Poor Economics by Abhijit Banerjee and Esther Duflo: think small, and feel good

Poor Economics: A Radical Rethinking of the Way to Fight Global PovertyPoor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit V. Banerjee
My rating: 5 of 5 stars

A lively account of the application of the methods of science to a field where politics, philosophy, and ideology usually reign.

I was put onto this book by an ecologist friend who really liked it, but who laughed as he said, “The economists think that they’ve just discovered the scientific method!” He was referring not to the authors, but to those who have been going ga-ga over this book.

He’s got a point. At the same time, I can see why economists and others concerned with elevating the world’s poorest people from their poverty might go ga-ga over this book and its implications. This is one time when I think that a book’s extravagant subtitle—”a radical rethinking of the way to fight global poverty”—is not overblown.

The authors, two high-achieving young economists, set out to test a number of poverty-alleviation policies and programs, using the scientific technique of randomized controlled trials (RCTs) across many poor communities in 18 countries (as I recall). For example, asking why it was that more people in malarial regions of Africa did not acquire and use treated bed-nets for their children, the authors set up a number of experiments in which these bed-nets were made available to different villages in different ways and at different prices, from free to full market price. In doing this they came to discover what gets more bed-nets over more beds, and thereby saves more people from malaria. They performed many other such tests across a range of issues affecting poor people, such as education, health care, insurance, and banking. In setting up these RCTs they worked closely with local aid organizations, and they also talked with many people in the poor world. Their book is replete with fascinating case studies of poor people living their lives.

What makes the book “radical” is that the economics of development has been hitherto guided by high-level theories in economics, philosophy, and politics. Economists like Jeffrey Sachs believe that there is such a thing as a pervasive “poverty trap,” one or more self-perpetuating mechanisms that have the effect of keeping poor people poor, despite their best efforts. From this point of view, the solution to systemic poverty is to inject massive, targeted economic stimuli into poor areas to push people over the threshold of the trap, so that they can prosper as middle-class and affluent people prosper. Other economists hold that, on the contrary, governments and aid agencies should keep their hands off trying to “help” poor people; instead, efforts should be made to improve markets and institutions in poverty-racked places, so that the natural productivity of people can be allowed to operate. These and other high-level philosophies have dominated the world’s efforts to help the poor, and the results, according to Banerjee and Duflo, have been underwhelming.

The authors’ view, after years of making these tests and sifting the data, is that it’s time to stop thinking big and start thinking small. For it turns out that small adjustments in the way a program is conceived or run can make big differences in the outcome—and this is not a matter of opinion, but a matter now of documented fact. And it seems possible, or maybe more than possible, that such small, incremental changes could add up to a big change in the quality of life for the world’s poorest people.

The book’s prose is lively, intelligent, and filled with good humor. They’ve been deeply invested in this work for years, and they know whereof they speak. These are not angry, finger-pointing crusaders; these are good-natured people who look at the poorest people on Earth, and see themselves. They are optimists about world poverty, and by reading their book you might become one too.

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