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Poor Economics: Rethinking Poverty And The Ways To End It is a book that shows its readers a whole new approach to tackling poverty.
Summary Of The Book
Governments, NGOs, and various other organizations have been working for a long time to find ways to improve the living conditions of the poor and end poverty. But, according to the authors of this book, the conventional approaches are based on generalizations and misconceptions.
For around fifteen years, the authors have conducted field research in many places around the world, studying the financial habits of the poor. They have come up with many surprising findings that provide new insights into the lifestyles and the spending choices of the economically weaker section.
The authors post an interesting analysis when they raise the question of whether there really are a billion hungry people, as many aid agencies claim. They do not actually dispute the numbers or the reality of the problem of hunger, but just point out the interesting choices that poor people make when offered aid in one way or another.
Duflo and Banerjee provide some interesting examples and situations to drive home their point. For instance, the authors point out that in many areas, the poor could spend around 30% more on food if they cut down on expenditures like tobacco and alcohol. They also point out that when people, even the poor, buy food, what drives their choices is not more calories, but taste and variety.
As an example they explain what happened when people in a few regions in China were offered rice or wheat noodles at subsidized rates. The authors found that these people were eating less of these foods and were actually spending more on meat and shrimp.
They also point out some interesting facts about the credit choices of the poor. For instance, in Chennai, fruit sellers buy INR 1000 worth of fruit on credit from the wholesalers and pay it back at the end of the day with an interest of 4.69%. This works out to a mind boggling interest rate per year.
Even when micro-finance loans are available at reasonable interest rates, many people prefer to borrow cash from traditional money-lenders at higher rates. This is because money-lenders offer flexible choices on when the repayment starts and on how the repayments are made.
In this vein, the book highlights many interesting facts that provide new insights on what drives the spending habits of the poor. Poor Economics: Rethinking Poverty And the Ways to End It defines a different perspective on what actually defines poverty and can help in coming up with new ways to tackle it.
About The Authors
Abhijit Banerjee is an economist and he is currently the International Professor of Economics at the Ford Foundation at MIT.
Some of his other publications are Aging And Death Under A Dollar A Day, What Is Middle Class About The Middle Classes Around The World?, and The Experimental Approach To Development Economics.
He was born in Kolkata, India in February 1961. He won the inaugural Infosys Prize in Social Sciences and Economics.
Esther Duflo is co-founder of the Abdul Latif Jameel Poverty Action Lab.
Her only book with Abhijit Banerjee is Poor Economics: Rethinking Poverty And The Ways To End It.
She is currently the professor of Development Economics at MIT. She has received many awards, including the John Bates Clark Medal.
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