Dear Reader , If you wish to skip this 1,600 word screed, here is the abstract:
Occasional blogger reads book: Poor Economics; A Radical Rethinking of the Way to Fight Global Poverty, by Abhijit Banerjee and Esther Duflo, both of MIT’s Poverty Action Lab. Blogger is hopelessly confused, sees nothing radical in the book, writes the following:
Poor Economics is a fictive work that splices together unrelated field experiments into a kind of economic novel. A deft use of anecdotes, quotes, and soul-searching reflections joins unrelated studies to tell “a coherent story about how poor people live their lives.” The book’s graceful writing lulls the reader into thinking that a) there is a coherent story about poverty to be told, and b) there is any shred of logic in the authors’ connect-the-dots approach to telling that story.
If you are seeking the same level of revelation found in Portfolios of the Poor: How The World’s Poor Live on Less Than $2 per Day (Collins et. al), you will be disappointed. No such revelations are to be found in Poor Economics.
Let us turn to Chapter 8, perhaps most relevant to this readership. It is called “Saving Brick by Brick.” This chapter serves up many puzzles. The first is a list of questions posed, but never answered:
If the poor save brick by brick, it must be because they have no better way to save. Is it because banks have not found a way to collect the savings of the poor, and there is a “microsavings” revolution waiting to happen? Or, is there something we haven’t yet thought of that makes an unfinished house an attractive investment? And should we be impressed by the extraordinary patience of people often living on less than 99 cents a day, who will deprive themselves of some of the little pleasures of life for years in order to complete their houses? Or, if surprised by the fact that, if building the house brick by brick is the only way to get to own a house, they don’t try to save more to build it faster?
Go on, I dare you to find this chapter answering the questions raised. Instead, you will find it rambles through studies that are pleasing to read about on the surface, but which do not bring us closer to understanding the social or financial underpinnings of poverty, in this case a poverty of savings.
For those of you who want to cut to the chase about savings clubs, read the somewhat mystifying paragraph that follows a description of a savings account experiment.
This highlights an interesting paradox [in reference to the experiment with savings accounts]: There are ways to get around self-control problems, but to make use of them usually requires an initial act of self-control. Pascaline Dupas and Jonathan Robinson demonstrated this nicely in another study with the vendors of Mymala market, in Kenya. They had noticed that many small businesses lose sales when their owner (or someone in his family) gets sick and has to buy medicine. So they thought of helping people earmark some of their savings specifically for such contingencies, or for buying preventive health products (such as chlorine or a bed net). They contacted members of ROSCAs and offered them a lockbox, which could be used to save specifically for health contingencies. Some people (randomly selected) were given the key to the box, whereas for others, the NGO field officer kept the key: She would come and open when people needed the money because of a health problem. Giving people a health box did help them to spend more on preventive health. But, giving them a lockedhealth box, to Dupas and Robinson’s surprise, did not: They simply did not put much money in it. People reported not using it, or using it for very small amounts, for fear that they would need the money for something else and would not be able to access it.
There are two problems with this analysis. First, it makes no sense. Are Dupas and Robinson testing the savings behavior of group members holding a key versus the NGO fieldworkers holding a key? (And why in tarnation would you randomize which members held keys? The point of these self-forming groups is that members designate other trusted members to perform various functions.) Or, are they testing for savings in a health box versus a locked health box? (Whatever that difference may be.) Or were they testing whether ROSCA folks would use the boxes, of whichever kind, for preventive health care? (Probably the latter, but it’s hard to know.)
Second, it’s not clear what evidence the authors of the book are drawing upon. In an attempt to shed light on the lockbox mystery, I looked up the cited paper, referenced on Pooreconomics.com: Pascaline Dupas and Jonathan Robinson, “Savings Constraints and Preventive Health Investment in Kenya, 2010.” However, what pops up is an article by the same authors called, “Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya, 2008,” and which makes no mention of these varied lockboxes. What’s a reader to do?
Next, there is the somewhat stupefying narrative about barriers to opening and maintaining savings accounts. The authors beautifully profile a “sophisticated” financial self-manager named Jennifer Auma. She juggles six different ROSCAs and hides cash in her home. She also has a savings account with a village bank. However, the withdrawal fees whittle away her money, making the bank account unattractive.
So (meaning therefore, meaning a bit of logic should follow), the authors describe how fellow researchers set about to understand whether people would save more, should they have a bank account in which to save. But, in fact, Jennifer has a bank account. Never mind, the fellow researchers solve a different problem, which is that poor people don’t have a bank account. So, the fellow researchers subsidize fees to open an account (and discover that the problem is withdrawal fees). But, Jennifer’s problem is and has been the withdrawal fees, not the account opening fees. “Jennifer Auma explained to us that her savings account at the village savings bank was not a good place to save small amounts, because the withdrawal fees were too high.” Somehow, this is all supposed to hang together in the reader’s mind.
Then, still with Jennifer in view, in another whipsaw segue the authors discuss the promise of M-PESA, the famous Kenyan money transfer service. M-PESA charges withdrawal (and transfer) fees, and they are proportionally big. These are exactly the fees that Jennifer Auma complains of. So how is M-PESA a solution to Jennifer’s problem? “Someone like Jennifer could deposit cash at one of the many grocery shops that happens to be an M-PESA correspondent.” Not sure how M-PESA helps Jennifer.
Finally, there’s the dead-end that begins with the nuns. A guru of the authors who “had just returned from Kenya shared with us something he noticed there: a huge difference between the farms run by a group of nuns, which were luxuriant, and those run by their neighbors, which were much less impressive. The nuns were using fertilizer and hybrid seeds. “Why, he asked us, were the farmers not able to do what the nuns were doing?””
My own question is: why didn’t the guru pose this question to the farmers or the nuns, instead of the authors? He might have learned something.
We never return to the nuns in this tale so I will have to fill in a bit here. My guess, informed by chocking up hundreds of evenings in more than a few convents, is that it’s not just about hybrid seeds and fertilizer (nuns, of course, use those). It’s about a church system that builds, disseminates and reinforces tried and true as well as experimental farming practices. It’s about a system that uses commercial seed and chemical fertilizers along with finely tuned methods of seed culling and storage, irrigation and pest management, and replenishment of continually worked land. It’s about a system that educates its membership on successful farming methods and whose members know that if they fail with a new variety of seed or new way to nourish the soil, they won’t starve, that someone in their diocese or order will be there to help.
Religious districts and communities are not inclined to let dozens, hundreds, or thousands of children, orphans, and sick people go neglected while its nuns learn to finesse their farm. They will step in and help, should a problem occur. Nuns know and count on this.
Members of religious communities can take risks that local farmers cannot. The luxuriant farms of the nuns are not signs as the authors suggest of whether “the nuns’ profession presumably inclines them to patience because their rewards are mainly in the afterlife?” They are signs that the nuns share decades of communal knowledge about how to optimize a plot of land, a social network that fortifies this knowledge, and a safety net ready to catch them in case they falter. Local farmers have one of these things or have them in scarce supply.
One must muse at the end Chapter 8 about the point of all those studies, all those experiments, all those field researchers wheeling onto farms and into villages like scientific juggernauts, bearing down on hapless farmers and hapless savers, lavishing them with praise for being “ingenious,” but not trusting that they have figured out the savings problem in the absence of formal, dependable, financial services.
Ultimately, Poor Economics is a work of fiction, but even good fiction is able to help the reader suspend his or her beliefs. Poor Economics does not do that. It only makes us hunger for real works of non-fiction that illuminate, detail and enrich. Portfolios of the Poor is among those works, and so are the very studies that the authors cite in the book, including their own.
Reader Comments (3)
Kim, in happily placing complete reliance upon your review of this publication upon which to base my own judgements, it seems to me this is a classic case of academics working hard to fulfill the dictum 'publish or perish'.
(Yet Amartya Sen is reported to have said: “A marvellously insightful book by two outstanding researchers on the real nature of poverty.” And Steven Levitt: “This book is a must-read for anyone who cares about world poverty. It has been years since I read a book that taught me so much. ‘Poor Economics’ represents the best that economics has to offer.”)
Whilst I have no in-principled objection to the bending of academic intellect to the complexity of the myriad factors that combine to create and maintain systemic poverty, I do get the sense the field has become a little too magnetic for those wishing/needing to make their mark outside the classroom or lab. Perhaps it's mine own limitations that mean I all too often fail to see a connection between dense research and practical application?
Mon, September 12, 2011 | Greg Pirie
I apologize in advance if I offend anyone, but......Kim's view reminds me of something an old development 'warrior' once said to me years ago about his opinion of academia when I was consulting in Gabon,
"PHD means Piled Higher and Deeper. It is knowing more and more about less and less, until you know everything about nothing"
I almost fell off my chair laughing...
Wed, September 14, 2011 | Jill Thompson
An interesting postscript in this 13Oct social enterprises/entrepreneurs blog, which quotes at length a section from the book outlining the positive conclusions drawn by Banerjee & Duflo about microcredit inputs: <www.techsangam.com/2011/10/13/does-microcredit-work-for-urban-poor-banerjee-duflo-answer>.
Thu, October 20, 2011 | Greg Pirie