POOR ECONOMICS1. Think Again, Again

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・ Every year, 9 million children die before their fifth birthday.

・ A woman in sub-Saharan Africa has a one-in-thirty chance of dying

while giving birth-in the developed world, the chance is one in 5,600.

・ There are at least twenty-five countries, most of them in sub-Saharan

Africa, where the average person is expected to live no more than fifty-

five years.

・ In India alone, more than 50 million school-going children cannot read

a very simple text.

This is the kind of paragraph that might make you want

to shut this book, and, ideally, forget about this whole

business of world poverty: The problem seems too big,

too intractable. Our goal with this book is to persuade you

not to.

　 A recent experiment at the University of Pennsylvania illustrates well

how easily we can feel overwhelmed by the magnitude of the problem.

Researchers gave students 5 to fill out a short survey. They then 💲

showed a flyer and asked them to make a donation to Save the

Children, one of the world’s leading charities.

There were two different flyers.

Some students were shown this:

→Food shortages in Malawi are affecting more than 3 million

children; In Zambia, severe rainfall deficits have resulted in

a 42% drop in maize production from 2000. As a result, an

estimated 3 million Zambians face hunger; Four million

Angolans – one third of the population – have been forced to

flee their homes; More than 11 million people in Ethiopia

need immediate food assistance.

Other students were shown a flyer featuring

a picture of a young girl and these words:

→Rokia, a 7 – year – old girl from Mali, Africa is desperately poor

and faces a threat of severe hunger or even starvation. Her life will

be changed for the better as a result of your financial gift. With

your support, and the support of other caring sponsors, Save the

Children will work with Rokia’s family and other members of the

community to help feed her, provide her with education, as well as

basic medical care and hygiene education.

The first flyer raised an average of 1.16 from each student. 💲

The second flyer, in which the plight of millions became the

plight of one raised 2.83. The students, it seems, were willing 💲

to take some responsibility for helping Rokia, but when faced with

the scale of the global problem, they felt discouraged.

Some other students, also chosen at random, were shown the

same two flyers after being told that people are more likely to

donate money to an identifiable victim than when presented with

general information.

This book is an invitation to think again, again: to turn

away from the feeling that fight against poverty is too

overwhelming and to start to think of challenge as a

set of concrete problems that, once properly identified

and understood, can be solved one at a time.

Jeffrey Sachs, adviser to he United Nations, director of the Earth

Institute at Columbia University in New York City, and one such expert,

has an answer to all these questions: Poor countries are poor because

they are hot, infertile, malaria infested, often landlocked; this makes it

hard for them to be productive without an initial large investment to

help them deal with these endemic problems. But they cannot pay for

the investments precisely because they are poor – they are in what

economics call a “poverty trap.”

Both (William Easterly, who battles Sachs from New York

University and Dambia Moyo, an economist who previously

worked at Goldman Sachs and at the World Bank) argue

that aid does more bad than good: It prevents people from

searching for their own solutions, while corrupting and

undermining local institutions and creating a self-

perpetuating lobby of aid agencies.

There are in fact answers… it is just that they are

not kind of sweeping answers that Sachs and

Easterly favor. This book will not tell you whether

aid is good or bad, but it will say whether

particular instances of aid did some good or not.

But in truth, aid is only a very small part of the money that is spent on

the poor every year. Most programs targeted at the world’s poor are

funded of their country’s own resources. India, for example, receives

essentially no aid. In 2004 – 2005, it spent half a trillion rupees ( 31 💲

billion USD PPP) just on primary – education programs for the poor. Even

in Africa, where foreign aid has a much more important role, it

represented only 5.7 percent of total government budgets in 2003. More

important, the endless debates about the rights and wrongs of aid often

obscure what really matters: not so much where the money comes from,

but where it goes.

To take an examples, according to the World Health

Organization (WHO), malaria caused almost 1 million deaths

in 2008, mostly among African children. One thing we know is

that sleeping under insecticide-treated bed nets can help

many of these lives. Studies have shown that in areas where

malaria infection is common, sleeping under an insecticide-

treated bed net reduces the incidence of malaria by half.

For approximately 10, you can deliver an insecticide-treated 💲

net to a family and teach the household how to use it.

 

Because malaria is contagious, if Mary sleeps under a bed net,

John is less likely to get malaria – if at least half the population

sleeps under a net, then even those who do not have much less

risk of getting infected.

 

Given the benefits both to the user and others in the

neighborhood, selling the nets at a discount or even given them

away would seem to be a good idea.

Easterly and Moyo object, arguing that people will not value

(and hence will not use) the nets if they get them for free.

 

The shift from broad general questions to much narrower

ones has another advantage.

 

Answering these questions, we get to understand what, if

anything, is special about the poor.

It is the body of knowledge that

grows out of each specific answer and the understanding that goes into

those answers that give us the best shot at, one day, ending poverty.

This book builds on that body of knowledge. A lot of the material that

we will talk about comes from RCTs conducted by us and others, but we

also make use of many other types of evidence.

The message of this book, however goes well beyond poverty

traps. As we will see, ideology, ignorance, and inertia – the three

Is – on the part of expert, the aid worker, or the local policy

maker, often explain why policies fail and why aid does not have

the effect it should.

We hope to persuade you that our patient, step-by-step approach

is not only a more effective way to fight poverty,

but also one that makes the world a more interesting place.

Thank you!!