Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty Hardcover – 26 Apr 2011
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"In an engrossing new book, (Abhijit Banerjee and Esther Duflo) draw on some intrepid research and a store of personal anecdotes to illuminate the lives of the 865m people who, at the last count, live on less than $0.99 a day". --The Economist
"(A) new book by Duflo and co-author Abhijit Banerjee, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, will once more turn the spotlight on actions to tackle poverty. The book aims to make 2011 the year that the "economics of poverty" become a key part of international political discussions." --The Guardian Online
"(W)onderfully insightful and compassionate..."
--The Guardian Online
About the Author
Abhijit V Banerjee was educated in Kolkata, Delhi and Cambridge, Massachusetts. He is currently the Ford Foundation International Professor of Economics at MIT. He is the recipient of many honours and awards, and has been an honourary advisor to many organisations including the World Bank and the Government of India. Esther Duflo is the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at MIT. She studied at the Ecole Normale Superieure in Paris, and at MIT, and is the recipient of several important awards including a MacArthur "Genius" award (2009) and the John Bates Clark medal awarded annually to the best American economist under 40 (2010). In 2003, Banerjee & Duflo co-founded the Abdul Latif Jameel Poverty Action Lab (J-PAL), which they continue to direct.
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This is a MUST READ for anyone working in development. I love 'White Man's Burden' but for me this can and should shape how we think about getting people out of poverty on the all essential local scale. The authors have done a fantastic service to the aid sector, I just hope that it becomes widely read! This book will change people's lives, because I'll be reflecting on this thinking in my own work.
Early chapters discuss individual rationality. There's enough money to spend on food but there is more to the good life for human beings than food - even if you are poor. There is TV, or wedding feasts. Education can be seen as a lottery in which the winer - the brightest child in the family - should take all. Actually everyone benefits from each extra year do education. And people don't understand health issues. Actually none of us do, but we in the west have states that take much of the strain here for us.
The second part of the book deals with systemic issues. Handling costs make it hard for the poor to access lending or borrowing (though micro finance now helps). And they are not much interested in insurance, choosing instead to hedge the risks in their life by diversifying their economic activities. Many are entrepreneurs faute de mieux. A regular wage can transform Iives. Finally when it comes to politics, changes to eg transparency can make a big difference. So too can eg quotas for eg women in politics, by transforming expectations.
My one regret about this book is that the authors have not read Thinking Fast and Slow. This could explain many of their findings further. A causal story is a good story for the fast thinking system - in this book explaining to schoolgirls thatbsugarndaddies are more likely to have HIV than young men. Sometimes - as in the statistical thinking needed to get a grip on insurance or public health issues - there is no alternative but to wake up the slow thinker who lurks in all of us.
But this is very strongly recommended.
After all that is said and done, THIS is the concluding remark, the very last paragraph of the book. It came as a shock, especially when the authors had added so much understanding and many insights to the debate on poverty. But it is the truth that humbles us - the social crusaders who want to change the world from the backseat by "the kind of lazy, formulaic thinking that reduces every problem to the same set of general principles", prescribing solutions that do not listen to the poor people themselves and show no understanding of their choices. Yes, I do hear that the authors speak directly to me.
In a small way, I have spent most of my professional life compiling and ploughing through macroeconomic statistics. Yes, I have written many words of commentary on those statistics, but this book has made me more acutely aware how little relevance they are to people's daily life, and how little macroeconomic statistics reflect the individual people. I cannot count how many times I have written comments on the impact of the Asian financial crisis of 1997-1998, with Thailand and Indonesia particularly hard hit by it. But when you ask the poor people if they felt any difference during that period, the answer was no, because poor people faced a lot of uncertainties in life already as it was, and they did not see the Asian financial crisis pose any more uncertainty outside the norm for them. This book helps me see that gulf.
The issue of poverty and economic developments has always been my interest on the side, although I have never worked directly in the field. Having read this book, I now realise where macroeconomic analysis of poverty is lacking. But microeconomic analysis is tough as data are difficult to gather and requires us to get off our comfortable seat and office, get our hands dirty and go to meet with the real people in real life. This is what the authors of this book have done. I admire their patience, their sincerity in their attempt to truly understand the issues they set out to investigate, and their professional skills in designing their "experiments" and processing their findings, such that anecdotes do not remain some random anecdotes! I agree with other reviewers that they are fine economists.
I like this book because it confronts many paradoxes about the poor people head on, and attempts to make sense what seems irrational! I feel so enlightened by it. The blurb even got my 9-year old son thinking, and this is the success of the book. For example, I have read about the wonders of microfinance in the Economist, as a layman. But years on, I have been puzzled why it has not made a bigger impact in the poor economies and to the poor people, if it is as wonderful as claimed. This book clears my puzzle, by their painstaking analysis of the challenges of this market, to what extent microfinance has succeeded in meeting those challenges and where the market still fails. Now I feel I have understood something.
Perhaps it is rightly said that people who are interested in the issue of poverty and would like to do something about it are well-meaning people. But often good intentions not only fail but could yield perverse effects, which must be avoided. This book has urged a new approach to policymaking, which has predominantly relied on and measured by macroeconomic statistics. Perhaps it is high time we derived a policy framework to make more use of microeconomic analysis, although I acknowledge that it is not easy, not least because of the difficulties in generating consistent and comparable intertemporal and interspatial microeconomic data for policy purposes. And as taxpayer, we have the duty to learn more if our money is well-spent. Among other things, we should be interested if our aid programmes to the poor countries is indeed helping the poor people effectively; the percentage of GDP that we spend on aid sheds very little insight into that. And this book links us to the people, not the issues, whom we try to help.
Development economics is really interesting to me because it has real life implications and evaluating the outcomes of strategies that have been used to improve the living standards of the poor can have surprising results. One of my favourite parts of the book was about microfinance and whether is actually helps the poor.
I really enjoyed this book and would recommend it! Another similar development economics book that I enjoyed was Why Nations Fail.