Social media has been ablaze with this question recently. We know we face a crisis of mass poverty: the global economy is organized in such a way that roughly half of humanity is left unable to meet basic needs. But the question at stake this time is different. A couple of economists on Twitter have claimed that the world average income is $16 per day (PPP). This, they say, is proof that the world is poor in a much more general sense: there is not enough for everyone to live well, and the only way to solve this problem is to press on the accelerator of aggregate economic growth.
This narrative is, however, hobbled by several empirical problems.
1. $16 per day is not accurate
First, let me address the $16/day claim on its own terms. This is a significant underestimate of world average income. The main problem is that it relies on household surveys, mostly from Povcal. These surveys are indispensable for telling us about the income and consumption of poor and ordinary households, but they do not capture top incomes, and are not designed to do so. In fact, Povcal surveys are not even really legitimate for capturing the income of “normal” high-income households. Using this method gives us a total world household income of about $43 trillion (PPP). But we know that total world GDP is $137 trillion (PPP). So, about two-thirds of global income is unaccounted for.