a level of income below which one is deemed to be unable to satisfy basic human needs. This aids policy makers as it gives an indicator as to the proportion of the population that need to be lifted out of poverty. As for the causes, poverty is often determined by history and path dependence. Indeed with a lack of institutions to aid social mobility, poor parents will often have poor kids and history repeats itself in a perpetual cycle. It is very difficult for those in poverty to lift themselves out, for example because they are locked out of credit markets as a result of a lack of wealth and thus unable to borrow to spend at present. Furthermore, there is a lot of literature surrounding the impact of poor nutrition on creating a poverty trap. Those in poverty have limited access to good nutrition which has harsh consequences; it causes muscle wastage, retardation of growth and increased illness. This results in a lower capacity to work and thus lower capacity to generate an income, which further hinders the ability to seek adequate nutrition and thus a poverty trap is created.

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Answered by Kabeendan M. Oxbridge Preparation tutor

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