Economic Theory of Poverty

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Economic Theory of Poverty Aimee Vroman Strayer University Econ Problems and Issues ECO 405 Professor Charles Fairchild November 6, 2011 Abstract When it comes to poverty, we live in a double standard society. On both sides of the political arena, they use poverty to their advantage and yet refuse to do anything about it. On one side we speak of one person, one vote and equality of opportunity and on the other side classical economics theorizes that the existing income inequalities and the resulting wealth inequalities cannot be eliminated by state intervention. Such interventions lead to decrease in national income. Income and wealth inequalities in an economy are common. In market economies they can be more prominent. One idea of poverty is income below subsistence level. Sources of poverty include differences in wealth, differences in personal ability, and differences in education and training. Antipoverty policies put in place by some governments include food stamps, welfare assistance, and subsidies on goods of mass consumption. Throughout this paper we will explore these parts of the theory together in the hopes that we come to a better understanding of poverty as a whole. Economic Theory of Poverty Poverty is the state of one who lacks a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. A little more than one and half billion people are estimated to live in absolute poverty today. Relative poverty refers to lacking a usual or socially acceptable level of resources or income as compared with others within a society or country. For most of history poverty had been mostly accepted as inevitable as traditional modes of production were insufficient to give an entire
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