Publisher’s write-up:
‘Why would a man in Morocco
who doesn’t have enough to eat buy a television? Why do the poorest in India
spend 7 per cent of their food budget on sugar?
This eye-opening book
overturns the myths about what it is like to live on very little, revealing the
unexpected decisions that millions of people make every day.’
Poor Economics was written in
2011 by MIT economists Abhijit Banerjee and Esther Duflo, years before they
were eventually awarded the Nobel prize. This book explores the life of the
poor in developing countries, with samples mainly from India, Indonesia, Kenya
and a few from Latin America. The book is split into two parts – Private
Lives where the authors explore the lives and management of personal finances
of the poor – the classic question of ‘how do you live with 99 cents a day?’
; and the latter that focuses on institutions, both government and private
(like microfinance).
The economists were known for implementing
their randomised controlled trials, used primarily in medicine in the field of
economics. We do not have clear answers as to whether welfare schemes or other
public policies work and despite that, economists and people in general have strong
views on their effectiveness. To explore the same, the authors use randomised
controlled trials across various parts of the developing world.
The question that authors explore
is the existence of poverty trap – wherein, if people are within the poverty
trap, they would never be able to reach levels of income that could help them
escape this trap. Economists have conflicting views on this subject where some deny
the existence of this trap. The authors discuss the results of the trials he
conducted on people escaping the poverty trap.
We have certain fundamental
notions that in developing economies – being sent to school and higher income
levels could be a panacea to the problem of poverty. However, many children who
have been through several years of education in Kenya or India are unable to
read a basic paragraph in any language (their native language or the lingua
franca). Similar issues were noticed in terms of rising income levels – where people
were not consuming more calories, but were preferring to have tastier food
(high spending on sugar, higher quality rice, etc.)
The book provides an insight into
the average lives of the poor – especially the issue of short term versus long
term view. Much as there consensus on the political inclination of the writers
of this book, the book was objective in each of their examples; also exploring
the arguments of the economists who have opposite views (I could be accused of
confirmation bias in picking this book considering my alignment with the economists
in terms of politics).
The first part took us through
the world of the poor and even dispelled some of the popular notions that schemes
are difficult to implement among the poor because of illiteracy or ignorance whereas
their beliefs triggering resistance are often traded for a small welfare
measure (like a bag of lentils for vaccinating your child).
The second part on institutions
was the weaker section of the book, where the authors explore microfinance,
policies and the politics that surround it and, entrepreneurs (both success stories
and otherwise). The analysis was less on the institutions and seemed like an extension
of the first part of the book where the authors had yet again analysed on the
impact on individual lives based on the aid extended by the institution. While
I understand that through these randomised controlled trials, it ultimately
resorts to analysing individual lives, the title was a misnomer which gave me a
different expectation.
A strength as well as a weakness
of this book was that it was simplified. You do not need a degree in economics
to understand or appreciate the book and you are not overloaded with equations
or incomprehensible curves and the graphs used were explained in detail by the
authors. However, I would have liked it better if they had used more illustrations
to demonstrate some of their results. Someone who is well versed with economics
might have felt that the book lacked the depth.
The book did not promise any
solutions and in fact, the title of the concluding chapter is In Place of a
Sweeping Conclusion. For those who do not have much experience or knowledge
about life in developing countries, this book could provide insights – on both
the economic and social factors that come into play.
On that note, I would award the book
a rating of eight on ten.
Rating – 8/10
Have a nice day,
Andy
Andy
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