Poor Economics

Why doesn’t a farmer want to school his kids? Why does he have nine kids when he can hardly afford to care for one? Why does a poor lady in Africa not immunise her children? Why would a man in Morocco who doesn’t have enough to eat buy a television? Why is it so hard for children in poor areas to learn even when they attend school? Why do the poorest people in the Indian state of Maharashtra spend 7 percent of their food budget on sugar? Does having lots of children actually make you poorer?

We’ve all had our brush with poor people, sometime somewhere in out lifetime. Sometimes, we pay attention, often times we don’t. On our regular way to the school, college or work, we often come across one poor person on the roadside. However, we seldom find ourselves thinking about why they remain poor despite all the government and international efforts.

All these questions have very simple answers provided we look directly at the problem without the filter of our political alignment or economic perspective. More often than not, poor are reduced to a set of clichés. Broad and often simplistic formulas that, in reality, mean nothing – “Free market for the poor”, “Give money to the poorest”, “Foreign aid kills development”, “Make Poverty History” etc. are used to define solutions poverty.

“These ideas all have important elements of truth, but they rarely have much space for an average poor women or men, with hopes and doubts, limitations and aspirations, beliefs and confusion.” A very dramatic – either a  tragic episode or an uplifting anecdote, to be admired or to be pitied – approach has failed us. We should treat them as “source of knowledge” and as “people to be consulted about what they think or want to do.”

“Because poor possess very little, it is assumed that there is nothing interesting about their existence. Unfortunately, this misunderstanding severely undermines the fight against global poverty”, write Abhijit Banerjee and Esther Duflo in Poor Economics. It is very easy for us to sit in the comfort of our homes and offices and discuss what would work for the poor and what won’t. But in those conversations, we often impose our own biased points of view rather than see the world through the poor eyes.

Aid budgets run into billions, yet very little work had been done to analyse their outcomes. He and Duflo, both economists at the Massachusetts Institute of Technology, thought a better approach would be to appropriate the methodology of the pharmaceutical industry, and subject different types of aid to randomised controlled trials. In 2003 they established a Poverty Action Lab, and by 2010 its researchers had conducted more than 240 experiments in 40 countries, in a Herculean attempt to find out what actually works.

This book will not tell you whether aid is good or bad,” its authors write, “but it will say whether particular instances of aid did some good or not.” Their overwhelming message is that there is no Big Idea or golden bullet, so we should stop thinking about “Aid”, and start thinking about “aid”.

Through their work, Banerjee and Duflo look at some of the most surprising facets of poverty: why the poor need to borrow in order to save, why they miss out on free life-saving immunizations but pay for drugs that they do not need, why they start many businesses but do not grow any of them, and many other puzzling facts about living with less than 99 cents per day.

POOR ECONOMICS argues that so much of anti-poverty policy has failed over the years because of an inadequate understanding of poverty. The battle against poverty can be won, but it will take patience, careful thinking and a willingness to learn from evidence.

This meticulous work offers transformative potential for poor people anywhere, and is a vital guide to policy makers, philanthropists, activists and anyone else who cares about building a world without poverty.

Read review by The Guardian here.

25 thoughts on “Poor Economics

  1. Modi will destroy the poverty, because we was poor.

    I dont understand your point here.

    In theory poverty is impossible to remove from society, Why you ask?
    It is simply due to, in time power and wealth move towards smaller percentage population by default. There is no denying it, we cant make all poor rich or middle class because there will always be someone richer than everyone, Communism tried to do that but failed. So in the end.

    “If you are born poor it is not your fault, But if you die poor then it is your fault” – Bill Gates



    1. This is the problem that the book that I refer to has so beautifully described. Blind sloganeering without a well-defined and targeted policy has never worked.

      Liked by 2 people

    2. In the capitalistic system of organising economies, wealth exists in unity with poverty. It’s true that you can not imagine workers without capitalists, they’re not different but together constitute one whole.

      That however, doesn’t mean that we can overlook the prejudices prevalent in our society. Yes, we can’t abolish classes, but we can certainly make the differentials less sharper. It will be done when we stop defining success as ‘business success’. It’s not by default that wealth concentrates with a smaller percent of people, its because of greed. And greed is not a universal human attribute. It’s bred by the society.

      Almost in all cases, people do not die poor because it’s their fault. They die poor because of the greed of a select few. The very nature of poverty in India is appalling, did you know over 40% of infants in india are born severely underweight because their mothers don’t have enough food. Over 50% of people don’t have toilets and defecate in the open.

      It’s not that there’s not enough money to help these people, but help does not reach them because its not profitable to invest in the well being of poor people. These people aren’t useless or bad, it’s the system of money making which constantly marginalises them.


      Liked by 3 people

        1. I think money and opportunities mostly reinforce each other, in the present economic scenario! such that those who lack either automatically are devoid of the other.

          Liked by 1 person

          1. Very true, that’s the point. If there is an immediate relation between the two then we are right in measuring everything in money. That’s what the capitalist system is all about, we can’t change it. It’ll go only when its internal contradictions mature.

            But if poor people aren’t getting the same opportunities as the rich people, how can we lay the blame squarely on the poor and say they’re poor because they aren’t working hard enough?

            And that’s where I think should aid comes in- to provide similar opportunities, not money. It’s a nasty feedback loop, I understand, but it’s impossible to disentangle. Guess we need the right attitude.

            Liked by 1 person

            1. I think aid is a very broad term but only well targeted, well researched aid has worked – as the book repeatedly describes. Where it is thrust on people or where it disrupts people’s lives, it fails miserably.
              My point is – sitting in our rooms we cannot prescribe aid packages to any poor society without knowing or pretending to know the realities of ground.
              That would make aid much more effective.

              Liked by 1 person

  2. Well written and explained in brief. Our own multiplicity determined by culture, class, socio-economics and so on is dense and slow to alter. I would only add that perhaps positive outcomes are most realized when begun not as a battle against, but rather a desire for. Change guided with your (or their) near closing words of – ‘…patience, careful thinking, and a willingness to learn…’ is sustainable.
    Thank you for sharing your insights.

    Liked by 1 person

  3. book theme looks interesting. though it’s on the line of freakonomics, trying to explain things from the point of view of economics. so could be an intersting read depending upon the analogies created. nice review.

    Liked by 1 person

  4. Interesting post. I work at a newsagents in a largely working class area in the UK. Every day I see people who have very little spending money, are on welfare or state pensions, buying things they simply do not need. Lottery tickets and scratchcards being the prime example, giving themselves hope that they can fix their issues by becoming a millionaire. Even though they know the odds are slim of winning maintaining their current way of life and struggling is a favoured option over spending more on essentials and non-wasteful luxuries.


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