Poor Economics – a rich new book from Abhijit Banerjee and Esther Duflo

Abhijit_BanerjeeJust finished Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, Duflothe latest Big Book on development. Like all good books, it has its own website, full of background papers etc. It’s from the doyennes of the new focus on measurement in general and randomized control trials (RCTs) in particular, Abhijit Banerjee and Esther Duflo from the Abdul Latif Jameel Poverty Action Lab (J-PAL) at MIT. Given that provenance, I was half-expecting a fairly reductionist form of ‘if it can’t be measured, forget it’ thinking, but like many gurus, they are much more intelligent and nuanced than their followers. Their overall approach is Bottom of the Pyramid meets Freakonomics – ‘leave the large questions aside and focus on the lives and choices of poor people’ and why interventions by governments or NGOs do/don’t work. They draw heavily on J-PAL’s 240 experiments in forty countries. It’s all very beguiling, with RCTs presented as the ‘cleanest way to answer questions’. They are unashamedly, indeed belligerently, micro, small-is-beautiful technocrats, with little time for the ‘big questions and grand theories’ of Jeff Sachs or Bill Easterly (who both get a polite kicking, characterized respectively as ‘supply wallah’ and ‘demand wallah’). Instead, Banerjee and Duflo prefer the benign paternalism of the ‘nudge’ approach – providing information, changing default options, introducing incentives to encourage (but not coerce) poor people to do what we think is best for them. As they point out ‘Aren’t we, those who live in the rich world, the constant beneficiaries of paternalism now so thoroughly embedded into the system (e.g. chlorinated water, routine vaccinations) that we hardly notice it?’ Chapters cover themes (hunger, population, health, education) and institutions (risk management, microfinance, entrepreneurialism, politics v policies). Each asks heretical questions (why don’t poor people do what’s best for them – spend more on food, and less on treats? Why do they insist on expensive and useless injections from quack doctors, rather than cheaper and more effective prevention?) and is crammed with fascinating research and surprising conclusions (the most cost effective ways to delay teenage pregnancy is to give out free school uniforms – page 115 for the explanation). The authors identify five key lessons in their final chapter (‘In Place of Sweeping Conclusions’….): “1. The poor often lack critical pieces of information and believe things that are not true (e.g. on immunization, or benefits of education) 2. The poor bear responsibility for too many aspects of their lives. The richer you are, the more the ‘right’ decisions are made for you. [hence the need for nudges] 3. There are good reasons that some markets are missing for the poor, or that the poor face unfavourable prices in them….in some cases technological or institutional innovation may allow a market to develop where it was missing, [but in others] governments should step in. 4. Poor countries are not doomed to failure because they are poor, or because they have had an unfortunate history….. failures have less to do with some grand conspiracy of the elites to maintain their hold on the economy and more to do with some avoidable flaw in the detailed  design of policies and the ubiquitous three Is: ignorance, ideology and inertia…. It is possible to improve governance and policy without changing the existing social and political structures 5. Expectations about what people are able or unable to do all too often end up turning into self-fulfilling prophecies. Changing expections is not easy, but it is not impossible” Beyond the specifics, I found myself wrestling with the underlying narrative – how do Banerjee and Duflo actually see poor people? On one hand, they are genuinely and unpaternalistically fascinated by them – the book is studded with detailed conversations with poor people as the authors try and uncover the logic behind their choices and predicaments. Poor people are definitely not ‘the other’, but just like the rest of us, albeit living lives of greater risk and effort. The approach seems to be a) talk to poor people b) on the basis of these conversations and observations, come up with some hypotheses c) then design an RCT or other data-driven exercise to test them. Discard the bad ones, and keep the ones that fit the data. e) Then speculate on ‘likely explanations’ for the relationships you have established What they don’t seem to do (rather than that last stage) is go back and talk to the poor people again to check if their explanations are the right ones – ‘the poor’ as the authors call them, seem to be important as informants, but not the final arbiter – instead, ultimate truth lies in what they call ‘the verdict of the data’. So for example, when they discuss the finding in Peru that ‘when former squatters were handed out property rights, fertility declined, but only if the woman’s name was included on the title’ they speculate on the reasons for this (women acquiring bargaining power) instead of going to ask some women. I would have liked more of a ‘Voices of the Poor’ exercise to reality check their conclusions and discussions with poor people themselves, but at times (e.g. in the chapter on health), ‘the poor’ started to resemble little more than lab rats. A common critique of this kind of work is that it ignores issues of power and politics, but at least for this book, that isn’t really fair. The authors are well aware of issues of power in terms of patriarchy or caste. But they are incrementalist and disagree with the structural focus of the ‘political economy’ approach or sweeping calls for revolution – they argue that positive changes can be achieved with less pain, often on a massive scale, even in hostile political environments, simply by minor tweaks to policies and institutions. And they aren’t scared to follow the logic of their own arguments, even when it takes them in some surprising directions, not least concluding that government intervention is widely needed, that giving out stuff for free and social safety nets are often a good idea, that poor people would usually prefer a government job to the hassle and risk of being an entrepreneur, or that industrial policy can make a lot of sense. Their treatment of microfinance, despite it’s close association with RCTs, echoes many of the misgivings in the recent discussion on this blog. So it’s hard to pigeon-hole the work as particularly right or left wing. But is it a Big Book? Yes in terms of the approach – I think it will leave a lasting impact on its readers in showing the merits of a bottom-up, evidence-driven approach. But not, I think, in terms of content – lots of interesting, surprising facts and analyses, but no one big message. Given their suspicion of grand narratives, I’m sure the authors would be quite happy with that. And here (again) is Esther Duflo, queen of the randomistas and all-round rising star, strutting her stuff on TED ]]>

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5 Responses to “Poor Economics – a rich new book from Abhijit Banerjee and Esther Duflo”
  1. Nice summary Duncan. On the issue of Poor Economics missing out rigorous qualitative research with the poor to understand ‘why’ their quantitative findings occur, Open the Echo Chamber (http://www.edwardrcarr.com/opentheechochamber/?p=327) goes further, arguing that there is a lack of engagement (or apparent lack of engagement from what they write) of previous qualitative research in these fields that would have been illuminating even before they started their own surveys or RCTs. Pas a Pas blog (http://pasapasblog.wordpress.com)
    suggests that we need an Innovations for Poverty Action that really includes the rigorous qualitative aspect of research too. I’d love to hear more from people involved about how much this is done in practice – perhaps donor constraints etc are an issue, or the perceived need to place more faith in just the quantitative data?
    I haven’t quite finished Poor Economics myself yet, but the aspect I liked was the detailed interrogation of the poverty traps idea for different themes, rather than just one overall trap. For example, the idea Banerjee and Duflo propose that the poor create in their heads a poverty trap for education by only thinking that the later years of education have a pay-off (this leads to their first conclusion that you mention).

  2. Michael

    If Duflo and Bannerjee’s opinion is that ignorance prevents poor people from improving their lives, then why would they seek to destroy the value of their data by confounding it with the opinions of the ignorant?

  3. @Michael – Because Banerjee and Duflo want to understand why poor people hold particular opinions or beliefs, and qualitative research (including talking to the poor) is an important tool in helping answer this question of ‘why’.

  4. Rasna Warah

    Fascinating talk by Duflo. I live in Kenya’s coastline, where malaria is endemic and where treated bed nets are distributed for free at government clinics. However, many people I have spoken to say that while they use them for their children, they do not use them as adults as the nets are “suffocating”. (I too didn’t use them till I got a four-poster bed) The very simple solution would be to design nets that could fit around a frame around the bed. (I wouldn’t have known this if I hadn’t asked the question.)
    Regarding aid, I recently edited and published a book called Missionaries, Mercenaries and Misfits (available on Amazon) that shows that it is not the amount of aid that matters, nor the quality. The problem is that most aid ends up paying for administrative costs of donors or gets siphoned off by corrupt officials in government, in the UN or even in NGOs. In fact, aid is an industry that serves donors more than beneficiaries. And it can also be a form of neo-colonialism that perpetuates poverty. Aid also de-industrialises nations as pointed out by Erik Reinhert in his brilliant book How Rich Countries Got Rich and Why Poor Countries Stay Poor.

  5. Fouad Kamel

    Reading the latest Oxfam “killing”report 44 to 28 Vs 50% that seems to exclude Wars
    And Listening to The PSE Paris Conference by Duflo ….
    I am really at a loss trying to find out the benefits of each for my little torn and beautiful
    Country Lebanon recently under scrutiny due to the Syrian refugy problem that Oxfam
    has adressed With AUB ( my Alma mater university)
    The current divergence between two power of thoughts seems reminiscent of
    Metaphysics and Analytical philosophy
    Poverty is poverty is poverty
    And it needs unity of action and strategies
    But for sure thank you all for the tremendous effort
    Fouad Y Kamel