Poor Economics: Rethinking Poverty & the Ways to End it

by Abhijit V. Banerjee

In Hyderabad, we explicitly asked slum dwellers to tell us whether there were any goods they would like to cut back on. They readily came up with tea, snacks, alcohol, and tobacco. And indeed it was clear from what they told us and from the data we collected that significant parts of their budgets ended up getting spent on these items. The same self-knowledge was apparent when Esther, Kremer, and Robinson asked a group of participants in the Kenyan fertilizer program, in advance of the harvest, to choose the day when they would come to sell the vouchers. A large fraction asked them to come early. The farmers knew that right after harvest was when they would have money available, but that it would soon disappear. Given this self-awareness, it is no surprise that many of the ways the poor save seem to be not only intended to keep the money safe from others, but also to guard it from themselves.