[Book Review] Poor Economics

Book Title - Poor Economics
Author - Abhijit Banerjee & Esther Duflo
Genre - Economics/ Development
Rating - 3/5

Exegesis – This book “Poor Economics” is essentially about the far less known mechanisms which come into play when we refer to the economic decisions made by the poor populace of the world as a whole. Generally one would think that given that these people are illiterate and hardly know anything about economics, they might just be making such decision in the dark. But as it turns out the name of the book is actually a misnomer. When one looks closely, one finds that they have their own frugal innovations when it comes to savings, loans and other financial matters. It is actually “Rich” and not “Poor” Economics.

Essentially the book works on five ideas for reformulating our attempt to fight poverty namely – dealing with information asymmetry, more services to poor, missing markets for poor, the three Is (discussed later in this review) and the bad prejudices of the policy makers. The book beautifully presents facts and inferences to understand poverty in a deeper way and supplements every point with empirical evidence.

Genre – The theme of the book is developmental economics where the authors have dealt with various dimensions of development like Poverty, Health, Education and many more focusing on the idea that we first need to understand the complex and novel economic principles of the poor in order to make our schemes work. For e.g. generally we would think that if the rural poor have less children they would then be spending more per child when it comes to education. But evidence shows that the reverse happens. Since they have fewer children now, they think that the chances of their kids supporting them in the old age have reduced and ergo they start saving more for their future.

Previous Work – Abhijit Banerjee and Esther Duflo both together founded the Abdul Latif Jameel Poverty Action Lab in 2003 and have been researching on various aspects of Poverty alleviation by way of conducting numerous researches across many countries. Abhijit Banerjee has also published another book titled “Making aid work” whereas Esther Duflo has authored one relating to Education of HIV prevention. Apart from these books they both have authored numerous papers and research journals on similar issues. In this present piece of work, they have come together to rethink poverty and the ways to end the same.

What the book adds? There have been several books rethinking the idea of poverty but this one certainly digs deeper and presents several new and intriguing perspectives. The entire world as a whole has been trying to get rid of this evil called poverty. Huge resources have been directed in this direction for so many centuries but why have we not succeeded yet? That’s because we have not correctly understood poverty and the ways of the poor. This book hits a bull’s eye on this note. We have huge amounts of aids coming into the developing countries but without significant results. This books deals with this anomaly as well.

Moreover, this book also attempts to bring to light the subtle inter linkages between various sectors like Education, Health, Social security and many others and scientifically demonstrates that how improvement in one sector leads to improvement of other or decline of the other. The entire gamut of inferences and assertions made in the book are supported by the hard evidences from the several Randomized Control Trials (RCTs) conducted in several parts of the world and especially the Third World Countries. The kind of effort which had been put in the conduction and completion of these trials is mind boggling.

The authors also deal with the rhetorical question of “Why policies fail?” and answer it beautifully in the form of the three Is namely – Ideology, Ignorance and Inertia. Apart from that the book also presents certain interesting facts when it comes to social welfare and the myth of hunger. Their studies claim that with improvement in Water and Sanitation, the populations were witnessing less cases of diarrhea and other ailments and thus people were leaking lesser calories. Apart from that there has been a decline in the requirement for physical labor. All these would surely mean that the daily calorie requirements have drastically come down and we cannot measure hunger based on that archaic calorie requirements.

Talking on the aspect of Health, the authors present the real reasons of failures with several studies to support their claim. As per them, the poor health indicators are mainly because of under diagnosis and overmedication which the present systems are exhibiting. Another major reason is the absenteeism of the health workers which is rampant in the rural parts of the world. Moreover, the authors also talk about the failure of the idea of the distribution of the freebies to the poor. Ideally that should work given that poor people would take anything being given for free. But as per research, they start seeing that commodity as valueless as it is being distributed free of cost.

In one part of the book, the authors present an interesting premise linking the phenomenon of Witch-hunting to the occurrences of drought in certain parts of the world. They say that since the produce was limited it was seen as a good idea to get rid of the non-producing mouths in the villages and such single women were an easy target. Meanwhile the data does resemble the idea but one cannot be entirely certain of this that people can go to this extent. Questionable and debatable premise at best, one would say. 

Quotes – Apart for the comprehensive discussions based on several empirical evidence, the book also presents some wonderful quotes which stay with the reader. While defining the idea of poverty the authors say, “Poverty is the absence of the capacity to realize one’s full potential as a human being”. Talking about evidence the authors say, “Verifiable evidence is a chimera, at best a distant fantasy, at worst a distraction”. There are several other wonderful lines which keep the reader engaged and creates a wonderful flow in the reading.

Overall, it becomes sort of a must read piece of work especially for those who are into public service or are planning to join them. The economics of the poor is not that simple and cannot be taken for granted. Those who are at the helm of policy formulation must first understand how economics works at the cutting edge. And this book is an excellent attempt in that direction.