Updated: Oct 14, 2021
Authors: Abhijit V. Banerjee & Esther Duflo
Total no. of pages: 402
Total approximate words: 1,08,540
My only source of getting information about the winners of Nobel Prize is the social media. Facebook, to be precise. Whoever is behind their social media presence, is doing a pretty good job! The page regularly updates not only about the laurates, and their inventions, but also share interesting backstories, about what led to certain inventions. Then there are these candid photos and stories, about the laurates, that adds the ‘color’ factor and makes it appealing to a mediocre like me. So, through this page of ‘Nobel Prize’, I came to know about Abhijit V. Banerjee, one of the three Nobel Prize winner for Economics in 2019, and the second Indian to receive it in the same field. The first one was Amartya Sen. Not disregarding the fact that Banerjee is probably an American citizen now, but him having roots in Bengal, intrigued me to know more about his research and studies. And my hungry eyes for books started looking for anything that this Bengali man wrote. And viola, I bumped into ‘Poor Economics’!
The book focuses on the problem of poverty, in third world countries, majorly in Asia, and Africa. The authors, along with their teams and NGOs (Non-Government Organizations) in different countries have created exercises over the years and have implemented them at the grass root level. These included, education, microfinance, health, policies, and politics.
The book explains the poverty trap, and how hunger and poverty go hand in hand. Because the poor cannot afford to eat enough, it makes them less productive and keeps them poor. The authors give live examples of such impoverished people, and puts light into their way of thinking and dealing with their poverty. Surprisingly, for a lot of hungry people, buying more calories is not the number one priority. In their eighteen-country data set on the lives of the poor, food represented from 36 to 79 percent of consumption among the rural extremely poor. And it wasn’t because of other necessities. A lot of households in fact spent on alcohol, tobacco, and festivals.
It talks about how cheap prevention is easier to afford than an expensive cure. An example of how a disease like diarrhoea can be easily prevented in countries like India, and Zambia, with the usage of subsidized ingredients like chlorine and ORS (Oral Rehydration Solution), or Malaria, with the usage of just a bed net. Sadly, high absenteeism rates and low motivation among government health providers are certainly two reasons that this preventive care is not being delivered as expected. In India only, 56 percent of the time, the government facilities were found to be closed, and only 12 percent of the cases were because the nurse was on duty somewhere else near the center. The rest of the time, the employee was simply absent. Furthermore, even when the doctors and nurses were present, they did not treat their patients particularly well.
The book also tackles questions on, if poverty comes down to top-down education policy, and the massive differences in the quality of education provided in government and privately owned schools. Also, if fertility rate is directly proportional to financial savings? And its relation to the difference in treatment that a boy child gets compared to a girl child. Why does the poor want large families? Why the poor people are like the hedge fund managers? And what can they do to cope with the risks that come with it? Why don’t they want insurance?
Number of examples are seen through out the book about different grass root problems and their viable solutions. One such is microcredit and its importance for the poor. The authors share their experiments of microcredit success, as well as its limitations. They talk about the psychology behind savings and why the poor lack the self-control to save more and what can be done to encourage them to save more.
Citing corruption at every level as one of the major causes of the fallacies in implementing the many policies, the authors give many examples of such shortcomings. Rulers who have the power to shape economic institutions do not necessarily find it in their interest to allow their citizens to thrive and prosper. They may personally be better off with an economy that imposes lots of restrictions on who can do what, and then selectively relaxing some of them to their own advantage, thereby weakening competitions, which would enable them to stay in power.
The book also explains about why for the government, even the one with well intentions, it is still a challenge to do its job. Majorly because the government is trying to do what the free market could not do, which essentially makes it a fundamentally difficult job. What further makes it complicated, is that there is no easy way of assessing the performance of most people who work for the government, which is why there are so many rules for what the bureaucrats should and shouldn’t do. The result of which is an endemic corruption. The book shows many examples that actually throws direct light on such grave issues.
The authors conclude the book, by stating how the economic growth of any nation is directly proportional to its manpower and brain power. The whole idea of ‘be at the right place at the right time’, is possible only when people are well fed, are educated, and healthy, which in turn would make them feel secure and confident to invest in their children and in their own creativity of nurturing wealth. Policies that specifically focuses on keeping people from striking out because of anger, frustrations, violence and the feeling that they have nothing to lose, might be a crucial step in protecting the future of many nations that aspire to leave the tags of ‘underdeveloped’.
What I really liked in the book?
Simple style of writing. Ease of reading. Despite being written by academics, the entire interphase of the book is designed in a way that the message reaches to all kinds of people. The many examples of people from different countries with impoverished background, which helps in identifying and pin point the actual grass root level problems. The other examples that show the relations between poverty, hunger, illiteracy, high fertility and corruption. The book is written in such simple style, that I would not mind calling it ‘economics for dummies’.
What I didn’t like in the book?
Lack of examples from developed countries, about how poverty (however minimal) is managed there. What kind of policies are made keeping in mind the poorer sections of the society and what ensures the almost non-existent corruption in such places?
My favorite excerpts:
‘Instead of raging against their destiny, the poor have made things tolerable by reducing their standards.’
‘Our typical reaction when we are confronted with problems like poverty, is to be generous. But our second thought is often that there is really no point, and that our contribution would be a drop in the bucket, and the bucket probably leaks.’
‘Poor countries are poor because they are hot, infertile, malaria infested, often landlocked; this makes it hard for them to be productive without an initial large investment to help them deal with these endemic problems. But they cannot pay for these precisely because they are poor--- they are in what the economist call a “poverty trap”,’.
‘The combination of elevated expectations and little faith can be lethal.’
‘Fertility decisions are made by a couple, but women end up paying most of the physical costs of bearing children. Not surprisingly, their preferences for fertility end up being quite different from those of men.’
‘For many parents, children are their economic futures: an insurance policy, a savings product, and some lottery tickets, all rolled into a convenient pint size package.’
‘Good policies can also help break the vicious cycle of low expectations: If the government starts to deliver, people will start taking politics more seriously and put pressure on the government to deliver more, rather than opting out or voting unthinkingly for their co-ethnics or taking up arms against the government.’
‘The political constraints are real, and they make it difficult to find big solutions to big problems. But there is considerable slack to improve institutions and policy at the margin. Careful understanding of the motivations and the constraints of everyone (poor people, civil servants, tax payers, elected politicians, and so on) can lead to policies and institutions that are better designed, and less likely to be prevented by corruption or dereliction of duty. These changes will be incremental, but they will sustain and build on themselves. They can be the start of a quiet revolution.’
Ease of reading: 8.5/10
Writing style (to keep the reader engaged): 8/10
Resonating to the reader (moving, and relatable): 7.5/10
Overall, I would definitely recommend this book if you are into thought provoking writings about the world economics, policies, corruption and poverty.
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PS This review is based on my personal reading of the book and understanding it with my own limited experiences.