Untying the Knot

Friday, April 22, 2011

Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. By Abhijit Banerjee and Esther Duflo. PublicAffairs; 336 pages; $26.99. To be published in Britain in June by PublicAffairs; £15.99. Buy from Amazon.com, Amazon.co.uk

ESTHER DUFLO grew up in France pitying Kolkata’s poor, based on what she had read in a comic book about Mother Teresa. Abhijit Banerjee grew up in Kolkata envying them: poor kids always had time to play and they routinely beat him at marbles. As economists at the Massachusetts Institute of Technology, both remain fascinated by poverty. In an engrossing new book they draw on some intrepid research and a store of personal anecdotes to illuminate the lives of the 865m people who, at the last count, live on less than $0.99 a day.

The two economists made their names (and remade their discipline) by championing randomised trials. These trials test anti-poverty remedies much as pharmaceutical firms test drugs. One group gets the remedy, another does not. The two groups are chosen at random, so the remedy should be the only systematic difference between them. If the first group does better, the benefit can be attributed to the project and not the many other factors that might otherwise obscure the result.

These trials proved immensely appealing. They promised to sift nuggets of truth from the slurry of received wisdom and wishful thinking that characterises much aid-talk. The hope was that once a trial proved the worth of a project or programme, governments and donors would back it and prescribe it more widely.

The approach has caught on. Another book, “More Than Good Intentions” by Dean Karlan and Jacob Appel of Innovations for Poverty Action is also out this month. But the approach has also attracted criticism. These trials, the critics point out, show whether a drug or remedy works, but not how it works. Even in medicine, a randomised trial can only show whether the average patient benefits; not whether any individual patient will benefit. Human physiology differs from patient to patient, so does the physiology of poverty.

“Poor Economics” should appease some of their critics. It draws on a variety of evidence, not limiting itself to the results of randomised trials, as if they are the only route to truth. And the authors’ interest is not confined to “what works”, but also to how and why it works. Indeed, Ms Duflo and Mr Banerjee, perhaps more than some of their disciples, are able theorists as well as thoroughgoing empiricists.

Source: The Economist (link opens in a new window)

poverty alleviation