Measures of Material Hardship: Final Report. Role of Individual Choices and Social Norms

04/01/2004

The role of individual preferences and social norms also should be considered when defining and interpreting material hardship. Ravallion (1994) notes the difference between the "welfarist" (choice-based) and "non-welfarist" (norm-based) approaches.

  1. [Welfarism] aims to base comparisons of well-being, and public policy decisions, solely on individual 'utilities'  the preferences of individuals themselves  while [non-welfarism] typically prefers to base assessments on certain elementary achievements, such as being able to afford to be adequately nourished or clothed, and may pay little or no regard to information on utilities per se. (p. 4)

The choice-based approach, or welfarism, assumes that rational people can and will make choices that maximize their individual well-being, regardless of whether their choices are consistent with a societal, or norm-referenced, standard. In contrast, the norm-based approach (non-welfarism) assumes that there is some bundle of basic needs or commodities that form a minimum standard that applies to everyone regardless of preferences. For example, societal norms may say that indoor plumbing is a minimum necessity, but an individual may voluntarily forego this "necessity" to live in a remote cabin in the woods because he would rather live in an isolated place than have indoor plumbing. A welfarist would judge that the individual is better off for doing so; a non-welfarist, that the individual is worse off.

The norm-based (non-welfarist) approach reflects much of what has been done in resource economics and research in developing countries, where a minimum standard of basic need is identified for a population and an assessment is made of the extent to which that population falls below these minimum standards. In the US, however, virtually no one must go without the very barest necessities that are literally essential to sustain life. At the higher thresholds used in domestic analyses of material need, households may plausibly choose to make trade-offs or forego what are called "necessities" (indoor plumbing, a working automobile, a visit to the doctor) for reasons other than lack of resources.

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