What It Means to Live on 99 Cents a Day: Wisdom from Poor EconomicsMarch 22, 2012
Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit Banerjee and Esther Duflo is one of the most up-to-date assessments of why people face poverty, how it holds them back, and how some of our solutions — are holding them back.
Abhijit and Esther, thank you for enlightening us. You help us understand more empathetically how our lives are easier, and why. Why our energy can go to more high impact decisions, allowing us to progress more quickly. And what can work, and not work, in empowering others to get the advancement they so deserve. Impoverished people have to work so very hard — just to exist, day to day.
Here is an excerpt from Poor Economics.
Living on 99 cents a day means you have limited access to information—newspapers, television, and books all cost money—and so you often just don’t know certain facts that the rest of the world takes as a given, for example, that vaccines can stop your child from getting measles. It means living in a world whose institutions are not built for someone like you. Most of the poor do not have a salary, let alone a retirement plan that deducts automatically from it.
It means making decisions about things that come with a lot of small print when you cannot even properly read the large print. What does someone who cannot read make of a health insurance product that doesn’t cover a lot of unpronounceable diseases? It means going to vote when your entire experience of the political system is a lot of promises, not delivered; and not having anywhere safe to keep your money, because what the bank manager can make from your little savings won’t cover his cost of handling it. And so on.
All this implies that making the most of their talent and securing their family’s future takes that much more skill, will power, and commitment for the poor. And conversely, the small costs, the small barriers, and the small mistakes that most of us do not think twice about loom large in the lives of those who have very little.
Poor Economics is a book about the very rich economics that emerges from understanding the economic lives of the poor. We open with the essential aspects of people’s family lives: what they buy; what they do about their children’s schooling, their own health, or that of their children or parents; how many children they choose to have; and so on. Then we go on to describe how markets and institutions work for the poor: Can they borrow, save, insure themselves against the risks they face? What do governments do for them, and when do they fail them?
Are there ways for the poor to improve their lives, and what is preventing them from being able to do these things?
Poor Economics is ultimately about what the lives and choices of the poor tell us about how to fight global poverty. It helps us understand, for example, why microfinance is useful without being the miracle some hoped it would be; why the poor often end up with health care that does them more harm than good; why children of the poor can go to school year after year and not learn anything; why the poor don’t want health insurance; and it reveals why so many magic bullets of yesterday have ended up as today’s failed ideas.
The book also tells a lot about where hope lies: why token subsidies might have more than token effects; how to better market insurance; why less may be more in education; why good jobs matter for growth. Above all, it makes clear why hope is vital and knowledge critical, why we have to keep on trying even when the challenge looks overwhelming. Success isn’t always as far away as it looks.
Abhijit Banerjee and Esther Duflo have spent more than 15 years studying the lives of the poor, and the effectiveness of different methods of aid. Poor Economics challenges many beliefs about what it means to be in poverty, and looks at the causes for certain trends and patterns. Abhijit Banerjee and Esther Duflo are professors at MIT and cofounders of the Abdul Latif Jameel Poverty Action Lab.