A social engineering model for poverty alleviation

Poverty, the quintessential denominator of a developing nation, has been traditionally defined against an arbitrary poverty line; individuals (or countries) below this line are deemed poor and those above it, not so! This has two pitfalls. First, absolute reliance on a single poverty line, based on basic food consumption, and not on total consumption distribution, is only a partial poverty index at best. Second, a single expense descriptor is an exogenous quantity that does not evolve from income-expenditure statistics. Using extensive income-expenditure statistics from India, here we show how a self-consistent endogenous poverty line can be derived from an agent-based stochastic model of market exchange, combining all expenditure modes (basic food, other food and non-food), whose parameters are probabilistically estimated using advanced Machine Learning tools. Our mathematical study establishes a consumption based poverty measure that combines labor, commodity, and asset market outcomes, delivering an excellent tool for economic policy formulation. Current inequality and market consumption modelling appears to be subjective. Here the authors combined all three axes of poverty modelling - Engel-Krishnakumar's microeconomics, Aoki-Chattopadhyay's mathematical precept and found that multivariate construction is a key component of economic data analysis, implying all modes of income and expenditure need to be considered to arrive at a proper weighted prediction of poverty.