Monetary Approach

This approach identifies poverty as a shortfall in consumption or income. The approach sets a poverty line as defined by a threshold income below which a person is considered to be poor. The most common poverty line is the $1 a day, set by the World Bank. The main assumption made by this approach is that consumers' objective is to maximize their utility and that the ensuing welfare can be measured by their total consumption. And a proxy of consumption is their total expenditure or income. An income below what is considered necessary to consume a minimum basket of basic goods would then be defined as the poverty line.

Origins
The monetary approach has its origins in work of Booth and Rowntree in the late 19th and early 20th Centuries.

Booth and Rowntree pioneed and objective assessment of poverty -predefined by the external observer. But they also created an individualistic view of poverty, meaning that poverty could be defined with respect to an individual's circumstances, disregarding the role of society and the individual's social influences.

This view of poverty was consistent with the perception of poverty as a social ill, rather than as a disadvantaged situation. This created the idea of the undeserving poor; those who were poor by own will and who, quite clearly, did not deserve the help or assistance of society or the State. The deserving poor, on the other hand, where assited by charitable interventions designed to help the individual. The social causes of poverty were, therefore, not addressed.

This view, thankfully, is all but gone. But the policies of Reagan and Tatcher in the 1980's and the neo-liberal economics of the 1990s, have promoted the idea that poverty is a monetary phenomenon and that it can be reduced by addressing income alone. We must reverse this mentality and address the real issues.