OK, I had promised a few days ago that I would write some threads about insights I got from reading Esther Duflo and Abhijit Banerjee, 2 of this year's Nobel laureates in economics /
First, an important disclaimer: I do not work in development economists. The furthest I ever got in implementing a Randomized Controlled Trials was participating in a H2020 proposal to use this to study the effect of MaaS (the proposal was not accepted) /
No, what I intend to do here is share some memories I have from reading "Poor economics", their bestseller that explained their approach to development economics to a general public. I had borrowed this book, so everything I write here is written from memory /
So I hope the public will indulge some sloppiness in my argument. /
OK, so one of the stories that stuck with me is the following. The work of Duflo and Banerjee focuses very much on the poorest of the poorest. To be clear, I am not talking here about the "I live in a 50 m2 appartment with 6 people" or I can't afford meat poor" /
(which is already very poor of course), but about the absolute bottom in the world distribution of income. People who are chronically underfed, to be more concrete. /
Now, one of the intriguing findings discussed in the book is that when people in this category see their incomes increase marginally, one of the behavioural responses is a *decrease* in caloric intake /
Yes, you read that correctly. People who were chronically underfed reduce their caloric intake when their incomes improve a bit. So what is happening? /
I suppose that, when confronted with this, most of us would think of a poor person in a developed country (probably living in a "food dessert"), who, thanks to his higher income, switches from a "taco bell" and KFC diet to a quinoa salad diet /
Even if this stereotype was accurate (I have recently seen evidence that it isn't), remember that this is *not* the kind of poor we are talking about. /
What Duflo and Banerjee found is that, for the very poorest, a small change in income will not change anything fundamental about the amounts of calories they could afford if they would spend their additional income entirely to more food /
So, basically, even if they would spend their additional income entirely to eating more, they would still go to bed hungry. A bit less hungry, but still hungry /
Which raises the question: what else can you spend your money on? One answer is: tastier food. And this is what happens. Extremely poor people spend extra income on tastier food rather than on extra calories. /
If you can't change anything about the hunger, you might at least enjoy the meal. You might argue this is irrational. But that's probably because you see from the perspective of a person for whom hunger is not a permanent feature. Taste brings a bit of consolation in a miserable/
life. This also explains why poor people, as soon as they can afford it, will often buy televisions or radios rather than invest in their farms. Again, this may appear shortsighted, but Duflo and Banerjee warns us against seeing this from our perspective /
An investment is always uncertain. You may spend money on additional equipment, just to see the whole investment wiped away because of a drought or a flood. In this sense, spending money on consumption goods that immediately improve your life makes sense - even if you're hungry./
So there's an important message, one that people working in development often forget: poor people want to improve their lives according to their priorities, not according to the priorities of (probably well meaning) helpers from abroad /
Also: details matter. In order to understand the motivations of people, it is important to go beyond the appearances and the easy explanations. I suppose this implies that more cross disciplinary work between development economists and anthropologists would be welcome.
