| | |  | Security Jobs | Home » » Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty | | | | | | | Description: | | Winner of the 2011 Financial Times/Goldman Sachs Best Business Book of the Year Award Billions of government dollars, and thousands of charitable organizations and NGOs, are dedicated to helping the world's poor. But much of their work is based on assumptions that are untested generalizations at best, harmful misperceptions at worst. Abhijit Banerjee and Esther Duflo have pioneered the use of randomized control trials in development economics. Work based on these principles, supervised by the Poverty Action Lab, is being carried out in dozens of countries. Drawing on this and their 15 years of research from Chile to India, Kenya to Indonesia, they have identified wholly new aspects of the behavior of poor people, their needs, and the way that aid or financial investment can affect their lives. Their work defies certain presumptions: that microfinance is a cure-all, that schooling equals learning, that poverty at the level of 99 cents a day is just a more extreme version of the experience any of us have when our income falls uncomfortably low. This important book illuminates how the poor live, and offers all of us an opportunity to think of a world beyond poverty.
Learn more at www.pooreconomics.com | | | Product Details: | | | Author:
| Abhijit Banerjee | | Hardcover:
| 320 pages | | Publisher:
| PublicAffairs | | Publication Date:
| April 26, 2011 | | Language:
| English | | ISBN:
| 1586487981 | | Package Length:
| 9.21 inches | | Package Width:
| 6.06 inches | | Package Height:
| 1.34 inches | | Package Weight:
| 1.28 pounds | | Average Customer Rating:
|  based on 39 reviews |
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118 of 124 found the following review helpful:
 A Remarkably Informative Book.Apr 15, 2011
By AdamSmythe
Although I am an economist by training and have studied economics for many years, I admit that in reading this book I have learned a great deal about the complexities of both the theory and the practice of anti-poverty policies in developing nations.
Why are people so interested in the issue of global poverty? Well, to list a few of the many aspects about poverty addressed in this book, every year about 9 million children die before they reach their fifth birthday, usually in the poorest countries. In the developed world, a woman has a one-in-5,000 chance of dying while giving birth, but in many sub-Saharan Africa countries the odds are one-in-30. There are at least 25 countries in the world with life expectancies of 55 years or less. If these sorts of situations capture your mind and lead it to ask what can be done, one of the first things you might consider doing is learning more about the conditions and circumstances that lead to these revealing statistics. That's where this book comes in.
So, is this book one you should buy? Presumably that's why you are reading this. Here are a few observations that may help you decide whether to buy this fine book: In the authors' own words, the book "is ultimately about what the lives and choices of the poor tell us about how to fight global poverty." That may not sound too sexy or exciting, but if you have an interest in facts, theories and observations about global poverty, then this is your book. On the other hand, if what you seek are simple theories and, especially, strong advocacy of a few preferred solutions, then you are probably barking up the wrong tree. Don't get me wrong; I like the book just as it is. There is so much information to consider and so many approaches to fighting poverty to contemplate. Just don't expect the authors to take a lot of your time championing pet solutions. Because the problem of poverty is itself rather complex, so are some of its solutions. Jack Webb (the "just the facts, ma'am" star of the "Dragnet" series) might have loved this fact-filled book. At least, he'd love it if he was an economist or someone interested in learning (a lot) about global poverty. Yet there's much more to the book that mere facts. Primarily, there is a pursuit of understanding the circumstances associated with poverty and the efforts to overcome it. That's where this book excels.
It's certainly early to judge, but this book could prove to be a classic in its field. It successfully challenges and encourages the reader to think in new ways about anti-poverty initiatives. Although its authors are probably unknown to the general public, they are well regarded in economics. They both have received a number of prestigious awards, including the John Bates Clark Medal (to Esther Duflo) for the best American economist under age 40. Previous winners of this award include a Who's Who of economists, such as Paul Samuelson, Milton Friedman, James Tobin, Kenneth Arrow, Gary Becker, Martin Feldstein, Lawrence Summers and Steven Levitt.
In short, this is a substantial book with a great deal of important content. There are some graphs, but less than you might expect from two economists. Importantly, it is readable and understandable by the interested lay reader. Frankly, I think it's a book you won't forget. If the issues of global poverty and economic development interest you, this is a book well worth your careful consideration.
40 of 42 found the following review helpful:
Refreshing and Powerful Vision of Anti-Poverty PolicyJul 13, 2011
By Herbert Gintis
The authors identify three major approaches to dealing with world poverty, suggest that whatever their virtues and faults, there is a very piecemeal and pragmatic approach through which significant gains can be made without addressing the systemic obstacles identified by the three approaches. Their analysis is brilliant, focused, rooted in first-rate data sets, yet rich in social detail and anecdotal vignettes. I believe there are probably right, and their approach deserves to be widely studied an evaluated by policy makers in the advanced and developing countries.
The dominant school of thought is probably the supply-side theory, most visibly represented by Jeffrey Sachs (the authors call him a "supply wallah"). According to this theory, the poor are poor because they lack money and resources, and there is a "poverty trap" such that investment in productive technologies must be very large in order to have a positive and sustainable effect. Because poor individuals, and even poor countries, lack the capacity to finance such investments, they are trapped in a low-level economic equilibrium. For this reason, Sachs and the supply theorists advise that the rich countries transfer a large lump-sum amount of money to a poor country, so it can get over the poverty-trap hump.
A second salient school of thought is the demand-side theory, represented by William Easterly and many others. Demand-siders (the authors call them "demand wallahs") believes that the poor are poor because they do not want to undertake what would be necessary to move out of poverty and there is no poverty trap. Thus, if you throw money and resources to the poor, they consume it immediately rather than using it for long-term betterment.
The third school of thought is the corruption school, represented by Acemoglu and Robinson, as expounded in the book Why Nations Fail. According to this theory, countries remain poor because their governments are predatory, exploiting the citizenry by refusing to make investments in productive infrastructure, by direction all profits to cronies, and by permitting rampant corruption that renders creative entrepreneurship unprofitable. According to this school, to which I admit to being very favorable, the supply wallahs are wrong because the resources throw into the system will be appropriate by the rich and powerful, and the demand wallahs are wrong because the poor are actively maintained by the oligarchy in their position of servitude.
The authors are very insightful and balanced in presenting the views of these three schools and the evidence that supports these various positions. They also clearly explain their mutual critiques. For instance, the supply wallahs claim that states are predatory and corruption is rampant only because the country is so poor, and the demand wallahs claim that when the people want to move out of poverty, they will reform their governments. I find these defenses of supply and demand wallahs rather tendentious, leaving the corruptions school as the overall most plausible school.
I think it is fair to say that Banerjee and Duflo have little sympathy for demand and supply wallahs, but considerable respect for the corruption theory. Their own position is that there are virtually always ways to productively intervene to pull a significant fraction of people out of poverty. The authors, who have collected huge amounts of data and interviewed many poor people from around the world, make the following argument.
Most important, the poor in a poor country have about the same array of preferences and capacities as that of the human population as a whole, and humans are substantively rational in making decisions that affect their lives. However, the poor have a lot fewer resources than the well-off, they lack information and skills provided to the well-off, and lack access to such public goods as clean water and consumables subject to food and drug regulations.
The poor are therefore extremely heterogeneous. Microfinance organizations like the Grameen Bank therefore provide a general path to affluences, simply because only a fraction of the population has the will and ability to be successful entrepreneurs. On the other hand, entrepreneurs often fail several times before finally becoming successful, so the authors advise an expanded microfinance industry that is more tolerant of the sorts of behaviors that may involve short-term losses, but lead to long-run successes. The authors conclude that we must consider microfinance policies as extremely successful and worthy of following, even though it is not panacea for the abolition of poverty.
Because the poor lack access to social services freely available to the non-poor, the authors advocate such measures as providing clean water to poor villages and adding nutrients, such as iron, to staple foods. This, they argue, is not charity but simply the extension to poor of services already supplied to the rest of society.
Concerning education, the authors believe that poor parents are usually very eager to have their children educated, although they may lack the means of enrolling their children in schools or providing for their transportation to and from school. However, too often the content of schooling is determined by what is good for the more affluent classes, so poor children are led voluntarily to quit school. The authors advise that the content of education take into account the preferences and culture of the target population.
I cannot do justice to the beauty and intricacy of the argument developed in this book. The authors' main point is that we must look closely at the details of the lives of the poor in order to develop policies to help people to pull themselves out of poverty. This is neither demand or supply wallah-ism, and as they repeatedly stress, real progress can be made even in a society whose government provides a poor environment for economic development.
20 of 23 found the following review helpful:
The tools to make changeApr 27, 2011
By Sofya Ignatyeva
Poor Economics is an excellent survey of empirical data on the world's most impoverished areas. The amount of work put into the studies (the authors have extensive work in their own control studies) is astounding, and well worth a look for anyone interested in the data.
The general picture one hopes when reading a book like this is a "silver bullet" that will solve the problems of every kind of poor people around the world. As the authors are quite upfront in saying, this is not realistic. Economies are complex and work in strange ways. Anyone familiar with systems dynamics will recognize the traps that "silver bullet" theories get into: one quick fix leads to some improvement, but causes side effects that might make matters worse in the long run.
This book examines how the predominant theories on poverty have played out. They cite Jeffrey Sachs' The End of Poverty, in which the idea is that aid will bring an end to a "poverty trap". And then regard William Easterly's The White Man's Burden, in which the idea is that aid tends to make people dependent on it and thus makes them less capable. With these plausible arguments as a backdrop, they delve into the examples and case studies to identify instances where one or both or neither are true.
Ultimately, the argument that is made is for a comprehensive understanding of the way poverty works in order to apply proper levels and composition of aid. Though, this isn't a grand theoretical survey of the way economies and systems in general function. I would recommend something like Juggernaut: Why the System Crushes the Only People Who Can Save It for that. It is still a penetrating survey of poverty and offers the reader the tools to do something about it.
10 of 11 found the following review helpful:
Taking Economics Out of the Ivory Tower and To the VillageJun 03, 2011
By Etienne ROLLAND-PIEGUE
It used to be that anthropologists would go down to villages and mingle with the people while economists would sit in their armchairs and design grand theories. Now it is the other way around. Anthropology has become an ivory tower discipline, with less and less emphasis on fieldwork and an impulse to produce ever more complex intellectual systems. Anthropologists are actively involved in campus politics, along with other cultural studies and postmodern theorists, and totally disengaged from real policy decisions. Meanwhile, economists are going to the field, not only to observe and measure, but also to make things happen. Poor Economics explores the new and exciting frontiers of development economics, by two young scholars who have greatly contributed to taking the discipline out of the ivory tower and to the village.
In doing so, they are following a long tradition of economists interested in development issues. Their elders, from James Meade to Gunnar Myrdal, used to go and see things for themselves before advising governments of newly independent countries or managers of international organizations on the best way to kick-start development. There was a time when the anthropologist would take the economist to the village. Multidisciplinary projects would gather economists along with anthropologists and other social scientists to study a particular location from various angles. Clifford Geertz, one of the towering figures of modern anthropology, participated in such joint initiatives, and the perspective from his fellow economists enriched his earlier writings--before he turned to a more interpretive approach of cultures and launched attacks against what he labeled "economism".
The difference between then and now is that the economist no longer needs to partner with the anthropologist in order to collect data and frame her observations in the village. She has two new allies she didn't have at the time: the NGO activist and the computer. The first helps her design development programs and collect the data to find out what works, what doesn't and why. The second will allow her to analyze that data with scientific rigor. She will be able to test hypotheses and to ask in particular what would have happened in the absence of the program or to measure how much difference it made. The result has been a revolution in development economics, identified with field experiments and randomized control trials--hence the label sometimes used to designate its promoters, the `randomistas'.
Has the economist kicked the anthropologist out of the village? Maybe this is simply a matter of labeling. Anthropologists could come up with their own random field experiments, with different research questions that would certainly yield different answers. They could bring a different sensitivity to the field: a focus on culture as a system of symbols, an understanding of power dynamics, and a questioning of the observer's role--what social scientists call "reflexivity", that remains utterly lacking in most economists' work. Indeed, political scientists are beginning to follow the footsteps of the randomistas and apply the same methods, investigating issues such as consumption of public goods or corruption with innovative research designs. Nothing should prevent anthropologists to do the same, except perhaps the "not invented here" syndrome and an aversion to numbers shared by many adepts of "qualitative" approaches.
One could even argue whether the kind of research conducted by the two authors of Poor Economics is really economics. It just happens that they work in an economics department. But they do their own stuff, undaunted by academic categories and intellectual boundaries. When they find something interesting in anthropology, they pick it, as when Esther Duflo uses the work of French anthropologist Claude Meillassoux, who showed that yams, a "male" crop in Côte d'Ivoire, can only be sold to pay for school fees or medical care for the family, but not to buy liquor or some tobacco. The authors also use the latest results in brain science--although this is not the part of the book that I find the most convincing. They have publications in medical journals, not just economics reviews. Whereas anthropologists are busy patrolling the borders of their discipline, denouncing the encroachment of "economism", the economists are busy pushing the envelope of their discipline, claiming new terrain along the way. Their "can-do" attitude puts them at the heart of policy debates, and the impact of their evaluations is now heavily felt in poverty alleviation programs around the world.
Randomistas have sometimes been accused of "soft paternalism", a critique they share with other promoters of "nudges" who use incentives to improve individual decisions about health, wealth, and happiness. Banerjee and Duflo have a ready answer to that critique: "It is easy, too easy, to sermonize about the dangers of paternalism and the need to take responsibility for our own lives, from the comfort of our couch in our safe and sanitary home. Aren't we, those who live in the rich world, the constant beneficiaries of a paternalism now so thoroughly embedded into the system that we hardly notice it?" Here the field economist talks back to the armchair theorist and brings a sense of perspective to debates about poverty, without lapsing into moral posturing or ideological arguments.
"How can you work with corrupt governments and ruling oligarchies," goes another critique. Banerjee and Duflo can answer to that as well. Most of their work is conducted in democratic countries, such as India, Kenya, or Indonesia. They tend to partner with local NGOs and social activists, more than with state bureaucracies or international agencies. In addition, they show that innovative program designs and rigorous evaluations can help keep corruption and inefficiency at bay. Denouncing bad governance and labeling country leaders as crooks makes an armchair theorist feel good, but does not lead very far. For the authors, the important lesson is to take advantage of whatever slack there is: "Good policies (sometimes) happen in bad political environments. And, perhaps more important, bad policies (often) happen in quite good ones." To quote the Book of Revelation: "He that is righteous, let him be righteous still." Poor Economics is an invitation to be smart, not an empty jeremiad or a feel-good sermon.
I am sure that readers trained in anthropology could raise many other critiques and show the limitations in their economic colleagues' work. Indeed, they should be invited to pick up the gauntlet, and rise to the challenge. The important point is that they should do it from a grounded perspective--by going back to the village, the slum or the policy council, and try to make things happen as well.
9 of 10 found the following review helpful:
 radical indeedMay 26, 2011
By Felix De Rosen
Development economics is a comparatively new field of study and it has changed considerably in its roughly fifty years of existence. "Poor Economics" represents a significant change, namely a move away from the sweeping generalizations of scholars such as Jeffrey Sachs and William Easterly, and a realization that we actually understand very little in development economics. The proof of our lack of understanding can be found in our lack of success in actually bringing about wealth in the developing world (either that or a hidden lack of intent).
In any case, Banerjee and Duflo start with the premise that, given the inaccuracy of past models, the best we can do is start on a micro level and see what works. They do this through randomized control trials (RCTs), in which groups are subjected to different treatments, such as subsidies for food, education campaigns, or reorganization of village committees. The groups are randomized, with some groups receiving the treatment (experiment group) and others not receiving anything (control group).
Using the results from numerous RCTs around the world, as well as hundreds of other experiments, surveys, case studies and more, "Poor Economics" is incredibly well researched. One thing the authors don't justify, however, is whether RCTs are good predictors of real life choices. For example, how similar are the treatments used in RCTs to the actual policies implemented in real life?
I won't summarize the contents of the book. But I can say that the conclusions within are indeed "radical" in the sense that they take very little for granted. They are based off of micro level data and offer very interesting insight into the incentives that shape the lives of the poor.
The policy recommendations at the end of the book are incontrovertible, but I don't know who realistic they may be in the face of macro-level constraints such as world trade policies that favor developed countries. I have my doubts as to how effective even the best policies and the best governments can have on the development of countries under the economic hegemony of the US and Europe. I wished the authors had addressed this.
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