Rethinking how to fix poverty by using empirical results to verify what works

Why do the poor borrow to save? Why do they miss out on free life-saving immunizations, but pay for unnecessary drugs? In Poor Economics, Abhijit V. Banerjee and Esther Duflo, two practical visionaries working toward ending world poverty, answer these questions from the ground. In a book the Wall Street Journal called “marvelous, rewarding,” the authors tell how the stress of living on less than 99 cents per day encourages the poor to make questionable decisions that feed—not fight—poverty. The result is a radical rethinking of the economics of poverty that offers a ringside view of the lives of the world’s poorest, and shows that creating a world without poverty begins with understanding the daily decisions facing the poor.

The book discusses the value of many things like mosquito nets that prevent 30% of Malaria. If someone does not get Malaria their earnings are 50% more for every year of their life. They also analyze why only about ten percent of the poor buy Mosquito nets or Chlorine to purify drinking water. The problem relates to procrastination, lack of knowledge, mistaken beliefs and other factors which are described empirically.

The rich tend to have the correct decision made for them
* get your kid vaccinated or they cannot go to public school
* have plumbing so they do not have to remember to buy chlorine to purify water

The treatment for diarrhea is surprisingly simple. Called Oral Rehydration Therapy (ORT), it is a mixture of water, salt, and sugar that replenishes the lost fluids in the body. This basic treatment has helped reduce diarrheal deaths by about two-thirds in the last 25 years. It is perhaps the height of human tragedy that still so many parents must watch a son or daughter die of diarrhea when the cure is so simple and so inexpensive. It is not difficult to make sure that even severely impoverished people have access to clean water, sugar, and salt.

However, if a poor person takes their child for treatment and is given ORT therapy (water, salt and sugar) and it prevents death 2 out of 3 times, they are disappointed. They wanted an antibiotic or some other fool proof intervention. Plus it does not work 1 out of 3 times. Which stories get told more to the other villagers ? the 2 out of 3 times or the 1 out of 3 times.

Note – The use of empirical data, frequent measurement and marketing like A/B testing makes sense for the rich world as well. There should not be the expectation that all of the correct policies in a program (for healthcare, banking or any major area) can be formed all at once. This is also the advantage of many smaller and competing approaches. However, when it does become clear that something is working then the results need to be quickly communicated so that the option to adopt what appears to be working can be made.

Yes there are low cost solutions to many of the problems of poverty
* unclean drinking water
* disease (vaccination)
* safer births (clean birthing kits)

However, more analysis needs to be made about how things are deployed and accepted.

Why do the poor not eat better ?

Many people in wealthy countries do not eat well.
They buy Super Big Gulps and junk food.

Poor people may not know about the value of micronutrients and how having enough helps life time earnings and health.

But they might but do not breakout of a pattern.

Developed world people know they should exercise and eat right but do not.

Not everyone knows what are the most economical and simplest ways to get the right micronutrients.

* iodine fortified salt
* iron fortified fish sauce

There is also only very slow improvement in the choices and behavior of people as they move up from
$1 Purchasing power parity per day to
$4/day etc…

Deworming costs $1.36 PPP per year for two years instead of one leads to a $3269 PPP gain over a lifetime in Kenya.

Having a world with less poverty would mean economic gains in trade to developed countries

There is a gain to the world from a less poor world.
* More trade
* more consumers
* Possible reductions in conflict and terrorism

More marketing and empirical approaches should be tried to aggressively reduce poverty.


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