Poor Economics is an important read for anyone who wants to understand (and ultimately end) poverty, not least because it won the authors the 2019 Nobel prize in economics in “for their experimental approach to alleviating global poverty” the total benefits of which are almost immeasurable. The extensive number of case studies that can be found within Poor Economics is a direct result of numerous experimental programmes that the pair set up across developing countries in the span of 15 years. Each of these as an attempt to solve the smaller issues, hoping that these will one day also resolve the bigger issues that the poor face. In conjunction with Michael Kremer (who won the Nobel alongside them), the pair are responsible for a new approach to fighting global poverty, one which begins with individual communities. One of their many successes has been that they recorded and published the results of a successful education programme in India which involved extra support and tutoring for students who were falling behind. It has since been recorded that more than 5 million Indian school children have benefitted from similar programmes.
In their introduction, Banerjee and Duflo outline the aim of Poor Economics which is to encourage people not to be defeated or intimidated by the issue of world poverty. I would claim that Poor Economics fulfils this role completely through their engaging and impactful analysis of the economic activities of those living in poverty. This is largely because it introduces two entirely new concepts to the study of global poverty, making the book both an easy read and impactful on the way that economists approach global poverty.
Esther Duflo, courtesy of NPR
Esther Duflo is only the second woman to win the Nobel Prize in economics, the first female economist, and the youngest person (46) to do so. It is perhaps for these reasons that the book offers such a new approach to the economics of poverty, and consequently, has changed the attitudes of economists towards the issue of poverty worldwide.
A refreshing aspect of Poor Economics is the author’s tendency to defeat many of the polarised arguments between economists, while introducing their fresh new view. For instance, on the issue of aid, economists are often for or against aid in poor and developing countries, but Banerjee and Duflo argue that these polarising arguments are ‘too big’ and will not help those in poverty. This belief has lead to their new approach towards the issue of global poverty.
The first stage of Banerjee and Duflo’s new approach was to claim that in order to resolve big issues such as ‘how can we end poverty?’ we must start by solving smaller, more localised issues, such as persuading the poor to use bed nets for protection from Malaria. Although this may not seem likely to solve the issue of global poverty, it attempts to solve one of many ‘poverty traps’. The idea being that the bed nets will increase the health of the population and enable people to work and escape poverty. It is only when these smaller issues have been addressed that we can start to think about the bigger picture. This approach makes the book accessible for everyone because instead of trying to wrap your head around complex and abstract economic thought, the issues that the book deals with directly are simplistic, while still making a large difference to the lives of the poor and the study of economics.
Similarly, the second stage of their new approach is that Poor Economics contains many case studies of experiments that have been carried out to understand and improve the lives of those living in poverty. These case studies allow us to quantitively see the benefits of some interventions, and the downfall of many others. A particularly memorable example being that people are less likely to buy subsidised healthcare products, and more likely to buy them full price. The main point to be taken away from these case studies is that the actions of those living in poverty often do not match up with the actions that the rich of the world would expect of the poor. One such example is that when the poor find themselves with additional money, they would not choose to spend it on more nutritious or calorific food, but rather on more expensive brands of food. These case studies are what makes the book engaging because they allow people to relate and understand easily. Poor Economics is rife with excerpts from conversations that Banerjee and Duflo had directly with people living in poverty, adding an authenticity to their findings.
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