Poor EconomicsA Radical Rethinking of the Way to Fight

Poor EconomicsA Radical Rethinking of the Way to Fight Global Poverty Poor Economics was one of the most enlightening books I had the pleasure of devouring this year I'm neither an economics student nor do I profess to have any knowledge regarding the subject What I have is a keen interest in everything unknown to me And this was book sure opened me up to a new cognizanceOn average the poor people live on 99 cents per day The fact which is shocking by itself also puts them at a great disadvantage because of a lack of resources and knowledge To elevate global poverty we need to learn how their lives look like to the choices they make so that the government can frame policies in a way that doesn't just look good on paper but they work practically tooFrom their research in the Poverty Action lab along with fieldwork Abhijit Banerjee and Esther Duflo do an outstanding job of explaining the behavior of poor people and reason for their status uo They use conclusions and evidence drawn from the randomized control trial to explain the steps that can be taken to steer them on the right courseThis book reads like a textbook that combines the research work illustrated using graphs with anecdotes in a very interesting manner As I said before I did not know of this subject but reading this book has opened my perspective about looking at poverty You don't need an economics background to understand the insights from the book so I highly recommend reading itSee on Instagram This is one of the best pop economics books I have read in a very long time Such books typically follow the same recipe top academic seeks recognition outside the profession and writes the book propounding the theory enlisting in support loads of evidence consistent with the theory and curiously brushing offforgetting to mention most of any evidence even vaguely incompatible with the main argument of the book The book tends to go on forever repeating the same score in all possible tonalities and in spite of most attempt to either humour or literary effects is generally rather boring to read Length seems to be necessary to establish the authors credential with the layman This book is very different Duflo and Banerjee do not try and shovel down the readers' troats the ultimate theory of poverty They present the evidence explain how to think about it and show where a remedy works and where the same approach to the same problem fails miserably But in all this they suggest to the reader how to go about thinking of poverty of its causes and of its conseuences and how to approach the evaluation of policies to alleviate it Yes the double handed economists approach will be unsatisfactory for anyone looking for the silver bullet but as we all know in most situation in life silver bullets do not exist and ther is no one universal solution to problems that have plagued us for centuriesAbove all this book is interesting and engaging a very good read recommended to anyone with even a passing interest in poverty So This is an economics bookA rumbling sound is heard as ninety percent of the people reading this review frantically jiggle their mice in an effort to click another link on this page Any link Even an ad for laundry detergentOk hello to the two remaining readers out there Thank you for sticking around I know ‘economics’ is one of the least sexy words in reading right up there with ‘tax law’ and that economics books are as enticing to most readers as a fat stack of local council permit applicationsHell I’m with you on this I had to study the dismal science that is economics at school and again in first year university I can tell you from experience that there is no stimulant on earth short of mainlined honey badger adrenaline that can keep me awake in a lecture on supplydemand graphsPoor Economics however is that rare unicorn of reading an interesting economics book Like Loretta Napoleoni's works Terror Incorporated and Rogue Economics and Adam Tooze’s Wages of Destruction Duflo and Banerjee’s work mixes hard economic fact with fascinating examples of real world problemsIf you’ve ever despaired at the seemingly intractable nature of poverty around the world this is a book that will give you hope Duflo and Banerjee DB stress the importance of information gathering of speaking to the poor of exploring what it is that makes it hard for them to increase their incomes and in the process they explore some fascinating case studies and trials of attempt to help the poor and the many success and failures they have witnessedA number of my assumptions were overturned for example; while I thought starvation and malnutrition were first order issues in addressing poverty hunger is not the problem it was Getting enough calories is not an intractable problem for many of the world’s poor and in some places declines in manual labor have slightly reduced the calorie needs of communitiesMicrofinance is also unlikely to be the panacea it has sometimes been claimed to be While small loans can help the poor expand their small businesses the nature of these businesses makes expanding them beyond subsistence level difficult DB do stress that microfinance can help the poor just that the stories of poor people founding business empires on a loan of a few hundred bucks are very much outliers most businesses hit constraints on their expansion uite early on while others with promise can rarely access loans of the size they needFurther some well intentioned interventions such as a programs in Kenya that promoted marriage in order to reduce teen pregnancy keep kids in school and limit HIV transmission can perversely end up increasing to the problems they are trying to solve Horrifyingly this focus on marriage saw young female students getting involved with older financially stable men who were likely to be carriers of HIV and expected their young wives to drop out of school to care for their childrenThere are however many interventions that can help from focusing schools on basic skills like reading and mathematics to subsiding treatments like de worming tablets that pay big dividends in keeping children healthy and able to attend school for longer DB caution the importance of avoiding what they call the three I's Ideology ignorance and inertia all of which can be overcome with programs carefully designed for the reality on the ground not the imagined reality that so often seems to underpin aid projectsWhile global poverty is crushingly resistant to being eradicated DB offer an optimistic take on improving the lives of the poor arguing that while there may not be easy big fixes for this problem there are nonetheless many ways to make people's lives better while slowly changing the deprived situations that so many of our fellow humans have been stuck with Overall Poor Economics brings a hopeful message to an area of global policy and justice that sorely needs it Note to Self to include this when writing a full blown review for this bookI recently read an article published in NY Times on how women economists are NOT recognized for their work when they co author it with another a male economist The article goes on to explain how the bias is deep entrenched in the field of economics Recently I was having a conversation with a friend working in the field of finance on the Indian economy and particularly about the drought which has hit most states check the second link and I made a reference to this book on how Indian institutions are going weak He instantly recognized the book and told me the name of the author as Abhijit When I told him that the book has another author named Esther he just uipped almost spontaneously that perhaps the co author would have just helped the other author in finishing up the main work and perhaps that's why her name almost never shows up Even good reads shows the author only as Abhijit V Banerjee if you find it changed have it done by me This has nothing to do with this book but says a lot about the field of finance and economicsIf people can make cliches and sweeping assumptions on the work of an author just on the basis of their gender just consider how grave and ignorant their assumptions would be on the topic of poverty which most of us just read see and empathize about but never have underwent it ourselves or have studied about it from the ground This books helps one to break all such cliches rhetoric and generalizations and provides an honest account and solutions to what goes on in the ground realityVery Highly Recommended NY Times article About the drought on India Winner of the 2011 Financial TimesGoldman Sachs Best Business Book of the Year AwardBillions 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 worstAbhijit 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 euals learning that poverty at the level of 99 cents a day is just a extreme version of the experience any of us have when our income falls uncomfortably lowThis important book illuminates how the poor live and offers all of us an opportunity to think of a world beyond povertyLearn at wwwpooreconomicscom This kind of book can be annoying as popular social science tends to fall into one of two camps The first are those that just repeat a single idea over an over again eg The Tipping Point The second are those that simply rehash 101 textbooks adding a few kooky examples or anecdotes eg The Undercover EconomistTo some extent this book is vulnerable to both those criticisms The authors make a big push on the importance of empirical evidence in designing interventions – using randomized controlled tests – rather than taking bigger ideological positions like so many development authors eg Sachs Easterly The book also seems a repeat of DEV409 from my Masters Of course the second of these criticisms is a bit unfair as DEV409 is clearly not a 101 course Also it’s a bit snobby as there’s nothing wrong with popularising the basics anywayI’m glad I read this book for four reasonsFirst the central idea is a good one Given the design of most development work it’s clear that we still need reminded of the need to move away from large abstract and unproven ‘best practice’ programmes and towards targeted measureable and adaptable interventions The parts of the book that touch upon political economy which is really all of the second half and especially chapter 10 were also fairly open ended which encouraged me as there’s clearly a lot that we can still do I hope I have the time and brains to contributeOn that note the book is positive and encouraging That big ideas don’t work shouldn’t discourage us from trying just to refocus our efforts My pessimism about development is usually the result of my own mistaken expectations that big ideas might deliver results Banerjee and Dufflo grant us permission to move away from this by seeking out niche opportunities at the marginsThird many of the policy interventions and results in the book are of interest in themselves I was especially keen on the microfinance bits as there seems so much potential and – of interest to me – microfinance displays an especially strong link between economic development and institutionsFinally the book serves as a reminder that the poor have to work their way through decision processes just as complicated as the rest of us and often so Working in development it’s easy to despair at people making the ‘wrong’ decisions without understanding why they do soBanerjee and Dufflo say all this elouently than me so here’s a uotation from their conclusion This book is in a sense just an invitation to look closely If we resist the kind of lazy formulaic thinking that reduces every problem to the same set of general principles; if we listen to poor people themselves and force ourselves to understand the logic of their choices; if we accept the possibility of error and subject every idea including the most apparently commonsensical ones to rigorous empirical testing then we will be able not only to construct a toolbox of effective policies but also to better understand why the poor live the way they do Disappointing I was very eager to read about rigorous studies that determine what works for fighting poverty But the authors somehow kept getting off track from this desperately important concept I still think the work of the Poverty Action Lab is very interesting but this is just not an exciting book about a radical rethinking of the way to fight global povertyThe big five lessons from the authors are1 The poor lack information so tell them the truth artfully2 The poor lack control and day to day life is difficult for them so make good behaviors as easy as possible3 The poor get poorer free market institutions like banks don't work well for people with no money so make necessary things and opportunities cheap or free4 Poor countries are not doomed so do things that are proven to work5 Expectations can be self fulfilling so start positive feedback loopsThis doesn't sound new to me This sounds like basic public health The book delivers some valuable information about very specific uestions like whether it's effective to give away bed nets to prevent malaria The answer is yes But even this message is muddled with much back and forth about political theory and academic hedging Much of the book is about economic theories and debates between the left and right A lot of it is anecdotal Much of what is data based comes from their 18 country data set but all those 18 countries are poor This violates the basic logic of epidemiological studies or randomized trials RCTs ie a 2X2 table with input and outcome None of these countries has the relevant outcome of Rich It is hard to learn from a data set like this what makes countries Rich vs Poor For that it is much worthwhile to read the works of Ha Joon Chang who writes about how South Korea went from starving mess to high tech powerhouse The phrase purchasing power parity is repeated every time a dollar amount is converted from another currency This is insanely irritating That sort of thing can be said once at the beginning of the book Such a high degree of precision in language is unnecessary or even misleading because often these dollar amounts are referring to GIGO calculations This book is not what I thought it was or what it promised it would be in the intro It is not an economic analysis of poverty I was thinking it would be in line with books like scarcity that explain the decisionmaking of poor people as a rational response to circumstances It had elements of that certainly but it was a book about development I didn't love the first half of the book but I thought the second half or third was very useful Especially their analysis of micro credit and other development projects I like their critiues of these programs even though I thought they were too tepid in critiuing the Everyone is an entrepreneur model which I think is total garbage I loved their focus at the end on structures of power I think this book could have been bigger and broader and could have connected the political economy of poverty see Jason Hickel's The Divide and other books but it was still a useful response to people like Easterly and Sachs Radical Through my ratings reviews and edits I'm providing intellectual property and labor to com Inc listed on Nasda which fully owns Goodreadscom and in 2013 posted revenues for 74 billion and 274 million profits Intellectual property and labor reuire compensation com Inc is also reuested to provide assurance that its employees and contractors' work conditions meet the highest health and safety standards at all the company's sites In the paperback edition the title was changed to happy go lucky Poor economics Barefoot Hedge fund Managers DIY Doctors and the Surprising Truth about Life on Less Than 1 a Day And for a reasonThis informative well meaning and acclaimed book is telling us that fighting poverty is just about little tweaks in the way NGOs run their programmes in developing countries Tweaks based on the findings of lo and behold social psychology and econometrics For example remember to give food to the mothers when they bring their children to your vaccine centreI cannot think of anything conservative than this which explains the award from Goldman SachsFTA appropriate title for the book could be Development without even thinking of challenging the status uo or No wealth redistribution guaranteedIf you think that a 13% increase in the income of someone who earns 1 a day is a good result this book will provide you with very useful tips I mentioned this book on my blog here and now I finally read it I'll admit I was a little disappointed that the book wasn't as detailed as her lecture on the actual experiments the Poverty Action Lab has been involved in There was much on larger picture topics and brief summaries of experiments and how they contributed to the dialogue on how to address that particular topic within development circlesThat said it was still a fascinating read and I felt like it's been the best thing I've read to help me catch a vision of what life is like for the international poor those living on less than 99 per day If you want to shed some light on what life is like for the poor in America I'd suggest Nickle and Dimed by Barbara Ehrenreich or Promises I Can Keep Why Poor Women Put Motherhood Before Marriage by Kathryn Edin and Maria Kefalas Here's the thing that just drives me crazy when I read aboutthink about the poor the little inconveniences and set backs they face I mean the little things that can ruin MY day like not being able to get in to see the doctor that day or a fee I wasn't expecting or a price hike on my favorite yogurt are the kinds of things that determine whether or not the poor get to EAT that day or whether they'll be able to keep their business open And those inconveniences are in addition to all the work the poor have to do to make the right choices for their welfare that we take for granted For instance they have to chlorinate their own water every time they want to drink it or cook with it if you forget you can get water borne diseases which can give you diarrhea which kills millions of children every year They have to make an effort to buy iodized salt They can't eat fortified cereals every morning so getting adeuate micronutrients is a chore There's no social welfare program like social security to back you up and banks are essentially inaccessible to the poor When they can manage to save money they have to use their now very limited supply of self discipline to not spend it It's so unfair that it makes my insides wriggleHowever this book was full of relatively easy simple and inexpensive ways to ameliorate those inconveniences Like putting cheap chlorine dispensers next to the public water source or subsidizing iodized and iron rich salt or simple information campaigns with usable information Sex with older men is likely to give you HIV decreased the number of high school girls who had sex got pregnant dropped out of school and contracted HIV compared with the control group Deworming children at the cost of about 150 per child per year increased their average yearly wage by the 10's of percentsBanajerjee and Duflo propose focusing on these small forms of assistance and little nudges towards making the right decision rather than trying to find some large scale magic bullet to eradicate poverty Let's get this generation a little healthier and a little educated and get some simple policies in place and then we'll be a little step higher for the next generation I found it hard to disagree They often mention Jeffrey Sachs and his book The End of Poverty which is currently on my bookshelf as an opposing view I'm curious to see what Sachs has to sayAlso here's the word on microcredit according to Banjerjee and Duflo It's great for giving small loans to the poor to run small businesses However many of these businesses fail because so many of their neighbors go into the same business and there's not enough demand Microcredit loans do not encourage risk taking and bigger businesses mean bigger risks since most loans have to start to be repaid only a week after taking out the loan and the other debtors in your lending group don't want you to do anything to jeopardize their ability to make a payment Microcredit loans aren't usually practical for educational purposes like a tuition payment since you may or may not have the money to start paying it back a week later In studies they did they found microcredit users purchased consumer goods but didn't spend much on education or health Essentially they say microcredit loans are a way for the poor to ensure they have a job which is no small thing and is a useful service but it's not a cure all for poverty

About the Author: Abhijit V. Banerjee

Abhijit Vinayak Banerjee is an Indian economist He is currently the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology Banerjee is a co founder of the Abdul Latif Jameel Poverty Action Lab along with economists Esther Duflo and Sendhil Mullainathan and a Research Affiliate of Innovations for Poverty Action a New Haven Connecticut based research

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