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.
©2011 Abhijit V. Banerjee and Esther Duflo. (P)2011 HighBridge Company
“Reads like a version of Freakonomics for the poor.” (Fast Company)
“A must... for anyone who cares about world poverty. Poor Economics represents the best that economics has to offer.” (Steven D. Levitt, author of Freakonomics)
“A marvelously insightful book by two outstanding researchers on the real nature of poverty.” (Amartya Sen, winner of the Nobel Prize for Economics)
This is one of those rare books that strikes the right balance between being choked full of fascinating information, and not being over the head of a non-specialists. It has a tremendous breadth of coverage, and I would absolutely recommend it first (before anything by Sachs or Easterly, for example) for those interested in development economics. (It's not a bad read for economists either.)
For those who don't know: there's a longstanding feud between Sachs and Easterly--who sit at opposite ends of Manhattan at Columbia and NYU respectively--over, among other things, whether giving more aid to poor countries actually does any good, with Sachs arguing that it does, and Easterly basically arguing that if you don't have good "institutions"--which no one ever quite fully defines--nothing is going to help. Banerjee and and Duflo, at MIT, are trying to move the discipline beyond this old argument, and I would say largely succeed in this book. They do this by focusing on data driven results, especially experimental results, which are very rare in much of economics, but are becoming more and more the norm in development since there's a good deal of donor money and projects in poor countries can be remarkably inexpensive. So, for example, there's this really old irritating argument over whether giving away mosquito bednets, as opposed to selling them cheaply, actually leads to less usage because people don't value them. Well, someone finally actually did the experiment, and found that people who are given bednets mostly do actually use them, though they may take extras and waste them, and selling them really cheap works pretty well too. This is what development economists spend their time on.
But there are many more interesting facts to be learned from this book. For example, hunger apparently isn't a problem almost anywhere in the world, though a few specific spots in sub-Saharan Africa may be exceptions. But in most places, if you give people more money to be spent on food, they don't end up eating any more calories; they just eat nicer food. On the other hand, poor nutrition among children and pregnant women may be an issue with serious long-term costs. Community scale drinking water systems may be one of the most effective ways of preventing illness. Microfinance doesn't hurt the poor, but it doesn't seem to help all that much either. Insurance schemes for the poor may seem like a nice idea, but are very hard to implement and are often resisted by those they're intended to help.
My main quibble: This new approach to development is inherently microeconomic (as opposed to macro) in nature. You can't really do macroeconomic experiments where you transform one country's economy and not another. Which doesn't mean macro issues aren't discussed at all--there's a very long discourse on how poverty traps, essentially a macro idea, are to be understood at the micro level. But some of the big ideas in development are inherently macro in nature. One book can't do everything, but since I really do think this should be the first book non-specialists read, I would have liked the authors to summarize some of the other perspectives on the field a little more/better.
For anyone who's even briefly browsed The Economist, there is a lot we think we know about development, most of it gleaned from armchair economists' big ideas about what should be done, how the world can be changed, etc. This book takes a very different perspective and looks directly at what the evidence from the field really tells us. There is so much that we think we know but we just don't and, if you choose to read it, I recommend that you take pencil and paper, and ask yourself a few questions:
Why are the poor malnourished?
Why are the poor unhealthy?
Why do the poor have so many children?
Why don't the poor save?
Why are poor countries corrupt?
I found the book illuminating in coming to answer these questions from ACTUAL field evidence in ways that are not only unexpected but ring true. It is such a breath a fresh air when most of what we hear in this area is speculation about might happen given one or another aid policy.
Yet, and this is only one part where I should caution the reader, the book is not nearly as objective as the authors want us to believe. In some places (microcredit being the big example), the authors depend on the willingness of non-governmental institutions to share their private data and, understandably, are unwilling to explicitly write against them. Given the quality of most of the book, this becomes laughable in some places when, for example, the authors do a parenthesis on the great intelligence of a person in an out-of-the-blue impromptu or, in contrast to the rest of the book, when the authors become vague about unfavorable findings in their own statistical research. Such a conflict of interest is unavoidable for sure but I wish it had been stated more clearly at the beginning of the book.
This book provides a close up look at a range of studies focused on the bottom billion. In it, you'll learn a bit about randomized control testing (RCT) and its strength as a research tool. Moreover, you'll get a glimpse into what various researchers have learned about the causes and effects surrounding hunger, disease prevention, economic progress, as well as how the poorest parents make family planning decisions.
Research-based insights that will surprise most of us. Must-read for the socially conscious. This book is packed with experimental-quality data and conclusions that gives us all the opportunity to help reduce poverty with initiatives that actually work.
This book subjects the theory behind development approaches to experimentation and provides useful illustrations of why a strict rational choice approach to economic thinking often fails to model people well.
A life-long audiobook fan, I began listening in the 1980s, when the first and the only game in town was "Books on Tape" on cassettes.
Having grown up surrounded by many poor people and having worked with many of them early in my career, i picked up this book after seeing it recommended by The Economist. After the first few chapters I began skipping forward. I mean this book would be good for someone professionally interested in poverty, but for a regular listener - I kept thinking this would have made a great article in The Wall Street Journal, but do I really need all those details of all those different studies...
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