between economic, environmental, and social conditions and the choices people make. Livelihoods depend not only on current incomes but on how individuals, households, and nations use resources over the long term. Physical and financial capital is critical and relatively easily measured. Equally important but less easily measured are sustainable use of natural capital and investment in human and social capital.

Poverty and hunger

Extreme poverty (crudely measured by the percentage of people living on less than US$1 per day) in developing countries decreased from 28% in 1990 to 19% in 2002, and is projected to fall further to 10% by 2015 (World Bank, 2006c). Progress has been particularly striking in East Asia and the Pacific, where the target of the MDGs has already been achieved, and in South Asia, where progress is on track. But the proportion of people in sub-Saharan Africa who live in extreme poverty has changed little since 1990, and remains at about 44% (World Bank, 2006c). The prevalence of undernourishment has fallen from 20% of the population of developing countries to 16% over the past decade, with reductions in Asia and Latin America partly offset by increases in Africa and the Middle East (World Bank, 2006c). Poverty is most pronounced in Africa and South Asia.

     In the simplest terms, hunger can be thought of as the situation that occurs when consumption falls short of some level necessary to satisfy nutritional requirements. Similarly, poverty can be thought of as the situation that occurs when income falls short of some level defined by society, usually in terms of the ability to afford sufficient food and other basic needs. These definitions provide a starting point, but simple definitions mask more complex relationships. In fact, income and consumption fluctuate in response both to changing conditions and to choices made by farmers and others. This challenges us to consider more carefully how hunger and poverty arise out of the interaction between economic, environmental, and social conditions and the choices people make.

     Hunger is still the result of insufficient consumption, but insufficient consumption may itself arise for several reasons. For example, household income may be insufficient to acquire sufficient food to meet the nutritional requirements of its members, or food may be inequitably distributed within the household. Alternatively, income may allow a household to acquire sufficient food, but doing so may leave insufficient income to meet other needs, such as paying costs associated with schooling-forcing the household to choose between competing priorities. Similarly, poverty is still the result of insufficient income, but insufficient income may itself arise for a variety of reasons. For example, drought or illness might reduce the amount of crops or labor a household has to sell, while low wages or prices may reduce its value (Sen, 1981). Alternatively, income may be low (or high) in part because of choices a household made earlier in the season, such as which crops to plant, or how much fertilizer to apply, or whether to migrate in search of employment. These choices in turn depend on the resources available to the household. Resources may include natural resources such as land and water as well as the household's

labor power, tools and financial resources. Resources also include the household's social and institutional settings, which shape property rights and access to infrastructure and social support services.

     To complete the cycle, the quality and quantity of the household's resources in turn depend, at least in part, on the consumption and investment choices the household made previously. Given its income last week (or last year), for example, a household will make decisions about how much to spend on food, health care or education (each of which affects the quality of its labor resources), how much to spend on seeds, fertilizer and other agricultural inputs, and how much to save or invest in other ways. Once we recognize the dynamic interaction between household resources, choices, and outcomes, it becomes clear that a more complete understanding of hunger and poverty requires not only a broader understanding of the factors that affect them, but also a longer-term perspective on how they interact over time.

Livelihoods

Livelihoods are a way of characterizing the resources and strategies individuals and households use to meet their needs and accomplish their goals or in other words: "people, their capabilities and their means of living" (Chambers and Conway, 1991). Livelihoods encompass income as well as the tangible and intangible resources used by people to generate income and their entitlements to them. In 2003 about 2.6 billion people, or 41% of the world's population, depended on agriculture, forestry, fishing or hunting for their livelihoods (FAOSTAT, 2006), even while agriculture (including forestry and fishing) represented only 12% of GDP in developing countries in 2004, and 4% for the world as a whole (World Bank, 2006c).

     Diversification of livelihoods, both within agriculture and beyond, i.e., focusing on other sectors of the economy, is particularly important for countries where the proportion of people engaged in the primary sector is above 40% of all employment (ILO, 2004). This concerns about half of all countries worldwide. The share of households with wagespecialized earnings appears to considerably contribute to an increase of household GDP per capita (Hertel, 2004).

     Migration is another livelihood strategy pursued by nearly 200 million people. Reasons for migration are manifold; they range from labor seeking, economic interest and family reunification to displacement due to natural or cultural disasters. Temporary migration and commuting to national and international, rural and urban destinations are now a routine part of the livelihood strategies of many households, including farm households, both in industrialized and developing countries. The effects of migration on agriculture are highly diverse-migration can be a negative phenomenon that creates labor shortage in rural areas, leaving the land abandoned; or it can mitigate population pressure and resource use, and the remittances from family members can boost agricultural development (IOM, 2007).

Income

Economic well-being is most commonly thought of in terms of income (measured as a flow over a particular period of time). For a farm household, for example, this may be in kind (such as food crops produced on the farm) as well as in