Poor Economics Book Cover Poor Economics
Abhijit V. Banerjee, Esther Duflo,
Economic assistance

Poor Economics is about the economics of poverty. It contains a coherent overview of the observations and deductions obtained from many randomised control trials conducted in developing countries on a fairly large population living below the poverty line. The central focus of the endeavour is a deeper comprehension of the reasons that perpetuate widespread poverty in many countries of the world and find a way forward that may someday reduce or eradicate global poverty.

The book explores a wide range of issues related to the lives of the world’s poor: food, health, education, employment, savings and insurance, microfinance etc. and asks questions as to the ways and means of improving the conditions of the poor as far as each of those issues are concerned. Poor Economics also studies the role policies, governments and institutions play in eliminating or prolonging poverty. It raises questions that are germane such as if the poor are provided with more money, will it lead to better nutrition in the short term or do those with low incomes largely spend money on expensive cures rather than cheap prevention? The authors delve into the psychological reasons that make the needy and the indigent ignore the future for the present or how they lack motivation because all that they dream of appear impossibly far away.

line and wash sketch of a market

Yet, there are issues and areas where the arguments of the writers do not appear very convincing. They propose ways of up-scaling small businesses without taking into account if there is more demand of goods and services that such businesses offer. If entrepreneurship is not the way forward and only ‘good jobs’ can help a large number of people cross the poverty line, who will provide ‘good jobs’ in such large numbers? Once at least in this book, the writers make a truly preposterous statement:

‘As a result, the agents of the government (the bureaucrats, the pollution inspectors, the policemen, the doctors) cannot be paid directly for the value they are delivering to the rest of us — when a policeman gives us a ticket, we complain, but we don’t offer him a reward for doing his job well and keeping the roads safe for everyone. Contrast this with the grocery store owner: She delivers by selling us eggs, and when we pay her for the eggs, we know we are paying for the social value she is delivering.’

Offer the policeman a reward? Are bureaucrats and members of the police not already suitably compensated for the services they render? Then again, in the Indian context, what explains the ‘lazy thinking at the stage of policy design’ which leads to ‘large-scale waste and policy failure’ when the policy-makers are either the bureaucrats who have served several years at the grassroots or the political executives, a majority of whom are supposed to have a rural background?

roadside garments shop line and wash sketch

The authors of Poor Economics seem to rely on incremental change for ‘breaking the cycle of poverty’. The question remains that if it is a solution, does it not suffer from the same ‘time inconsistency’ that is alluded to several times in the book? Would it not be discouraging for both the affected and the solution-providers if it remains a long struggle and no light can yet be seen at the end of the tunnel?