Part 2 of review available here.

“The ladders to get out of the poverty trap exist but are not always in the right place, and people do not seem to know how to step onto them or even want to do so.” – Banerjee and Duflo

I’ll be posting a review of Poor Economics on Sunday, but it’s looking like a long one, so in the interim I thought I’d post a summary of their five lessons for economic development, and leave discussion to Sunday.

1. The poor often lack information or have false beliefs, leading them to do things like ignore potentially useful dietary advice.
2. The poor are responsible for far more decisions than comparable households in the West, to their cost. We take sanitization of water or the removal and treatment of sewage, for example, for granted: for the poor it can be a conscious choice. Too many conscious choices can be overwhelming, and reducing the number of decisions that need to be consciously made is no more patronizing than sanitizing household water in the US.
3. There are often good reasons for some markets for the poor to be missing, and so we can’t assume they will always self-form or should be formed. A health insurance market for the poor, for example, though of potential benefit, has struggled to form because the insurance options that can be sustained by the market are not what the poor want.
4. Poor countries are not doomed to failure because they are poor. We often hear of the failures of aid programs, but in many cases those failures are avoidable through small design fixes, rather than grand institutional change of the social and political structures.
5. Expectations of outcomes can often become self-fulfilling prophecies. Children drop out of school because they don’t expect to be good at it; adults stay in debt because they don’t expect to be able to stay out of it. Getting a virtuous cycle started can be enormously powerful.

Number 5, I would argue, is a lesson for life, not for development, but nevermind.

As we’ll find out on Sunday, the foundation of their book, however, is that these are not general rules applicable everywhere. Instead, they argue that development cannot be conducted by universal rules and general theories. It must be adapted to suit context, culture, and location, all of which require data, not ideological theorizing.

You can read part 2 of the review here. In the meantime, keep reading (or in the UK or Canada). Or, join the Subtle Illumination email list to your right!