« ECON 102 Syllabus | Main | Your Textbook Author.... »



Christine Pence

I found it very interesting what this article said with reference to the poor and their happiness. It reported that the poor do not have particularly low levels of self-reported happiness. In July, Time magazine published a cover story on the science and pursuit of happiness. (http://content.time.com/time/magazine/article/0,9171,2146449,00.html). Researchers have found that once one’s basic needs are met, increasing income has little correlation with increased happiness. Obviously the basic needs of the extremely poor are not met so this finding is not particularly pertinent. However, what the article says next does relate to the extremely poor. Scientist found that one’s financial status compared to those around him does influence happiness. Psychologist Cameron Anderson of the University of California, Berkeley studies socioeconomic status and sociometric status. He says, “When it comes to hierarchies, people sort themselves into higher or lower position…There's a line of research in which you make people feel high or low by imagining themselves with someone above them or below them.” We compare ourselves to those around us. If one’s income is lower compared to those directly around him, he will be less happy. However, most of the very poor in the world are surrounded by others who are also extremely poor. Therefore, they do not feel inferior. Even though they report very high levels of financial and psychological stress, everyone they know “is in the same boat.” Therefore, their happiness is not greatly affected.

Also relating to happiness, studies have found that religion plays a large role in increasing one’s happiness. Many of the extremely poor spend a portion of their income on religious festivals, wedding and funerals. In Udaipur, 90% of extremely poor families spent money on religious festivals and in South Africa this percentage raised to 99%. When individuals are living on less than $1 per day, allocating any money to things other than food means that those things must have great importance.

Colleen Paxton

A point discussed in this paper and in the textbook is the freedom of choice. The paper says that the poor do not see themselves "having a significant amount of choice." Whether it's the choice of spending money on food or entertainment or the choice of profession, the options are limited. The textbook discusses the importance of what a person can be and can do, and self-esteem is limited in poverty. The lack of specialization limits advancing a certain career or becoming efficient in one area. If the poor cannot advance themselves individually or become more efficient in one area to increase their income, how can they advance as a country? The textbook also points out that wealth does not necessarily bring about happiness, but rather it brings about an abundance of choice. The stress of choosing between your children's education or skipping meals should not be considered under a form of "insurance." This insurance reverses development. The paper says, “In several ways, the poor are trading off opportunities to have higher incomes." What if there were ways to increase specialization and opportunities now in order to increase income in the future rather than choosing a temporary higher income? The power to choose changes the conversation.

Daniel Molon

This article examines the lives of impoverished people from a collection of countries. The healthiness of the poor was one aspect that was looked into in this article, as the poor people in the countries surveyed report being underweight on the Body Mass Index scale, have a higher incidence of illness, and higher incidences of other health problems.

A surprising conclusion from this article was that the poor do believe that they have freedom of economic choice. This is deducted from the breakdown of how the poor spend their money, and that a significant proportion of their incomes are spent on non-essentials, such as alcohol, tobacco, and entertainment. However, there is a significant difference between rural and urban poor, as seen in the percentage who own a television. The authors point to the possibility of unmet demand for entertainment in rural areas, which would indicate that they do not have the same freedom of choice that urban poor do, which means that even among poor people there is a distinct difference in standard of living based on urbanization.

Despite the poor believing that they have economic freedom, their poor health leads me to believe that they do not realistically have enough money to meet their basic needs. Their spending money on things outside of what is considered basic necessities does not necessarily mean that all of their needs are being met. There are many possible causes that would lead to the poor citizens of these countries surveyed to choose not to purchase more basic necessities when given the choice. First, as seen with television’s inaccessibility to rural poor, it is possible that their basic needs cannot be met, as there may be a shortage of available cheap basic needs in the poor areas, as the countries observed are poor and may not have advanced infrastructures in place to make resources available to the poor. Secondly, maybe disregarding things such as entertainment as unnecessary is a wrong assumption, and that it should instead fall within self-esteem as a core value of development, as entertainment increases morale and happiness, which I believe would fit into the category of self-esteem.

Carson Coffman

The overarching theme I noticed in this paper was the idea of a "vicious cycle" of the poor. The questions that drew my attention to that were "Why don't the poor save more?" or "Why don't the poor invest more in education?" The answers to these questions raised this idea and introduces a new concept that was not mentioned in the paper.

The poor do not save more because of a lack of safe places to keep such money. Inside a pillow or underneath a mattress is not a viable option for many reasons (risk of theft, risk of spending the money because it is too readily accessible), and the cycle goes on and on. If your parents do not save money, they do not teach you to save money, and so you make the same mistakes with your children, and so on and so forth.

The question of education presents a stronger correlation to this idea. Banerjee and Duflo asserted that the quality of education of these children never improve, because parents are not recognizing the poor quality of the schools in which their children are enrolled. They develop this idea by saying that poor families generally have illiterate parents who do not realize how poor the education caliber is. As a result, their children receive little education, and, once again, the cycle continues. Thus, this results in uneducated people who are unable to overcome their circumstances due to a lack of teaching.

This vicious cycle introduces a concept that is not mentioned in the Banerjee and Duflo paper. The severity of this "cycle" suggests that not only do we need to aid the poor and provide them with supplies and resources to overcome their poverty, but also we need to aid them in breaking this cycle. No matter how many resources and assistance we (as more developed nations) give them, if they do not know how to utilize them to improve their lives. This idea can be aptly summed up my the old adage: "Give a man a fish, you have fed him for today. Teach a man to fish, and you have fed him for a lifetime."

Aaron DiGregorio

I found this article to be extremely thought provoking. How privileged are we as Americans where we believe making $10 an hour to be extremely impoverished, and yet that is 10x the income of the people mentioned in the article. I cannot even fathom having to provide, not only for myself, but my family as well on $1-2 a day.

I found it very interesting that the "extremely impoverished" people mentioned in the article do not have a low self-reported level of happiness. Although they do not have the pleasures of modern society, they are still able to find happiness. I also found it interesting that while it would appear that what little income they do have should automatically go towards staying alive, when interviewed they did still believe that they contained the power of choice. Perhaps once this power of choice is gone, would their level of happiness be significantly lower too?

During Tuesday's class, we discussed how an Economy is revolved around choices. And since these extremely poor people still believe that they have a choice in how the allocate their resources, I believe that it is vital that we as a developed society continue to study these undeveloped economies and thus allow them to progress in their decision making. Hopefully, in time, improving their economy as a whole all together.

Nick Z.

Like Aaron, I found this article to be astonishing. The participants in the research cited are faced with incredible challenges that I can not even fully grasp. When I think about all the money that is spent on my behalf by my parents (W&L tuition, food, clothes, entertainment, etc.) I feel very appreciative on one hand but anguished on the other that many suffer due to their financial situation.

I found the lack of resources the biggest factor in the demise of the poor. With little to no access to capital it is not surprising that those interviewed are not able to improve their financial situation. Without capital it is very difficult to be productive, especially when the majority of those interviewed are entrepreneurs. If there were a greater investment in capital within these poor areas the economy would become more productive and the standard of living would improve.

Before there can be any growth by an increase in capital I believe there must be a much greater investment in education. Without knowledge there can be no confidence to take the road less taken and participate in larger businesses. If the education system improved many of the poor may gain confidence in their capabilities and take the proper risks to improve their lives. To improve ones human capital is to improve ones productivity, to improve ones productivity is to improve the productivity of an entire nation. This being said the lack of government intervention in the discussed education systems is not only immoral but economically flawed.

Julia Murray

In addition to what others have said about the article, I think that is also highlights the importance of deeper analysis of economic data about the developing world, as opposed to more generalized and superficial data. The example that stuck out to me was the level of education in India. In India, 93.4% of children ages 6-14 are enrolled in public schools. On the surface, this data may seem relatively encouraging and lead the average consumer or even policy makers to believe that there is not a significant education problem in India. However, further analysis of the data reveals 34.9% of children age 7 to 14 cannot read a single paragraph at second-grade level. This does not sound like a country that has over 93% of children receiving education to me. This discrepancy underscores the importance of using several indicators to measure an indicator of development. Further analysis of the level of education available in India would most likely reveal that a large portion of teachers do not show up to school on a regular basis, that these teachers are not well-trained, or that there are far too many students in a class. As we continue to read more articles this semester, it is important to keep such examples in mind.

Lizzie Weston

I agree with Nick in thinking that the lack of resources is the biggest hurdle for impoverished people around the world. This article paints the picture of a cycle of being poor that is seemingly impossible to escape. The lack of education and healthcare, most importantly, seem to hold back millions of people around the world.
It is very upsetting that the education system is so poor in many of these countries. It was also very surprising to me that teachers at private schools were less qualified and absent more than their peers at dysfunctional public schools. This most of the time means that there is not a good choice for families, and their children will grow up to be just as poorly educated as their parents. The article said that “poor parents, who may often be illiterate themselves, may have a hard time recognizing that their children are not learning much.” This is an example of how much harder it is to break the cycle because this might continue for generations with government aid.
It is also disheartening that so many people are malnourished and that healthcare is so poor. Sickness also perpetuates the cycle because when students or workers are sick, they miss out on educational and occupational activities that could otherwise help them do more.


As I type this response on my iPad, I am sitting in a sorority house at a small, liberal arts campus--quite the juxtaposition to this article. First off, I think this article really made me reflect on how lucky we are to be here, at W&L, and to be healthy and on our way to a stable job. But on to the development economics...

For me, the most interesting question that was posed was: Why don't the poor spend more money on food? As we've been discussing in class, characteristics of development can't always be measured quantitatively. I think that in this particular case (though it could be applied to other topics throughout the article as well) we must consider the human element, for lack of a better term. In the 13 countries that were studied, food represented somewhere between 56 and 74-78 percent of a household's budget in rural and urban areas. At the same time, the median household spends 10 percent of their annual budget on festivals. Why? My answer may be too psychological or completely miss the target, but I think it has to do with being human. Food is temporary satisfaction--a poor person can eat one meal a day, but that will only satisfy them for 24 hours, if that. Thinking back on memories from a wedding or a religious festival, could make one happy for a lifetime. In addition, I think this answer may be closely related with expectations and life expectancy. A 45-year-old dad, who may be toward the end of his life (depending on the country's life expectancy), may want to "splurge" on a wedding for his daughter if he knows his time may be up soon.

I think that this concept of spending money on festivals could link back to the happiness of the poor, as Christine mentioned. The article says: "While the poor certainly feel poor, their levels of self-reported happiness or self-reported health levels are not particularly low." I think this only shows how important happiness economics is when looking at the whole picture.


I took many things away from this article, but the main thing that surprised me was the breakdown of what items the extremely poor spend money on. I cannot even begin to imagine having to live on one dollar or less per day, and before reading the article I thought that the majority (around 75%) of this one dollar would be spent on food. I was astounded that for the rural poor in Mexico only 49.6% of the one dollar budget is spent on food. I still do not understand how a person can take in enough calories to survive if he or she is spending so little on food.

I was also initially surprised to find out that of commodities purchased the extreme poor spend a significant amount alcohol and tobacco. I thought that after food the next thing to buy would be clothes especially in geographical areas where the climate can be cold. If I complain about the cold in a coat and boots, I cant imagine what it would be like for a child in little or inadequate clothing. However, after thinking about this point some more, I realize that I spent an aggressive amount of money on clothes that I do not need. I would assume that the extreme poor has a minimal wardrobe consisting of one or two shirts, pants, and maybe shoes. I think that maybe after purchasing the basics clothing becomes not as important in the budget allowing money for alcohol and tobacco?

Lastly, I never would have guessed that the extreme poor spend a decent amount of their budget on festivals. Without things like TVs or radios, festivals seem like one of the few sources of entertainment. I considered that taking part in these festivals might have a connection to why the extreme poor do not have a low level of happiness, explaining why it is such a big part of the budget.

After talking about choices of the extremely poor in class and reading this article, I feel like the extremely poor demonstrate that they do have somewhat of a choice in how to spend their money (bigger that I thought they would have) by spending their budget on festivals, tobacco, and alcohol. All of these things not being absolutely necessary for survival like food or water. Regardless, no one can deny that the options from which the extreme poor have to choose from are extremely small.

Gyung Jeong

As many of our classmates mentioned above, this paper examines the choices that the extremely poor make and observes the economic lives of the extremely poor. The first question that immediately came into my mind was how do we define the “extremely poor (EP)” people of the world. As the authors mention, “the EP people are currently living on no more than $1 per day per person, measured at the 1985 PPP exchange rate.” However, I am not sure if this is the correct or the best way to define it. Professor Stiglitz once argued in “GDP Fetishism,” (http://www.project-syndicate.org/commentary/gdp-fetishism) that GDP is not an accurate measurement of economic growth and that it is hard to put all the factors of the growth into one single number, GDP. As Professor Stiglitz stated, it might not be accurate to define the EP as the people who live under $1 per day. It is possible that there are people who might live on more than a dollar but still the circumstances and economic status might be the same as EP. This is just my thought of the definition.
It is also interesting to see the data that shows how EP people spend their income. I first thought that they would spend money on food most of the time, but (although they do spend a great portion of their income on food) it is surprising to see that they also spend money on festivals, forms of entertainments such as movies, and radio or television. They do not spend that much money on these activities, but it is still interesting that they have money for entertainment activities.

Olivia Davis

My reaction to the article was somewhat similar to Carson’s; poverty appears to be an endless cycle from one generation to the next. The element of causation was in the back of my mind as I read many of the article’s key points. Did poverty cause the trends indicated by the data, or vice versa?

The portion that the poor spent on alcohol and tobacco, for example, may be so large, relatively speaking, because of an addiction. Alcoholism prevents a person from being able to work to his or her fullest potential. An alcoholic may be fired for reporting to work intoxicated, if he or she shows up at all. A farmer suffering from alcoholism may be incapable of properly tending to crops. An addict also spends more than he or she can reasonably afford to satisfy these needs, thus depleting resources necessary to fulfill basics for survival, such as food.

The article explains the limited healthcare the poor receive, in addition to the prevalence of bad health. Naturally, a person with poor health is not able to perform many tasks as efficiently as a person in good health. For instance, a farmer without use of one arm cannot cultivate as much land in a given amount of time as a farmer who has full use of both arms. Therefore, the first farmer does not grow as many plants to sell as the second farmer. Additionally, the unhealthy are less likely to be hired for a job when up against healthier competitors. On the other hand, the poor may have come into poverty due to the illness of a person. Expensive medical costs that are not covered by insurance can deplete one’s savings.

I would be interested to learn more about some of the specific cases of the poor to have a better understanding of how they originally became impoverished, as well as to hear their rationales for their spending habits. Determining the exact causal flow in the situations mentioned above would allow greater comprehension of the roots of poverty, why the cycle continues for many people, and how to best break this cycle.


As mentioned above, Banjaree and Duflo examine the lives of poor and extremely poor to reveal patterns of their economic choices. The section that grabbed my attention was “How the Poor Earn Their Money” (pg. 10). Specifically, the authors highlight how even in rural areas the poor and extremely poor do not spend the majority or gain the majority of their income from farming their own land. I found this especially interesting because in my mind, if you were poor and lived in a rural area I would assume that subsistence farming would be the predominant source of income (e.g. rural China). However, Benjaree’s study revealed that not only was agriculture was not the main source of income, but also that the majority of poor/extremely poor held multiple occupations, with a median of 2.3 jobs per person in a 3 person home.

What exactly am I getting at? Ok so we’ve learned that a) rural poor/extremely poor do not always spend the majority of their time farming, and b) the rural poor/extremely poor almost always split their time between multiple jobs. The authors suggest that the fact that these people oftentimes split their time between multiple jobs leads to an overall lack of specialization among the poor and extremely poor. I think that dividing time between jobs and the lack of specialization of these poor and EP individuals plays a major role in perpetuating what Carson calls the “vicious cycle of the poor”. These people are often multiple working seasonal and daily occupations on an intermittent basis, preventing them from refining their skills in one particular field. As the authors assert, without any specialized skills these individuals are limiting their chances of getting promoted (e.g. earning more money). While I believe education is paramount to the progress of working poor, job specialization would benefit the lives (via increased income) of the poor and extremely poor.


Caring for the physical, mental, and emotional well-being of others seems like it would be at the center of social responsibility debates. The discourse in Banerjee and Duflo’s paper that most touched on this concept was that about stress. The world’s poor report high levels of financial and psychological stress, an emotion with the most frequently cited reasons being health problems, lack of food, and death (9). All of these reasons are physical, and thus focusing on health and nutrition improvement policies/initiatives, by reducing stress, may be one of the best moves for addressing not only the physical but also the mental and emotional tolls that I think are the most urgent results of world poverty. (Another related point the paper noted was that “cutting meals [has been] strongly correlated with unhappiness” (9).)

Stress can have detrimental physical, mental, and emotional side effects— 12% of those living under $2.16 in Udaipur report recent periods of being “’so worried, tense, or anxious’ that it interfered with normal activities like sleeping, working, and eating” (9). So in addition to reducing psychological and physiological tolls for the world’s poor, a focus on health and nutrition improvement could actually improve productivity, an improvement that might benefit the economy on the macro scale. For example, in class we looked at the productivity increase that was the result of China’s investment in healthcare.

Get Freedom

While reading this article, I was surprised to come across with following paragraph, “…the under $1 per day households spend very little on the forms of entertainment that are common in rich countries, such as movies, theaters, or video shows, In all 13 of the countries in our sample, in the month proceeding the survey the average extremely poor household spent less than 1% on any of these forms of entertainment. … Has the importance given to festivals and other indigenous forms of entertainment crowded out movie-going, or it is lack of access to movie theaters and such that gives festivals the place that they occupy in their lives.” (p6) I do believe that author should keep in mind that all the countries being studied have different cultural backgrounds, and different cultures have different understanding of forms of entertainment. What if poor people, from different countries, choose not to go to movies not because of the lack of movie theaters and shows, but simply because movie-going is not the form of entertainment they would like to pay for? What if, movie-going was not crowded out by festivals, but simply was not there from the beginning?
And plus, people, studied, might want to invest their money in their relatives and friends by organizing festivals rather than spending it on themselves (collaborative vs. individualistic) or they might be culturally expected to organize big festivals for different occasions (like my own Kyrgyz culture).

Hampton Ike

As mentioned by many of the comments before me, I was surprised by the choices made by the impoverished regarding material and consumption goods not related to sustenance. I think that beyond merely looking at the data as revealing a vicious cycle of perpetual poverty that feeds negligent or complacent behavior; the distribution of income spent on entertainment goods, alcohol, and tobacco highlights intrinsic human behavior. The inability to place future earnings, consumption, well-being, etc above temporal desires and cravings is ubiquitous in todays world, granted in very different ways. The poor in developing countries forgo fertilizer, food, and proper shelter for temporal nicotine, alcohol, and entertainment pleasure. However, everyday I see students and myself put off studying, working out, or intellectual attainment for netflix, hikes, and the list goes on. When speaking about the developing worlds inability to invest in social capital or living standards, it is important to realize that all peoples and cultures practice these same behaviors. I cannot answer why the extremely poor remain in their status and cannot move on, but I do believe that the problem lies beyond misallocation of resources.

Chase Douglas

The amount of spending not on food particularly jumped out at me in this article. Especially the level of spending on pleasure, such as community oriented events and entertainment and the fact that these purchases were rarely regretted, even though it meant damaging some serious aspects of one's life, such as health.

I really liked Shelby's point of about happiness economics. While it is imperative that these nations develop as quickly and as best they can, I think it is very important to develop happiness just as much as wealth. 12% of people in Udaipur reported symptoms of unhappiness and 2/3 of Americans report being unhappy (URL at bottom), yet we are rich beyond belief as compared to those in Udaipur. This article really got me thinking about how development should be defined and how it is implicated. I agree strongly with Shelby again that development must be holistic in that it covers all aspects of the human condition, not just dollars and cents.


Bayan Misaghi

An undertone of tradition steeps several of the earlier sections in this article. It is intriguing that both the poor and the extremely poor spend greater than 30% of their incomes on events like religious festivals, weddings, and funerals. Spending money on events like these rather than food, basic necessities, assets for the business, etc. indicates at least two things:
1. A commitment to a belief system, superstition, religion, etc. and/or
2. A way to signal wealth.
I have family in both India and Tanzania and they have on numerous occasions communicated to me that tradition takes precedent in how families—especially in rural settings— make decisions. Tradition in both countries includes strict adherence to religious ritual and it creates a culture of needlessly flaunting and keeping up with the Jones’s. Traditions like these dictate why even the extremely poor will sacrifice several meals to host a “proper” burial ceremony.

Later we read about how the poor earn their money and how individuals will have multiple occupations just to make ends meet. The paper lists three reasons why there is so little specialization, but I am going to suggest another. There is a lack of specialization possibly because the current workforce simply emulates the work habits of the older generation of workers. Even the entrepreneurship of the poor suggests that tradition dictates the lines of work an individual takes. Businesses are owned and operated by only a couple people, and most of them are family businesses. This suggests that parents hand down their businesses and teach their children a set of skills that they are familiar with, not encouraging the acquisition of new and potentially more profitable skills. Furthermore, the fact that the poor are clannish in business—not forming inter-family business partnerships—eliminates the possibility of economies of scale.

Lastly, the question of why the poor do not migrate for longer also has to do—at least, indirectly—with tradition and with the social network. The paper says that an individual’s social network at home provides an informal insurance, but then goes on to suggest that an individual’s commitment to family rather than “living alone” is another reason migrant workers return home sooner rather than later. Furthermore, The land on which a family lives is oftentimes the land of several generations of that family. A commitment to this family “heirloom” might also be a reason to return frequently.


Like every time I read an economics-based paper, I am disappointed by the conclusions drawn from the data, because I think they are missing important psychological and cultural factors that influence human behavior (granted, there IS interpretation, while many economic authors report only the data and leave the conclusions to the rest of us). The conclusion that sticks out most to me as being inadequate is the discussion of why the poor spend a big portion of their budget on festivals (this can be found on both page 5 and page 21). The authors ponder why countries spend so much money on this form of “entertainment”, when many people are malnourished, eat less than half the recommended daily calories, and/or have to skip meals sometimes.
This is certainly a valid question. However, I feel it is necessary to point out that among this sample of countries, expenditure on food ranges from 49.6% in rural Mexico to 81.7% in urban Papua New Guinea, with most countries in the range of 60-70%. The authors seem to expect that people experiencing extreme poverty would spend up to 100% of their budget on food and water, driven simply by a desire to survive. But just as a reference – the BOTTOM quintile of Americans spends only 12% of their budget on food. Of course, they have closer to $30 or $40 dollars a day rather than less than $2, but many of them live with similar conditions – less than half the recommended daily calories, occasional skipped meals, etc… I think it is worth mentioning that citizens of these countries are spending a huge percentage of their tiny budget on food compared to what the poorest of the poor in America spend.
We should also note, as Christine and “Get Freedom” did, the importance of culture, and living as a part of a community. Perhaps festivals are so ingrained into the culture that on some days they truly take precedence over eating. As Christine alluded to: there are communities in which it is more important to nourish spiritual health than physical. Or as “Get Freedom” mentioned: sometimes collaborative involvement may be more fulfilling than food to those individuals who live in constant stress. That would easily explain why some cultures spend 2-3% of their budget on festivals.
We can be reflective here on our own community and realize the importance of physiological and cultural incentives. For instance – why would struggling young adults, many living completely off their parents’ income, spend an outrageous amount of time and money on drinking alcohol in college, when it is clearly detrimental to physical and mental health? Why wouldn’t they focus all their energy on planning ahead and investing in their future? Or, even more generally, why do Americans spend so much money on deodorant, perfume, cologne, razors, and beauty products, when our bodies gave us hair to protect from our environment and pheromones in our sweat to attract the opposite sex? Or – why do we spend thousands of dollars drenching our dead relatives in chemicals, dressing them in stylish clothes, and putting them in beautiful boxes, just to be buried in the ground? There are many cultural factors to be considered here, and I believe we need to do a better job of examining those present in these poor countries to get a better understanding of their spending habits, before calling what could be deeply cultural rituals “entertainment”.
One other thing that stood out to me in this essay was the country Cote d’Ivoire. They seem to defy some trends present among other countries. For instance, they were the only country where rural houses actually had BETTER access to electricity and tap water than urban houses. Also, 79% of people earning less than $1 a day still had a savings account. I find these results to be borderline astonishing, and would love to read about their causes in more detail.

Vincent Kim

I am uneasy about how Banerjee and Duflo use the word “temptation” (pg. 22) to describe consumables that the poor should forgo for a potentially higher income and standard of living. Banerjee and Duflo are right to point out that relatively wealthy people often take those temptations for granted. However, in the next paragraph, I disagree that the poor are aware of their vulnerability to temptation. Only 28% of the poor in the Hyderabad survey listed at least one item they would like to cut from their total expenditure, so I believe this suggests a majority of the poor do not want to cut an item from spending. Therefore, since much of the poor in the survey did not want to cut these items, they should not be considered temptations—they are desired goods that contribute to a desired standard of living.

This distinction between temptation and desired goods is important, because it influences our understanding of the kind of development we want to realize. How we understand development affects how we work to achieve development. For instance, festivals and eating certain foods may be more important to both short term happiness (physical nourishment, taste, camaraderie, etc.) and long-term happiness (fond memories of celebration that brightens someone’s day). Many people in this blog have already mentioned how the poor can be happier spending their extra money on festivals, or tobacco instead of more calories. This understanding of happiness might influence people to decide that it might not be in poor people’s best interest (or in the interest of development) to save money and forgo festivals or cultural rituals.

I ultimately think that some of these value premises (term used in the textbook) should be decided by communities at a more local level, because people’s values and culture vary significantly across countries and communities. This way, I believe development can be defined more locally and implemented more efficiently than it could by the UN development goals or other international goals alone.

@Sagemtimberline: I am also interested in knowing why the poor in Ivory Coast save so much more relative to the poor in the other countries surveyed. Is it easier to save money there? What institutions make it easier to save? How much do those savings benefit the poor there?

Greta Witter

As others have discussed, the poor’s lifestyle and economic choices are as complex as they are diverse. Though choices may be driven by social norms or desires, decisions are “constrained by… market environment” (13). Without viable formal credit facilities individuals are unable save or borrow. Expansion of instinctive entrepreneurship into a financially sustainable and scalable enterprise is nearly impossible. In nations where political and legal systems are rudimentary (or corrupt), it would be naïve to assume that access to modern sophisticated financial institutions could possibly be solution. Yet, Banerjee and Duflo mention the success of micro-credit facilities as a “disciplined way to save” (15). The poor are willing and able to make smart decisions with their limited capital – but our Western institutions and social infrastructure cannot simply be transplanted, they must be must be tailored to the local landscape.
Micro-credit offers a potential pathway to efficiency and stability on an individual level, but a huge amount of responsibility will inevitably fall on the national government’s plate.
Healthcare and education stand out as the most basic social services to which the poor lack availability, access, and quality. Without any form of social safety net, many are unable and unwilling to take any form of risk (financial, educational, medical), as the consequences could be dire. Considering the public sector’s responsibility leads us to the duality of Eastern and Western development – is a healthy and educated workforce the pathway to GDP growth, or is GDP growth required to medicate and educate the workforce?

Nathan Kelly

First of all, Duflo is an incredible economist. Her work is some of the most revolutionary in development economics, often dispelling long held beliefs about those in underdeveloped regions of the world. This is no different. I feel as if I have a much better picture of the kinds of decisions that those living on less than a dollar a day have to make on a daily basis. On the other hand, it tells me that we still have a lot to learn. One of the topics I would love to see Duflo develop further is the difference between rural poor and urban poor. In my own thinking about the poor in developing countries, I have to believe that these two groups have very different decisions to make on a daily basis. The paper discusses this at some level whiled talking about TV and radio usage but I would think that the stressors and decisions being encountered would go far beyond the decision to have a TV or radio. However, as the article so readily showed, my beliefs about the economic lives of the poor may not be very accurate.

Mac Keers

One of the things that I found most interesting about the article was the bit about specialization. In these poor countries, people do not attempt to become specialized and instead prefer to do several jobs to maximize their income in the short term. This unfortunately stifles earnings potential and helps to perpetuate poverty. It is unclear whether the poor are aware of this effect or they just don’t have the wiggle room to work on single skills in the short term. Later in the article there seems to be some indication that even in extreme poverty people have some flexibility in their spending even to the point where they can save, so perhaps there is insufficient knowledge about how specialization is beneficial. Informing people about specialization in these communities or about efficiency might prompt them to make better decisions about how they spend their work hours. One recommendation involved the women making the dosas working in pairs so that there would be less waiting around. This would be easy to implement but may not be obvious to the people in these countries.
As many people have already mentioned, the amount that the poor spend on food was striking. Combining their lack of spending on food with poor dietary choices they are probably making their malnutrition worse than it needs to be. This may be another consequence of incomplete knowledge. Eating properly is essential to remaining healthy, which in turn leads to being more productive and receiving better pay. The link between proper nutrition and wage benefits may not be clear and again, just a little education could go a long way towards improving the quality of life for people in impoverished countries.

Libby C

I agree with several of the earlier comments noting the author's choice of the word "temptation" regarding spending on goods other than food. As the author notes, many people living on less than $1/day do not work in the same job for extensive periods of time and seem to avoid specialization. Thus, it is not surprising that they do not choose to save for a piece of equipment or a machine. In order to justify saving for an expensive item of physical capital, an individual would need to have a significant amount of confidence in their future means of employment. They would need to commit to foregoing the additional items they consume in the present, items which likely bring a significant amount of psychological benefits. I feel the article does not fully recognize the positive psychological benefits the individuals likely experience as a result of their ability to choose how they consume a portion of their limited income.

Peter Partee

Something that I was considering while reading this research was that the profit-maximizing, efficient equilibrium is not necessarily, and seldom is, the socially optimal equilibrium as well. The negative externalities created by efficient markets can yield huge inequality that you don't even have to go far to observe. According to the CIA's GINI coefficients (see bottom for link), the United States has a more unequal income distribution than a couple of the countries that were sampled for this MIT research. So for as easy as it is to kind of disengage from this research and say, "well that's something that happens in impoverished countries etc." Inequality is really all around us; the only difference is that there is simply more capital in the United States.

As far as the research itself goes, statistics that jumped off the page to me were that 60% of families have a member that migrates to work, as well as that on average only 2% of the budgets of those sampled went towards educational opportunities.


The comments to this entry are closed.