A Radical Rethinking of the Way to Fight Global Poverty

Clearly written and packed with good things to know, specifics and detail backing up broad ideas and concepts. Different approaches to working against poverty presented, with the need to determine what policies and programs are effective always emphasized.

Scholarly book - little on the deep side - but I knew that when I bought it. A lot of research went into the book, well substantiated, a must read for those wanting the latest thoughts on world poverty and ways to attack it.

I daresay and Banerjee and Duflo are genius in their approach. She has taken what we, from developing nations have known for decades, that the poor are the best economists. They have a lot to loose. This will be a classic for economists. It is a must read for anyone who wants to donate money or change the lives of those who are poverty stricken. It appeals to me because it uses the scientific approach to the problem of global poverty. Their thinking is radical to western observers, and should be studied before pontificating on what are the causes of poverty and what can help in developing nations.

The state of the professional debate in development cooperation - a form of social engineering ultimately aimed at the eradication of extreme poverty - shows some resemblance to the situation in medicine in the early 19th century. Increasingly it is possible to rely on objective data on how things work, but that type of knowledge finds it hard to be on the forefront of a debate that is still highly ideological and political. This does not mean that in development cooperation anything goes. It simply means that the profession has yet to gain the upper hand on charlatans and quakes that sometimes seem to dominate the debate. The profession in other words lacks a comprehensive system for the collection of hard data and conclusions and the identification of what works and what does not work. It thus also does not yet have a system to weed out ideological statements based on journalistic `evidence'. Worse, the little scientifically tested information that is available has a tendency to remain or disappears in unnoticed corners.

Less than ten years ago Abhijit Bannerjee and Esther Duflo created the Abdul Latif Jameel Poverty Action Lab which is dedicated to a type of testing that is one of the bedrocks of modern medicine: randomized testing. That in itself is a small revolution in an area where regression analysis and testing of single interventions still rule. Regression analysis can flesh out general tendencies, but often times the secret is in the structure and the historical path and by aggregating you lose that. Single interventions or case studies suffer from the fact that they provide empirical evidence of initial assumptions that may or may not be relevant. Furthermore they are only one story or a group of similar stories that may or may not be externally consistent. Finally, and most damning, these case studies are being often presented and/or researched by parties that have a vested interest in them. Randomized testing is more trustworthy that case-studies since it challenges prior assumptions, but is also suffers from a similar weakness: the findings may be internally consistent, but translating the results to other areas and times is a challenge. That however is no argument not to undertake those studies, the more so since over time the accumulation of these studies, perhaps with the help of regression analysis, may provide sufficient data to establish external consistency.

And sufficient and hard data already are available as witnessed in this book. The book is full of findings that provide insights that transcend the current debate on poverty. Combining micro-economics with randomized experiments the writers approach to the issue of poverty is refreshing. In the process they provide insight and meaning to the many perplexing and contradictory phenomena even a casual observer of poverty is confronted with. They show why poor people that get more income actually eat less, why they do not use the many services provided for them, why they are reluctant entrepreneurs, why life is so much more challenging for poor people than rich people, etc. etc. Just to survive poor people need to have a resilience that almost seems super-human. Anyone interested in poverty in general and/or specifically in issues pertaining to hunger, health, education, family planning, micro-credits, saving, entrepreneurship and institutional development should not miss this book.

To summarize, a groundbreaking book that could lift the debate on development and development to a higher professional level and a must read for anyone truly interested in the actual nature of being poor and the challenges poverty poses to the poor. In the words of Amartya Sen: "A marvelously insightful book on the real nature of poverty."

Well structured and researched, provocative, and possibly game-changing in the way we think about poverty and redistribution policies. It is also a recommended read for everyone that is eager to think about an old problem in a new way.

This book is well written and discuss 18 countries case study. The only think i was not that much interested to read was that i was already familiar the cases discuss and specially in India and Bangladesh.

Wonderful book, full of penetrating insights. Stays clear of ideological issues and sticks close to the evidence. Emphasizes that lots of incremental changes when taken together, can lead to revolutionary change.

Practical insights into the thought processes of the chronically poor the world over. You need to walk in their shoes to appreciate their problems and their solutions to those problems.
Policy makers need to incorporate the findings of the author and need patience to work the promising solutions that the author outlines in his research. Everyone should put on a pair of the shoes of the poor and walk with the author -- you will have a new appreciation of the problems of the poor and the "logic" that dictates their behavior. With an open mind maybe we can hope to find realistic solutions to world poverty.

Although I am an economist by training and have studied economics for many years, I admit that in reading this book I have learned a great deal about the complexities of both the theory and the practice of anti-poverty policies in developing nations.

Why are people so interested in the issue of global poverty? Well, to list a few of the many aspects about poverty addressed in this book, every year about 9 million children die before they reach their fifth birthday, usually in the poorest countries. In the developed world, a woman has a one-in-5,000 chance of dying while giving birth, but in many sub-Saharan Africa countries the odds are one-in-30. There are at least 25 countries in the world with life expectancies of 55 years or less. If these sorts of situations capture your mind and lead it to ask what can be done, one of the first things you might consider doing is learning more about the conditions and circumstances that lead to these revealing statistics. That's where this book comes in.

So, is this book one you should buy? Presumably that's why you are reading this. Here are a few observations that may help you decide whether to buy this fine book: In the authors' own words, the book "is ultimately about what the lives and choices of the poor tell us about how to fight global poverty." That may not sound too sexy or exciting, but if you have an interest in facts, theories and observations about global poverty, then this is your book. On the other hand, if what you seek are simple theories and, especially, strong advocacy of a few preferred solutions, then you are probably barking up the wrong tree. Don't get me wrong; I like the book just as it is. There is so much information to consider and so many approaches to fighting poverty to contemplate. Just don't expect the authors to take a lot of your time championing pet solutions. Because the problem of poverty is itself rather complex, so are some of its solutions. Jack Webb (the "just the facts, ma'am" star of the "Dragnet" series) might have loved this fact-filled book. At least, he'd love it if he was an economist or someone interested in learning (a lot) about global poverty. Yet there's much more to the book that mere facts. Primarily, there is a pursuit of understanding the circumstances associated with poverty and the efforts to overcome it. That's where this book excels.

It's certainly early to judge, but this book could prove to be a classic in its field. It successfully challenges and encourages the reader to think in new ways about anti-poverty initiatives. Although its authors are probably unknown to the general public, they are well regarded in economics. They both have received a number of prestigious awards, including the John Bates Clark Medal (to Esther Duflo) for the best American economist under age 40. Previous winners of this award include a Who's Who of economists, such as Paul Samuelson, Milton Friedman, James Tobin, Kenneth Arrow, Gary Becker, Martin Feldstein, Lawrence Summers and Steven Levitt.

In short, this is a substantial book with a great deal of important content. There are some graphs, but less than you might expect from two economists. Importantly, it is readable and understandable by the interested lay reader. Frankly, I think it's a book you won't forget. If the issues of global poverty and economic development interest you, this is a book well worth your careful consideration.

If you're into global poverty alleviation, this is a very worthwhile book. Evidence-based description of how things are.

You won't get sweeping generalizations because, as the authors constantly point out, the reality of life is a lot more nuanced.

Good read! Consider reading it and "More than Good Intentions" also :)

Leaving aside traditional views, the book show a new way to think the poverty. It made me wonder that to solve poor people problems we need to know what them think and feel, rather than simply saying what's best for them.

The topic is extremely fascinating, the conclusions they draw are surprising, but the presentation is dull. They write like academics, which they are. A good writer could have made this book so much better.

It deals in a very practical form with issues that contribute to poverty and their possible solutions: ignorance and knowledge, selfishness and generosity, integrity and corruption. The great problem of education and perception in communication which affect people's behavior.

The authors are experts on collecting data for the poverty research. The book is full of numbers, percentages, such as 8.2 births per 1000 women, 10%, etc. Every page is a result of their research. It makes a compelling read.

But the flow of the book is bad. One paragraph talks about India, then next sentence deals with China, Indonesia or other villages. It is difficult to understand the main theme of each chapter. S-shape curve and Jeffery Sachs kept popping up, but the explanation is different each time. Then they talk about the theory and the results do not match.

Therefore it is back to square ONE. How do you solve the poverty issue? Micro Finance, Yes and No. Government intervention, Yes and No. Lower interest rate, Yes and No. The end result, is no clear solution or recommendation. As a reader, I am more confused after reading this book.

I will recommend this book for students that are Economics majors in University. This book is not for the general public.

This review really consists of two parts, the first being the Kindle version of this book; the second part being the content of the book.

Just to set the stage, I read this book on a Kindle Fire HD, so this was not read on a computer with the Kindle App or on an Apple product with a Kindle app. Thus, I should have had all of the features of a Kindle book available to me.

With that in mind, this is a very poor excuse for an e-book. Here are some specific examples:

* The Preface of the book is located at the end of the book, just before the Index.
* The Index is useless. It is strictly a list of terms without any page references of hyperlinks.
* Chapters are NOT numbered but they are titled.
* Graphs are very fuzzy and almost unreadable when you enlarge them enough to see.

Just in case this was a problem with Kindle Fire HD, I also opened it in my Ipad using the Kindle app and it has the exact same issues.

Content of the Book:

I was hoping for a better understanding of Global Poverty and the problems that we have solving it and I was expecting a very scientifically based report with balance. What I found was another book where the authors have an agenda and they will select information to suit their agenda and reject any information that runs contrary to it. One specific example is how they deal with micro loans and what they expect from micro loans. Where in the definition of micro loan does financing a medium to large company come into play? Yet, that is one of the things they criticize micro loans for is that they do not loan enough to create a company that has hundreds of employees! They can find several examples of poorly run lending, but NEVER do they once mention KIVA or any of the work that the organization does to ensure the problems they mention are eliminated! Once again, if you can select the data you will you, you can prove anything you want to prove.

The authors also do a bit of research on the poor and their habits and then glibly contrast it against what they expect the non-poor would do. Do they actually do any research on this? No! They just assume that this is what must happen and this is what people who are not poor must think! (The authors actually state "one presumes that this must be what the non-poor think".

There is very little recognition of cultural differences in what people think makes them poor, wealthy, happy, or sad. But I guess that is to be expected since they authors never really define what they mean by "poor"!

The scary part about this book is not its content, but the fact that it is written by two recognized economists that happy to also be providing guidance to the United States on how to deal with Global Poverty!

While I think this book is poorly researched and written, I do believe that it is important to read because these are the people who are guiding our government to spend money to solve global poverty without ever asking the people on the ground who work with poverty day in and day out what they need or what they think! No wonder we spend so much money and get so little back in return!

This book gives an interesting perspective on the obstacles to fixing poverty in the developing world. They criticize both Jeffrey Sach and William Easterly for overstating how easy/hard it is provide useful aid to the poor by attempting simple and sweeping generalizations, where Banerjee and Duflo want us to look carefully at evidence from mostly small-scale interventions which sometimes produce decent results.

They describe a few randomized controlled trials, but apparently there aren't enough of those to occupy a full book, so they spend more time on less rigorous evidence of counter-intuitive ways that aid programs can fail.

They portray the poor as mostly rational and rarely making choices that are clearly stupid given the information that is readily available to them. But their cognitive abilities are sometimes suboptimal due to mediocre nutrition, disease, and/or stress from financial risks. Relieving any of those problems can sometimes enable them to become more productive workers.

The book advocates mild paternalism in the form of nudging weakly held beliefs about health-related questions where people can't easily observe the results (e.g. vaccination, iodine supplementation), but probably not birth control (the poor generally choose how many children to have, although there are complex issues influencing those choices). They point out that the main reason people in developed countries make better health choices is due to better defaults, not more intelligence. I wish they'd gone a bit farther and speculated about how many of our current health practices will look pointlessly harmful to more advanced societies.

They give a lukewarm endorsement of microcredit, showing that it needs to be inflexible to avoid high default rates, and only provides small benefits overall. Most of the poor would be better off with a salaried job than borrowing money to run a shaky business.

The book fits in well with Givewell's approach.

A lively account of the application of the methods of science to a field where politics, philosophy, and ideology usually reign.

I was put onto this book by an ecologist friend who really liked it, but who laughed as he said, "The economists think that they've just discovered the scientific method!" He was referring not to the authors, but to those who have been going ga-ga over this book.

He's got a point. At the same time, I can see why economists and others concerned with elevating the world's poorest people from their poverty might go ga-ga over this book and its implications. This is one time when I think that a book's extravagant subtitle--"a radical rethinking of the way to fight global poverty"--is not overblown.

The authors, two high-achieving young economists, set out to test a number of poverty-alleviation policies and programs, using the scientific technique of randomized controlled trials (RCTs) across many poor communities in 18 countries (as I recall). For example, asking why it was that more people in malarial regions of Africa did not acquire and use treated bed-nets for their children, the authors set up a number of experiments in which these bed-nets were made available to different villages in different ways and at different prices, from free to full market price. In doing this they came to discover what gets more bed-nets over more beds, and thereby saves more people from malaria. They performed many other such tests across a range of issues affecting poor people, such as education, health care, insurance, and banking. In setting up these RCTs they worked closely with local aid organizations, and they also talked with many people in the poor world. Their book is replete with fascinating case studies of poor people living their lives.

What makes the book "radical" is that the economics of development has been hitherto guided by high-level theories in economics, philosophy, and politics. Economists like Jeffrey Sachs believe that there is such a thing as a pervasive "poverty trap," one or more self-perpetuating mechanisms that have the effect of keeping poor people poor, despite their best efforts. From this point of view, the solution to systemic poverty is to inject massive, targeted economic stimuli into poor areas to push people over the threshold of the trap, so that they can prosper as middle-class and affluent people prosper. Other economists hold that, on the contrary, governments and aid agencies should keep their hands off trying to "help" poor people; instead, efforts should be made to improve markets and institutions in poverty-racked places, so that the natural productivity of people can be allowed to operate. These and other high-level philosophies have dominated the world's efforts to help the poor, and the results, according to Banerjee and Duflo, have been underwhelming.

The authors' view, after years of making these tests and sifting the data, is that it's time to stop thinking big and start thinking small. For it turns out that small adjustments in the way a program is conceived or run can make big differences in the outcome--and this is not a matter of opinion, but a matter now of documented fact. And it seems possible, or maybe more than possible, that such small, incremental changes could add up to a big change in the quality of life for the world's poorest people.

The book's prose is lively, intelligent, and filled with good humor. They've been deeply invested in this work for years, and they know whereof they speak. These are not angry, finger-pointing crusaders; these are good-natured people who look at the poorest people on Earth, and see themselves. They are optimists about world poverty, and by reading their book you might become one too.

This book deserves to become a classic of development literature. In my studies, I have read many hundreds of thousands of pages on development economics and associated questions about poverty and this three-hundred page book trumps them all in terms of addressing the question of what can actually be done.

This book sets itself up in stark contrast to the approaches of both Sachs and Easterly. At first glance, these two economists may appear utterly different. Sachs (best known forThe End of Poverty: Economic Possibilities for Our Time) believes that all problems of poverty can be solved with sufficient hand-outs. Easterly (best known for The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good) despises hand-outs and believes the developed world needs to back-off. The panacea, according to Easterly, is free markets.

Banerjee and Duflo argue that both these eminent economists make the mistake of focusing too much on the big questions. They argue that it is the small ones that matter. Both the philosophy and methodology they advocate is based on a simple premise: details matter. As they put it, "Attend to the details, understand the how people decide, and be willing to experiment."

In terms of philosophy, they argue for an incrementalist or a marginalist approach and demonstrate how much can actually be done when we get the details right. In terms of methodology, they urge the reader to turn from the BIG questions - governments versus markets, aid or no aid - and focus on an empirical approach using "randomised controlled trials" ("RCTs") to ascertain what works and what does not in addressing the challenges faced by the poor.

They examine poverty from all angles - looking at health, education, micro-credit, savings and insurance, entrepreneurs - and always they focus on the details. They stay away from sweeping statements ("the poor need credit", "micro-credit solves everything", "access to markets solve everything", "conditionality is critical for grant-giving", "democracy is non-negotiable") and they focus on the evidence. What do the poor actually do? What decisions do they make? What changes their decisions?

This book is a gold-mine of insights. Perhaps one of the most important is that the poor are not all that different from the rich. The same "time inconsistency" bias that causes the rich to renege on their commitments to regularly attend gym plays a role in the poor failing to effectively immunise their children. The authors also show how much the rich benefit from the invisible paternalism that pervades our lives and in how many ways, the lack of this affects the poor. They point out that the same desperation for a cure that drives the poor to both doctors and traditional healers, also drives the rich to consult alternative medical practitioners when faced by an incurable disease.

They examine where poverty traps exist and where they do not, and what kinds of interventions actually assist people to escape these traps. They look at where the poor lack good information - for instance, they look at the beliefs the poor hold about the benefits to education. They argue that most policies are stymied by the "three I's" of Ideology, Ignorance and Inertia, which result in policies being badly designed and never altered, rather than by corruption or endemic failure.

This is a powerful, insightful and, ultimately, radical book that challenges all the traditional approaches to understanding poverty and the poor. It shows an alternative path to widespread revolution or massive amounts of money being pumped in to save the poor. Instead, it urges us to look at the details and figure out what incremental changes need to be made. They argue "These changes will be incremental, but they will sustain and build on themselves. They can be the start of a quiet revolution".

Read this book. Join the revolution.

This book comes off as another -wealthy people writing about what it's like to be poor- work, but it does give proper acknowledgement to the actual causes and shows that there IS plutocracy, as the people causing the economical coefficients for specific demographics know they are causing them..

This is nothing new, read about Egyptian and Greek political policy. Most United States legislature and constitutions are based on ancient Greek plutocracy. It was the same in the countries all Americans came from. It's commonly known as class warfare in some tiers of the social hierarchy in modern America.

Politicians ignore working class democracy, labeling it as socialism.. People have social bias that marginalize large demographics from a nations work force then blame them for the natural result; it's mostly not race either.. Political infrastructure uses executive control to make plutocracy persistant like with funding elections and using electoral college they can control.. Landloards plan costs around their tenants with the most profit humanly possible based on tenants wages etc..

Review courtesy of www.subtleillumination.com

"To progress, we have to abandon the habit of reducing the poor to cartoon characters and take the time to really understand their lives, in all their complexity and richness."

I'd heard before that on average, tall people earn more money. What I hadn't heard was that apparently if you control for IQ, that difference disappears - tall people are smarter and so have higher wages. A suggested explanation is malnutrition, which both reduces height and lowers IQ, and poses a significant challenge to poverty. This and other fascinating studies make up the bulk of Poor Economics, as Banerjee and Duflo follow their own advice and turn to the data to understand the challenges of development.

If you want to help the poor, say Banerjee and Duflo, you need to give up grand theories and ideas of structural change, no matter how appealing a silver bullet may be. Rejecting Why Nations Fail, they argue that poverty is not the product of grand institutional failures, but rather is an individual or local condition, making cookie-cutter remedies useless. Development must be achieved by a series of small, well-thought out and well-tested steps, gradually accumulating into big changes, not grand designs with little relevance to the lives of the poor.

To do so, they point out, it is essential to first actually understand the lives of the poor. Arguments often rage over whether the poor are in a poverty trap, the concern being that had they only a little more money for health, schooling, or business, they could invest and increase their wages, starting a positive cycle of investment and returns. B&D, however, dismiss the arguments of Sachs, Easterly, and others, and point out that the answer can only be found in the data, through randomized control trials and empirical work, not through theory or ideological debates.

They do make some broader claims. Without a stable job, for example, they suggest there is little incentive to save, invest, or plan for the future. As a result, the creation of jobs with job security may be justified even if it is an inefficient method of job creation, because of the indirect benefits. I'm not sure if I agree or not, but it's an interesting point.

Perhaps the one criticism I have of Poor Economics is that their attempt to stick to economic rationality, though understandable, can feel forced. At several times in the book, as when they're discussing how some households will borrow at a 24% rate of interest in order to save it at 2%, psychological or behavioural explanations seemed like a natural next step in the discussion, and I was disappointed when they neglected them. Still, the book adds a much-needed voice in the discussion of economic development, one driven by data, not ideology.

Banerjee and Duflo write beautifully. This book is an easy read that summarizes an astounding number of studies of the microeconomics of poverty in developing countries. Despite not having one single sweeping conclusion, the authors manage to synthesize the literature into a compelling and insightful narrative of the lives of the very poor. The authors use almost no economic jargon and yet are able to accurately convey important and sophisticated economic concepts. It is quite a feat to be able to write in a way that can be understood and enjoyed by people with no background in economics as well as PhD economists.

I had heard about randomized controlled trials (RCTs) in development economics. This book improved my view of them substantially; while I had a prior as to their usefulness, my prior was not very well informed. While it is true that the trials are not replicable and require external validity, Banerjee and Duflo are acutely aware of this limitation. Furthermore, many of the experiments are reproduced in other settings suggesting that much of the time the results do have external validity. When a seemingly similar experiment yields different results, the hope is that there is something to be learned from that. Banerjee and Duflo discuss cases of both types.

I do worry that the very high cost of running such experiments may narrow the set of researchers that are able to publish development studies in the top academic journals. As such, we may be narrowing the range of viewpoints (e.g., macroeconomic perspectives) on development. I hope development economists working on RCTs continue to be open to other approaches of looking at development.

Perhaps the most useful insight I took away from the book is the point that a lot of the same behavioral biases that cause the poor to make suboptimal decisions are shared by people in rich countries. How many times have you heard someone overweight, or who smokes, or who doesn't save enough for their retirement complain that the poor still have flatscreen TVs? The consequences of biases in decision-making and the processing of information are just much more severe for the poor. Rich people simply don't have many life or death choices (e.g., whether to purify drinking water) in their daily lives. This is a crucial point and should enable us to think about poverty with a little more compassion.

I recommend this book to anyone who has even a passing interest in poverty and development.

The authors of "Poor Economics" start by contrasting the 2 polar positions found in "The End of Poverty" and "White Man's Burden" and they carefully walk not a middle ground, but on a plane above either of these simplistic viewpoints.

And in the end, "Poor Economics" is careful not to draw any "sweeping" conclusions. But the authors do offer several smaller specific viewpoints supported by their research, each of which points the way to better allocation of whatever resources we do choose to spend on poverty. Some of these observations include:

The poor often don't have access to correct critical information that could help them and are often hurt by misinformation they believe. They need credible sources of good information and a corollary is, govt misinformation undermines govt credibility and efforts. So, small investments in credible, specific useful information on nutrition, health, and education can go a long way.

The "poor" are responsible for too many of their own "decisions" that the "rich" have decided for them. In this item, almost everyone in the US would fit in the "rich" category because for example, we don't have to decide to drink clean safe drinking water, it's an almost automatic assumed fact of life. The "poor" in other countries have to know how to make water safe and decide that it's worth that effort and expense. Would anyone reading this know how to sanitize unsafe water from scratch or to fortify raw cereal?

And of course, the maxim that people live up or down to your expectations, or expectations are self-fulfilling. Especially in education, teachers who see no hope for their students will end up with failures, teachers who believe in their students will see success.

The one big picture sweeping conclusion they could have made is: there is no universal approach and every solution will be localized based not only on the local conditions, but also on the societal norms there. We have to understand a society and what drives the individuals in it before we can help.

This book is to poverty what gene therapy is to cancer treatment: not there yet, but hopeful and citing some very specific helpful research. Gene therapy and successful poverty reduction both depend of specifics.

The last thing I concluded (and this is me, not the authors) is their research shows the poor make the same less-than-perfect decisions we all do. Americans (on average) borrow too much, eat too much, and have unhealthy lifestyles that we know are unhealthy. If we get a tax refund, instead of paying down debt we buy something big and new. It's disingenuous for us to criticize the poor for their "bad" decisions about how to feed themselves or allocate their limited income when we're so bad at it ourselves.

I'd recommend this book to anyone interested in how the rich world treats countries and people in poverty. Unfortunately, I don't see it being the bestseller that either "White Man's Burden" or "The End of Poverty" is because it doesn't appeal to either extreme or use inflammatory rhetoric that will get it the kind of media attention those 2 books have.

This book is about people that spend less than what you can buy for 99 cents per person per day in the USA. In 2005, 865 million people actually did, most of them in Asia, Africa and Latin America.
The message of the book is that in all countries extreme poverty can be reduced much faster and more effective than is happening to day. A lot of effort and money is wasted because the causes of the poverty are not understood leading to wrong policies and right policies that are poorly executed (often lack of follow up). The positive message is that significant progress can be made with without radical changes of institutions, corruption, or enormous subsidies.
Finding ways to lead poor people out of their poverty traps is far from easy. You have to understand how they make decisions, and if they make the wrong decisions what method is effective leading to correct decisions. That is not easy either. Understanding is not a question of only questions and answers and verbal persuasion. The authors describe many examples like the problem of state paid teachers in poor villages in India that were often absent. The book describes a wide range of common problems l reducing hunger, insurance for healthcare and drought, poor teacher performance, family planning, ethnicity problems, the merits of entrepreneurship of the poor and additional action required for more "good" jobs, that is with a fixed stable income over time, the significant merits and limitations of microcredit, the need additional credit possibilities, saving money without risk and reasonable returns. I was surprised to learn that many of these very poor save money, lend and borrow from each other, and why it is so difficult to replace moneylenders.
The two authors are Professors at MIT and use a scientific method making experiments that prove if a method works or not, (RCT) Randomized Controlled Trials. That means that they compare the performance of groups that are exposed to different methods, and analyzing the results. It is fascinating to read about these tests and how excellent solutions were discovered.
These two academics point out that they have radical different views from other well known academics in this field notably, Jeffrey Sachs, Darin Acemoglu and James Robinson, and Paul Collier. These academics present Big Ideas like radically changing the institutions, even by force, or doing no more than promoting freedom. These generalizations can lead to doing nothing or wasted effort and funds. To be successful you have to investigate causes, test solutions and monitor implementation.
Some leaders of government like Luiz Inácio Lula da Silva Brazil and Deng Xiaoping of China and Manmohan Singh from India, have introduced policies and programs that have significantly reduced poverty. However these countries still face serious poverty problems. Many of the projects described are from these countries
I have been amazed about how much can be done with simple measures in what look like hopeless situations. Just one example. Corruption is a huge problem. In Kenya the government paid for schools, teaching material and teachers but there was some doubt about how much actually reached the schools. An audit was made that found that only 13% of the funds the government sent to the schools actually arrived at the schools. These results were widely published in the newspapers. Soon thereafter the percentage became 70%. This is one of several examples how corruption can be reduced from the bottom up, rather from the top down, that is policy change leading to political change. Other similar examples are described. Improvements can and should be made top down and bottom up in politics and policies. For me a brilliant idea.

This book convinced me of the usefulness of RCTs (randomised controlled trials) in economics. Banerjee and Duflo muster up empirical evidence to show that there are marginal dents we can make in poverty. They do not oversell their point - this is not a Sachs/Easterly/Collier polemic - and perhaps the title is misleading. There is nothing "radical" about the authors' proposals. Indeed, they caution that there is no easy fix to poverty.

"Poor Economics" has received well-deserved accolades, and I have little to add in this regard. I therefore make critiques of their work along three lines. First, Banerjee and Duflo do not properly discuss RCTs' limitations. Second, there is a lot of unexplored territory that the authors do not suggest. Finally, the book underestimates the impact of politics.

First, RCTs have important limitations, like their consideration of externalities. For example, a program that subsidises fertiliser in one village can harm farmers in another one that did not receive fertiliser. RCTs do not often measure the impact of externalities like this. This is a major limitation that the authors brush over.

Second, there is a lot of unexplored territory. For instance, I am surprised that the authors do not suggest exploring financial cooperatives. The poor already have informal social networks to coordinate the use of funds - so why not formalise this through a cooperative? Financial cooperatives can become good complements to microfinance. This is just one of many unexplored areas.

Finally, and perhaps most importantly, Banerjee and Duflo gloss over politics' pivotal role. Although RCTs can make aid more effective, aid itself can never radically reduce poverty. Massive poverty reduction only occurs when people overthrow elites and start implementing democratic reforms. The authors retort that marginal gains can be made on the political front - this is disingenuous, since their 18-country dataset does not include truly undemocratic regimes (like DRC and Afghanistan). Instead, their 18 countries are fledgling democracies, where marginal gains are possible because there is sufficient slack. There is a reason we cannot conduct politically-based RCTs in countries like Cuba. Ultimately, elite control of economic and political institutions engenders poverty.

These criticisms are not meant to suggest that the book is mediocre - every economist and policymaker should read "Poor Economics," and I highly recommend it to those interested in development. In fact, this should be development students' first port of call, and I will be using this book to teach students. Nonetheless, one should be aware of its limitations.

"So the poor have hope,
And injustice shuts her mouth." -- Job 5:16

If a pharmaceutical company wants to improve health, it begins by studying what goes wrong in a disease. Having found the patterns of disease, it looks for ways to interrupt those patterns. When a promising molecule is identified, controlled trials begin. If such trials prove the molecule is safe and effective, governments will license production and prescription of the new medicine.

Professors Banerjee and Duflo employ a similar methodology for finding ways to interrupt patterns that lead to and sustain poverty. That's the key message of this book: Unless you employ good methods to identify what to do, money and effort spent on eliminating poverty may well be unproductive or even counterproductive.

Those who aren't familiar with the research results will learn a lot about how poverty shapes perspectives and problems so that poor people may well choose alternatives that don't optimize wealth and poverty elimination. Once again, "economic man" and "economic woman" are proven to be myths created by theoreticians.

My takeaway from this book is that a lot more would be accomplished by earmarking 10 percent of money intended for poor people to conduct studies and trials to find what really works, rather than just spending money on what some "expert" believes will work.

In my own work on the 400 Year Project (to accelerate global improvements by 20 times), successful poverty elimination experiments have required a lot of individual adjustments for each person and family. But typical "solutions" to poverty don't encompass such flexibility.

I liked the last part of the book best, "In Place of a Sweeping Conclusion," where the professors point out the results of individual studies completed to date don't allow for any sweeping conclusions.

Bravo and Brava!

After reading this book I could not help but asking why it took sixty years of development research and policy to really start looking closely at the way the poor live, take decisions and react to incentives. It can only have been arrogance to think that our development experience can easily be replicated in the South. Banerjee/Duflo explain convincingly the constraints of the poor, their general insecurity and uncertainty and their - not always rational - ways of reacting to personal emergencies and outside incentives. I found it quite sobering when the authors point out that the poor have to take conscious decisions where we can rely on a functioning system that takes decisions for us, be it with regard to putting chlorine into your drinking water, saving for retirement, sending your children to school. And what if the government in your country is not willing or able to provide these services and you are not educated enough to make best use of them? The authors do not have easy recipes for remedying the current approach to development but they instill a sense of the daunting task that development presents and the uncertainty if and when it can be achieved. This is an extremely important while eminently readable book. I recommend it very much.

After decades of effort, billions of dollars, thousands of aid workers and hundreds of antipoverty programs, 865 million people still barely survive on the equivalent of less than a dollar a day. But that can change, one small clinic, one incentive and one schoolroom at a time according to this eye-opening work - The Financial Times/Goldman Sachs' business book of the year for 2011. Authors and MIT economic researchers Abhijit V. Banerjee and Esther Duflo report field-tested experiments showing that lifting the world's poor into a more comfortable, productive life is possible, mostly with relatively simple changes, not masses of money. They call for understanding the human behaviors and motivations that drive all people, rich and poor alike, and apply that understanding to solving the seemingly overwhelming, intractable problem of global poverty. getAbstract strongly recommends this highly accessible yet scientific account of how to make life better for millions of people, while enabling the poor to contribute to the world's economic and social progress.

One of the most daunting obstacles economists and other social scientists face when observing the real world in an empirical way is a lack of control. It is notoriously difficult to establish randomized, controlled experiments in the real world, because unlike laboratory settings, the real world cannot be controlled by setting all conditions equal except for one, in order to measure the impact of that particular factor. There are serendipitous occasions when such randomized trials emerge through happenstance, but they are rare in the developed world, usually because no one has the patience to see them through. In "Poor Economics," Abhijit Banerjee and Esther Duflo summarize studies performed by various economists and social scientists, including themselves, of the developing world to see how the world's poorest make decisions, and whether various proposed solutions fit the data. They find that randomized and (somewhat) controlled experiments occur more naturally there, because NGOs, in particular, will often implement new ideas in a piecemeal fashion, establishing programs in some randomly-chosen villages but not others, and allowing for the observation of the effects of the programs. Along the way, they use anecdotal evidence to punctuate, but never override, the broader evidence of the empirical data. The stated purpose of the book is to treat the poorest people on earth like real people, who make decisions about how to spend their limited resources in ingenious and creative, but altogether human, ways.

The book approaches the broader subject according to various specific problems, such as nutrition, education, access to capital, or political environment (to name a few). Along the way, they summarize various opposing views of the plight of the extreme poor in various countries, and try to examine the empirical data available to determine which views are more supported by the studies shown. The writing is generally clear and accessible, with very little in the way of jargon or pointy-headed econ-speak. They don't really come down, overall, on one side or another (between rich world top-down intervention, on one hand, to a more market-based approach on the other), but explore different areas in which a particular approach might work to achieve some ends, but not others. There were many valuable insights to be gained, and lot ot be learned abut the true lives of the poorest among us.

The one criticism i had for the book was an oversight that I felt manifested in a few different areas, but particularly in the later chapters on microcredit and entrepreneurship. The authors made some excellent points about the nature of most "entrepreneurs" in the poorest areas (who take up new businesses out of necessity and rarely grow them into anything lasting), as well as the highly risk-averse nature of microcredit and its limited penetration among the poor. However, they usually cited data that covered periods of three years or less- sometimes, a change would be instituted (in, say, access to cheaper credit) and they would look a the relatively small uptake from the poor over 18 months, and conclude that the impact wasn't as advertised. But of course, it takes time for cultural practices and comfort levels to change, and some of the habits and practices that exist across different countries and continents among the poor are not going to simply evaporate overnight due to a change in policies or capital availability. So it would be a mistake to abandon some ideas simply because they don't have a large measurable impact immediately. Overall, however, I felt that the insights to be gleaned from this book are well worth the time to read it, and at roughly 270 pages, it's a pretty quick and easy read.

In this book two upstart economists show how to break the debilitating stranglehold of ideology on academic economics: A laser focus on empirical understanding (how economies of the poor actually work), using scientific methods (in depth interviews, randomized controlled trials) long common in related disciplines. What's missing is global context.

For example, there is no way more than a tiny fraction of all the world's tiny businesses run by the world's poor could ever rise to the level of supporting middle class incomes. Each such successful business must be run by relatively few people commanding a relatively large amount of global resources, especially cheap energy and all the products and services and distribution systems enabled by cheap energy. Energy from the most useful source, oil, is maxing out right now, collapsing global economic growth, with coal and gas not far behind, while realists expect renewables to replace only a fraction of the coming decline in fossil fuels.

So it doesn't matter how clever we are at helping those millions of tiny businesses, few will succeed because neither the markets nor the supplies will be there. To overcome the current limits-to-growth without major economic contraction, we'd need very rapid development (over 2 to 3 decades) of the technology and infrastructure for massive amounts of cheap energy from a new source, such as nuclear fusion. Despite much hype of new technologies by a host of entrepreneurs, nothing like this is in sight, leaving incremental improvements to mitigate, but not stem the long fossil fuel descent ahead.

The good news: Somewhat better incomes for the poor are possible by not only reducing corruption, but also monopolies, tax evasion, and all the other ways that channel most of the profits to a few owners and executives. Too bad that Banerjee and Duflo only address corruption, and even that in only a fragmentary way. The bad news: Even the world's most productive economies, such as North America, Europe, and China are failing on this score, with radical increases in economic inequality over the last two generations.

Reality check: Even though global population growth is now slowing, if the long term goal is at least a very modest middle class life style for everyone on the planet, it is likely that global population will have to shrink to something like the 1 to 2 billion people who are currently somewhat middle class. Of course a utopian could cite the fact that the global population could be cut in half over 40 years if women on the average were to have only one child, with that child born in her mid thirties. Now a dystopian ... well, you fill in the blank.

So Banerjee and Duflo are to be commended for actually investigating how the world's poor deal with hunger, health, family size, education, work, risk, etc. Yet their work needs a sequel that puts it in a limits-to-growth global context. Part of the problem undoubtedly stems from the focus of mainstream economics on an absurdly narrow micro-economic view of the world, with a superficial and distorted view of macro-economics. Only a few economists, like Charles Hall, understand that cheap energy (and associated technology) has always been the driver of economic growth, going back to our hunter-gather days, where energy came to us mostly from eating scattered plants and animals.

Today the poor are poor because very little of that cheap energy is serving them, most of it goes into serving the rich because they control it in one way or another. Fundamentally this is an issue of political economy. The bad news is that changing a political economy from within often involves prolonged struggle, including violence. The good news is the work of Banerjee and Duflo suggests that well researched interventions from respected forces on the outside can make significant improvements by a series of carefully chosen low cost tweaks to the system. This is of course exactly what one expects from the complexity of real world economies as opposed to the simplistic and misleading models promoted by most economists.