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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 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 pioneered the use of randomized control trials in development economics. Work based on these principles, supervised by the Poverty Action Lab, is being carried out in dozens of countries. Drawing on this and their 15 years of research from Chile to India, Kenya to Indonesia, they have identified wholly new aspects of the behavior of poor people, their needs, and the way that aid or financial investment can affect their lives. Their work defies certain presumptions: that microfinance is a cure-all, that schooling equals learning, that poverty at the level of 99 cents a day is just a more extreme version of the experience any of us have when our income falls uncomfortably low. This important book illuminates how the poor live, and offers all of us an opportunity to think of a world beyond poverty. Learn more at www.pooreconomics.com


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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 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 pioneered the use of randomized control trials in development economics. Work based on these principles, supervised by the Poverty Action Lab, is being carried out in dozens of countries. Drawing on this and their 15 years of research from Chile to India, Kenya to Indonesia, they have identified wholly new aspects of the behavior of poor people, their needs, and the way that aid or financial investment can affect their lives. Their work defies certain presumptions: that microfinance is a cure-all, that schooling equals learning, that poverty at the level of 99 cents a day is just a more extreme version of the experience any of us have when our income falls uncomfortably low. This important book illuminates how the poor live, and offers all of us an opportunity to think of a world beyond poverty. Learn more at www.pooreconomics.com

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

  1. 4 out of 5

    Ronald Barba

    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 (i.e. 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 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 (i.e. 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 drama). 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.

  2. 5 out of 5

    Scott

    So. This is an economics book. (A rumbling sound is heard as ninety percent of the people reading this review frantically jiggle their mice in an effort to click another link on this page. Any link. Even an ad for laundry detergent.) Ok, hello to the two remaining readers out there. Thank you for sticking around. I know ‘economics’ is one of the least sexy words in reading, right up there with ‘tax law’ and that economics books are as enticing to most readers as a fat stack of local council permit So. This is an economics book. (A rumbling sound is heard as ninety percent of the people reading this review frantically jiggle their mice in an effort to click another link on this page. Any link. Even an ad for laundry detergent.) Ok, hello to the two remaining readers out there. Thank you for sticking around. I know ‘economics’ is one of the least sexy words in reading, right up there with ‘tax law’ and that economics books are as enticing to most readers as a fat stack of local council permit applications. Hell, I’m with you on this. I had to study the dismal science that is economics at school, and again in first year university. I can tell you from experience that there is no stimulant on earth short of mainlined honey badger adrenaline that can keep me awake in a lecture on supply/demand graphs. Poor Economics however is that rare unicorn of reading- an interesting economics book. Like Loretta Napoleoni's works Terror Incorporated and Rogue Economics and Adam Tooze’s Wages of Destruction, Duflo and Banerjee’s work mixes hard economic fact with fascinating examples of real world problems. If you’ve ever despaired at the seemingly intractable nature of poverty around the world this is a book that will give you hope. Duflo and Banerjee (D+B) stress the importance of information gathering, of speaking to the poor, of exploring what it is that makes it hard for them to increase their incomes, and in the process they explore some fascinating case studies and trials of attempt to help the poor, and the many success and failures they have witnessed. A number of my assumptions were overturned, for example; while I thought starvation and malnutrition were first-order issues in addressing poverty, hunger is not the problem it was. Getting enough calories is not an intractable problem for many of the world’s poor, and in some places declines in manual labor have slightly reduced the calorie needs of communities. Microfinance is also unlikely to be the panacea it has sometimes been claimed to be. While small loans can help the poor expand their small businesses, the nature of these businesses makes expanding them beyond subsistence level difficult. D+B do stress that microfinance can help the poor, just that the stories of poor people founding business empires on a loan of a few hundred bucks are very much outliers - most businesses hit constraints on their expansion quite early on, while others with promise can rarely access loans of the size they need. Furthermore some well-intentioned interventions- such as a programs in Kenya that promoted marriage in order to reduce teen pregnancy, keep kids in school and limit HIV transmission - can perversely end up increasing to the problems they are trying to solve. (Horrifyingly, this focus on marriage saw more young female students getting involved with older, more financially stable men who were more likely to be carriers of HIV and expected their young wives to drop out of school to care for their children). There are however, many interventions that can help, from focusing schools on basic skills like reading and mathematics, to subsiding treatments like de-worming tablets that pay big dividends in keeping children healthy and able to attend school for longer. D+B caution the importance of avoiding what they call the three I's: Ideology, ignorance and inertia, all of which can be overcome with programs carefully designed for the reality on the ground, not the imagined reality that so often seems to underpin aid projects. While global poverty is crushingly resistant to being eradicated D+B offer an optimistic take on improving the lives of the poor, arguing that while there may not be easy big fixes for this problem, there are nonetheless many ways to make people's lives better while slowly changing the deprived situations that so many of our fellow humans have been stuck with. Overall, Poor Economics brings a hopeful message to an area of global policy and justice that sorely needs it.

  3. 5 out of 5

    Sumirti Singaravel

    (Note to Self to include this when writing a full blown review for this book). I recently read an article* published in NY Times on how women economists are NOT recognized for their work when they co-author it with another a male economist. The article goes on to explain how the bias is deep entrenched in the field of economics. Recently, I was having a conversation with a friend, working in the field of finance, on the Indian economy and more particularly about the drought which has hit most sta (Note to Self to include this when writing a full blown review for this book). I recently read an article* published in NY Times on how women economists are NOT recognized for their work when they co-author it with another a male economist. The article goes on to explain how the bias is deep entrenched in the field of economics. Recently, I was having a conversation with a friend, working in the field of finance, on the Indian economy and more particularly about the drought which has hit most states (check the second link**), and I made a reference to this book on how Indian institutions are going weak. He instantly recognized the book and told me the name of the author as Abhijit. When I told him that the book has another author named Esther, he just quipped almost spontaneously that perhaps the co-author would have just helped the other author in finishing up the main work, and perhaps that's why her name almost never shows up. Even good reads shows the author only as Abhijit V. Banerjee (if you find it changed, have it done by me). This has nothing to do with this book, but says a lot about the field of finance and economics. If people can make cliches and sweeping assumptions on the work of an author just on the basis of their gender, just consider how grave and ignorant their assumptions would be on the topic of poverty, which most of us just read, see and empathize about, but never have underwent it ourselves, or have studied about it from the ground. This books helps one to break all such cliches, rhetoric and generalizations, and provides an honest account and solutions to what goes on in the ground reality. Very Highly Recommended! * NY Times article - (http://www.nytimes.com/2016/01/10/ups...) ** About the drought on India - http://indianexpress.com/article/opin...

  4. 4 out of 5

    Neil

    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 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".

  5. 4 out of 5

    Apoorva

    Review to come!

  6. 5 out of 5

    Andy

    Disappointing. I was very eager to read about rigorous studies that determine what works for fighting poverty. But the authors somehow kept getting off track from this desperately important concept. I still think the work of the Poverty Action Lab is very interesting, but this is just not an exciting book about a "radical rethinking of the way to fight global poverty." The big five lessons from the authors are: 1. The poor lack information (so tell them the truth artfully) 2. The poor lack control Disappointing. I was very eager to read about rigorous studies that determine what works for fighting poverty. But the authors somehow kept getting off track from this desperately important concept. I still think the work of the Poverty Action Lab is very interesting, but this is just not an exciting book about a "radical rethinking of the way to fight global poverty." The big five lessons from the authors are: 1. The poor lack information (so tell them the truth artfully) 2. The poor lack control and day-to-day life is more difficult for them (so make good behaviors as easy as possible) 3. The poor get poorer: free market institutions like banks don't work well for people with no money (so make necessary things and opportunities cheap or free) 4. Poor countries are not doomed (so do things that are proven to work) 5. Expectations can be self-fulfilling (so start positive feedback loops) This doesn't sound new to me. This sounds like basic public health. The book delivers some valuable information about very specific questions like whether it's effective to give away bed nets to prevent malaria. The answer is yes. But even this message is muddled with much back and forth about political theory and academic hedging. Much of the book is about economic theories and debates between the left and right. A lot of it is anecdotal. Much of what is data-based comes from their "18-country data set" but all those 18 countries are poor. This violates the basic logic of epidemiological studies or randomized trials (RCTs), i.e. a 2X2 table with +/- input and +/- outcome. None of these countries has the relevant outcome of Rich. It is hard to learn from a data set like this what makes countries Rich vs. Poor. For that, it is much more worthwhile to read the works of Ha-Joon Chang, who writes about how South Korea went from starving mess to high-tech powerhouse. . The phrase "purchasing power parity" is repeated every time a dollar amount is converted from another currency. This is insanely irritating. That sort of thing can be said once at the beginning of the book. Such a high degree of precision in language is unnecessary or even misleading, because often these dollar amounts are referring to GIGO calculations.

  7. 5 out of 5

    Paola

    This is one of the best "pop-economics" books I have read in a very long time. Such books typically follow the same recipe: top academic seeks recognition outside the profession and writes the book propounding the theory, enlisting in support loads of evidence consistent with the theory, and curiously brushing off/forgetting to mention most of any evidence even vaguely incompatible with the main argument of the book. The book tends to go on forever repeating the same score in all possible tonali This is one of the best "pop-economics" books I have read in a very long time. Such books typically follow the same recipe: top academic seeks recognition outside the profession and writes the book propounding the theory, enlisting in support loads of evidence consistent with the theory, and curiously brushing off/forgetting to mention most of any evidence even vaguely incompatible with the main argument of the book. The book tends to go on forever repeating the same score in all possible tonalities, and in spite of most attempt to either humour or literary effects is generally rather boring to read. Length seems to be necessary to establish the authors credential with the layman. This book is very different: Duflo and Banerjee do not try and shovel down the readers' troats the ultimate theory of poverty. They present the evidence, explain how to think about it, and show where a remedy works and where the same approach to the same problem fails miserably. But in all this, they suggest to the reader how to go about thinking of poverty, of its causes and of its consequences and how to approach the evaluation of policies to alleviate it. Yes, the double handed economists approach will be unsatisfactory for anyone looking for the silver bullet, but as we all know in most situation in life silver bullets do not exist, and ther is no one universal solution to problems that have plagued us for centuries. Above all, this book is interesting and engaging, a very good read, recommended to anyone with even a passing interest in poverty.

  8. 5 out of 5

    Mehrsa

    This book is not what I thought it was or what it promised it would be in the intro. It is not an economic analysis of poverty. I was thinking it would be more in line with books like scarcity that explain the decisionmaking of poor people as a rational response to circumstances. It had elements of that certainly, but it was a book about development. I didn't love the first half of the book, but I thought the second half or third was very useful. Especially their analysis of micro-credit and oth This book is not what I thought it was or what it promised it would be in the intro. It is not an economic analysis of poverty. I was thinking it would be more in line with books like scarcity that explain the decisionmaking of poor people as a rational response to circumstances. It had elements of that certainly, but it was a book about development. I didn't love the first half of the book, but I thought the second half or third was very useful. Especially their analysis of micro-credit and other development projects. I like their critiques of these programs even though I thought they were too tepid in critiquing the "Everyone is an entrepreneur" model, which I think is total garbage. I loved their focus at the end on structures of power. I think this book could have been bigger and broader and could have connected the political economy of poverty (see Jason Hickel's The Divide and other books), but it was still a useful response to people like Easterly and Sachs.

  9. 5 out of 5

    Heather

    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 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.

  10. 4 out of 5

    Ben Thurley

    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 t 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 than economist in them (for example when considering the way people internalise and conform to social expectations) to toughen up their analysis, but over all this is a very welcome addition to development literature. 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.

  11. 5 out of 5

    Galina

    Full of individual stories about the way the poor cope with their life. I normally classify such books as "sad". Not this one. The book is offering something that I haven't seen in many other books that are dealing with poverty. It is exploring first the left extreme of the spectrum that focuses on collectivism, then the right that is focused on the individualism, and finally tries to put itself somewhere in between. Each side is backed by examples of its supporters. The main heroes of the book Full of individual stories about the way the poor cope with their life. I normally classify such books as "sad". Not this one. The book is offering something that I haven't seen in many other books that are dealing with poverty. It is exploring first the left extreme of the spectrum that focuses on collectivism, then the right that is focused on the individualism, and finally tries to put itself somewhere in between. Each side is backed by examples of its supporters. The main heroes of the book are, not surprisingly, on the left Jeffrey Sachs and on the right William Easterly. Despite this, it has to be acknowledged that Banjeree and Duflo did a really good job when it comes to criticizing Easterly and Sachs' views. However, they conclude that when it comes to helping the poor "details matter" and state that most economists that are dealing with poverty are too general and not specific enough with their recipes for sustaining the development in poor countries. In the same time they do little to come up with concrete suggestions as to what can be done and provide only vague recommendations making it harder for me to see where is this "radical rethinking" that the title of the book is so concerned with.

  12. 5 out of 5

    Sara

    Radical? [Through my ratings, reviews and edits I'm providing intellectual property and labor to Amazon.com Inc., listed on Nasdaq, which fully owns Goodreads.com and in 2013 posted revenues for $74 billion and $274 million profits. Intellectual property and labor require compensation. Amazon.com Inc. is also requested to provide assurance that its employees and contractors' work conditions meet the highest health and safety standards at all the company's sites.] In the paperback edition the t Radical? [Through my ratings, reviews and edits I'm providing intellectual property and labor to Amazon.com Inc., listed on Nasdaq, which fully owns Goodreads.com and in 2013 posted revenues for $74 billion and $274 million profits. Intellectual property and labor require compensation. Amazon.com Inc. is also requested to provide assurance that its employees and contractors' work conditions meet the highest health and safety standards at all the company's sites.] In the paperback edition the title was changed to happy-go-lucky "Poor economics: Barefoot Hedge-fund Managers, DIY Doctors and the Surprising Truth about Life on Less Than $1 a Day". And for a reason. This informative, well-meaning and acclaimed book is telling us that fighting poverty is just about little tweaks in the way NGOs run their programmes in developing countries. Tweaks based on the findings of - lo and behold - social psychology and econometrics. For example, remember to give food to the mothers when they bring their children to your vaccine centre. I cannot think of anything more conservative than this - which explains the award from Goldman Sachs/FT. A more appropriate title for the book could be "Development without even thinking of challenging the status quo" or "No wealth redistribution: guaranteed". If you think that a 13% increase in the income of someone who earns $1 a day is a good result, this book will provide you with very useful tips.

  13. 4 out of 5

    Sidharth Vardhan

    Probably one of the biggest nemises of all intelligent thought is over-simplification. An easy example is one guy giving a detailed long explanation of something, and another underpnning it by saying "so you are saying ... *Insert a small sentence*". This is most visible in interviews where interviewer seems to sometimes doing it intentionally to save his ignorant, lazy audience the effort of understanding a complex thought. The trouble is it encourages a dislike for intellectualism - the ignoran Probably one of the biggest nemises of all intelligent thought is over-simplification. An easy example is one guy giving a detailed long explanation of something, and another underpnning it by saying "so you are saying ... *Insert a small sentence*". This is most visible in interviews where interviewer seems to sometimes doing it intentionally to save his ignorant, lazy audience the effort of understanding a complex thought. The trouble is it encourages a dislike for intellectualism - the ignorant start thinking their ignorance is as good as someone's life time of studies. Twitter takes it to a whole new league - because there, no one knows differenc ebetween wits and wisdom. And there is really no room for a thought that might require more than 140 characters to express itself. No wonder, Banerjee and Duflo's winning Nobel prize was not loved by genuis people on twitter. Most of them argue all banerjee has ever said is *insert some simplistic idea about removing poverty like freebies* which is hardly new. I have my own reasons to dislike most of intellectuals - they often seem to be waiving theories in air. But these two don't suffer that problem either. Instead of giving sweeping theories, they are just sharing the observations on a number of ground realities - talking about things that have worked and things that have not worked, about the experiments they carried out etc. I don't want to go into details and to try to summarise or it would seem to be a case of over-simplification, so I will leave with this quote: "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. Armed with this patient understanding, we can identify the poverty traps where they really are and know which tools we need to give the poor to help them get out of them."

  14. 5 out of 5

    James Van

    I thought I was going to love this book, but I didn't really get much out of it. It was a summary of "some aid is good aid" which I already believe, so I guess the persuasion wasn't attractive to me. The details, though, were mostly things I'd already heard or read. I think watching Esther Duflo's TED talk might give away most of the information and excitement of this book. If you're wondering why not everyone agrees with "The End of Poverty" then maybe this book would impress you. Or if you're st I thought I was going to love this book, but I didn't really get much out of it. It was a summary of "some aid is good aid" which I already believe, so I guess the persuasion wasn't attractive to me. The details, though, were mostly things I'd already heard or read. I think watching Esther Duflo's TED talk might give away most of the information and excitement of this book. If you're wondering why not everyone agrees with "The End of Poverty" then maybe this book would impress you. Or if you're still super excited about microlending. Maybe I'm just jaded enough such that I'd rather hear more about the cases where aid seems to be surprisingly helpful, rather than another takedown of aid fads of the past 10 years.

  15. 5 out of 5

    Daniella Araujo

    I was fortunate to have started reading this book authored by the most recent recipients' of the Nobel Prize in Economics before the prize was awarded. Ms Duflo and her husband's work on putting together evidence-based research for mitigating poverty is impressive. I cannot judge the book solely based on their work results, though. The book has appeal, has a nice narrative, but it felt like it jumps a little too quickly to somewhat formulaic rules at the end, as a way of hastily wrapping it all I was fortunate to have started reading this book authored by the most recent recipients' of the Nobel Prize in Economics before the prize was awarded. Ms Duflo and her husband's work on putting together evidence-based research for mitigating poverty is impressive. I cannot judge the book solely based on their work results, though. The book has appeal, has a nice narrative, but it felt like it jumps a little too quickly to somewhat formulaic rules at the end, as a way of hastily wrapping it all up. The amount of data and results they have amassed could have rendered a rich and complex discussion on such a poignant topic -- poverty.

  16. 4 out of 5

    Andrew

    On one hand, Banerjee and Duflo are quite good at diagnosing the micro-level problems that face the global poor. And this is good -- these are things people need to know about. On the other hand, they wonder why so many programs espoused by the elites of the world aren't working (you know the kind, the let's-teach-slum-kids-Python-programming kind), and why the do-nothing William Easterly approach isn't working, and why expectations aren't being met. I just want to whisper to them... "the problem On one hand, Banerjee and Duflo are quite good at diagnosing the micro-level problems that face the global poor. And this is good -- these are things people need to know about. On the other hand, they wonder why so many programs espoused by the elites of the world aren't working (you know the kind, the let's-teach-slum-kids-Python-programming kind), and why the do-nothing William Easterly approach isn't working, and why expectations aren't being met. I just want to whisper to them... "the problem is capitalism, ya dummies." By failing to examine how systems are rigged to distribute money upwards, by failing to recognize power dynamics, by occasionally resorting to some of the starry-eyed nonsense that they aim to critique, this comes off as weak tea at best, and a missive by the handmaidens of neoliberalism at worst.

  17. 5 out of 5

    Ed

    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. 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. And not only asking them but also studying what they actually do and the institutional and situational structures that keep them poor. Above all it uncovers just how rational seemingly counter productive behavior is. And I think the book has massive implications for studying poverty in richer countries using the same methodology. It has some interesting solutions but it tends to see incremental, experimental, see if it works approaches and not the grand plans of its just down to Grameen Banks whatever. Read it if you give a shit about the poor.

  18. 4 out of 5

    Fouad Jaber

    Too broad, too general, it loses its meaning while trying to provide a general theory of poverty. The best parts were the chapter about poverty traps and the elite nature of educational systems in underdeveloped countries, but the rest was dull.

  19. 4 out of 5

    Ha-Linh

    I should have read this book long time ago. Nevertheless, it is still an excellent book to reflect on the big picture of the field of development economics for a student like myself and for anyone who wants to work on making policies that try to help the poor. The complex issue of poverty with all its difficulties that the involved agents face requires a thorough investigation in carefully designed experiments rather than using conventional understanding of how economics works in the more privil I should have read this book long time ago. Nevertheless, it is still an excellent book to reflect on the big picture of the field of development economics for a student like myself and for anyone who wants to work on making policies that try to help the poor. The complex issue of poverty with all its difficulties that the involved agents face requires a thorough investigation in carefully designed experiments rather than using conventional understanding of how economics works in the more privileged parts of the world. I will quote the book itself because this summarizes very well the authors' message: "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." Highly recommend for everyone!

  20. 4 out of 5

    Divya Sornaraja

    A wonderful book: renders clear understanding on the ground reality of well-intended policies for the welfare of the economically challenged. Reading this book helps one realise the complexity and the gravity of the poverty problem. Most topics explains how one can’t throw money or random large scale policies as a silver bullet solution. It all boils down to grooming the poverty-stricken and help them understand their rights, power, potential and option of tools to pick and fight. A must read to A wonderful book: renders clear understanding on the ground reality of well-intended policies for the welfare of the economically challenged. Reading this book helps one realise the complexity and the gravity of the poverty problem. Most topics explains how one can’t throw money or random large scale policies as a silver bullet solution. It all boils down to grooming the poverty-stricken and help them understand their rights, power, potential and option of tools to pick and fight. A must read to the compassionate and the welfare-driven. Although they covered most of the MFI stories, I was hoping to find the tales of Bandhan Bank, etc. Turns out after this book(2011) they did visit Bandhan Bank in 2013. So, may be they’d write about it in their next book? Also cover the influence of Mobile phones and technology here? Some economists suggest that incentivising access to mobile and internet has improved economic activity and banking on a grand scale. Would love this team’s opinion on that. May be JPAL would cover them in the future? Following their work after this book.

  21. 5 out of 5

    Nishat

    I am a new reader of economic books. For someone like me, this book will make you more interested in learning and understanding economics. When I was reading, I came to know a lot of theorists, like Jeffrey Sachs. What I like about this book is it is very easy to understand and well written. If you are a non-economics background, this book will help you to understand what is going on around the so-called third world. Looking forward to the new book of Abhijit Banerjee which would be published at I am a new reader of economic books. For someone like me, this book will make you more interested in learning and understanding economics. When I was reading, I came to know a lot of theorists, like Jeffrey Sachs. What I like about this book is it is very easy to understand and well written. If you are a non-economics background, this book will help you to understand what is going on around the so-called third world. Looking forward to the new book of Abhijit Banerjee which would be published at the end of this year.

  22. 5 out of 5

    Tam

    A wonderful read. Instead of trying to find a universal, one-time solutions or principles/formulas like other lame books, this one delivers valuable lessons about working from the bottom up, with specific cases. Very informative and challenging material, yet it could have been better if the book can expand its examples' scope.

  23. 5 out of 5

    Marcy

    I read this for an online development class at MIT taught by the authors. I found the book to be quite steeped in World Bank/IMF views and rather closed off to any alternative ways of seeing. I was disappointed with the book.

  24. 5 out of 5

    Sai Kishore

    "Economic institutions shape economic incentives,the incentives to become educated,to save and invest,to innovate and adopt new technologies,and so on.Political institution determines the ability to citizens to control politicians" - Acemoglu & Robinson "Economic institutions shape economic incentives,the incentives to become educated,to save and invest,to innovate and adopt new technologies,and so on.Political institution determines the ability to citizens to control politicians" - Acemoglu & Robinson

  25. 4 out of 5

    Paul,

    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 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 by their specific worldviews even when there seem to be, as with the price of the bed nets, concrete questions that should have precise answers. To caricature ever so slightly, on the left of the political spectrum, Jeff Sachs (along with the UN, the World Health Organization, and a good part of the aid establishment) wants to spend more on aid, and generally believes that things (fertilizer, bed nets, computers in school, and so on) should be given away and that poor people should be enticed to do what we (or Sachs, or the UN) think is good for them: For example, children should be given meals at school to encourage their parents to send them to school regularly. On the right, Easterly, along with Moyo, the American Enterprise Institute, and many others, oppose aid, not only because it corrupts governments but also because at a more basic level, they believe that we should respect people’s freedom—if they don’t want something, there is no point in forcing it upon them: If children do not want to go to school it must be because there is no point in getting educated." (p.9) There are a few very important concepts. One is the concept of a poverty trap, which is mentioned by several development authors, but clarified here in a helpful way. "There will be a poverty trap whenever the scope for growing income or wealth at a very fast rate is limited for those who have too little to invest, but expands dramatically for those who can invest a bit more. On the other hand, if the potential for fast growth is high among the poor, and then tapers off as one gets richer, there is no poverty trap." In other words, a poverty trap is a situation where a little bit of input to get people "over the hump" or out of the trap, has an incredible output and solves the problem. But if there is just a potential for fast growth that gets less as people get richer, this is not a trap, it is merely "low-hanging fruit". The other key concept is the randomized, controlled trial. Long a staple of medical research, Banerjee and Duflo are advocating taking this painstaking method as a way of actually verifying the results of our development work. This empirical verification is notoriously difficult to do, but the RCT methodology seems to be sound. It is producing answers that are surprising, obvious, depressing, and encouraging, all at the same time. They have stepped into the lives of the poor, and asked them why they do things. These is a major break from deciding what SHOULD happen and what poor people SHOULD do philosophically. Unsurprisingly, Banerjee and Duflo find out that a mixture of the different philosophies (top-down and bottom-up) tends to work best. Because poor people are people. They are good at the same things reach people are good at, and they are bad at the same things rich people are bad at. That's why rich people and poor people both eat too much junk food. The difference is that in richer countries, our wealth and institutions protect us from many of the consequences of our human failings. Great read. Let's cover some of the material. On Food - The data shows that even folks living on less than a dollar a day spend only half of that money on food. Further, when they receive extra money, they increase their expenditures on tasty foods rather than nutritious foods. (Side note: Banerjee and Duflo's understanding of nutrition is quite flawed) "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. This is one of the running themes in this book. Another explanation for their eating habits is that other things are more important in the lives of the poor than food." "Generally, it is clear that things that make life less boring are a priority for the poor. This may be a television, or a little bit of something special to eat—or just a cup of sugary tea." "As we saw in India, the poor do not eat any more or any better when their income goes up; there are too many other pressures and desires competing with food. In contrast, the social returns of directly investing in children and pregnant mother nutrition are tremendous. This can be done by giving away fortified foods to pregnant mothers and parents of small children, by treating children for worms in preschool or at school, by providing them with meals rich in micronutrients, or even by giving parents incentives to consume nutritional supplements. ... Developing ways to pack foods that people like to eat with additional nutrients, and coming up with new strains of nutritious and tasty crops that can be grown in a wider range of environments, need to become priorities for food technology, on an equal footing with raising productivity. " Their conclusion: Food is NOT a poverty trap, but there are some great returns to be had by simple low cost solutions like providing free salt fortified with iodine, iron supplements, and other micronutrients. On Health The primary problem is not the adequacy or expense of the solutions, it is the poor who are unwilling or unable to use them. Examples being chlorine to purify water, bed nets, etc. In addition, the poor like most people, tend to spend their money on expensive cures rather than cheap prevention. "By contrast, it is not natural to attribute causal force to inaction: If a person with the flu goes to the doctor, and the doctor does nothing, and the patient then feels better, the patient will correctly infer that it was not the doctor who was responsible for the cure. And rather than thanking the doctor for his forbearance, the patient will be tempted to think that it was lucky that everything worked out this time but that a different doctor should be seen for future problems.This reaction creates a natural tendency to overmedicate in a private, unregulated market. This is compounded by the fact that, in many cases, the prescriber and the provider are the same person, either because people turn to their pharmacists for medical advice, or because private doctors also stock and sell medicine." "Our natural inclination is to postpone small costs, so that they are borne not by our today self but by our tomorrow self instead. This is an idea that we will see again in future chapters. Poor parents may even be fully convinced of the benefits of immunization—but these benefits will accrue sometime in the future, while the cost is incurred today. It makes sense, from today’s perspective, to wait for tomorrow. Unfortunately, when tomorrow becomes today, the same logic applies. Likewise, we may want to postpone the purchase of a bed net or a bottle of Chlorin until later, because we have better use for the money right now (there is someone frying delicious conch fritters across the street, say). It is easy to see how this could explain why a small cost discourages the use of a life-saving device, or why small incentives encourage it. The 2 pounds of dal works because it is something that the mother receives today, which compensates her for the cost she bears for getting her child immunized (the couple of hours spent bringing her child to the camp or the low fever that the shot sometimes causes). If this explanation is correct, it suggests a new rationale for mandating specific preventive health behaviors or for providing financial incentives that go beyond the traditional economic argument we have already suggested, which is that it makes sense for society to subsidize or enforce behaviors that have benefits for others. Fines or incentives can push individuals to take some action that they themselves consider desirable but perpetually postpone taking. More generally, time inconsistency is a strong argument for making it as easy as possible for people to do the “right” thing, while, perhaps, leaving them the freedom to opt out. In their best-selling book Nudge: Improving Decisions About Health, Wealth, and Happiness, Richard Thaler and Cass Sunstein, an economist and a law scholar from the University of Chicago, recommend a number of interventions to do just this." This is a solid argument for the intervention of the government into private affairs and an abrogation of perfect freedom. People are not good at doing the right thing for the future Is it patriarchal/matriarchal ... yes? But is it helpful and necessary? It seems to be, at least in countries that are experiencing incredible poverty. And this point is key: we have a limited amount of self-control. The less often we have to use it to make good decisions for the future, the better off the society as a whole will be. "Our real advantage comes from the 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, most of us 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." On Education Banerjee and Duflo state problem well. Parents bear the costs now in terms of money, students bear the costs now in terms of effort, and both are rewarded far, far in the future. "Misperception can be critical. In reality, there should not be an education-based poverty trap: Education is valuable at every level. But the fact that parents believe that the benefits of education are S-shaped leads them to behave as if there were a poverty trap, and thereby inadvertently to create one." "At the broader, societal level, this pattern of beliefs and behavior means that most school systems are both unfair and wasteful. The children of the rich go to schools that not only teach more and teach better, but where they are treated with compassion and helped to reach their true potential. The poor end up in schools that make it very clear quite early that they are not wanted unless they show some exceptional gifts, and they are in effect expected to suffer in silence until they drop out. This creates a huge waste of talent. Among all those people who drop out somewhere between primary school and college and those who never start school, many, perhaps most, are the victims of some misjudgment somewhere: Parents who give up too soon, teachers who never tried to teach them, the students’ own diffidence. Some of these people almost surely had the potential to be professors of economics or captains of industry. Instead they became daily laborers or shopkeepers, or if they were lucky, they made it to some minor clerical position." B & D set up the goals of education as twofold: give everyone a basic set of skills and identify talent. What are the solutions? "A first factor is a focus on basic skills, and a commitment to the idea that every child can master them as long as she, and her teacher, expends enough effort on it. This is the fundamental principle behind the Pratham program, but it is also an attitude that is encapsulated by the “no excuse” charter schools in the United States.37 These schools, such as the Knowledge Is Power Program (KIPP) schools, the Harlem Children’s Zone, and others, mainly cater to students from poor families (particularly black children), with a curriculum that focuses on the solid acquisition of basic skills and continuous measurements of what children actually know." On Family Size There is no evidence to show that large families are bad for their members. Which makes top-down family planning a poor choice (and also unlikely to work anyway) "They can have the number of children they really want, and if it turns out that none of them are willing or able to take care of them, there is always the public fallback. The most effective population policy might therefore be to make it unnecessary to have so many children (in particular, so many male children). Effective social safety nets (such as health insurance or old age pensions) or even the kind of financial development that enables people to profitably save for retirement could lead to a substantial reduction in fertility and perhaps also less discrimination against girls" The second part of the book is on institutions. It recognizes that the poor face incredible amounts of risk, which reduces their ability to think clearly (because of the amount of stress) and their ability to cope with disaster. The poor are ingenious in their diversification to reduce their risks. "Another way the poor limit risk is by being very conservative in the way they manage their farms or their businesses. For example, they may know that a new and more productive variety of their main crop is available but choose not to adopt it. One advantage of sticking to the traditional technology is that farmers don’t need to buy new seeds—they just save enough seed from last season’s crop to replant—whereas the new seeds often cost a significant amount of money. Even if the new seeds repay the investment many times over when things go well, there is always a small chance that the crop will fail (say, because the rains don’t arrive) and the farmer will lose the extra investment he has made in new seed. The family is also used in creative ways to spread risk. Farming households in India use marriage as a way to diversify the “risk portfolio” of their extended families. When a woman moves to her in-laws’ village after marriage, this creates a link between the household she came from and the household she married into, and the two families are able to call on each other when in trouble." B & D see a clear role for government intervention here as well. "For these reasons, micro insurance may not become the next billion-client market opportunity:There seem to be deep reasons that most people don’t yet feel very comfortable with the kinds of insurance products that the market is willing to offer. On the other hand, the poor clearly bear unacceptable levels of risk. There is thus a clear role for government action.This does not mean the government needs to substitute for a private insurance market, but for a real market to have a chance to emerge, the government will probably need to step in. Private companies could continue to sell exactly the kinds of insurance they are currently willing to sell (catastrophic care with a strict cap, indexed weather insurance, and so forth). But for the time being, the government should pay a part of insurance premiums for the poor. There is already evidence that this could work: In Ghana, when weather insurance was offered to farmers with a large subsidy on the premium, almost all farmers to whom it was offered took it up." Poor people, like the rest of us, hate spending money on insurance that only pays when something goes terribly wrong. They want a regular return on investment. but the only way to give that is to make insurance too expensive for poor people. Thus: government intervention. On Loans The poor pay incredible interest premiums. This makes micro-finance seem a godsend, and it is to a certain extent. but the fact of the matter is that not all people are entrepreneurs with the skills and desire to expand a business enough to move out of poverty, just like in the developed world. Therefore, micro-finance will help people who do have t those skills, which is great. But it won't help everyone, which is okay too. Micro-finance is just one tool in the development toolkit. An interesting conclusion is that micro-finance also works against entrepreneurship in that it is set up to make people invest as safely as possible. "The rigidity and specificity of the standard microcredit model mean, for one thing, that since group members are responsible for each other, women who don’t enjoy poking into other people’s business don’t want to join. Group members may be reluctant to include those they don’t know well in their groups, which must discriminate against newcomers. Joint liability works against those who want to take risks: As a group member you always want all other group members to play it as safe as possible. ... One way to summarize all these results is to observe that, in many ways, the focus on “zero default” that characterizes most MFIs is too stringent for many potential borrowers. In particular, there is a clear tension between the spirit of microcredit and true entrepreneurship, which is usually associated with taking risks and, no doubt, occasionally failing. It has been argued, for example, that the American model, where bankruptcy is (or at least was) relatively easy and does not carry much of a stigma (in contrast with the European model, in particular), has a lot to do with the vitality of its entrepreneurial culture. By contrast, the MFI rules are set up not to tolerate any failure." However this is a necessary part of micro-finance "Opening the door to defaults, even as a way to encourage necessary risk taking, may lead to an unraveling of the social contract that allows them to keep repayment rates high and interest rates relatively low. The necessary focus on repayment discipline implies that microfinance is not the natural or best way to finance entrepreneurs who want to go beyond micro-enterprises. For each successful entrepreneur in the Silicon Valley or elsewhere, many have had to fail. The microfinance model, as we saw, is simply not well designed to put large sums of money in the hands of people who might fail. This is not an accident, nor is this due to some shortcoming in the microcredit vision. It is the necessary by-product of the rules that have allowed microcredit to lend to a large number of poor people at low interest rates. " On Saving The central problem with saving is that it requires self-control. And though there are ways around these self-control problems (like social savings groups), they require an INITIAL act of self-control too. "This effect is reinforced by the fact that a lot of the goods that the poor might really look forward to having, such as a refrigerator or bicycle or admission to a better school for their child, are relatively expensive, with the result that when they have a little bit of money in hand, the temptation goods are in an excellent position to stake their claim (You’ll never really save enough for that refrigerator, the voice in your ear insists. Have a cup of tea instead . . . ).The result is a vicious circle: Saving is less attractive for the poor, because for them the goal tends to be very far away, and they know that there will be lots of temptations along the way. But of course, if they do not save they remain poor. " INTERESTING: "Everywhere we have asked, the most common dream of the poor is that their children become government workers ... The poor don’t see becoming an entrepreneur as something to aspire to. The emphasis on government jobs suggests a de"

  26. 5 out of 5

    Shur'tugal Argetlam

    Poverty is not just a lack of money; it is not having the capability to realize one's full potential as a human being.-Amartya Sen Talking about the problems of the world without talking of some accesible solutions is the way to paralysis rather than progress. There will be a poverty trap whenever the scope for growing income or wealth at a very fast rate is limited for those who have too little to invest, but expands dramatically for those who can invest a bit more. One study finds that potatoes m Poverty is not just a lack of money; it is not having the capability to realize one's full potential as a human being.-Amartya Sen Talking about the problems of the world without talking of some accesible solutions is the way to paralysis rather than progress. There will be a poverty trap whenever the scope for growing income or wealth at a very fast rate is limited for those who have too little to invest, but expands dramatically for those who can invest a bit more. One study finds that potatoes may have been responsible for 12% of the global increase in population between 1700 and 1900. Two generations of living in the west without intermarriage with other communities is enough to make the grandchildren of south Asian immigrants more or less of the same height as other ethnicities. Adults who have  been well nourished as children are both taller and smarter. When you are unemployed, you don't want to eat some dull wholesome food  you want to eat something tasty. There is always some cheap pleasant thing to tempt you.  The poor are trapped by the same kinds of problems that afflict the rest of us- lack of information, weak beliefs and procrastination among them. We should recognize that no one is wise, patient, or knowledgeable enough to be fully responsible for making the right decisions for his or own health. Parental income plays a vital role in determining educational investment. Hence leavinggot purely to the market will not allow every child to be educated to her ability. Supply and demand strategies have no reason to be mutually exclusive.  Pratham, the NGO, believes that every child can master basic skills as long as the child and his teacher spend enough effort on it. Contraceptive access has not reduced fertility, but how it is accessed does, for eg , with or without partner. Uniform distribution and sex education cancel out each other's gains in Kenya because of sugar daddy issues. If there is growth in the village where the child is born, boys will increase in number. Development in the village where the girl is married into causes an increase in the no of girls in the village . The right space for policy is not to replace family but to complete its actions and sometimes, protect from its abuses. For the poor, every year feels like being in the midst of a colossal financial crisis. Cortisol directly impairs cognitive and decision making capabilities  Microfinance giving organizations that ask for mandatory enrollment into insurance as a part of the loan lose a lot of business and face client resistance. Microfinance may not be the next billion customer market opportunity because people don't feel comfortable with the kinds of insurance products offered. But govt subsidies on insurance premiums or where govt pays the premiums, insurance acceptance is high and helps mitigate the enormous risks that farmers take.  Despite the high rates charged by moneylenders why don't poor people go to banks? Inaccessible, high risk. The high risk of due diligence makes small loans unviable for banks and pushes interest rates higher for informal lenders. Also the absence of savings accounts with moneylenders. Microfinance institutions lend to groups and small amounts that discourage risk taking rather than individuals reducing moral hazard. Despite MFIs, people borrow from moneylenders to avail of the lax repayment schedules and ability to default. MFIs are important, but they're not going to result in a mass exodus from poverty. Businesses of the poor have high marginal return when the investment is small but low overall return because the business is so small. The many businesses of the poor are less a testimony to their entrepreneurial spirit than a symptom of the dramatic failure of the economies in which they live to provide them with something better.  During the industrial revolution between 1980-1999, the poor gained disproportionately from industrial growth, because higher-paid employment became available even to those with low skills. A sense of stability is necessary for people to take a long term view. To create these stable jobs, it should be easier to migrate to cities, policies on urban land use and low income housing is vital. It is equally important that good jobs be created in small towns as well. So development in urban and industrial infrastructure in these areas is necessary.  The gap between intention and implementation can be quite wide. Power to the people, but not all the power. Women leaders almost always make a difference. They are less inclined to take bribes. Good policies may or may not be necessary for good politics; it ie certainly not sufficient. 

  27. 4 out of 5

    Laurent De Serres Berard

    Simple accessible writing that succeed in making many principles of development economics easy to understand. No this book book is not a radical way to rethink poverty. However, it is incredibly efficient in explaining basic principles to help understand why poverty doesn't seem to fit in basic or intuitive economics, and how to better help those cases. Moreover, it does so by looking at exploring factors of poverty in different cases and teaching us along the way how to observe those principles Simple accessible writing that succeed in making many principles of development economics easy to understand. No this book book is not a radical way to rethink poverty. However, it is incredibly efficient in explaining basic principles to help understand why poverty doesn't seem to fit in basic or intuitive economics, and how to better help those cases. Moreover, it does so by looking at exploring factors of poverty in different cases and teaching us along the way how to observe those principles in everyday life. I also give this book a 5 stars because of its nuances it bring, by taking the time to resume different point of views of economic, and where the book stands among them so that it help keeping the reader objective and informed about alternative views as well. It is also well documented. A lot of this rely on specific cases as examples, but this is to make it easier to understand to general readers. It does not pretend to create knowledge that can be generalized, so it cannot be criticized for taking only cases that work for them. The main idea of the book ( ut not the only one) start with the premise that, if the poorest population seem to answer liberal markets where everyone gets off better, it is because of existence of ''poverty traps'' that prevent them to invest current resources for future benefits. A graph resume this premise, that the reader need to keep in mind and recognize in real life poverty cases. This graph show, instead of a straight line showing the net gain of investing current wealth for future wealth, a ''s'' line that demonstrate a difficulty to gain on investment at the bottom of the graph. Although they could become more wealthy fast, when you are at the bottom of the S curve, starting the climb is harder, making it less worth to invest for the future, creating those ''poverty traps''. It then explore what shapes those traps can take, making it a useful exercise to apply in real life. Those traps can take many forms : the higher risk of long term investment for the poor, the ''illusion'' of a poverty trap that make it real ( believe that only some children can get something out of school), the difficulty of savings and balancing risk, lack of relevant insurrance. It also shows the limits of microcredits, and of poverty entrepreneurship to who even if marginal return on investment stay high, the net return still keep the individual in economic precarity, threatening his business. This is shown by a S curve also on marginal utility of investment, and explain why so many won't invest more in their businesses. This doesn't happen in more develop country, as their businesses profits from being able to use often innovations to create new services and demands, while poorer business compete for already provided services or goods. The book end with a call to address social institutions ( education and schools, market exchange, roads) instead of political institutions ( ministry of finance, legislations...) that are harder to change, or almost impossible unless the right factors in history are there. Meanwhile, small changes are better than nothing, even if it look inefficient. Again, simple read, that inform greatly, and make easy to understand and apply in cases analysis more complex ideas about behavior, risk management and marginal utility. The fact that the author leave a lot of space to disagree with him, doesn't impose a vision but instead inform us on where his opinion stand in the stream of school of thoughts about those things is deeply appreciated.

  28. 5 out of 5

    Greg Stoll

    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 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.

  29. 4 out of 5

    T. Sathish

    Very interesting insights

  30. 4 out of 5

    Converse

    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 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.

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