The Gospel according to Banerjee and Duflo*

This book review has subsequently been published in Development Southern Africa – see here

In their latest book, Poor Economics, Esther Duflo and Abhijit Banerjee present a highly-readable overview of the problems facing the world’s poor, as well as the most effective ways of overcoming those problems. The book covers the usual suspects of poverty research (health, education, nutrition, family-size, and financial access), and provides an overview of the findings from Randomized Control Trials. It reads as a nontechnical summary of their research over the last two decades and is completely free of economic jargon and theoretical grand-standing, making the book accessible to non-economists.

Those more familiar with RCT research will find the countless stories and anecdotes enlightening and informative. By painting a nuanced picture of the lives and choices of the poor, we are better able to understand the sometimes elusive logic that drives households, families and individuals to make the choices they do.

Yet it must be said that although the book is filled with colourful vignettes and moving anecdotes, the authors do not base their recommendations on a few personal encounters – as is so often the case in qualitative research. Rather, they use the anecdotes as emotionally-pleasing poster-boys for the less palatable RCT’s that litter the end-notes of every chapter and convince the reader that this is all based on highly legitimate stuff.

One of the lasting motifs of the book is the humanization of the poor. By placing their evidence in the wider sociological context that poor people inhabit, we begin to see that while the world of the poor is vastly different from that of our own, the contradictions and complexities inherent in all human behaviour are no less prevalent among the poor.

Another notable feature of the book is the companion website (www.pooreconomics.com). The site provides downloadable data for every chapter of the book, as well as data-visualisations and extensive references and research links. There is an entire section devoted to ‘Teaching the book’ which provides lecture notes, problem-sets, podcasts and assignments for every chapter of the book.  Keeping in step with the pragmatic ethos of the book, the website’s ‘What you can do’ section has links to a number of organisations involved in various projects around the world.

In their concluding chapter, the authors highlight ‘five key lessons’ which emerge from their research. The classification is both interesting and informative:

1)      Information deficiency – the poor often lack information, such as the benefits of immunization and early education, or the higher HIV prevalence among older men.

2)      Lack of access – they lack access to financial products such as savings and retirement accounts, as well as medically enhanced products like chlorinated water, iodized salt, and fortified cereals – all of which could substantially improve their lives.

3)      Missing Markets – Although there are success stories of markets emerging to meet the needs of the poor (microcredit for one), many times the conditions for a market to emerge on its own are simply not there. This deprives the poor of many services that would enhance their lives, especially health insurance and no-frills savings accounts.

4)      The three I’s: Rather than predatory elites, the Ideology, Ignorance, and Inertia of experts, aid-workers and local policy makers often explain why policies fail and why aid does not have the desired effect. Rather than continually pointing to abstract conspiracy theories that are difficult to prove, one should focus on the errors we know we are making.

5)      Incorrect expectations – the poor often do not know what they are entitled to from local government, as the authors conclude; ‘politicians whom no one expects to perform have no incentive to try improving people’s lives’. Furthermore, low expectations of their own capabilities, as well as their children’s educational capabilities, become self-fulfilling prophecies.

Throughout the book the authors highlight what solutions have worked in the past and why. They make numerous thoughtful proposals about the way forward, but their most valuable contribution is their pragmatism in tackling the global problem of poverty.  Although there are institutional deficiencies in many developing countries, these do not negate the possibility of improving governance and policy, they argue. Indeed, their research shows that improvements can be made in spite of these institutional deficits. Thoughtful policies that nudge people in the right direction can have large impacts; “We may not have much to say about macroeconomic policies or institutional reform, but don’t let the modesty of the enterprise fool you: Small changes can have big effects”.

After removing the straight-jacket of academic formality, Banerjee and Duflo provide a flowing and detailed portrait of the lives of poor people. They are content to confine their world-class research methods and award-winning techniques to the end-notes of the book and instead give centre stage to the problem at hand: global poverty. This combination of technical rigour, readability and pragmatism is likely to make this book a classic in development economics literature. By moving beyond platitudes and ideological dogmas, they show us that a small group of thoughtful, committed researchers can change the way we look at poverty, and hopefully, the way to eradicate it.

* Book review: ‘Poor Economics

A Radical Rethinking of the Way to Fight Global Poverty’

By: Abhijit V. Banerjee and Esther Duflo

-Nicholas Spaull