Poor Economics: A radical rethinking of the way to fight global poverty

By: Abhijit Banerjee and Esther Duflo

This is one of the best books I’ve read on addressing global poverty. And I’ve read a LOT of books on this topic. It summarizes a massive amount of primary in-the-field research and has lots of interesting finds which will surely challenge some of your assumptions on effective poverty programs. The authors founded Abdul Latif Jameel Poverty Action Lab in 2003. Also, there is a book website.

What works; not what you think should work

I was impressed with the authors’ focus on “what actually works” based on empirically validated experiments and data. This is very refreshing in a world where so many people approach poverty with pre-determined viewpoints. I particularly like how they compare, contrast and critique the two primary international development perspectives of “supply wallahs” (Jeff Sachs & co) and the “demand wallahs” (Bill Easterly & co). The authors (both economists) seek to test whether there are specific poverty traps (Sachs’ concept which Easterly contests) in specific situations. Their conclusion — sometimes there are and other times there aren’t. It just depends on the specific situation.

Similarly they critique the pessimism of both the political left and the right who (for different reasons — colonialism or unfortunate culture) think that political institutions in these countries must change first and they won’t. They look for pragmatic steps forward in both good and bad political regimes.

Progress generally comes incrementally and at the margins

They are not idealists. The authors are realists who believe that improvement comes incrementally at the margins. It is all about the small stuff which adds up. Much of what works isn’t “sexy” and therefore isn’t easy to raise donor money for. Some of the successful approaches they’ve discovered are counter-intuitive at first and many are far from perfect. But they are committed to taking a scientific approach and to judge things by their results and to learn as they go.

There are far too many excellent facts in this book to cover in a short review. So, I will call out a few as illustrative and recommend that you read the book for the full benefit.

Focus on testing specific interventions (with randomized controlled trials)

“This book will not tell you whether aid is good or bad, but it will say whether particular instances of aid did some good or not.” One of the big issues with aid is, how do we know what interventions are effective? or more effective than others?

Read Part II of book review >