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I read this book when it was first published and recently re-read it because I was curious to know (a) what I had missed the first time and (b) to what extent (if any) the book has since lost relevance since it was written more than two years ago. My conclusions? I missed several key points, and, the book's more relevant now than it was then.

As Abhijit Banerjee and Esther Duflo explain, they have written a book about "The very rich economics that emerges from understanding the economic lives of the poor. It is a book about the kinds of theories that help us make sense of both what the poor are able to achieve, and where and for what reason they need a push." Frankly, the first time around, I did not pay sufficient attention to the material that focuses on the details of poor families' daily lives: their dreams, their fears, their frustrations, and (yes) their noble qualities.

Banerjee and Duflo are correct to suggest that their book "is ultimately about what the lives and choices of the poor tell us about how to fight global poverty...And it reveals why so many magic bullets of yesterday have ended up as today's failed ideas...Above all, it makes clear why hope is vital and knowledge is critical, why we have to keep on trying when the challenge looks overwhelming. Success isn't always as far away as it looks." I agree. But it is also true that success isn't always as near as it looks.

They provide an abundance of information, insights, and counsel that can help their reader to do some "radical thinking of the way to fight global poverty." Here are some of the several dozen passages that caught my eye:

o The nature and extent of poverty's impact on eating habits (Pages 22-28)
o A "nutrition-based poverty trap" (38-40)
o The "health trap" (43-48)
o "Supply-Demand Wars" (72-76)
o "The Curse of Expectations" (86-93)
o "Why Schools [in Developing Countries] Fail" (93-97)
o "Reengineering Education" (97-100)
o What Is Wrong with Large Families" (106-111)
o "Children as Financial Instruments" (119-123)

Rather than add to the number of demonstrably ineffective "magic bullets," Banerjee and Duflo suggest a few points to keep in mind when thinking about how to improve the lives of the poor: "First, the poor often lack critical pieces of information and believe things that are not true...Second, the poor bear responsibility for too many aspects of their lives...Third, there are good reasons that some markets are missing for the poor, or that the poor face unfavorable prices in them...Fourth, poor countries are not doomed to failure because they are poor, or because they have had an unfortunate history...Finally, expectations about what people are able or unable to do all too often end up turning into self-fulfilling prophecies...Despite these five lessons, we are very far from knowing everything we can and need to know." Be that as it may, Banerjee and Duflo are to be commended for how far, how deep, and how well thy have increased our understanding. Thank you.

According to a Chinese proverb, the best time to plant a tree was 100 years ago; the next best time is now. The same can be said for reducing - if not eliminating - poverty in the world.
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on 5 February 2013
This book is about people that spend less than what you can buy for 99 cents per person per day in the USA. In 2005, 865 million people actually did, most of them in Asia, Africa and Latin America.
The message of the book is that in all countries extreme poverty can be reduced much faster and more effective than is happening to day. A lot of effort and money is wasted because the causes of the poverty are not understood leading to wrong policies and right policies that are poorly executed (often lack of follow up). The positive message is that significant progress can be made with without radical changes of institutions, corruption, or enormous subsidies.
Finding ways to lead poor people out of their poverty traps is far from easy. You have to understand how they make decisions, and if they make the wrong decisions what method is effective leading to correct decisions. That is not easy either. Understanding is not a question of only questions and answers and verbal persuasion. The authors describe many examples like the problem of state paid teachers in poor villages in India that were often absent. The book describes a wide range of common problems l reducing hunger, insurance for healthcare and drought, poor teacher performance, family planning, ethnicity problems, the merits of entrepreneurship of the poor and additional action required for more "good" jobs, that is with a fixed stable income over time, the significant merits and limitations of microcredit, the need additional credit possibilities, saving money without risk and reasonable returns. I was surprised to learn that many of these very poor save money, lend and borrow from each other, and why it is so difficult to replace moneylenders.
The two authors are Professors at MIT and use a scientific method making experiments that prove if a method works or not, (RCT) Randomized Controlled Trials. That means that they compare the performance of groups that are exposed to different methods, and analyzing the results. It is fascinating to read about these tests and how excellent solutions were discovered.
These two academics point out that they have radical different views from other well known academics in this field notably, Jeffrey Sachs, Darin Acemoglu and James Robinson, and Paul Collier. These academics present Big Ideas like radically changing the institutions, even by force, or doing no more than promoting freedom. These generalizations can lead to doing nothing or wasted effort and funds. To be successful you have to investigate causes, test solutions and monitor implementation.
Some leaders of government like Luiz Inácio Lula da Silva Brazil and Deng Xiaoping of China and Manmohan Singh from India, have introduced policies and programs that have significantly reduced poverty. However these countries still face serious poverty problems. Many of the projects described are from these countries
I have been amazed about how much can be done with simple measures in what look like hopeless situations. Just one example. Corruption is a huge problem. In Kenya the government paid for schools, teaching material and teachers but there was some doubt about how much actually reached the schools. An audit was made that found that only 13% of the funds the government sent to the schools actually arrived at the schools. These results were widely published in the newspapers. Soon thereafter the percentage became 70%. This is one of several examples how corruption can be reduced from the bottom up, rather from the top down, that is policy change leading to political change. Other similar examples are described. Improvements can and should be made top down and bottom up in politics and policies. For me a brilliant idea.
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on 5 March 2013
A great insight into how the poor live, make their choices and make financial decisions. Particularly useful for those who are thinking about making charitable donations and are concerned about donating where it will really help.
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on 13 November 2012
I "enjoyed" this book as it made me stop and think. I say "enjoyed" as there are some difficult illustrations that seem counter-intuitive so to say it was enjoyable would be wrong given the human struggle involved. It seems to be presented in a balanced and evidenced way, rather than a mere set of opinions.

I would say it is definately worth a read.
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on 20 August 2012
Many books on development aid expound a broad theory based on soem key assumptions about development aid being ideolgically "good" or " bad".Poor Economics is a very interesting and stimulating book that reviews the empirical evidence of "what works" (or does not)in development aid.This makes it a very useful for busy aid workers or commentators on the value of the different measures deployed in the quest to give the right kind of aid to help underdeveloped countries tackle their problems.

This is a very useful and up to date book to get an overall picture of what is effective and also has excellent references to follow up on particular subjects -not just books but websites that contain date on ongoing research .
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on 17 January 2016
This is a frustrating book to read for so many reasons. Firstly, it is very badly written. The prose is plodding and turgid. The word count needlessly proliferates and the editor has failed to prune effectively. The paperback also suffers from a tiny font. Secondly, there is a clear lack of structure. The book reads like a series of extended essays with little logical development. It is also unclear who the book was written for, the authors seem to assume absolutely no knowledge of economics yet it has academic pretensions. I found myself frequently irritated by the style. So for example on p.195 we ‘learn’ about psychological biases in the behaviour of the poor (note: it seems no book on economics today can be complete without at least a nod towards these behavioural heuristics regardless of their validity for the argument proposed). I found myself saying out loud ‘Sure, but these psychological biases (to the extent that they are valid) will be found in rich people as well.’ Some four pages later (p.199) the authors acknowledge this but in a seemingly post-hoc fashion then conclude that of course these biases have more important negative repercussions for the poor than the rich. A not entirely convincing way of squaring the circle! Thirdly, there is some very odd logic employed. To begin with the authors define poverty as living on less than $1 per day. So an absolute definition of poverty and they ignore the issue about relative poverty. Subsequent to the book being written of course the World Bank has shifted the goal posts by defining poverty as living on less than $2 per day. Fourthly the authors themselves seem caught between two stools. Is this a book about developmental economics (the economics of growth in developing countries) or is it a book about the utility of foreign aid? It’s really a bit of both although the authors frame many of the questions through the prism of the latter by drawing a dichotomy between the two opposing camps represented by Sachs and Easterly. Yet many of the points they seek to make are really about what policies the domestic governments of these developing economies should actually be following. Fifthly, the methodology employed is a real mish-mash between individual anecdotal stories and more scientific randomised field studies. The former are clearly included to enliven the text yet we are told nothing about the methodology for their selection, accuracy or representativeness. As for the latter it becomes apparent that the majority of field trials do not support the interventionist approach or at least offer support for only the most specific nuanced measures (usually the researchers cited in this book were forced into an iterative approach to even find the smallest positive results). Whether the latter would actually work on a large-scale across different countries is unclear. The authors do not consider for instance the dangers of datamining. There have been so many field trials that sheer numbers will mean some will demonstrate positive results from interventionist measures. Sixthly, the empirical evidence is frequently contradictory (something the authors do acknowledge) but surprisingly the authors plough on with their pro-interventionist approach. Seventhly, studies are frequently cited as in ‘x% of poor people said y’ with no baseline for comparison. So in the chapter on education the authors decry the ‘fact’ that parents frequently label their children along the lines of ‘he/she is the smart one and he/she the dim one’. Yet this is what parents (and teachers) throughout the world do! Do the poor do it to a greater extent than anyone else? No evidence is presented to support this conclusion. Eighthly, the chapter on borrowing seemed incredibly naiv. It is well documented (for perhaps 50 years) that the higher interest costs faced by lower income borrowers reflects such issues as size of loan/doorstep lending (administration costs), higher risk of default/bad debt (more uncertain income & lack of collateral), etc. This is not news. Similarly there is a silly argument that the founders of Infosys (p.179) found it difficult to get a loan despite the fact that the founders,”[received] their degrees from the ultra-prestigious Indian Institute of Technology.” It is of course only apparent with hindsight that Infosys would be as successful as it was. Debt finance to start-ups is notoriously high-risk (even those founded by alumni from prestigious universities!) – the risk borne by the lenders is more akin to equity finance and therefore not something a bank is well skilled to provide. Also of course many Western start-ups also find it difficult to raise finance. This example proves nothing (note Banerjee was awarded the inaugural Infosys prize in 2009 which is perhaps why this example was used). Ninthly the authors make some sweeping statement, with very little factual evidence, about colonial exploitation regarding India. Most economic historians have concluded that British rule was broadly neutral for the country’s economic development (it is not a simple story of wealth being syphoned off by the British). Lastly the chapter on institutions barely scratched the surface in terms of both development economics and the arguments over foreign aid.
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on 25 April 2012
This is an excellent and very readable book that has some real pearls of wisdom based on hard won experience on the field. It tries to take an apolitical and balanced approach and get to the root of such things such as why folk don't try to help themselves, why they dont avail themselves of available health facilities and how a lack of basic education can have real economic impacts on countries. It recognises the fact very well that there is no single solution to the economic problems facing the world.
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on 6 November 2013
The authors have discussed such intricate issues with ease of writing and presentation of data which is quite rare to see. Efforts taken to discuss effective ideas without actually discussing political issues have paid off.
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on 18 June 2012
This book was referred to me and I have loved it. The information itself is engaging, but it is also perfectly couched in readable prose and with the perfect selection and number of anecdotes to tell the story. I feared that this book might be a bit samey, as I saw its layout, laying out an assumption and then disproving it, but it's not at all.

It's a great read, and I feel better informed for having read it.
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on 13 September 2011
An excellent read - combining orthodox economic theory with real life complications based on carefully observed behavioural patterns. All in all a powerful expose supporting the use of RCT to evaluate policy interventions.
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