Reading ‘Poor Economics’

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12th Feb 2012

It’s been both enlightening and frustrating reading this book – the unlikely winner of the Financial Times/Goldman Sachs Business Book of the Year award in 2011. The starting point is that policies to help the poor need to be based on solid evidence (i.e. randomized control trials), and the evidence and analysis presented here is fascinating.

Why do poor people borrow at high interest rates in order to save at lower rates? Why do their children miss out on life saving immunizations but they buy drugs they often do not need? Why do they pay to go to private schools when there are government schools for free? The book answers these questions in detail, illustrating the data with case studies of individual families, and hundreds of studies from the 18 countries that they focus on. The authors, both professors at MIT’s Poverty Action Lab, set out to try to understand how the poor make their decisions and what kind of aid and public policies would help.

The subtitle is “A radical rethinking of the way to fight global poverty” – but it’s only radical in the way that it seeks to present evidence. It is not radical in the sense of challenging or even exploring power relations which keep people poor. It doesn’t really consider factors that economic tools can’t explore. Occasionally the authors make patronizing statements such as “Negotiating shifts in the social norm within traditional societies can be a very complex business.” – as if this didn’t apply to all societies.

There’s a Poor Economics website which is packed with well-presented data from the original studies, short videos and stories (and even the author’s own lecture slides).

Poor Economics by Abhijit Banerjee and Esther Duflo, Perseus Books, 2011







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