Book review: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit V. Banerjee and Esther Duflo.
This book gives an interesting perspective on the obstacles to fixing poverty in the developing world. They criticize both Jeffrey Sach and William Easterly for overstating how easy/hard it is provide useful aid to the poor by attempting simple and sweeping generalizations, where Banerjee and Duflo want us to look carefully at evidence from mostly small-scale interventions which sometimes produce decent results.
They describe a few randomized controlled trials, but apparently there aren’t enough of those to occupy a full book, so they spend more time on less rigorous evidence of counter-intuitive ways that aid programs can fail.
They portray the poor as mostly rational and rarely making choices that are clearly stupid given the information that is readily available to them. But their cognitive abilities are sometimes suboptimal due to mediocre nutrition, disease, and/or stress from financial risks. Relieving any of those problems can sometimes enable them to become more productive workers.
The book advocates mild paternalism in the form of nudging weakly held beliefs about health-related questions where people can’t easily observe the results (e.g. vaccination, iodine supplementation), but probably not birth control (the poor generally choose how many children to have, although there are complex issues influencing those choices). They point out that the main reason people in developed countries make better health choices is due to better defaults, not more intelligence. I wish they’d gone a bit farther and speculated about how many of our current health practices will look pointlessly harmful to more advanced societies.
They give a lukewarm endorsement of microcredit, showing that it needs to be inflexible to avoid high default rates, and only provides small benefits overall. Most of the poor would be better off with a salaried job than borrowing money to run a shaky business.
The book fits in well with Givewell’s approach.