Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (edition 2011)

by Abhijit Banerjee

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nosajeel's review

This book deserves all the acclaim it has gotten, it is a modern take on development economics that eschews the grand macroeconomic theorizing and debates of Jeff Sachs, Bill Easterly, and Daron Acemoglu and James Robinson and instead dives right into the microeconomics of a wide range of topics including nutrition, public health, education, family planning, saving, insurance, entrepreneurship and public corruption. But Abhijit Banerjee and Esther Duflo are anything but neutral--they are strong partisans for "listening to the poor," understanding and sympathizing with how difficult their choices are, and doing all of this with random experiments, or at least well-identified microeconomic studies. In many cases these studies are informed by careful and thoughtful listening and a behavioral approach.

Banerjee and Duflo focus on small interventions--how best to deliver mosquito nets, implement deworming, provide public information about AIDS and help families save and invest. One of the most fascinating chapters was about corruption and institutions where they argue, persuasively, that it is too fatalistic just to assume that "INSTITUTIONS" (their capital letters) shape over hundreds of years determine economic destiny when "institutions" can be reformed around them and make a huge difference. Even corrupt, single-party local elections can bring more accountability and better results for the poor without broader regime change. And conversely, even broader regime change that improves INSTITUTIONS does not guarantee good institutions.

Banarjee and Duflo have a fascinating calculation where they point out that deworming children when they are in school increases their earnings by 20 percent as adults, they compare this to the fact that Kenya's four strongest years of growth were 4.5 percent annually, pointing out that deworming is the equivalent of four years of that growth.

Banarjee and Duflo do not stick completely consistently to the rules of their manifesto. For example, they conclude a chapter on entrepreneurship with an emphasis on how much more important it is to have a steady job, which they say requires improvements in regulation, infrastructure, and mobility policies--all of which are staples of traditional development economics and not the subject of their randomized trials. But with few exceptions, however, they stick within their constraints--and even actively throw up their hands in asserting that no one knows why countries thought to be basket cases like Bangladesh or Cambodia have started to take off while previous darlings like C̫te d�ÃÂªIvoire have moved the other way.

At the end of the day, however, Banarjee and Duflo are far more fatalistic and critical of macroeconomics and broader approaches than they are critical of some of the shortcomings in their own approach, like replicability, scalability, and general equilibrium effects. None of these are persuasive arguments against the value of their approach, but it does engender a little more humility and a little more of a sense that it worth trying a multiplicity of approaches to dealing with the world's oldest and most fundamentally challenging economic problem.

nosajeel | Jun 21, 2014 |

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Interesting summary of what we know (and don’t) about how poor people make decisions. Poor people are people! So they behave like people under resource constraints; when it comes to healthcare, that also includes information constraints (not really knowing much about vaccination, for example, including often lacking trustworthy sources of information). Some self-protective measures can also limit the upside of taking risks that might pay off—like people who spend money as it comes in so that they don’t get pressured to give it to needy family and friends. The research also suggests that microcredit has a limit—most businesses that poor people work in inherently don’t scale well, so expecting entrepreneurship to save poor people is a mistake. Given that poor people have to take way too many risks, it’s understandable that their ambitions for their children often are stable (ideally government) employment rather than entrepreneurship. (

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rivkat | Jul 20, 2023 |

This book is excellent. Most of us in countries like India claim to know about poverty. It is impossible for us to appreciate poor people's concerns, aspirations, and dreams. We don't live their lives nor interact with them, save at a superficial level. Experts who remain aloof from the problem of poverty have written most books on poverty.

This book fills a void and discusses the aspects of poverty and "poor economics." Each section covers a different aspect of poverty and contains enough anecdotal information and research findings. Each chapter also discusses the main theses of different authors.

I don't know why they referenced C. K. Prahalad's book on fortune at the bottom of the pyramid. That book is superficial.

There is a good concluding chapter.

The book is readable. Over the last few years, I saw many people troll the authors. This behaviour has been tragic because the trolls have not read this excellent book.

There is no simple solution to poverty. This is the tragic lesson of the book. But, I hope we come away with a greater appreciation of what needs to be done and don't treat the poor as useless. If we do this, then the authors have been successful. (

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RajivC | May 2, 2023 |

This book begins with acknowledging that some might call it patriarchal to enforce and/or influence the poor to act in ways that WE think are in their best interest... but then kind of lets that sentence peter out and doesn't say why it isn't patriarchal. LMAO. Still a nice collection of research done on developing communities. (

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brutalstirfry | May 6, 2022 |

One of the most well-written and informative books I've ever read. (

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zennkat | Feb 9, 2022 |

I don't recall where I picked this book up but I definitely didn't read the back of the book properly. I had thought it was about the economic decisions faced by people living in the UK and more specifically on council estates. I made that assumption based on the picture of the front cover and I thought that it would have some interesting way that money is saved.

I should have read the cover properly because as it turns out I was incorrect. It is based on the economic activities and decisions faced by the very poorest people in the world with the focus being on India. The main focus is on the bare economics and the way aid can both be helpful and unhelpful at the same time depending on how it is implemented. There is also a look at the psychology behind some of the seemingly bizarre decisions that these people make. One example that stood out for me was the fact that when researchers paid off the debts of groups of traders they would inevitably get back into debt before too long. It wasn't that these people had to get into debt from a financial people of view but that they were so used to being in debt they didn't see it as an issue to get into debt again.

Government agencies were looked at from the point of view of corruption. They point out that the big problem with corruption is that it is everywhere and a normal part of life for many. There is no point in investing millions on improving a road when the truck drivers can pay a small bribe to be allowed to drive an over weight truck on them and ruin them.

This is quite an interesting book but I found it a little dry and repetitive in places. (

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Brian. | Jul 24, 2021 |

Interesting examination of the culture of poverty around the world, and by use of controlled trials of various educational and anti-poverty programs, describes programs which seem to work, and those which don't.

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rsutto22 | Jul 15, 2021 |

This book is a treasure trove of information about global poverty. I came into the book with a host of naïve assumptions about why poverty exists and what can be done to stop it. (

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Musaib03 | Jan 29, 2021 |

This is a hard book to review. The first half is economists being genuinely surprised that humans aren't homo economicus, accompanied by bad pop-cogsci for why this might be, and a laughably bad understanding of mathematics (they routinely discount base rates, and call all sorts of things "s-curves", none of which are remotely s-shaped). This section is full of boring anecdotes there presumably to add a human touch to an otherwise dry book, but all that accomplishes is wasting the reader's time. (Un)notably, there are no proposed solutions to the problems described, nor any data that would be helpful to anyone in the First World. Maybe it's interesting if you're an economist, but I'm not.

The second half of the book is where things start to get interesting. The discussion becomes more abstract and starts talking more about how to actually solve some of these problems, about how economics can be used to incentivize some (but not all) solutions in the domain, and about where the standard economic tools will fail. This stuff is fascinating, and presents a lens through which we can inspect our own society---where we succeed and where we do not. The final chapter is on corruption and policies, and I would recommend the chapter to anybody who cares about social change (though I would *not* recommend the book itself.) The description blurred the stark line I had in my head about what constitutes corruption, and why it's not always necessarily a bad thing (eg. inappropriately funneling resources towards people who need them.)

All in all, 3/5. If you're particularly interested in pop-economics, you could do worse than this book, but I'd recommend Yudkowsky's Inadequate Equilibria over it any day. (

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isovector | Dec 13, 2020 |

I come from the business world and will be the first to acknowledge that I am not extremely knowledgeable about the different ways that have been attempted to overcome the obstacles facing poor communities that would achieve long-term improvement. However, I was familiar with much of what Banerjee discussed in this book, at least at a high level. The use of a behavioral economics approach to understand these problems made sense to me. While not described in this manner, I strongly support the use of an "agile" and "lean" approach that is recommended for developing solutions: design a solution, identify a way to try to in a small way and a controlled manner, assess the the results and modify the solution as needed. I think this is the best way to design solutions that can succeed, and I think this approach is consistent with what Banerjee is suggested.

I could not tell, however, if Banerjee thinks that this approach can then be used to design broad-based solutions. I tend to believe that any attempt to generalize such solutions will often fail, and that instead you need to have a portfolio of tested solutions that you then choose from based on the culture in the community you are trying to help and the problems the community faces.

A thought-provoking read, but not one that provides easy answers. But then that is probably proof of its value. (

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afkendrick | Oct 24, 2020 |

Amazing work comprehensively addressing an array of problems and needs of the poor. Their research methods strikingly humanize them and transform them from being a monolithic group of poor people and into simply people with unique problems and possible solutions. Inspiring angle that the authors took. (

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bsmashers | Aug 1, 2020 |

Things I have seen all my life (or at least in the first 17 years of it), written up in a clear and concise way, with some added hypothesis about why that might be the case. (

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MahiShafiullah | May 25, 2020 |

For anyone who has read The End of Poverty by Jeffery Sachs then this is another book that you should read. The authors are both Professors at MIT, Banerjee is economics and Duflo is Poverty Alleviation.

Even though it is a book about the economics of the poor around the world, it is not a high brow criticism of the way the poor manage themselves, but a series of practical suggestions and principles and ways that we, them and all stakeholders can make a big difference to their lives.

A lot of the examples in the text are based on randomised trial that they have conducted, or are party to the data from. This has given them a unique insight to the best way of alleviating a series of problems; from intestinal worms, micro finance, malaria nets, child immunisation to minimising the spread of AIDS.

The fact that a lot of these have been tested, means that the suggestions in the book are eminently practice, and with the right structures in place will make a hug he difference to the worlds poor. (

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PDCRead | Apr 6, 2020 |

Amazing insights into how things work for poor (

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cploonker | Mar 22, 2020 |

I'm looking forward to reading this after seeing this glowing review: http://www.defeatpoverty.com/2011/06/book-review-poor-economics.html

eldang | Sep 18, 2019 |

I'm looking forward to reading this after seeing this glowing review: http://www.defeatpoverty.com/2011/06/book-review-poor-economics.html

eldang | Aug 11, 2019 |

Eye opening book on the complex lives that poor people lead, and the thousands of decisions they have to make every day, what interventions work, and why some interventions don't. Read this book, you'll learn a lot about poverty, and it will change the way you look at policy. (

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RekhainBC | Feb 15, 2019 |

A pretty solid introduction to how to debunk common held believes about people living in poverty. (

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simonspacecadet | Jul 29, 2018 |

Authors review and research the economics of the poor who make less than 99 cents a day. (

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addunn3 | Nov 22, 2015 |

This book puts the 'micro' into the economics of world poverty.

[a:Banerjee|5302812|Abhijit V. Banerjee|https://s.gr-assets.com/assets/nophoto/user/m_50x66-82093808bca726cb3249a493fbd3bd0f.png] and [a:Duflo|3346682|Esther Duflo|https://d.gr-assets.com/authors/1368986687p2/3346682.jpg] go to the slums of India and jungles of Indonesian looking for homo economicus and they find him (and her). This is probably the book's most controversial idea, that the choices of the global poor can be understood using the standard tools of microeconomic analysis. They examine the constraints - in terms of resources and information - which the poor face that prevent them from moving out of poverty.

The authors pitch themselves very deliberately in between [a:Jeffrey Sachs|5265222|Jeffrey Sachs|https://s.gr-assets.com/assets/nophoto/user/u_50x66-632230dc9882b4352d753eedf9396530.png] and [a:William Easterly|18855|William Easterly|https://d.gr-assets.com/authors/1245028381p2/18855.jpg]; they neither believe in the big push not believe in doing nothing. Instead, inspired by [a:Sunstein|62303|Cass R. Sunstein|https://d.gr-assets.com/authors/1239833547p2/62303.jpg] and [a:Thaler|65483|Richard H. Thaler|https://d.gr-assets.com/authors/1438885744p2/65483.jpg], they advocate smaller scale 'nudges', designed to bump the global poor out of various 'micro' poverty traps.

This is a fascinating exercise in practical economics. (

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JohnPhelan | Nov 9, 2015 |

nosajeel | Jun 21, 2014 |

"Poor economics" puts a poor title and subtitle on a good book. The book isn't really "about a radical rethinking of the way to fight global poverty". It could have been if its conclusion had been its starting point. Applying the concepts of the dismal science on the lives of the poor (mostly in India), the two authors show that marginal incentives work and provide huge quick benefits. In part one, the authors look at hunger, health care, schooling and family planning. Their cases and findings are very interesting. The main lesson is that a puritan wagging of the finger is inappropriate. The poor make poor decisions, because they are trapped in their situation. Frivolous spending such as spending money on sugary goods instead of healthy food thus can be economic under their circumstances of their not benefiting from savings and investment in a highly uncertain environment. Similar to medieval Europe where people's lives fluctuated between feasts and famine. Part two looks at insurance, micro finance, saving and entrepreneurship. Given the recent prominence of micro finance, I found it a bit tedious and repetitious.

All their examples show that a little care and attention can lift people out of misery - but only for a short time. Economic incentives work but are not sufficient to lift people permanently out of poverty. The depressing conclusion of the authors is that the poor environments and lack of support often means that the improvements shown are not sustainable without transforming the community too.

The individualistic economic approach has to be supported by a communal or governmental effort. Unfortunately, local power often rests on keeping the others, and especially the poor, down. So any initiative to alleviate the lives of the many would endanger the existing power structure. Help can only come from an independent source not interested in preserving and even willing to fight that power structure (federal government, religious societies, international donors and agencies). While the book's examples are from Third World countries, its lessons are even more relevant for the deprived parts of so-called "developed countries". Hopefully, the authors pen a "poor economics II" that works on the political economy of poor places. Recommended. (

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jcbrunner | Dec 31, 2011 |

A comprehensive and accessible look at a number of current positions and debates in the foreign aid literature. Essential reading for anyone interested in the field. Below are the main conclusions from the book, which are modest, but have great potential for refining the focus of the foreign aid debate if heeded. These conclusions are supported throughout the book with vibrant examples, inspiring anecdotes, and a healthy dose of skepticism.

From the authors: "Despite [some useful conclusions reached by this book], we are very far from knowing everything we can and need to know [about foreign aid and poor economics]. This book is, in a sense, just an invitation to look more closely."

Here are the conclusions Banerjee and Duflo reached in their research:
1. "The poor often lack critical pieces of information and believe things that are not true." [i.e. benefits of immunization or education]
—— Introduction of simple pieces of information can often make a big difference. In order to do this, the information must: say something that people don't already know, do so in an attractive and simple way, and come from a credible source.

2. "The poor bear responsibility for too many aspects of their lives. The richer you are, the more "right" decisions are made for you."
—— "This means that their lives could be significantly improved by making it aas easy as possible to do the right thing—based on everything else we know—using the power of default options and small nudges: Salt fortified with iron and iodine . . . Chlorine could be made available next to every source [of water]."

3. "There are good reason that some markets are missing for the poor, or that the poor face unfavorable prices in them."
——"In some cases., a technological or an institutional innovation may allow a market to develop where it was missing . . . but we also have to recognize that in some cases, the conditions for a market to emerge on its own are simply not there . . . We should recognize that this may entail giving away goods or services . . . for free or even rewarding people, strange as it might sound, for doing things that are good for them."

4. "Poor countries are not doomed to failure because they are poor, or because they have had an unfortunate history."
——"It is possible to improve governance and policy without changing the existing social and political structures."

5. "Expectations about what people are able or unable to do all too often end up turning into self-fulfilling prophecies."
——Has both detrimental and promising implications. Once the poor change their expectations from pessimistic and ungrounded to positive and realistic, the resulting "success often feeds on itself. "When a situation starts to improve, the improvement itself affects beliefs and behavior," which can lead to a positive feedback loop of progress. (

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