There is often a lot of discussion around foreign aid and charity programs to help countries where the majority of the population lives below the poverty line. The behavior of people, who struggle to meet their basic needs, is also scrutinized. Those who do not live under such circumstances might say things such as: ‘why don’t the poor just stop spending so much money, if you didn’t buy that TV, you would be able to buy food!’. However, their situations are far more complex than we can imagine. Furthermore, we make different economic decisions under different circumstances.
Banerjee and Duflo wrote an intriguing book on this subject, Poor Economics. They rely on anecdotal stories, random controlled trial experiments, and historical events to explain what it is like living on less than $1 a day. The authors also discuss how these people can be helped to live a more prosperous life. While there are many (government) programs to aid poor people to at least attend elementary school, it doesn’t give them all the required information to successfully participate in society. For instance, the knowledge of immunizing their children, or which politician to vote for doesn’t reach these people. Second, they have to go the extra mile to achieve a healthy life. Many of us in the Western world have access to sanitary facilities, clean drinking water, and we’re familiar with and have access to preventative measures to stay healthy. We don’t have to think twice about these things. We don’t have to add chlorine to our water after visiting the water pump.
The authors list many more findings of how the decisions might not make sense at face value, but when you take a better look, the reasons for their decisions become clear. Banarjee and Duflo talk about the functional and dysfunctional social policies that have been implemented as well. I find this book encouraging as the authors ensure that there is a lot that can be done in order to help those in need.