Monday, August 08, 2011

Worth a Read

Poor Economics by Abhijit Vinayak Banerjee and Esther Duflo

What is striking is that even people who are that poor are just like the rest of us in almost every way. We have the same desires and weaknesses; the poor are no less rational than anyone else—quite the contrary. Precisely because they have so little, we often find them putting much careful thought into their choices: They have to be sophisticated economists just to survive. Yet our lives are as different as liquor and liquorice.

The average poverty line in the fifty countries where most of the poor live is 16 Indian rupees per person and per day. People who live on less than that are considered to be poor by the government of their own countries. At the current exchange rate, 16 rupees corresponds to 36 U.S. cents. But because prices are lower in most developing countries, if the poor actually bought the things they do at U.S. prices, they would need to spend more—99 cents. So to imagine the lives of the poor, you have to imagine having to live in Miami or Modesto with 99 cents per day for almost all your everyday needs (excluding housing). It is not easy—in India, for example, the equivalent amount would buy you fifteen smallish bananas, or about 3 pounds of low-quality rice. Can one live on that? And yet, around the world, in 2005, 865 million people (13 percent of the world’s population) did.

Living on 99 cents a day means you have limited access to information—newspapers, television, and books all cost money—and so you often just don’t know certain facts that the rest of the world takes as given, for example, that vaccines can stop your child from getting measles. It means living in a world whose institutions are not built for someone like you. Most of the poor do not have a salary, let alone a retirement plan that deducts automatically from it. It means making decisions about things that come with a lot of small print when you cannot even properly read the large print. What does someone who cannot read make of a health insurance product that doesn’t cover a lot of unpronounceable diseases? It means going to vote when your entire experience of the political system is a lot of promises, not delivered...And so on.

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