Poor Economics
Abhijit Banerjee and Esther Duflo
Random house
Rs 499 pp 306 For most of us Indians, answers to the following questions would be anecdotally self-evident: do the poor starve? Are the poor prone to disease? Are poor kids dumb? Do the poor breed faster? If you answered ‘yes’ to all of the above, Poor Economics could disabuse you of some fairly universal myths surrounding poverty. It doesn’t just tell you where you are wrong; you also get to know why you are right when you are.
Abhijit Banerjee and Esther Duflo shun most received wisdom about poverty. Instead, they conduct randomised control trials “used in medicine to evaluate the effectiveness of new drugs” to figure out how people react to specific economic incentives. “The shift from broad general questions to much narrower ones has (its) advantage. When we learn about whether poor people are willing to pay money for (mosquito) nets, and whether they use them if they get them for free, we learn about much more than the best way to distribute (mosquito) nets.”
This approach — observe the phenomenon to derive the principle — has put man on the moon, and the MIT economists can’t be faulted for expecting similar breakthroughs in the social sciences. It’s a minor point that the scientist is in quest of immutable physical laws, whereas economists deal with the far more fickle human nature. The study of development economics nevertheless gains immensely from the empiricism Banerjee and Duflo bring to it.
So much for the method, what about the object of their scrutiny? The myriad ‘small’ answers to the ‘small’ questions posed by the researchers draw out a few broad themes. The poor lack information to make decisions. The poor have more decisions to make than the rich. Both the State and the market tend to keep the poor out. The rich do not conspire to perpetuate indigence. And finally, defeatism does defeat. In themselves, these inferences ought to shape society’s attitude towards poverty, and, to an extent, they form the guiding principles of most social welfare systems.
But the true value of Poor Economics lies in the wealth of opportunities that answers to the small challenges thrown up. De-worming children, dropping chlorine into the village well, mid-day meals in schools, micro-credit and micro-insurance, improved local government, each provides a “billion client opportunity” and this list is by no accounts exhaustive. Fortunately for India, quite a few of these innovations have found their way into the official programme to eradicate poverty, yet much more lateral thinking must seep in if the battle is to be won.
For instance, if micronutrients for the foetus and the infant have a demonstrable impact on future earning prospects, State policy may need to be radically rethought from storing grain to a cash incentive for pregnant women and their infants to eat fortified salt. It costs much less than the mountain of rotting grain. A school-building programme that churns out an army of illiterates could benefit from community volunteers. And handouts to parents that complete the inoculation cycle of their children go a long way towards disease eradication.
The one conclusion that appears counter-intuitive in India is the claim made by Banerjee and Duflo that there is no grand conspiracy of the elites to maintain, or tighten, their hold on the economy. India’s current pre-occupation with graft in high places is a periodic outpouring of public resentment. Corruption and the resulting failure of governance allows the rich to consolidate their position in society. The poorly trained private practitioner, for example, earns more than he should because the government doctor is absent. The problem is endemic, reaching into the Indian corporate boardroom.
Abhijit Banerjee and Esther Duflo
Random house
Rs 499 pp 306 For most of us Indians, answers to the following questions would be anecdotally self-evident: do the poor starve? Are the poor prone to disease? Are poor kids dumb? Do the poor breed faster? If you answered ‘yes’ to all of the above, Poor Economics could disabuse you of some fairly universal myths surrounding poverty. It doesn’t just tell you where you are wrong; you also get to know why you are right when you are.
Abhijit Banerjee and Esther Duflo shun most received wisdom about poverty. Instead, they conduct randomised control trials “used in medicine to evaluate the effectiveness of new drugs” to figure out how people react to specific economic incentives. “The shift from broad general questions to much narrower ones has (its) advantage. When we learn about whether poor people are willing to pay money for (mosquito) nets, and whether they use them if they get them for free, we learn about much more than the best way to distribute (mosquito) nets.”This approach — observe the phenomenon to derive the principle — has put man on the moon, and the MIT economists can’t be faulted for expecting similar breakthroughs in the social sciences. It’s a minor point that the scientist is in quest of immutable physical laws, whereas economists deal with the far more fickle human nature. The study of development economics nevertheless gains immensely from the empiricism Banerjee and Duflo bring to it.
So much for the method, what about the object of their scrutiny? The myriad ‘small’ answers to the ‘small’ questions posed by the researchers draw out a few broad themes. The poor lack information to make decisions. The poor have more decisions to make than the rich. Both the State and the market tend to keep the poor out. The rich do not conspire to perpetuate indigence. And finally, defeatism does defeat. In themselves, these inferences ought to shape society’s attitude towards poverty, and, to an extent, they form the guiding principles of most social welfare systems.
But the true value of Poor Economics lies in the wealth of opportunities that answers to the small challenges thrown up. De-worming children, dropping chlorine into the village well, mid-day meals in schools, micro-credit and micro-insurance, improved local government, each provides a “billion client opportunity” and this list is by no accounts exhaustive. Fortunately for India, quite a few of these innovations have found their way into the official programme to eradicate poverty, yet much more lateral thinking must seep in if the battle is to be won.
For instance, if micronutrients for the foetus and the infant have a demonstrable impact on future earning prospects, State policy may need to be radically rethought from storing grain to a cash incentive for pregnant women and their infants to eat fortified salt. It costs much less than the mountain of rotting grain. A school-building programme that churns out an army of illiterates could benefit from community volunteers. And handouts to parents that complete the inoculation cycle of their children go a long way towards disease eradication.
The one conclusion that appears counter-intuitive in India is the claim made by Banerjee and Duflo that there is no grand conspiracy of the elites to maintain, or tighten, their hold on the economy. India’s current pre-occupation with graft in high places is a periodic outpouring of public resentment. Corruption and the resulting failure of governance allows the rich to consolidate their position in society. The poorly trained private practitioner, for example, earns more than he should because the government doctor is absent. The problem is endemic, reaching into the Indian corporate boardroom.
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