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104 of 107 people found the following review helpful
5.0 out of 5 stars Refreshing and Powerful Vision of Anti-Poverty Policy
The authors identify three major approaches to dealing with world poverty, suggest that whatever their virtues and faults, there is a very piecemeal and pragmatic approach through which significant gains can be made without addressing the systemic obstacles identified by the three approaches. Their analysis is brilliant, focused, rooted in first-rate data sets, yet rich...
Published on July 13, 2011 by Herbert Gintis

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120 of 155 people found the following review helpful
2.0 out of 5 stars Interesting but flawed
The authors offer a classification of aid philosophies: _supply wallahs_ and _demand wallahs_. The _supply wallahs_ believe that the poverty is caused by the lack of the goods that are needed to escape poverty. What are these goods? The authors offer the following list: food, health, education, contraception, insurance, banks and entrepreneurship. They devote one chapter...
Published on May 8, 2011 by Tektrader


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104 of 107 people found the following review helpful
5.0 out of 5 stars Refreshing and Powerful Vision of Anti-Poverty Policy, July 13, 2011
By 
Herbert Gintis (Northampton, MA USA) - See all my reviews
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This review is from: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Hardcover)
The authors identify three major approaches to dealing with world poverty, suggest that whatever their virtues and faults, there is a very piecemeal and pragmatic approach through which significant gains can be made without addressing the systemic obstacles identified by the three approaches. Their analysis is brilliant, focused, rooted in first-rate data sets, yet rich in social detail and anecdotal vignettes. I believe there are probably right, and their approach deserves to be widely studied an evaluated by policy makers in the advanced and developing countries.

The dominant school of thought is probably the supply-side theory, most visibly represented by Jeffrey Sachs (the authors call him a "supply wallah"). According to this theory, the poor are poor because they lack money and resources, and there is a "poverty trap" such that investment in productive technologies must be very large in order to have a positive and sustainable effect. Because poor individuals, and even poor countries, lack the capacity to finance such investments, they are trapped in a low-level economic equilibrium. For this reason, Sachs and the supply theorists advise that the rich countries transfer a large lump-sum amount of money to a poor country, so it can get over the poverty-trap hump.

A second salient school of thought is the demand-side theory, represented by William Easterly and many others. Demand-siders (the authors call them "demand wallahs") believes that the poor are poor because they do not want to undertake what would be necessary to move out of poverty and there is no poverty trap. Thus, if you throw money and resources to the poor, they consume it immediately rather than using it for long-term betterment.

The third school of thought is the corruption school, represented by Acemoglu and Robinson, as expounded in the book Why Nations Fail. According to this theory, countries remain poor because their governments are predatory, exploiting the citizenry by refusing to make investments in productive infrastructure, by direction all profits to cronies, and by permitting rampant corruption that renders creative entrepreneurship unprofitable. According to this school, to which I admit to being very favorable, the supply wallahs are wrong because the resources throw into the system will be appropriate by the rich and powerful, and the demand wallahs are wrong because the poor are actively maintained by the oligarchy in their position of servitude.

The authors are very insightful and balanced in presenting the views of these three schools and the evidence that supports these various positions. They also clearly explain their mutual critiques. For instance, the supply wallahs claim that states are predatory and corruption is rampant only because the country is so poor, and the demand wallahs claim that when the people want to move out of poverty, they will reform their governments. I find these defenses of supply and demand wallahs rather tendentious, leaving the corruptions school as the overall most plausible school.

I think it is fair to say that Banerjee and Duflo have little sympathy for demand and supply wallahs, but considerable respect for the corruption theory. Their own position is that there are virtually always ways to productively intervene to pull a significant fraction of people out of poverty. The authors, who have collected huge amounts of data and interviewed many poor people from around the world, make the following argument.

Most important, the poor in a poor country have about the same array of preferences and capacities as that of the human population as a whole, and humans are substantively rational in making decisions that affect their lives. However, the poor have a lot fewer resources than the well-off, they lack information and skills provided to the well-off, and lack access to such public goods as clean water and consumables subject to food and drug regulations.

The poor are therefore extremely heterogeneous. Microfinance organizations like the Grameen Bank therefore provide a general path to affluences, simply because only a fraction of the population has the will and ability to be successful entrepreneurs. On the other hand, entrepreneurs often fail several times before finally becoming successful, so the authors advise an expanded microfinance industry that is more tolerant of the sorts of behaviors that may involve short-term losses, but lead to long-run successes. The authors conclude that we must consider microfinance policies as extremely successful and worthy of following, even though it is not panacea for the abolition of poverty.

Because the poor lack access to social services freely available to the non-poor, the authors advocate such measures as providing clean water to poor villages and adding nutrients, such as iron, to staple foods. This, they argue, is not charity but simply the extension to poor of services already supplied to the rest of society.

Concerning education, the authors believe that poor parents are usually very eager to have their children educated, although they may lack the means of enrolling their children in schools or providing for their transportation to and from school. However, too often the content of schooling is determined by what is good for the more affluent classes, so poor children are led voluntarily to quit school. The authors advise that the content of education take into account the preferences and culture of the target population.

I cannot do justice to the beauty and intricacy of the argument developed in this book. The authors' main point is that we must look closely at the details of the lives of the poor in order to develop policies to help people to pull themselves out of poverty. This is neither demand or supply wallah-ism, and as they repeatedly stress, real progress can be made even in a society whose government provides a poor environment for economic development.
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162 of 174 people found the following review helpful
5.0 out of 5 stars A Remarkably Informative Book., April 15, 2011
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This review is from: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Hardcover)
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.
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16 of 17 people found the following review helpful
4.0 out of 5 stars radical indeed, May 26, 2011
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This review is from: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Hardcover)
Development economics is a comparatively new field of study and it has changed considerably in its roughly fifty years of existence. "Poor Economics" represents a significant change, namely a move away from the sweeping generalizations of scholars such as Jeffrey Sachs and William Easterly, and a realization that we actually understand very little in development economics. The proof of our lack of understanding can be found in our lack of success in actually bringing about wealth in the developing world (either that or a hidden lack of intent).
In any case, Banerjee and Duflo start with the premise that, given the inaccuracy of past models, the best we can do is start on a micro level and see what works. They do this through randomized control trials (RCTs), in which groups are subjected to different treatments, such as subsidies for food, education campaigns, or reorganization of village committees. The groups are randomized, with some groups receiving the treatment (experiment group) and others not receiving anything (control group).
Using the results from numerous RCTs around the world, as well as hundreds of other experiments, surveys, case studies and more, "Poor Economics" is incredibly well researched. One thing the authors don't justify, however, is whether RCTs are good predictors of real life choices. For example, how similar are the treatments used in RCTs to the actual policies implemented in real life?
I won't summarize the contents of the book. But I can say that the conclusions within are indeed "radical" in the sense that they take very little for granted. They are based off of micro level data and offer very interesting insight into the incentives that shape the lives of the poor.
The policy recommendations at the end of the book are incontrovertible, but I don't know who realistic they may be in the face of macro-level constraints such as world trade policies that favor developed countries. I have my doubts as to how effective even the best policies and the best governments can have on the development of countries under the economic hegemony of the US and Europe. I wished the authors had addressed this.
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26 of 31 people found the following review helpful
5.0 out of 5 stars The tools to make change, April 27, 2011
This review is from: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Hardcover)
Poor Economics is an excellent survey of empirical data on the world's most impoverished areas. The amount of work put into the studies (the authors have extensive work in their own control studies) is astounding, and well worth a look for anyone interested in the data.

The general picture one hopes when reading a book like this is a "silver bullet" that will solve the problems of every kind of poor people around the world. As the authors are quite upfront in saying, this is not realistic. Economies are complex and work in strange ways. Anyone familiar with systems dynamics will recognize the traps that "silver bullet" theories get into: one quick fix leads to some improvement, but causes side effects that might make matters worse in the long run.

This book examines how the predominant theories on poverty have played out. They cite Jeffrey Sachs' The End of Poverty, in which the idea is that aid will bring an end to a "poverty trap". And then regard William Easterly's The White Man's Burden, in which the idea is that aid tends to make people dependent on it and thus makes them less capable. With these plausible arguments as a backdrop, they delve into the examples and case studies to identify instances where one or both or neither are true.

Ultimately, the argument that is made is for a comprehensive understanding of the way poverty works in order to apply proper levels and composition of aid. Though, this isn't a grand theoretical survey of the way economies and systems in general function. I would recommend something like Juggernaut: Why the System Crushes the Only People Who Can Save It for that. It is still a penetrating survey of poverty and offers the reader the tools to do something about it.
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120 of 155 people found the following review helpful
2.0 out of 5 stars Interesting but flawed, May 8, 2011
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The authors offer a classification of aid philosophies: _supply wallahs_ and _demand wallahs_. The _supply wallahs_ believe that the poverty is caused by the lack of the goods that are needed to escape poverty. What are these goods? The authors offer the following list: food, health, education, contraception, insurance, banks and entrepreneurship. They devote one chapter to each of these topics. The _demand wallahs_ point to the long string of failed aid projects and claim that what is missing is a demand for these products. For reasons known only to those making the choices. _Demand wallahs_ are skeptical of any top down intervention.

Jeff Sachs is the best known _supply wallahs_. He has argued that small cheap interventions like free mosquito nets can have huge benefits. William Easterly is the best known _demand wallah_. He is a trenchant critic of top down interventions. The book criticizes both of these philosophies. They chide the _supply wallahs_ for not scientifically evaluating potential aid strategies. The author's evaluation tool of choice is the _Randomized Control Trial_ (RCT) (akin to the technique used to evaluate new drugs). They disagree with the _demand wallahs_ by pointing to successful aid strategies (success as measured by RCTs). The authors take the stance: We have no overarching theory of what aid strategy is likely to work. But we will evaluate individual strategies rigorously. And recommend whatever works.

The chapters all follow a pattern: First the authors present a puzzle (e.g. why don't the poor eat more when they earn more?). Then they (half-heartedly) try to explain the behavior by giving us more insight into the lives of the poor. These sections are the best part of each chapter. But the authors say that they are still unable to explain the seemingly irrational behavior. Now, they throw up their hands and appeal to something called _behavioral economics_. Humans are irrational and they need brilliant economists to design aid strategies that take their irrationality into account. And "nudge" them to do the "right" thing. We are told that citizens of rich countries have benevolent "nudgers". But who "nudged" Europe and America from poverty to wealth a few hundred years ago? That question is not tackled by the authors.

While RCTs sound very scientific, no mention is made of the problem of "data mining". i.e. the problem of finding "statistically significant" results simply by trying out a large number of strategies. Spurious results will not work "out of sample". How have the rigorously vetted strategies done when used "out of sample"? We are not told. The comparison to drug testing raises other questions: There are many critics who claim that that the FDA generates more costs than the benefits. RCTs only tell us if a drug works for the average person. But is that the right question? Since there is so much variation amongst people, might not some people benefit from a drug? Similarly for the aid strategy. A more general concern about the book is the astonishing degree of confidence that a "solution" to poverty exists. And that "solution" is amenable to the methods of science. Authors are no doubt familiar with Hayek's criticism of _scientism_. I wonder how they would react to it.

This is an ambitious book. The best parts of the book are the descriptions of the lives of the poor. For example, the description of the mechanics of micro credit is very interesting. But the book fails to tackle more important questions: What are the limitations of RCTs? What is the role of religion and culture? The technocratic and paternalistic tone of book jars. I leave the reader with the following excerpt. This is a rare reference to religion I was able to find in the book: "When the poor actually know what they want -- marrying their daughter to someone from the right caste or religion, to take an *unfortunate* but important example -- they are not at all easy to bribe".
After reading this sentence, I am forced to conclude that all the author's talk of respect for the choices of the poor is mere talk.
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11 of 13 people found the following review helpful
5.0 out of 5 stars Taking Economics Out of the Ivory Tower and To the Village, June 2, 2011
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This review is from: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Hardcover)
It used to be that anthropologists would go down to villages and mingle with the people while economists would sit in their armchairs and design grand theories. Now it is the other way around. Anthropology has become an ivory tower discipline, with less and less emphasis on fieldwork and an impulse to produce ever more complex intellectual systems. Anthropologists are actively involved in campus politics, along with other cultural studies and postmodern theorists, and totally disengaged from real policy decisions. Meanwhile, economists are going to the field, not only to observe and measure, but also to make things happen. Poor Economics explores the new and exciting frontiers of development economics, by two young scholars who have greatly contributed to taking the discipline out of the ivory tower and to the village.

In doing so, they are following a long tradition of economists interested in development issues. Their elders, from James Meade to Gunnar Myrdal, used to go and see things for themselves before advising governments of newly independent countries or managers of international organizations on the best way to kick-start development. There was a time when the anthropologist would take the economist to the village. Multidisciplinary projects would gather economists along with anthropologists and other social scientists to study a particular location from various angles. Clifford Geertz, one of the towering figures of modern anthropology, participated in such joint initiatives, and the perspective from his fellow economists enriched his earlier writings--before he turned to a more interpretive approach of cultures and launched attacks against what he labeled "economism".

The difference between then and now is that the economist no longer needs to partner with the anthropologist in order to collect data and frame her observations in the village. She has two new allies she didn't have at the time: the NGO activist and the computer. The first helps her design development programs and collect the data to find out what works, what doesn't and why. The second will allow her to analyze that data with scientific rigor. She will be able to test hypotheses and to ask in particular what would have happened in the absence of the program or to measure how much difference it made. The result has been a revolution in development economics, identified with field experiments and randomized control trials--hence the label sometimes used to designate its promoters, the `randomistas'.

Has the economist kicked the anthropologist out of the village? Maybe this is simply a matter of labeling. Anthropologists could come up with their own random field experiments, with different research questions that would certainly yield different answers. They could bring a different sensitivity to the field: a focus on culture as a system of symbols, an understanding of power dynamics, and a questioning of the observer's role--what social scientists call "reflexivity", that remains utterly lacking in most economists' work. Indeed, political scientists are beginning to follow the footsteps of the randomistas and apply the same methods, investigating issues such as consumption of public goods or corruption with innovative research designs. Nothing should prevent anthropologists to do the same, except perhaps the "not invented here" syndrome and an aversion to numbers shared by many adepts of "qualitative" approaches.

One could even argue whether the kind of research conducted by the two authors of Poor Economics is really economics. It just happens that they work in an economics department. But they do their own stuff, undaunted by academic categories and intellectual boundaries. When they find something interesting in anthropology, they pick it, as when Esther Duflo uses the work of French anthropologist Claude Meillassoux, who showed that yams, a "male" crop in Côte d'Ivoire, can only be sold to pay for school fees or medical care for the family, but not to buy liquor or some tobacco. The authors also use the latest results in brain science--although this is not the part of the book that I find the most convincing. They have publications in medical journals, not just economics reviews. Whereas anthropologists are busy patrolling the borders of their discipline, denouncing the encroachment of "economism", the economists are busy pushing the envelope of their discipline, claiming new terrain along the way. Their "can-do" attitude puts them at the heart of policy debates, and the impact of their evaluations is now heavily felt in poverty alleviation programs around the world.

Randomistas have sometimes been accused of "soft paternalism", a critique they share with other promoters of "nudges" who use incentives to improve individual decisions about health, wealth, and happiness. Banerjee and Duflo have a ready answer to that critique: "It is easy, too easy, to sermonize about the dangers of paternalism and the need to take responsibility for our own lives, from the comfort of our couch in our safe and sanitary home. Aren't we, those who live in the rich world, the constant beneficiaries of a paternalism now so thoroughly embedded into the system that we hardly notice it?" Here the field economist talks back to the armchair theorist and brings a sense of perspective to debates about poverty, without lapsing into moral posturing or ideological arguments.

"How can you work with corrupt governments and ruling oligarchies," goes another critique. Banerjee and Duflo can answer to that as well. Most of their work is conducted in democratic countries, such as India, Kenya, or Indonesia. They tend to partner with local NGOs and social activists, more than with state bureaucracies or international agencies. In addition, they show that innovative program designs and rigorous evaluations can help keep corruption and inefficiency at bay. Denouncing bad governance and labeling country leaders as crooks makes an armchair theorist feel good, but does not lead very far. For the authors, the important lesson is to take advantage of whatever slack there is: "Good policies (sometimes) happen in bad political environments. And, perhaps more important, bad policies (often) happen in quite good ones." To quote the Book of Revelation: "He that is righteous, let him be righteous still." Poor Economics is an invitation to be smart, not an empty jeremiad or a feel-good sermon.

I am sure that readers trained in anthropology could raise many other critiques and show the limitations in their economic colleagues' work. Indeed, they should be invited to pick up the gauntlet, and rise to the challenge. The important point is that they should do it from a grounded perspective--by going back to the village, the slum or the policy council, and try to make things happen as well.
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5 of 5 people found the following review helpful
4.0 out of 5 stars Embraces complexity, March 22, 2012
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This review is from: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Hardcover)
It's nice to be able to summarize a book's message in a catchy slogan. This is not one of those books. The lesson I learned from "Poor Economics" is that there is no 'pure philosophy' that will lead to the end of global poverty. The answers are complicated and need to be examined on a case by case basis. Most of the time when you ask, "will this work," the answer is "kind of."

I read this book about 2 months ago. I remember the subjects that were covered and some of the conclusions. At the same time, I am frustrated by how much I have forgotten. The authors' stubborn obsession with nuance makes it hard to remember everything. It's not an easy book to work into conversation. This book is much more intellectually rewarding than it is fun to read.
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4 of 4 people found the following review helpful
4.0 out of 5 stars Amazing introduction to how poor people actually live - Don't really agree with use of RCTs, August 31, 2013
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As a development professional (i.e. someone who is paid to help poor people in poor countries) I'm very happy to see how the experiences and theories of the authors meld with my own experiences of how poor people in developing countries conduct their lives and organize their livelihoods. As such, I'd say the book serves as an excellent introduction to the economic lives of the poor (although their is another book entitled exactly that, also excellent) and what type of development interventions are likely to work.

The authors advocate for a more measurable approach to development: conduct development projects like scientific experiments to see what work's and what doesn't. In the jargon, this is known as using Randomized Control Trials (RCTs). The authors are very reasonable and don't see RCT's as a cure to all ills, but a step on the path to making development projects a bit more effective. The book functions as an introduction to the use of RCTs in development projects

There are many objections to the effectiveness of RCTs. But the major one is this: In most scientific experiments, an experiment can be replicated by someone else doing the exact same thing and end up with the exact same result. This is called, in the jargon, external validity, and is necessary for science to be,well, science. Unfortunately, there is no guarantee of external validity in international development. There are simply too many unknown unknowns and uncontrollable variables that a successful development project in one place and time has no guarantee of working in another. So, if this makes any sense, RCTs are not very effective in improving aid effectiveness.

In my own experience, there are three practical problems with implementing RCTs: 1) You need to have very smart, well trained people involved from the beginning to ensure the construction of the experiment is valid. This is not always possible. 2) These things are very very expensive to do. 3) Development organizations that do the implementing of projects don't want their projects evaluated since they see it as a way to cut funding.

Insofar as RCTs can be used as an organizational learning tool, there are cheaper methods of M&E (monitoring and evaluation, the jargon again) that can accomplish just that.

All in all, a very good read. The book is obviously meant for a wide audience and is easy reading. As someone who knew alot about what was introduced, I still found it worthwhile to read.
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4 of 4 people found the following review helpful
4.0 out of 5 stars Serious Economics Poorly Presented, December 14, 2012
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I have no doubt that among economists this book merits all the praise it has received; I do NOT recommend it for the general reader, indeed, I do not recommend it at all unless it is assigned reading, in which case my recommendation is moot. The book is neither as radical as its title pretends, nor as detailed as I was hoping for--how, exactly, do the one billion poor spend their 99 US cents a day? I bought the book because I am thinking about how to persuade Sir Richard Branson that he should sponsor "The Virgin Truth" [one pager concept has been posted online]; go "all in" on all the Opens including Open Base Transceiver Station, Open Spectrum, Open Software, etcetera [topic of my most recent book], and give each of the five billion poor free cell phone access and free education "one cell call at a time" as conceptualized by the Earth Intelligence Network. For me, this book is a four and not light reading. All text, few charts, no lists, no comparatives, no visualization.

The authors take one really brilliant idea and then talk around it, and that is why they lose one star. The brilliant idea is that we really do need to understand at a micro level how the just under one billion extreme poor spend their 99 cents a day (the other four billion less poor live on $2 to $20 a day), and how they make their choices, choices that often reject tiny investments in prevention (chloriating their water, for example) with the result that they end of losing work and spending more on remediation after the fact. YES! I agree. They then proceed to answer, at best, 20% of the question.

The big take-away for me--I was absolutely delighted to see this message repeated throughout the book--was how a tiny bit of information can make a world of difference, both in the choice that an individual poor person makes, and in the eradication of corruption once detailed numbers are published about what *should* have reached each schoolhouse in any given district. In other words, and this is NOT the key point of the book, but rather my key point: without changing a single institution, without redirecting a single dollar, the simple implementation of an information transparency regime changes everything. Now THAT is a book I hope these two authors will write soon, and that book will probably join my 10% "Beyond 5 Stars." [I read in 98 categories, just one of them fiction, access all my reviews and their Amazon pages by category at Phi Beta Iota, here ae just two: Nature, Diet, Memetics, Design (206); Peace, Poverty, & Middle Class (253).

The authors being and end their book, which pulls together hundreds of micro-surveys across fifteen years into one volume, and therefore a solid five for economists, with three words, all starting with I: Ideology, Ignorance, and Inertia. My three words are Ignorance (the poor); Corruption (the intermediaries); and Noncholance (by the Donors, including all the Specialized Agencies of the United Nations (also intermediaries), not a single one of which gives a hoot about the Secretary General's efforts to orchestrate "Deliver As One."

The book is divided into two parts, Part I is Private Lives and Part II is Institutions. I confess to being disappointed by both parts, the first for lack of detail and the second for lack of specifics (related but not the same). I do value the details that I do extract, including, for example:

+ Poverty is not the same as hunger or starvation
+ Food is roughly 45-75% of all expenses, varying between rural and urban
+ Alcohol, tobacco, festivals including burials, and sugar are big items that do get bought
+ Food TASTE matters to the poor
+ Essentials, even at 99 cents a day, include a cell phone, TV, parabolic antenna, and even a DVD player
+ The indulgences, both big and small, are carefully thought through, not at all impetuous

- The lack of knowledge is CRITICAL -- about impact of education on earnings, chlorine on diarrhea, iron supplements, vitamins
- Unborn babies and the very young children are the center of gravity for life-long impact of aid if delivered

OF NOTE (45): According to one study, a child who grows up malaria free will earn 50% more per year, than one who does not, for life

- Traditional healers tends to be preferred by the poor to government doctors
- The doctors are generally abysmal -- down in the bottom quartile
- Doctors tend to under-diagnose and over-medicate
- Government regulated delivery is extremely poor -- rules written by bureaucrats out of touch with reality

+ Incentives do work -- a bag of beans for each immunization, a set of stainless steel plates for completing the series

- Kid drop out of school and too often are not learning anything from their rote schools
- In India 50% of the teachers are not in front of a class when they are supposed to be
- Huge waste in not having an early detection system for high performers

+ Re-engineering education recommended -- forget the years of schooling across all subjects, focus on the basis (reading, writing, arithmetic) and let kids learn at their own pace

- Too few population planning programs understand social norms or the mechanics of getting to women in their homes, out of sight, without their husbands, in order to place the tools and the knowledge in their hands

+ TV soap operas are a magnificent vehicle for changing social norms (e.g. encouraging smaller families, more child education), I myself am unaware of any global program to actively create such programs in the 183 languages that are still spoken by millions each. This strikes me as something that could and should also be delivered to free cell phones if the daily power sourcing can be solved.

+ Micro-delivery of anything via women is better. There is much more detail that could have been provided here.

Part II, although about Institutions, does continue to address the poor themselves.

- They bear 100% of the risk with no safety net -- weather, illness, anything can wipe them out
- They do not understand nor have a provider of weather or crop or health insurance

+ Their solution is to diversify their skill sets -- farm, bicycle taxi, other

+ Micro-finance is a wonderful innovation but its rigid rules drive many of the poor to the traditional money lenders who charge up to 5% a DAY

I am totally engrossed by the section on the various forms of lending available to the extreme poor, and the information implications. The cost of validating a loan to a very poor person is too high for traditional institutions -- but imagine if they have a cell phone they cannot live without, and it provides all the locational, pattern analysis, contacts, and earnings information needed, and well as a precise location when the time comes to send in the eunuchs to show them their "package" (this was the only humor the authors offered in 305 pages).

The authors discuss micro-saving as the next possible big thing among the one billion extreme poor, and they have me thinking about the role that a cell phone (with back up in the cloud) could play there. The cost of setting up traditional bank accounts is too high -- the cost of having a cloud banking system -- to include remittances that comply with all anti-terrorism laws and offer good pattern analysis -- is not too high.

The discussion of the disconnects between WHEN the poor have money, WHAT they buy, and the TIMING, is most interesting. This is what an intelligence professional calls "requirements definition," and it is clear through the book that most aid programs have not really gotten down to the level of detail that the authors have achieved -- but neither do the authors come out with a Banks & Textor type handbook, another worthy project that could cut across industry lines. My own thinking on a Local to Global Range of Needs Table in the cloud is more on target.

The section on entrepreneurship is very interesting, and has me thinking about how we might combine a free cell phone, a village information cloud, a commitment to Open Source Everything (e.g. show them how to create the Open Farm set of technologies), and a commitment to train ONE villager in every micro-task that a village needs, across agriculture, energy, water, health, etcetera. There is so much more we can all do and frankly I consider the Specialized Agencies and their inattentive donors a major part of the problem -- no one is holding these people accountable for failure, just as we are not holding our governments accountable for spending 1.3 trillion a year on war when I can eradicate the ten high level threats to humanity for one third that cost if made available each year for ten years. [See Medard Gabel's graphic, am posting it above with the cover of the book.]

The discussion of institutions really does lack specificity, and I can only assume the authors are trying very hard not to offend. Me, I like to throw grenades in the door and talk to the survivors, if any, or start fresh with people that are not totally trapped in the old paradigms. It is clear that all of the aid institutions are both ignorant and corrupt, and I specifically include the Red Cross, which is now notorious for collecting hundreds of millions for Katrina or Haiti, and then delivering less than 20% -- or in Bono's case, 1% at best.

Clear to me is that we need to change the rules of the donation game. I would like to see total transparency required of all aid organizations, in real time, day after day, and any Specialized Agency that fails to meet that transparency requirement, and fails to be certified by the Secretary General for being in harmony with the Millenium and other High-Level goals, starved to death. Cut them off and let them die. The authors provide a couple of very exciting examples from Uganda, of corruption before information transparency, and accountability afterward, and I am absolutely certain of two things [which I briefed to a UNICEF Conference, look for Steele Open Everything UNICEF]:

01. 80% of the rich do not donate to charity now, we can get them to donate one thing to one family at a time if we create a global online Local to Global Range of Needs Table that is fed from the bottom up, that allows individuals to come together (one reports the spare part need for a Rumanian water pump from the 1950's, a Rumanian engineer offers to build the part, a German pays for FedEx, etc]

02. If we focus on bottom up requirements and global transparency of needs, donations, and efficacy by individual and organization, we will stop wasting 50% or more of the existing funds channeled via institutions both non-profit (hah hah) and governmental.

In other words, we are long over-due for an information revolution in the global economy, starting with the one billion poorest.

The authors conclude with five points, I won't spoil their ending, but will observe that all five points are points that can be implemented with an information revolution.

The notes are superb, there is no bibliography and that is another reason for four stars. While I read the notes -- on 6 star books I read the notes first -- I consider a professional bibliography an absolutely essential feature for any book, shame on all concerned for not providing one for this book.

Now here are ten links for other books, I have written a summary review of each at Amazon with a mirror accessible by category at Phi Beta Iota the Public Intelligence Blog.

Down and Dirty Real Life of the Poor [Apologies that the books are US centric]
Life at the Bottom: The Worldview That Makes the Underclass
Off the Books: The Underground Economy of the Urban Poor
Nickel and Dimed: On (Not) Getting By in America
The Working Poor: Invisible in America
Nobodies: Modern American Slave Labor and the Dark Side of the New Global Economy

Big Picture Books I have reviewed [a fraction, I am only allowed five more links]:
An Atlas of Poverty in America: One Nation, Pulling Apart 1960-2003
The Globalization of Poverty and the New World Order
The Global Class War: How America's Bipartisan Elite Lost Our Future - and What It Will Take to Win It Back
Confessions of an Economic Hit Man
Open Veins of Latin America: Five Centuries of the Pillage of a Continent

I've read Prahalad, Farmer, etcetera, the authors cite them all so I have used my choices above to be of greater use to the non-economist seeking more readable volumes. If you would really like to get into a high level survey of my reading, a free graduate course in reality, look for these two lists:

Worth a Look: Book Review Lists (Positive)

Worth a Look: Book Review Lists (Negative)

Best wishes to all,
Robert Steele
THE OPEN SOURCE EVERYTHING MANIFESTO: Transparency, Truth & Trust (2012)
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3 of 3 people found the following review helpful
5.0 out of 5 stars Excellent and well researched book, July 17, 2011
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This review is from: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Hardcover)
I had the opportunity to read this book Poor Economics by Abhijit Banerjee and Esther Duflo. The book provides excellent insights into the life of poor. The main objective of the book is resolve the conflict between the two solutions for global poverty. One of the solution being is to do nothing and allow the market to evolve in poor countries and other being to fund them until the markets are mature enough to take care on their own.

The authors try to emphasize the fact that there is no one fixed approach to solving the poverty problem. But through RCT (Randomized Control Trials) which many researchers and authors have conducted, the authors try to show that how simple policy changes to existing programs can make it more effective.

For eg. take the example of child vaccination. The authors inform us that in certain poor areas in rural Rajasthan even when vaccination is free, people tend to avoid the program for a variety of reasons. One being superstitious beliefs against vaccination and other factor is time inconsistency. Time inconsistency affects the rich and poor but in the latter's case the consequences are much more drastic. Here the poor understand that vaccination might be better for their children's future just like we understand that eating healthy foods will prevent heart-attack in the future. We keep postponing our habit of eating healthy foods, the poor who have other immediate problems to take care (like the next meal) keep postponing their decision to take their vaccinate their kids. Now when the vaccination program made a small change of adding an extra provision of providing 2Kg dried lentils with each vaccination, the program saw a significant jump in % of children getting vaccinated. The authors explain that the superstitious beliefs though prevented vaccination, it was not rooted strongly in their minds. And by adding the free lentils to the program the poor could come to the camp, get vaccinated and go back home and need not worry about the next meal at least for that day.

The authors also show that poor, in contrast to the popular view that they are lazy and spend irrationally have a lot of factors going against them. For example the middle class society takes many things are granted. For eg. Vaccination: Once the child is born, the hospital immediately provides vaccination. An other example the authors cite is drinking water, we need not worry on water being treated with chlorine to prevent certain water borne diseases, the government does that for us. But for the poor, the water sources (wells, ponds) in their case needs to chlorine treated, else they are susceptible to infections. The poor need to take decisions constantly for their next meal, medicine, money for their business etc and at each step they face more problems than a typical middle class person.

The authors cover the following topics of health, education, insurance and loans (MFI, banks etc) for the poor. In each case they provide insights on why certain policies work and certain don't and how significant achievements in reducing poverty can be made even within existing political structures. Well researched and an useful book for anyone who wants to understand about global poverty.
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Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty
Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit V. Banerjee (Hardcover - April 26, 2011)
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