Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty

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Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty

4.19 of 5 stars 4.19 · rating details · 1,773 ratings · 213 reviews

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 pi...more

Hardcover, 320 pages

Published April 26th 2011 by PublicAffairs

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Jan 06, 2013 Ben Thurley rated it 5 of 5 stars

Banerjee and Duflo have written a great book that aims to see poverty as a “set of concrete problems that, once properly identifed and understood, can be solved one at a time.” Using the best economic and observational evidence (often taken from randomised trials) they build a case for what actually works in helping overcome poverty, taking up the fight against what they argue are the biggest barriers –ignorance, ideology and inertia.

It is thoughtful and rigorous, though possibly slightly too te...more Banerjee and Duflo have written a great book that aims to see poverty as a “set of concrete problems that, once properly identifed and understood, can be solved one at a time.” Using the best economic and observational evidence (often taken from randomised trials) they build a case for what actually works in helping overcome poverty, taking up the fight against what they argue are the biggest barriers – ignorance, ideology and inertia.

It is thoughtful and rigorous, though possibly slightly too technocratic at times. Occasionally I thought they needed a little more sociologist (for example when considering the way people internalise and conform to social expectations).

They draw 5 broad conclusions about poverty and ways to address it:

1) The poor often lack critical pieces of information and believe things that are not true.
2) The poor bear responsibility for too many aspects of their lives. “The richer you are, the more the “right” decisions are made for you.
3) Some markets are missing for the poor, or the poor face unfavourable prices for critical goods.
4) Most program failures are not inevitable, but the result of a flaw, and one or more of ignorance, ideology and inertia.
5) Expectations of what people can and cannot do often end up turning into self-fulfilling prophecies.

Building on 2) above, their take-down of the self-congratulation of the wealthy and concomitant stigmatisation of poor people is outstanding:

Our real advantage comes from many things that we take as given. We live in houses where clean water gets piped in – we do not need to remember to add Chlorin to the water supply every morning. The sewage goes away on its own – we do not actually know how. We can (mostly) trust our doctors to do the best they can and can trust the public health system to figure out what we should and should not do. We have no choice but to get our children immunized – public schools will not take them if they aren’t – and even if we somehow manage to fail to do it, our children will probably be safe because everyone else is immunized. Our health insurers reward us for joining the gym, because they are concerned that we will not do it otherwise. And perhaps most important, we do not have to worry where our next meal will come from. In other words, we rarely need to draw upon our limited endowment of self-control and decisiveness, while the poor are constantly being required to do so. (68)

They bring their analysis down to specific recommendations about concrete programs that will make a difference in the lives of poor people, such as improving the nutritional yields of foods that people like to eat, increasing access to immunisation, giving away bednets and giving cash transfers (conditional or otherwise).

It's a great read, skewering inappropriate poverty diagnoses and poorly-designed interventions, but offering powerful examples of hope and transformation.

I read it in the same fortnight as Getting Better by Charles Kenney earlier this year and it really works as a great micro-economic companion piece to his macro-economic take on global development and the fight against poverty.
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Jan 14, 2012 Ronald Barba rated it 5 of 5 stars

Shelves: business-and-economics, law-politics, poverty-and-development, start-ups-and-ngo-management

Poor Economics doesn't simply offer a unilateral view of how to fight global poverty; rather, this book offers views from both sides of the foreign aid debate (e.g. Sachs v. Easterly) and provides examples of different organizations that have dealt with attacking poverty on both small and large scales.

There are five key takeaways from Poor Economics, with regard to any localized campaigns attempting to improve the lives of the poor:

1) Individuals/communities inherently believe that outside orga...more Poor Economics doesn't simply offer a unilateral view of how to fight global poverty; rather, this book offers views from both sides of the foreign aid debate (e.g. Sachs v. Easterly) and provides examples of different organizations that have dealt with attacking poverty on both small and large scales.

There are five key takeaways from Poor Economics, with regard to any localized campaigns attempting to improve the lives of the poor:

1) Individuals/communities inherently believe that outside organizations/companies claiming to help their economic/health statuses do not make true claims. Info campaigns must educate the poor on critical facts/information, and this information must come from a legitimate & reliable source (i.e. the press) AND must be attractive (e.g. presented in a TV dramas).

2) The poor bear responsibility for most/all aspects of their lives. Unlike individuals in the First World or people in the middle- and upper-classes, the poor do not have direct access to proper banking or credit institutions, government aid, etc. Certain institutional/Institutional changes must be made to give the poor better access to these resources (e.g. ease access to banks or offer savings accounts as default options).

3) There are good and legitimate reasons that some markets are missing for the poor or face unfavorable prices in certain markets. This provides the opportunity for technology or institutional organizations to develop a market (such as the case for microcredit lending). Local and national governments need to create conditions to allow such markets to emerge, of course.

4) It should not be assumed that poor countries are destined to fail because they are or have been poor, or that it's because of a long-running history with failure. The failure can be solved through an overhaul of public policy, greater monitoring of workers and politicians, and greater education & involvement of the people themselves within this public sphere.

5) Expectations matter. If we expect people to fail, then they will fail based on the low expectations expected of them and consequently low expectations they expect for themselves. In order to create changes in the lives of the poor, expectations must be changed.
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Jun 01, 2013 Ed rated it 5 of 5 stars

No this is not about how useless economics had become under the hegemony of the Chicago School of Free Market Fundamentalism. This is about the economics of being poor. And refreshingly instead of focusing on the theories of poverty and the decision making of the poor, it is based on large scale, many country research asking those on less than a $1 a day how they make decisions on how they spend their money, what food to eat, what health care to seek, what education to try to get their children....more

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Aug 06, 2012 Mal Warwick rated it 5 of 5 stars

Must Reading About Global Poverty and the Contrasting Approaches to Combat It

Public debate about the way to combat global poverty has ricocheted between two extremes. One was summed up in 2005 in The End of Poverty by Jeffrey Sachs, the Columbia economist who spearheaded the UN Millennium Development Goals. The other was laid out by former World Bank economist William Easterly the following year in The White Man’s Burden. Sachs advocates massive government-to-government foreign aid. Easterly dep...more Must Reading About Global Poverty and the Contrasting Approaches to Combat It

Public debate about the way to combat global poverty has ricocheted between two extremes. One was summed up in 2005 in The End of Poverty by Jeffrey Sachs, the Columbia economist who spearheaded the UN Millennium Development Goals. The other was laid out by former World Bank economist William Easterly the following year in The White Man’s Burden. Sachs advocates massive government-to-government foreign aid. Easterly deplores foreign aid, convinced that it does more harm than good.

In Poor Economics, Abhijit Banerjee and Esther Duflo seek a path between these two extremes, emphasizing the Randomized Controlled Studies they and their colleagues had conducted to ascertain what works and what doesn’t. (As of 2010, they had completed more than 240 studies in forty countries around the world.)They characterize Easterly’s approach as demand-driven, since he believes that poor people must seek their own solutions — a conservative, free-market attitude. By contrast, Sachs’ approach is supply-driven, reflecting Sachs’ conviction that a government must provide for its people based on consensus thinking about what poor people need — a liberal, top-down attitude. (I find myself bemused that I’m on the right side of this debate.)

Banerjee and Duflo report that their observations and research results support each of these two approaches — and sometimes both — depending on what issue they study. Hunger, health, education, financial services, family planning, business development, policy options: each field offers up a unique picture of success and failure attributed to one or another of the two approaches. In other words, circumstances and details matter, all of which may vary from one country to another. There is no silver bullet, they assert, no panacea to eliminate poverty.

Poor Economics focuses on the overarching question of whether there is such a thing as a “poverty trap.” Sachs contends there is: poor people will be stuck in poverty unless and until they are given the resources to release themselves from the trap. In many circumstances, Banerjee and Duflo find scant evidence to support this assertion. In others, however, they see the need for government intervention in the lives of the poor because otherwise they will perceive no reason to act for themselves.

Rather than identifying a simple, unitary explanation why Sachs’ approach often fails, they emphasize “ideology, ignorance, and inertia — the three I’s — on the part of the expert, the aid worker, or the local policy maker.” These three I’s, they claim, “often explain why policies fail and why aid does not have the effect it should.” Banerjee and Duflo explain further: “The poor often resist the wonderful plans we think up for them because they do not share our faith that those plans work, or work as well as we claim.”

It would be difficult to find two scholars better prepared than Abhijit Banerjee and Esther Duflo to forge a middle course through the opposite poles of thought about global poverty erected by Jeffrey Sachs and William Easterly. Banerjee, an Indian economist who is also the son of two economists, holds an endowed chair in economics at MIT. He co-founded MIT’s Abdul Latif Jameel Poverty Action Lab with Duflo, a French economist and a former MacArthur Fellow (recipient of the “genius” award).

For anyone who seeks deeper understanding of global poverty and the ways and means of fighting it, Poor Economics is must reading. This book is the latest I’ve read in my ongoing effort to study world poverty. For a list of additional books on the topic, go to my reading list.

(From www.malwrwickonbooks.com)(less)

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Feb 27, 2012 Sriram rated it 4 of 5 stars

Harvard economist who has studied poverty from a randomized control type perspective. He does so humanely with specific case studies. He questions assumptions such as are bed nets really not used by poor people when given to them rather than when they have to pay for them, why is is so hard for poor people to save, what are the reasons that people access curative services but not preventative services? Is overpopulation really keeping countries in poverty or are large families worse for children...more

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Feb 17, 2012 Converse rated it 2 of 5 stars

Shelves: economics

I listened to the audio version of this book, downloaded from audible.com.

The authors basic question is whether or not there is a "poverty trap" and their basic means of exploring this question are randomized experiments in which people are randomly assigned to get misquito nets, or food subsidies, or microcredit, or have savings accounts established for them, etc. The authors are quite proud of this methodological advance; I am appalled that techniques known to statisticians for decades, probab...more I listened to the audio version of this book, downloaded from audible.com.

The authors basic question is whether or not there is a "poverty trap" and their basic means of exploring this question are randomized experiments in which people are randomly assigned to get misquito nets, or food subsidies, or microcredit, or have savings accounts established for them, etc. The authors are quite proud of this methodological advance; I am appalled that techniques known to statisticians for decades, probably since before the Second World War, are only now being applied by economists. The field work they cite has been done in may countries, including Mexico, Morocco, Kenya, and India.

Whether or not there is a poverty trap seems to depend on what aspect of the lives of the very poor you look at. In some aspects, such as the difficulty in scaling up a business to a point where it is trly profitable, there may well be a poverty trap. In other aspects, such as the number of calories consumed, there probably isn't for people who are not actually starving.

The very poor don't always reason any better than those of us who are not poor. They are particularly good at taking a full course of vaccines for a particular disease, probably because a vaccine is something you take when you (or your children) seem to be fine; however they do spend a good proportion of their income on health care, favoring treatments that have the definite aspect of being treated (such as getting a shot, effective or not) when they or their family are actually sick. They underestimate the benefit of each additional year of education, assuming (as the educational systems of many countries encourage them to do) that there is little benefit unless you get to the advanced grades; and thus they tend to concentrate schooling only on those of their children who seem likely to go all the way to the top.

Some of the topics apparently debated among development economists seem to me to not need the amount of chewing over they have recieved. For example, there seems to be a school that holds that "good government" which is apparently held to be synonmous with democracy is needed for economic growth, and as this seems unlikely in many poor countries, the possiblity of growth is low. This notion seems very odd to me, as South Korea, Taiwan, and Chile were all military dictatorships during much of period of rapid growth, and China is basically a one-party state. The idea that the poor are natural entrepeneurs and that the rich nations should encourage this as a means of ending poverty is currently fashionable. Although the portion of the population running their own businesses in poor countries is much higher than those in rich countries, laborious experiments have shown the difficulty of scaling up a one-person business to a point where it is worth it when you include the value of that persons time. I think it should have obvious from the statistics of rich and poor countries that this notion that entrepeurship was going to save the day was silly.

It wasn't clear to me that the numerous surveys of poor people and randomized experiments involving extremely poor people actually led to much insight in how to reduce poverty. I think looking at how people stopped being extremely poor might be more helpful. I also thought that the authors were mostly overlooking (except for a couple of anecdotes about a couple of successful Chinese businesspeople) were overlooking the elephant in the room, the considerable growth in the Chinese economy and consequent lifting of many of people out of extreme poverty. India, the site of much of the authors work, has also experienced growth, if to a lesser degree than China, but you wouldn't know it from the focus of their work.(less)

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Jan 12, 2012 Heather rated it 4 of 5 stars

I mentioned this book on my blog here, http://livingeden.blogspot.com/2011/1..., 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 more 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 circles.

That said, it was still a fascinating read and...more I mentioned this book on my blog here, http://livingeden.blogspot.com/2011/1..., 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 more 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 circles.

That 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 about/think 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 adequate 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 wriggle.

However, 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 more 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 $1.50 per child per year, increased their average yearly wage by the 10's of percents.

Banajerjee 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 more 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 say.

Also, 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 more consumer goods, but didn't spend much more 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.

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Dec 30, 2012 Jake rated it 4 of 5 stars · review of another edition

Shelves: economics, development

On the negative side:
- This book is arbitrarily organized into two sections, "Private Lives" and "Institutions", to which none of the subsequent chapters actually correspond.
- The authors routinely say "a study showed this" or "an experiment proved this" without providing an iota of context regarding things like sample size, statistical significance, the specification used, external validity, or possible (and often problematic) Hawthorne effects.
- There is the unending rhetorical over-simplif...more

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Jun 08, 2013 Josh Meares rated it 4 of 5 stars

I really enjoyed Banerjee and Duflo's book! They have interacted with most of the major current opinions on the big issues in development thinking: Sachs, Easterly, Collier, etc. But their focus is less on the "right" aka perfect way to set up and improve the big institutions, and more on what is actually provably working and not working in the field and why.

In their own words, "The positions that most rich-country experts take on issues related to development aid or poverty tend to be colored...more

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May 21, 2011 Ifedayo rated it 4 of 5 stars

Shelves: 2011

I really liked this book. Essentially the authors provide a literature review on previous studies that have been done in economic development. The emphasis is on random controlled trials, where an intervention is introduced to one group and the effects are compared to a control group. I definitely feel like there's a dearth of studies in the field of development, and at its core the book is an appeal for more rigorous studies in the field of development. It was interesting to read some of the co...more I really liked this book. Essentially the authors provide a literature review on previous studies that have been done in economic development. The emphasis is on random controlled trials, where an intervention is introduced to one group and the effects are compared to a control group. I definitely feel like there's a dearth of studies in the field of development, and at its core the book is an appeal for more rigorous studies in the field of development. It was interesting to read some of the conclusions of some of the studies. For example the effect of micro finance is a generally overstated by the media. While microfinance might help some poor people, there's really no evidence that the poor are more entrepreneurial than the rich. If anything, the poor want stable jobs not to start their own companies. Further, microfinance tools are generally opposed to true entrepreneurship. Most of them require people to start paying back their loans in the following week. Thus they end up supporting small subsistence business that employ just one or two people.

There were so many results that I found interesting and I would encourage others to read this book. Let's see: Poor people are less likely to consume preventitive health because they are not sure that it has an effect. Studies that provided free bed nets and allowed the users to see their effect actually made participants more likely to buy a subsequent net. Also, Soap operas are good ways to change social norms.

My only critique of this book is that even though the authors say that it's important not the generalize in the field of development. They do a lot of generalizing themselves. They lump studies done in different continents in order to reach conclusions. I'm not familiar with life in rural Kenya or urban India, but my instinct says that they can't be all that similar. They also end the book by paradoxically providing a list of important conclusions about the lives of the poor and then criticizing past development workers for drawing too broad conclusion.

Overall though, it's a good book. (less)

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Jul 17, 2012 Jim rated it 4 of 5 stars

Shelves: economics

One of the most daunting obstacles economists and other social scientists face when observing the real world in an empirical way is a lack of control. It is notoriously difficult to establish randomized, controlled experiments in the real world, because unlike laboratory settings, the real world cannot be controlled by setting all conditions equal except for one, in order to measure the impact of that particular factor. There are serendipitous occasions when such randomized trials emerge through...more One of the most daunting obstacles economists and other social scientists face when observing the real world in an empirical way is a lack of control. It is notoriously difficult to establish randomized, controlled experiments in the real world, because unlike laboratory settings, the real world cannot be controlled by setting all conditions equal except for one, in order to measure the impact of that particular factor. There are serendipitous occasions when such randomized trials emerge through happenstance, but they are rare in the developed world, usually because no one has the patience to see them through. In "Poor Economics," Abhijit Banerjee and Esther Duflo summarize studies performed by various economists and social scientists, including themselves, of the developing world to see how the world's poorest make decisions, and whether various proposed solutions fit the data. They find that randomized and (somewhat) controlled experiments occur more naturally there, because NGOs, in particular, will often implement new ideas in a piecemeal fashion, establishing programs in some randomly-chosen villages but not others, and allowing for the observation of the effects of the programs. Along the way, they use anecdotal evidence to punctuate, but never override, the broader evidence of the empirical data. The stated purpose of the book is to treat the poorest people on earth like real people, who make decisions about how to spend their limited resources in ingenious and creative, but altogether human, ways.

The book approaches the broader subject according to various specific problems, such as nutrition, education, access to capital, or political environment (to name a few). Along the way, they summarize various opposing views of the plight of the extreme poor in various countries, and try to examine the empirical data available to determine which views are more supported by the studies shown. The writing is generally clear and accessible, with very little in the way of jargon or pointy-headed econ-speak. They don't really come down, overall, on one side or another (between rich world top-down intervention, on one hand, to a more market-based approach on the other), but explore different areas in which a particular approach might work to achieve some ends, but not others. There were many valuable insights to be gained, and lot ot be learned abut the true lives of the poorest among us.

The one criticism i had for the book was an oversight that I felt manifested in a few different areas, but particularly in the later chapters on microcredit and entrepreneurship. The authors made some excellent points about the nature of most "entrepreneurs" in the poorest areas (who take up new businesses out of necessity and rarely grow them into anything lasting), as well as the highly risk-averse nature of microcredit and its limited penetration among the poor. However, they usually cited data that covered periods of three years or less- sometimes, a change would be instituted (in, say, access to cheaper credit) and they would look a the relatively small uptake from the poor over 18 moths, and conclude that the impact wasn't as advertised. But of course, it takes time for cultural practices and comfort levels to change, and some of the habits and practices that exist across different countries and continents among the poor are not going to simply evaporate overnight due to a change in policies or capital availability. So it would be a mistake to abandon some ideas simply because they don't have a large measurable impact immediately. Overall, however, i felt that the insights to be gleaned from this book are well worth the time to read it, and at roughly 270 pages, it's a pretty quick and easy read. (less)

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Jul 31, 2011 Greg Stoll rated it 5 of 5 stars · review of another edition

Poor Economics is about the world's poor (living on the equivalent of 99 cents a day, not including housing) and how best to help them. There are basically two broad schools of thought on how to help: for example, in education one group (the "supply wallahs") says we just need to get kids into schools with good teachers, and the rest will take care of itself. (i.e. ensuring the supply of education will solve the problem) The other group (the "demand wallahs") says there's no point in doing this...more Poor Economics is about the world's poor (living on the equivalent of 99 cents a day, not including housing) and how best to help them. There are basically two broad schools of thought on how to help: for example, in education one group (the "supply wallahs") says we just need to get kids into schools with good teachers, and the rest will take care of itself. (i.e. ensuring the supply of education will solve the problem) The other group (the "demand wallahs") says there's no point in doing this if the parents don't believe there's value in education, and it's a waste of money (and possibly screws up the free market) to spend aid dollars on it.

It should come as no surprise that people generally are in one group or the other based on ideology. This book was written by the cofounders of the Poverty Action Lab, which conducts randomized control trials to actually figure out what ways of helping the poor are the most effective.

One of the big questions is whether a "poverty trap" exists with respect to a particular issue. A "poverty trap" means that if you're stuck at a very low income level, there's no good way to increase your income without getting an infusion of cash. "Supply wallahs" generally believe that poverty traps exist, and giving aid will help people get out of the trap and support themselves, while "demand wallahs" generally believe that poverty traps don't exist and aid will be wasted.

Now, to randomly call out parts I found interesting: (yay for Kindle highlighting!)
- A nutrition poverty trap would be if people were hungry enough to make them weak and unable to work, and thus spiral down into making less and less income. This does not seem to be the case for most adults, as when the poor get more money to spend on food they tend to spend it on better-tasting calories instead of more calories, thus indicating that they weren't seriously short on calories in the first place. However, getting proper nutrients to children is a problem, and giving away food with lots of nutrients does make children develop better. Each year of improved nutrition for a child increases their average income as an adult.
- Malaria is a serious problem in a lot of poor countries, and one simple preventative measure is to sleep under a bed net to keep out mosquitos. Poor people seem to realize this is a generally good idea, but bed nets are rather expensive (equivalent of $10) and the effects are hard to see immediately. (it's hard to quantify _not_ getting sick in the short term) Poor people, like all of us, are prone to procrastination in these sorts of circumstances, and so giving away bed nets does help to break the cycle. In fact, after being given a free bed net, they're more likely to buy one at full price when given the opportunity later. More developed societies have lots of ways to force us to do things that are good for us but that we might put off otherwise - for example, schooling is mandatory for children, and vaccination is mandatory to enroll in school; our drinking water is chlorinated for us; and our sewage is piped away. This lessens our cognitive load so we don't constantly have to make important decisions and fight the urge to procrastinate. Research has shown that we have a limited supply of willpower that gets drained when we have to have decisions, and it's no surprise it's harder to make good ones when you have to make them all the time.
- In Brazil, the state doesn't promote family planning, but when telenovelas (soap operas) with female characters with small families (none or one child) first became available in an area, the number of births would drop dramatically.
- Microfinance does help people make money, but the effects weren't as radical as many had hoped.
- A study in Uganda showed that only 13 percent of money allocated by the government for schools actually was received by the schools. (presumably the rest was lost to corruption, etc.) This, of course, is depressing and is why some think most foreign aid is useless without good governmental institutions. However, these results were reported in Uganda and there was an uproar, and when the study was repeated 5 years later, the number was up to 80 percent, showing that just having people care about corruption can be powerful in itself.

There's more good stuff in the book, but I'm all summarized out. You can read more about it at the book's website pooreconomics.com.(less)

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Feb 13, 2012 Sam rated it 3 of 5 stars

Hesitated between 3 and 4 star.
Not a very charismatic book, quite "wordy" and kind of gets lost in descriptions. but makes good sense.
There is no snap action or conclusions, however, a more concise way of writing could make reading easier. For someone who has time to read, it does describe the complexities, which one often overlooks ... !

Officially:

Winner of the 2011 Financial Times/Goldman Sachs Best Business Book of the Year Award

Billions of government dollars, and thousands of charitable org...more

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Jun 28, 2011 Abby Jean rated it 5 of 5 stars

Shelves: summer-project, 2011

i really really liked this book. their argument is that there's not one sweeping and universal cause for global poverty, and thus no sweeping and all-applying solution. instead, making small changes at the margin may be the best way to proceed - which is both slightly discouraging and very exciting, in that we need not wait until we figure out the "grand solution" but can start making effective inroads on the problem with what we know already. they review a number of issue areas and talk about r...more

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May 05, 2013 Paul rated it 4 of 5 stars · review of another edition

Shelves: books-read-2013

For anyone who has read The End of Poverty by Jeffery Sachs then this is another book that you should read. The authors are both Professors at MIT, Banerjee is economics and Duflo is Poverty Alleviation.

Even though it is a book about the economics of the poor around the world, it is not a high brow criticism of the way the poor manage themselves, but a series of practical suggestions and principles and ways that we, them and all stakeholders can make a big difference to their lives.

A lot of the...more

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Jun 30, 2012 Fiona rated it 3 of 5 stars · review of another edition

I have to admit, I put this down before finishing it. I didn't read cover properly when buying, so didn't realise it was all about poverty in the developing world. I thought there might be some insights into poverty in western world too. Although a lot of this was quite interesting, I would have found it more interesting understanding how some of the same principles play out in the UK, US or Europe.

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Jun 02, 2011 Ryan rated it 4 of 5 stars

a good, quick read that highlights a lot of the lessons learned from RCTs in development over just the past few years. Occasionally frustrating in its effort to still position itself in the context of the sachs/easterly debate, which isn't, to me, a useful dialectic (though admittedly one that has dominated the field for a decade). the book shines when it gets into the nitty-gritty of the work j-pal and its affiliate researchers do, and the accompanying Web site is indispensable. Banerjee and Du...more

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Nov 26, 2012 Cheryl rated it 3 of 5 stars · review of another edition

Shelves: non-fiction, business

Great insight, well-structured research that makes for a not-so-difficult read. I would venture to say that this book is the answer to how foreign aid could be appropriated best in developing countries. It also speaks to a bigger issue: the role of social entrepreneurship in the developing world. I hoped though, that it would be more radical in its approach.

What I liked:

1. The close look at India's economy.
2. The thorough research that produced such gratifying information and statistics.
3. Th...more

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Jan 23, 2012 Neil rated it 4 of 5 stars

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 (e.g. The Tipping Point). The second are those that simply rehash 101 textbooks, adding a few kooky examples or anecdotes (e.g. The Undercover Economist).

To 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 randomize...more 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 (e.g. The Tipping Point). The second are those that simply rehash 101 textbooks, adding a few kooky examples or anecdotes (e.g. The Undercover Economist).

To 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 (e.g. 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 anyway.

I’m glad I read this book, for four reasons:

First, 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 contribute.

On 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 margins.

Third, 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 institutions.

Finally, 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 more so. Working in development, it’s easy to despair at people making the ‘wrong’ decisions, without understanding why they do so.

Banerjee and Dufflo say all this more eloquently than me, so here’s a quotation from their conclusion:

"This book is, in a sense, just an invitation to look more 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".(less)

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Mar 30, 2013 Lily Moore rated it 3 of 5 stars

This book focused on one major idea/thought- is there a "poverty trap?" A poverty trap is basically a term for if you have a very low income, there is no way to make things right without finding a large sum in the meantime. Overall I did enjoy this book because it gave me a counter argument to the typical, "provide education, and the poor will improve." Of the family does not value education, then how will that idea be useful?
If there was one thing about this book that I did not like, it is the...more

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Sep 27, 2012 Kaushik rated it 5 of 5 stars

Shelves: economics-and-economic-history

Brilliant - lucid and well researched. The book is remarkable for its highly scientific and grounded approach towards tackling poverty and its message of optimism - that efforts of the right kind can go a very long way. While RCTs do have issues at times in terms of spillover effects, this needs to be compulsory reading for all policymakers.

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Jan 14, 2013 Palash Bansal rated it 5 of 5 stars

A very well written book, which sums up the problems faced by the poor and the reasons why the government policies are failing to address them. It puts into context the rational behind the decisions that poor people make, which often violates the common sense and the concept of rationality. Such decisions may be taken by us for granted but prove to be life threatening for the poor.
The basic problems of health, education, population, and micro-finance institutions are beautifully explained and w...more

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Aug 08, 2012 Jack rated it 4 of 5 stars

Shelves: economics, politics

The "Freakonomics"/Gladwellian book of development aid. Readable and interesting. The authors are economists writing for the non-economist. And they sure seem to know what they're talking about and have dedicated their lives to improving the lives of billions. So many people claim more should be done: these folks are doing something about it. They claim to be walking a middle ground between the Easterly/"Nothing can be done for them - they have to do it for themselves" approach and the Sachs "Le...more

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Feb 27, 2012 Benjamin rated it 5 of 5 stars

Shelves: 200_book_mba

This book is a very good introduction both to the specifics of the economics of the poor and the very poor (which they treat with exceptional distinction), and to empirical thinking applied to economics, which is all too rare. Synthesizes from the likes of Jeffery Sachs (whom I at least admire greatly) and William Easterly (on the opposite end of the ideas spectrum, but whom I also find admirable), bringing in their ideas while throwing out their big-idea-first approach.

While I think the there...more

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Oct 17, 2011 Troy rated it 4 of 5 stars

Poor Economics is a great, important, and easy read. It's not written with a terribly technical voice, so even readers that lack training in economics will have no problem grasping its content.

The book is essentially a compilation of anecdotal stories used as evidence for the authors' micro analyses on a macro issue: global poverty. The overall message of the book is that the traditional macro approaches to fighting poverty (Foreign Aid) are not working because there is no care taken for the mic...more

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Apr 03, 2013 Arthur rated it 5 of 5 stars · review of another edition

I started reading this while taking the edX MIT class taught by one of the authors (Esther Duflo). The class was, in some respects, the best online class I'd experienced, but because of the workload required and its focus on data that I found inapplicable to my own interests, I did not complete the class. Additionally, I found that the book covered the majority of topics discussed, and did so well enough that the supplemental coursework seemed superfluous.

Despite my having an outlook on global p...more I started reading this while taking the edX MIT class taught by one of the authors (Esther Duflo). The class was, in some respects, the best online class I'd experienced, but because of the workload required and its focus on data that I found inapplicable to my own interests, I did not complete the class. Additionally, I found that the book covered the majority of topics discussed, and did so well enough that the supplemental coursework seemed superfluous.

Despite my having an outlook on global poverty that is fundamentally different than the authors (in that they do not significantly address the likelihood that rapid technological advancement will alter most of the circumstances that lead to and perpetuate poverty) I think the book did an incredibly good job at rationally approaching the reality of poor life as it exists today. The book consistently compared opposing viewpoints and grounded them in the real world experiments that best evaluates them objectively. The usefulness of randomized controlled trials seems so self evident that without this book, I would have never known that their use could be contentious. Granted, it is unfortunate that the book does not go more into the largest potential source of error in these trials: unlike the double blind medical experiments that inspired them, everyone involved in the trials knows which villages/families/individuals are receiving the intervention. Nevertheless, the authors' dedication to rationality is apparent in both the experimental method applied and the conjecture about the decision making of the poor. It appears that this rationality is extended to the evaluation of potential solutions, and in the choice of what data was relevant to include in the book, as both optimistic and downright condemning information was presented.

The truth about the institutions and individuals that are entwined in the problem of global poverty is a complex truth. It is often the case that the same agent will simultaneously profit from and reduce poverty, or perpetuate it while thinking that they are doing the right thing, or any number of counterintuitive combinations. The strength of Duflo and Banerjee's book is in their dedication to laying this truth out, and working with any practical method to reduce the suffering of the poor, no matter where it is found. Therefore, even though most of the numerous specifics related in the book will not find a permanent home in my mental index, and the greater lessons about method and objectivity are ones that I am confident I have already internalized, I am still glad to have read it. It certainly contributed to a more well rounded understanding of a complex situation, and it is always reaffirming to see the growing success of well structured, properly applied, good intentions.(less)

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Sep 23, 2012 Vivek rated it 5 of 5 stars

I live in Bangalore, India. I always wondered why the manual labourers who I used to see working so hard "waste" hard earned money on liquor. Why their kids rarely go to school. The domestic help at my home did everything to get her daughters educated, but her daughters were simply not interested. I was under the impression that kids who go to government schools have no brains and so could not do basic arithmetic. Poor pay more than 100% interest per annum for their petty loans, whereas we pay...more

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Jan 07, 2012 Fred Rose rated it 5 of 5 stars

Shelves: acara-reading-list, global-issues, india

"Very similar to "More Than Good Intentions", about development economics and what works or doesn't work in fighting global poverty. Very good book, not as readable as the other book but very detailed. Very good discussion on micro-credit and micro-savings and insurance, and how these things are really used (or not used). There is no simple answer here, every case is different but overall these books are must reads. The section on social entrepreneurship was more about small business owners (li...more

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Aug 16, 2012 Aditya rated it 5 of 5 stars

Shelves: marketing-business

The book offers some excellent insights into what we call as true development. Over the last 30 years, though food prices have steadily gone down, (1980 - 2005), the per capita calorie consumption has been falling implying that Indians are eating less and less and the authors have been able to point that out carefully as a nutritional problem.

The book is going to offer you different perspectives on a lot of policies for development including the Right To Food Act, China's one child policy, and e...more

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May 26, 2012 Remi rated it 5 of 5 stars

Both authors do a brilliant job of evaluating current poverty solutions in a realistic manner. In particular, it was revealing to see that microfinance is somewhat overhyped (it's great for tiding people over and providing financial services to an underdeveloped market: the poor)--however, it is hardly the poverty cure-all that people make it out to be.

Also, one of the underlying arguments in their book, which is that addressing poverty requires patience, attention to detail, and networked solu...more

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About 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...more

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“But then 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?” — 2 people liked it

“We must arm ourselves with patience and wisdom and listen to the poor what they want. This is the best way to avoid the trap of ignorance, ideology and inertia on our side.” — 1 person liked it

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