Rethinking Poverty. About “Poor Economics” by Abhijit Banerjee and Esther Duflo

Abstract

The article presents an overview of the book “Poor Economics. A Radical Rethinking of the Way to Fight Global Poverty” by Abhijit Banerjee and Esther Duflo, Nobel Laureates in Economics 2019. The book’s Russian translation was prepared and published in 2021 by the Gaidar Institute Publishing House and Faculty of Liberal Arts and Sciences Saint Petersburg State University’s. The monograph summarizes the long-term experience of studying the economic practices of poor residents of a number of countries. It is emphasized that poverty and its companions—malnutrition, diseases, unemployment, etc.—are not exclusively a consequence of objective social, economic, historical, climatic and other conditions and restrictions, but also a result of how people and households act in these conditions, and what choices they make every day. Banerjee and Duflo propose five key conclusions concerning the origins of poverty and the causes of its sustainability: (1) the poor are often guided by false or outdated information, and, as a result, make irrational decisions; (2) the poor have to independently look for solutions to many life problems and manage various risks; (3) many of the effective “readymade solutions” are not known to the poor, and numerous financial services are too expensive for them; (4) the policy of helping the poor is often ineffective not because of any fundamental problems, but because of the inflexibility and priority of the process over the results; (5) pessimism and disbelief in the possibility of change can turn into self-fulfilling prophecies, both at the level of individuals and households, and at the state level. The observations of the Nobel Prize Laureates show how working solutions to the problems of the poor can be simpler and more accessible than the ones applied around the world without much success.