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As most people have pointed out, and I agree, this paper does a very good job of objectively describing how the poor consume, generate income, and their access to markets and public infrastructure. What I thought was more interesting was how the paper supports the high development theory in two respects. The first being how underdevelopment is a cycle. Banerjee and Duflo report that roughly half of children between the ages of 7-12yrs are in school. Half the children grow up without learning that the world offers more opportunity than their unfortunate circumstance. Furthermore, growing up in a households of many people might give one a strong sense of connection and acceptance and ultimately make an individual less likely to move away. Secondly, high development theory suggests that government activism is required to break a cycle of underdevelopment. Banerjee and Duflo discuss how the extremely poor suffer from the lack of access to public infrastructure, while this varies by country and rural vs. urban living, nonetheless most extremely poor households are lacking in some sense. Access to health care and basic sanitation might decrease mortality rates and illness, both of which might increase productivity and ultimately income. These infrastructures are examples of government activism that would raise the quality of living for the extremely poor. Lastly, and on a different note, the paper was written in 2006, I wonder how all the statistics have changed (if at all) over the past nine years.

Austin Gilbert

When I envision an impoverished person, I imagine someone in need of food or other basic necessities and only seeking to satisfy these essential needs. I was surprised to read that extremely poor people that can not feed themselves sufficiently still fall victim to the temptation of goods like tobacco, alcohol, or radios and put their malnourishment aside for the satisfaction of these goods. I enjoyed the paper’s explanation for this phenomenon of poor individuals addressing their desires before their needs, as it stated, “Thinking about the economic problems of life must make it harder to avoid confronting the sheer inadequacy of the standard of living faced by the extremely poor.” I observed something similar to this growing up, as I had a friend whose family was low income, and although they could not afford a nice house or pay for the soccer team he played on, he and his parents owned iPhones. It could have been that they did not want to fully acknowledge their financial situation, so they decided to enjoy the moment.

Also, I recognized some similar ideas pointed out in Krugman’s paper about the issues of developing nations economies, referencing the constraints of small-scale industries. This paper similarly points out “the problem of small scale,” stating that the businesses being operated lack assets, capital, and are not benefiting from economies of scale and therefore cannot reduce costs to increase profit. This ties in with the High Development Theory, as investment into these minor businesses could help move them into the “virtuous circle” that is modernization and development.

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