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

This book is a treasure trove of information about global poverty. I came into the book with a host of naïve assumptions about why poverty exists and what can be done to stop it, but the authors referenced a plethora of research studies that obliterated my ill-conceived notions about poverty and provided me with a solid foundation of knowledge upon which I can build.Prior to this book, I held a number of beliefs that I simply assumed were common sense. For example, I had assumed that if you offered free food to someone who is consuming barely enough calories to survive that the overall amount of calories they consume would increase. Apparently this is not the case-- if you give them free rice, they will take the money they used to spend on rice and instead spend it on more expensive, unhealthier food (or worse yet, something like tobacco). Thus, even if everyone in developed countries purchased food and gave it to the people in poorer nations this would not solve world hunger.In chapter after chapter the authors bring up an issue faced by the world's poor, offer up the existing theories about the problem, point to research that sheds light on why the theories or current efforts fail to address the problem, and suggest solutions that we have reason to believe would work based on the findings of various research studies. The issues faced by the poor are wide-ranging and the authors do an excellent job trying to cover them all. Here are the main issues covered (a full chapter is devoted to each one):1. Hunger (why poor people are not getting enough calories)2. Health (why poor people don't try harder to get their kids de-wormed, vaccinated, etc.)3. Family size (why poor people choose to have large families even though it is difficult to support more children)4. Education (why poor people don't invest in all of their kids' education)5. Risk/insurance (why poor people incur so much risk yet aren't insuring themselves against it)6. Borrowing/microfinance (why microfinance isn't going to solve poverty and why borrowing is still an issue for some)7. Saving (why poor people aren't saving)8. Entrepreneurship (why poor people aren't all the great "entrepreneurs" that microfinance makes them out to be)9. Politics/institutions/corruption (why poor people can see improvements in their lives even with corrupt institutions)Each chapter begins with a difficult question which might seem to have an intuitive answer but does not; then the authors point to the results of research studies that shed light on the answer proceed to explain why the problem has not been solved if we know why it is occurring. For example, the chapter on saving begins with the following question: can poor people actually save money? Many people would immediately answer "of course not" simply based on the fact that the people we're talking about are poor. However, the authors provide convincing evidence that shows poor people are in fact capable of saving. This begs the question, if they can save, and it would be in their interest to do so (to provide a safety net for the enormous risk they face in their lives-- e.g., a family members becomes sick and can't work), then why don't they save? Are they simply lazy, short-sighted, and incompetent as we are told in the press? As you might imagine, the answer is not so simple (or condescending). Poor people don't save for a variety of reasons. First off, many of the world's poor don't have easy access to savings accounts. Banks are highly regulated and thus there is a significant cost involved in serving a client-- so why would a bank make an effort to cater to poor communities where they'll receive very little income from their customers to compensate for the costs they're incurring in offering banking services? Furthermore, it is easier for middle-class or wealthy people to save, not simply because they have more income but because the system makes it incredibly simple: for example, many people work for an employer that sets up a 401k plan for them and offers to match funds and deduct funds from your paycheck without you having to do anything. Most of the world's poor do not have such a simple option for saving-- they must exercise willpower week after week to overcome the temptation to spend (which we all have, poor or not), whereas the rest of us can just tell an employer once that we want to contribute to our 401k plan and that's the end of it. The authors even told stories of women who were taking out a loan at 24% interest and then saving the money in an account that only paid 4% interest. This seems incredibly foolish, so the authors inquired as to the women's motivations. It turns out they were doing this because this would force them to save-- having to repay the repay the loan would act as a disciplining mechanism. Essentially they were trying to force themselves to save because they didn't have a 401k account that would just automatically withdraw the money. They face the same temptations that we all do, they just don't have an easy means of overcoming them.But the authors don't simply point out problems and throw up their hands in desperation-- they offer concrete solutions to each problem. Not all the solutions are equally convincing and the authors are the first to admit there is no "magic bullet" but they go a long way toward providing a framework for how we might think about solving global poverty in the next one hundred years. For example, in the chapter that deals with the enormous amount of risk the poor face (due to crop failures, health problems, etc.) they ask why the poor don't simply obtain insurance. The answer is complicated and has to do with moral hazard, adverse selection, and fraud, the combination of which has made it difficult for a "market" in microinsurance to develop in the same way we've had an innovation in microfinance. Thus, the authors suggest that governments step in and help create such a market by providing subsidies for insurance premiums. Before you throw up your hands and yell "that's socialism!" bear in mind that they cite previous instances of such subsidies and how they led to dramatic increases in the number of poor people who were insured.There is no easy way to solve global poverty, as the world's poor face a number of problems that seem intractable. Yet when we examine each of these problems by looking at how the poor actually behave and how they respond to incentives, we can begin to develop a framework for how we might solve each of these problems and reach a point where poverty is a thing of the past. But before we can do anything to eradicate poverty, we need to understand why it exists, why it is self-perpetuating, and what can be done to stop it. This is the function of this book, and it excels on all fronts.

This book is great for those who seriously want to learn about how economics works for the very poor, who Banerjee and Duflo categorize as those who live on 99 cents a day or less. If you're interested in political cheap shots, feel-good straw man arguments, or emotional windbaggery, look elsewhere.Economics is a subject that is easily derailed by partisan jargon and pseudo-intellectualism, so I am always wary of each new econ book I pick up. Poor Economics is written by serious economists who have no time for such nonsense, and this is reflected in the high quality of the book. The authors seriously engage two different perspective throughout the book - one that argues that aid to the global poor often makes matters worse, and the other that argues that the poor cannot rise without heavy external (often government) help. The strengths and weaknesses of each are pointed out dispassionately for a variety of cases and circumstances. With each explanation of why one approach succeeded or failed, you gain a better understanding of how economics for the very poor works. The authors make pervasive use of empirical studies and provide meaningful analysis for each one.Good (economics) books teach you not what to think, but how to think. With this definition, Poor Economics easily qualifies as quite a good book.

As a development professional (i.e. someone who is paid to help poor people in poor countries) I'm very happy to see how the experiences and theories of the authors meld with my own experiences of how poor people in developing countries conduct their lives and organize their livelihoods. As such, I'd say the book serves as an excellent introduction to the economic lives of the poor (although their is another book entitled exactly that, also excellent) and what type of development interventions are likely to work.The authors advocate for a more measurable approach to development: conduct development projects like scientific experiments to see what work's and what doesn't. In the jargon, this is known as using Randomized Control Trials (RCTs). The authors are very reasonable and don't see RCT's as a cure to all ills, but a step on the path to making development projects a bit more effective. The book functions as an introduction to the use of RCTs in development projectsThere are many objections to the effectiveness of RCTs. But the major one is this: In most scientific experiments, an experiment can be replicated by someone else doing the exact same thing and end up with the exact same result. This is called, in the jargon, external validity, and is necessary for science to be,well, science. Unfortunately, there is no guarantee of external validity in international development. There are simply too many unknown unknowns and uncontrollable variables that a successful development project in one place and time has no guarantee of working in another. So, if this makes any sense, RCTs are not very effective in improving aid effectiveness.In my own experience, there are three practical problems with implementing RCTs: 1) You need to have very smart, well trained people involved from the beginning to ensure the construction of the experiment is valid. This is not always possible. 2) These things are very very expensive to do. 3) Development organizations that do the implementing of projects don't want their projects evaluated since they see it as a way to cut funding.Insofar as RCTs can be used as an organizational learning tool, there are cheaper methods of M&E (monitoring and evaluation, the jargon again) that can accomplish just that.All in all, a very good read. The book is obviously meant for a wide audience and is easy reading. As someone who knew alot about what was introduced, I still found it worthwhile to read.

I don't think I've ever given a book 5 stars before. I'm a (hard) scientist and work in aid. I have to be honest, I have little respect for much of social science with unproven theories and wishy washy ideas motivated by personal politics. This book is amazing. It gives good case studies with intriguing economic discussions that really delve into the reality (and not the hyperbole) of poor communities. So many of the examples are exactly what I encounter in my work, yet the insight and objective thinking of the authors and team doing this work are excellent.This is a MUST READ for anyone working in development. I love 'White Man's Burden' but for me this can and should shape how we think about getting people out of poverty on the all essential local scale. The authors have done a fantastic service to the aid sector, I just hope that it becomes widely read! This book will change people's lives, because I'll be reflecting on this thinking in my own work.

This is a brilliant book for anyone who is looking forward to working in the domain of development. Sample size used by researchers is majorly in India and Sub-Saharan Africa. It gives a wonderful insight about the bottlenecks in inclusive growth and how to achieve basic short-term targets in the arena of education, health, credit, etc.

I found this book very interesting and engaging because it examined lots of alternative causes of poverty and solutions to poverty. Poor economics is definitely suitable for people who don't have a lot of knowledge of economics and will probably still be interesting to those who have already got a good understanding.Development economics is really interesting to me because it has real life implications and evaluating the outcomes of strategies that have been used to improve the living standards of the poor can have surprising results. One of my favourite parts of the book was about microfinance and whether is actually helps the poor.I really enjoyed this book and would recommend it! Another similar development economics book that I enjoyed was Why Nations Fail.

Poverty as a subject has been of interest to many. Aim of every one is to identify the cause of it. But there are very few who have understood it and helped in understanding it to others.Authors Abhijit and Esther agrees that there is no one answer to understand poverty.As a reader, I thoroughly enjoyed the journey undertaken by authors from Kolkatta to various places to explain which are the factors that are responsible for poverty.Authors have managed to understand what is the factors that envelops an individual into poverty.This book should be read to understand:1. How politicians are responsible and if diligent they can help society in pushing people out of poverty2. How some times lack of information causes people to get struck in a situation3. How uncontrolled conditions like non availability of basic requirement of life and to struggle to obtain it makes people to struggle harder4. How flaw in the design of public policies does more harm than serving its purpose of dissolving povertySome of the statements by authors are so profound that they actually touch the main concern areas. How minor changes, if introduced can cause immense leverage in alleviating poverty from human society.Authors have taken lot of trouble to ensure that message is very crisp and easy to digest.l think Poor Economics should be read to know many unknown facets of poverty as it seems we have not given a very clear thought about why poverty is there in first place.Enjoyed reading and will highly recommend for reading.Thanks Abhijit and Esther.

Completely different take on why poor don't always behave like we assume they should. What can be done differently and why they may work when the standard fixes struggle