Review: Poor Economics – A Radical Rethinking of the Way to Fight Global Poverty

4 Star, Economics, Peace, Poverty, & Middle Class
Amazon Page
Amazon Page

Abhijit Banerjee and Esther Duflo

4.0 out of 5 stars Serious Economics Poorly Presented, December 14, 2012

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 smessage 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 are just two: Nature, Diet, Memetics, Design (206); Peace, Poverty, & Middle Class (253).

The authors begin 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 (by the poor); Corruption (by the intermediaries); and Noncholance (by the Donors, including all the Specialized Agencies of the United Nations, 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.

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 avaiable 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 t he Secretary General for being in harmony with the 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 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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