Poor Economics

One of the most important economics books aimed at wider audiences to emerge in the last few years is Poor Economics by Abhijit Banerjee and Esther Duflo. Banerjee and Duflo are two of the leading economists of their generation and are particularly associated with the use of randomised controlled trials in development economics. However, this book is broader in its scope and tackles a wide range of issues in the economics of poverty, development economics and the economics of the family. The book has ten chapters and two major sections, one dealing with individual behaviour among the poor and the second dealing with the role of institutions. Like the best popular economics works, each chapter deals with very big issues backed with the recent literature but presented in a punchy and readable fashion. It is a cracking read. The first section deals with nutrition, public health interventions, education interventions and fertility. The second section looks at insurance for the poor, microcredit, savings and entrepeneurship. Chapter 10 sets their argument in the overall context of development debates raging between people like Sachs and Easterly.

The book pushes strongly for the continued development of experimental approaches to economic development that attempt to find workable solutions that large-scale philantrophic and government funding initiatives could be aimed toward. It is important reading for anyone working in microeconometrics and development economics broadly defined and also would be great reading for anyone in Ireland working around the area of foreign aid policy. I open up this thread for anyone who wants to debate aspects of the book or the surrounding issues. From an irisheconomy perspective, it is worth thinking about how the ideas in the book might influence how the Irish government directs the overseas aid budget.

9 replies on “Poor Economics”

Liam Delaney says,

The book has ten chapters and two major sections, one dealing with individual behaviour among the poor and the second dealing with the role of institutions.

I sent this link to someone this evening Liam. Similar kind of broad view of the world at the moment. The event posting says,

The employment relationship is one of the fundamental institutions of advanced industrial societies for sharing the risks of economic life, in this case, between employer and employee. It lies at the heart of our concept of the modern business enterprise as a coordinator of human economic activity.

Its open-ended nature enables firms to hire labour before their detailed production plans are known, which is essential in an uncertain world. It also provides workers with greater predictability and protection in the provision of their services. It emerged as the dominant contractual framework for organising the buying and selling of labour services in all the advanced economies in the last century at a time when the national economy provided the framework for our thinking about economic and social issues.

Yet in recent years, it has come under great pressure to change, and many argue it is in crisis. New forms of temporary employment have developed to provide firms with more flexibility, both within and between economies, and these challenge some of the benefits that workers derived from steady employment.


@Liam Delaney,

Many thanks for highlighting this book. With, it seems, so many Irish people wallowing in self-pity it provides a salutary reminder that there’s a big world out there with billions of people who would love to have the problems Irish people are confronting.

This book seems to have provoked a bit of a debate in The Economist among the “experts”:

However, having done work in quite a few developing and middle-income economies over the years, I have come to the conclusion that any innovations of this nature – or the interventions they prompt – will only work with effective systems of political and economic governance. (I’m also a bit chary of philanthropic interventions. While, perhaps, we should laud the willingness to give of those who have amassed fortunes – when so few do, the manner in which these fortunes were amassed in the first place often point to failures of political and economic governance in developed economies.

And in this context, the pace of change seems to be accelerating building on the “Arab Spring”. The UK Guardian provides a flavour of what’s happening in Africa:

In any event, I expect that, by mentioning “systems of political and democratic governance” I’ve probably taken myself off-topic on this thread – and probably off-topic on this board. As a general point, I think that this board, despite the wonderful service it has provided over the last years, is rapidly reaching vanishing point. Apart from a handful of interesting contributions such as yours, it appears that most posts are generated by highlighting the first ‘expert’ that appears when “Ireland, banks, default” is typed into Google. Posts by the principal contributors have also declined over time. And there seems to be little interest in posting on non-bank, non-fiscal issues. (An example, is the lack of a post on the ESRI’s recent review of Irish energy policy.)

Anyway, it was good while it lasted and I’m sure many people are immensely grateful.

A book like this is useful for NGOs and aid agencies such as the World Bank in prompting experimentation. However, significant change at a macro level can only happen if a poor country can take advantage of globalisation.

The Commission on Growth and Development identified 13 growth ‘miracles’ since World War II. Each had an export sector as a driver of growth and an increasing share of trade in GDP. There are no exceptions. Every growth miracle involves leveraging the demand and resources of the global economy.


The Wall Street Journal has a report today on the Mahatma Gandhi National Rural Employment Guarantee Scheme, as the $9 billion program is known, it says it “is riddled with corruption, according to senior government officials. Less than half of the projects begun since 2006—including new roads and irrigation systems—have been completed.

Workers in the rural employment program aren’t allowed to use machines, for example, and have to dig instead with pick axes and shovels. The idea is to create as many jobs as possible for unskilled workers. But in practice, say critics, it means no one learns new skills, only basic projects get completed and the poor stay poor—dependent on government checks.”

In poor countries, there is the elite and the poor with a small middle aspiring to join the elite.

Microcredit seems like a positive for poor people but in recent times, there has been a backlash to it in India and Bangladesh and such firms have been termed ‘blood-suckers.’

I spoke to a poor Bangladeshi recently about his government’s efforts to oust Nobel peace prize winner, Muhammad Yunus, from Grameen Bank, the ‘bank for the poor.’

It was just one customer’s opinion; he said the bank hq is bigger than the central bank, Yunus’ family drive around Dhakka in big cars and somebody told him that the Nobel prize was paid for from a Swiss bank account!

Delusion but it illustrates what happens when people serving the poor join the elite.

Interesting. But could you deal with ‘philantrophic’. It’s not clear what kind of feeding is envisaged by the word.

The government puts a considerable amount of taxpayers into development aid. That’s laudable. I wonder how it is evaluated, if at all. I doubt if DFA has any in-house expertise to speak of. When the public hears that €x million is spent in Africa, say, there is a presumption that it is doing good. So, without going all “Easterly” on all this, what do we know?

@PH: “And there seems to be little interest in posting on non-bank, non-fiscal issues. (An example, is the lack of a post on the ESRI’s recent review of Irish energy policy.)”

I’ll pass on the bank and fiscal issues: not my area. But the energy area is of significant interest – and it should be of significant interest to any econ blog. No energy: no economy! ESRI review was not very helpful.

If anyone has an interest in energy (and its significant consequences for economics, finance, politics and life-styles in general): go to ->


You may have to do a bit of wading through archive material, but principle contributions are good: the respondents even better! Lots of very informed folk about. Be warned. Energy issues are about to bite down hard.


@Brian W,

You are correct that the economics and geopolitics of energy is becoming increasingly important. Indeed the ESRI’s review of energy policy is the first document I’ve seen in Ireland that tries to really get to grips with it. And indeed it is a shame that a thread hasn’t been opened here on it. But I think that is symptomatic of the way this board is going. Research papers like this are for quiet, murmered, deferential comment in the seminar room; let’s not expose them to robust debate among the hoi polloi.

But back to topic. I see this advocacy of randomised trials as a reaction to the excessively mathematicised, dessicated models of modern economics that are becoming increasingly divorced from reality. It may not be the way to go, but even if it were there are few economists of Keynes’s calibre to drive the revolution. And it is almost impossible for any to do so as the work is diffused among thousands of researchers and academics world-wide.

However, I still think the effort needs to be grounded in reform of politcial and economic governance.

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