There are a number of critical concepts that are important to understand when it comes to thinking about poverty and inequality. The first such concept I want to talk about is Amartya Sen's idea of entitlement. Sen used the word entitlements to contest the widespread assumption that famines occurred because of reductions and supply of food, because of food production and its decline. Instead he suggested, that even during famines, there is food available, but what happens is that the poor, or those who are unable to get food, don't get food because there's a collapse in their entitlement to food. Because available food gets hoarded and the poor are unable to afford the increased prices of food during periods of famine. This was a controversial idea when he first proposed it, but many people have come around to the view that famines occur because of a collapse in the entitlements that poor have to food. One can think of poverty in a similar way. Poverty doesn't exist because there aren't enough resources, there isn't enough wealth in the world. Just as famines don't occur because of the lack of food. Poverty exists because of the inability of the poor to command the resources that they need not to be poor, not to go hungry, not to have enough income. It is a function of the way our social arrangements ensure that some remain poor and some are rich. This lack of entitlement is what explains poverty and the absence of wealth and incomes and consumption necessary to survive comfortably among those who are poor. The second concept that is important to understand is that of Multidimensional Poverty Index. It has been difficult to compare poverty across countries and to measure poverty across countries, both because of the lack of data and because of disagreement over how to compare poverty in different countries. People have different resources, people value different resources. Cultural underpinnings of what counts as poor varies, and information about what counts as poor in different places doesn't exist in a way that it can be compared across countries and across cultures. The Multidimensional Poverty Index, or the MDPI, allows us to use the method to compare levels of poverty across different countries using widely available census dataset which are collected every decade in most countries. The Multidimensional Poverty Index has three dimensions: that of income or consumption or the material well-being, that of health, and that of literacy. The indicators for these different dimensions are listed in the slide here. Nutrition and child mortality over health. A number of years of schooling and school attendance for education, and cooking, fuel sanitation, breaking water, electricity, housing, and assets owned by a family or wealth or material poverty. Each of these three dimensions is weighted equally, such that health, education, and material well-being contribute equally to the estimation of the Multidimensional Poverty Index. Because information on each of these indicators is available in census datasets, one can construct indicator of poverty at national levels and at sub-national levels using census data and collect information on how it has changed over time by looking at information across decades. Building on the contributions of the Multidimensional Poverty Index and thinking about how to have a more encompassing sense of poverty and well-being, we can think of what the indicators for well-being might be. Well-being stands in contrast to poverty, but it is different from wealth or income. Simply having high levels of wealth or high level of income is insufficient to have high levels of well-being. We can think of well-being as a composite measure of both material and subjective aspects of poverty or the opposite of poverty. The material indicators of well-being are similar to those included in the Multidimensional Poverty Index: consumption, income, assets. Assets can be different livelihood capitals. We'll talk about what those are, health and education. But subjective aspects include the extent to which people are happy or satisfied with their lives. Because one can ask this question of anyone in any place and use their expression of satisfaction with their lives or happiness in their current circumstances as an indicator of their well-being. This is something also which can be compared across cultures and across countries. Large-scale datasets, similar to those of the census, do not exist for measures of happiness, but of satisfaction. But increasingly, many researchers are collecting data on subjective well-being. So as to enable comparisons of levels of well-being, it was estimated subjectively by those who were answering questions on this issue. They can be compared across different countries, and thereby well-being can be measured across cultures and across nations as well. I just mentioned livelihood capitals. Livelihood capitals are important in thinking about how to reduce poverty. People's ability to address poverty is linked to their capitals and to their labor. What does it mean to say livelihood capitals? and how are they linked to efforts to reduce poverty? For the longest time, economists and other social scientists felt that reductions in poverty were linked to the extent to which people were able to avail financial capital or credit. Those who had access to credit, those who could get loans from banks or from other institutions, could use this to increase their capacity to generate an income. Just as firms and organizations access capital from banks to increase their incomes to undertake new economic activities, so also could households. But over time, we have come to recognize that financial capital is not the only capital necessary for a family or an individual to be able to generate an income. In addition to capital of the financial type, it is also important for households and individuals to have access to other capital which are instrumental in their ability to use financial capital to generate an adequate income. The first such capital that was talked about and that was researched was human capital. The connotation here is very simple. Those who are better educated, those who have better training, those who have some skills, all of these constitute human capital. Those individuals, those families, will be better able to make use of access to finance. But in addition to human capital and financial capital, we have now come to recognize that social capital, physical capital that is infrastructure, and natural capital that is different features of the environment, are also instrumental in enabling households and families to move out of poverty. Where families do not have access to any of these five types of capitals, transfers of resources are crucial to allow them to have an income or to increase their consumption, and over time perhaps even to save and build some fashion capital. But where families and households, even those who are poor, have access to some of these five different forms of capital, it may be possible for them to engage and to embark on a self-sustaining path out of poverty. The absence of different capital and the inability of households to make an income and to move themselves out of poverty is often a situation that have been called poverty traps. Take a look at this video for a better understanding of poverty traps, as it explains what poverty traps are. Click on this YouTube video link.