A review of Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, by Abhijit Banerjee and Esther Duflo
@@@@@ (5 out of 5)
Public debate about the way to combat global poverty has ricocheted between two extremes. One was summed up in 2005 in The End of Poverty by Jeffrey Sachs, the Columbia economist who spearheaded the UN Millennium Development Goals. The other was laid out by former World Bank economist William Easterly the following year in The White Man’s Burden. Sachs advocates massive government-to-government foreign aid. Easterly deplores foreign aid, convinced that it does more harm than good.
In Poor Economics, Abhijit Banerjee and Esther Duflo seek a path between these two extremes, emphasizing the Randomized Controlled Studies they and their colleagues had conducted to ascertain what works and what doesn’t. (As of 2010, they had completed more than 240 studies in forty countries around the world.)They characterize Easterly’s approach as demand-driven, since he believes that poor people must seek their own solutions — a conservative, free-market attitude. By contrast, Sachs’ approach is supply-driven, reflecting Sachs’ conviction that a government must provide for its people based on consensus thinking about what poor people need — a liberal, top-down attitude. (I find myself bemused that I’m on the right side of this debate.)
Banerjee and Duflo report that their observations and research results support each of these two approaches — and sometimes both — depending on what issue they study. Hunger, health, education, financial services, family planning, business development, policy options: each field offers up a unique picture of success and failure attributed to one or another of the two approaches. In other words, circumstances and details matter, all of which may vary from one country to another. There is no silver bullet, they assert, no panacea to eliminate poverty.
Poor Economics focuses on the overarching question of whether there is such a thing as a “poverty trap.” Sachs contends there is: poor people will be stuck in poverty unless and until they are given the resources to release themselves from the trap. In many circumstances, Banerjee and Duflo find scant evidence to support this assertion. In others, however, they see the need for government intervention in the lives of the poor because otherwise they will perceive no reason to act for themselves.
Rather than identifying a simple, unitary explanation why Sachs’ approach often fails, they emphasize “ideology, ignorance, and inertia — the three I’s — on the part of the expert, the aid worker, or the local policy maker.” These three I’s, they claim, “often explain why policies fail and why aid does not have the effect it should.” Banerjee and Duflo explain further: “The poor often resist the wonderful plans we think up for them because they do not share our faith that those plans work, or work as well as we claim.”
It would be difficult to find two scholars better prepared than Abhijit Banerjee and Esther Duflo to forge a middle course through the opposite poles of thought about global poverty erected by Jeffrey Sachs and William Easterly. Banerjee, an Indian economist who is also the son of two economists, holds an endowed chair in economics at MIT. He co-founded MIT’s Abdul Latif Jameel Poverty Action Lab with Duflo, a French economist and a former MacArthur Fellow (recipient of the “genius” award).
For anyone who seeks deeper understanding of global poverty and the ways and means of fighting it, Poor Economics is must reading. This book is the latest I’ve read in my ongoing effort to study world poverty. For a list of additional books on the topic, go to my reading list.
Narrowing global inequities: a reading list
Lately I’ve been working with Paul Polak on a book about how to end global poverty. (Berrett-Koehler will publish the book in 2013.) Paul’s previous book, Out of Poverty, was published six years ago, and this new work – provisionally titled The Business Solution to Poverty – represents the evolution of his thinking, six more years of work with poor people in developing countries, and the reading and relevant field experience I’ve had over the years.
As I’ve dug more deeply into the subject of global poverty, it has become increasingly clear to me that truly understanding how today’s glaring inequities have come about requires extensive knowledge in a wide array of topics, from Third World history to social psychology, development economics to the history of business and international trade.
Well, I confess I’m no expert in any of those fields. I’ve read widely in some, superficially in others, and I’m learning a lot.
My reading has emphasized economic history, the economics of poverty, colonialism, Third World development, social enterprise, and the ongoing debate about the impact of “foreign aid” (more properly, overseas development assistance). Along the way, I’ve reviewed in this blog many of the books I’ve read.
In previous posts, I’ve offered up reading lists on some of these subjects individually. Here, I’m sharing a compiled list. These are the books I’ve actually read. Where I reviewed a book, you’ll find boldfacing and underlining that signifies a link to my review. The books are listed alphabetically by the author’s last name.
Banerjee, Abhijit, and Esther Duflo, Poor Economics A Radical Rethinking of the Way to Fight Global Poverty. PublicAffairs, 2011. (review to come)
Bornstein, David, How to Change the World: Social Entrepreneurs and the Power of New Ideas. Oxford University Press, 2007.
——, The Price of a Dream: The Story of the Grameen Bank. Oxford University Press, 2005.
——, and Susan Davis, Social Entrepreneurship: What Everyone Needs to Know. Oxford University Press, 2010.
Clark, Gregory, A Farewell to Alms: A Brief Economic History of the World. Princeton University Press, 2007.
Cohen, Ben, and Mal Warwick, Values-Driven Business: How to Change the World, Make Money, and Have Fun. Berrett-Koehler Publishers, 2006.
Collier, Paul, The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It. Oxford University Press, 2007.
Collins, Daryl, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven, Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Princeton University Press, 2009.
Crutchfield, Leslie R., and Heather McLeod Grant, Forces for Good: The Six Practices of High-Impact Nonprofits, 2nd Edition. Jossey-Bass Publishers, 2012.
Diamond, Jared, Collapse: How Societies Choose to Fail or Succeed. Viking Press, 2005.
Easterly, William, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Penguin Press, 2006.
Elkington, John, and Pamela Hartigan, The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World.Harvard Business Review Press, 2008.
Govindarajan, Vijay, and Chris Trimble, Reverse Innovation: Create Far From Home, Win Everywhere. Harvard Business Review Press, 2012.
Guha, Ramachandra, India After Gandhi: The History of the World’s Largest Democracy. HarperCollins Publishers, 2007.
Hochschild, Adam, King Leopold’s Ghost: A Story of Greed, Terror, and Heroism in Colonial Africa. Houghton Mifflin Company, 1998.
Kamkwamba, William, and Bryan Mealer, The Boy Who Harnessed the Wind: Creating Currents of Electricity and Hope. HarperCollins Publishers, 2009.
Kidder, Tracy, Mountains Beyond Mountains: The Quest of Dr. Paul Farmer, a Man Who Would Cure the World. Random House,2003.
Kristof, Nicholas D., and Sheryl WuDunn, Half the Sky: Turning Oppression Into Opportunity for Women Worldwide. Knopf, 2009.
Light, Paul Charles, The Search for Social Entrepreneurship. Brookings Institution Press, 2008.
Lynch, Kevin, and Julius Walls, Jr., Mission, Inc.: The Practitioner’s Guide to Social Enterprise. Berrett-Koehler Publishers, 2008.
Mehta, Pavithra, and Suchitra Shenoy, Infinite Vision: How Aravind Became the World’s Greatest Business Case for Compassion. Berrett-Koehler Publishers, 2011.
Moyo, Dambisa, Dead Aid: Why Aid is Not Working and How There Is a Better Way for Africa. Farrar, Straus and Giroux, 2009.
Polak, Paul, Out of Poverty: What Works When Traditional Approaches Fail. Berrett-Koehler Publishers, 2006.
Prahalad, C. K., The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Pearson Prentice Hall, 2004.
Sachs, Jeffrey D., The End of Poverty: Economic Possibilities for Our Time. Penguin Press, 2005.
Schwartz, Beverly, Rippling: How Social Entrepreneurs Spread Innovation Throughout the World. Jossey-Bass Publishers,2012.
Sullivan, Nicholas P., You Can Hear Me Now: How Microloans and Cell Phones Are Connecting the World’s Poor to the Global Economy. Jossey-Bass Publishers, 2007.
Wrong, Michaela, It’s Our Turn to Eat: The Story of a Kenyan Whistle-Blower. HarperCollins Publishers, 2006.
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Tagged as Aravind, current-events, David Bornstein, economic development, economic history, economy, foreign aid, global poverty, India, Jeffrey Sachs, Nicholas Kristof, Paul Polak, politics, poverty, social enterprise, Third World development, Tracy Kidder, William Easterly