« ECON 280 - Updated syllabus | Main | Reading for next Thursday (19th) »

09/06/2019

Comments

William Chapman

I found the choices made by the people studied in poor countries in terms of food expenditures to be very perplexing. The data shows that despite most people not consuming enough calories a significant portion of every dollar is not going towards food. Additionally, the money that the poor are putting towards food is not necessarily going to the most cost-effective food on a calorie per dollar basis. After trying to get out of my frame of reference as an American who rarely goes hungry for any significant amount of time this patter began to make more sense. A life where every dollar goes towards feeding oneself is not a life worth living. Even the poor need to find happiness in life and are likely making conscious decisions that it is worth being a little hungrier to bring some joy into their lives rather though weddings or owning a radio.

The description of the global poor as essentially small business owners or entrepreneurs was also striking. When I think of the working poor in the United States I think of retail or fast-food workers or potentially day laborers. Very few run a small business but rather tend to work for someone else. The article describes a society where people scrape together their pennies by engaging several different skills such as cooking or sewing while working for themselves. The statistic of three working occupants engaging in an average of seven different occupations was difficult to wrap my head around. In the United States we hear about people working several part-time jobs but this is a smaller portion of the population. Rarely will you see three family members each working 2+ jobs much less is that going to be the average.

EricDragon9

The paper titled, “The Economic Lives of the Poor” (Banerjee & Duflo, 2006), gave me a new perspective on many of the issues plaguing the poor and extremely poor. One of the topics that went against my expectations was how the poor spend money on food. Intuitively, one would expect the poor to spend as much of their money on food as they can until they are no longer malnourished. It was surprising that often people in poverty devote a sizable chunk of their income to entertainment rather than food purchases. Whether it be spending on TVs or festivals, it seems wasteful to devote resources to such activities. Even then, when they do purchase food they don't prioritize nutrition and will spend on foods that do not provide the most nutrition per dollar. This seems very inefficient, especially since malnutrition impacts their ability to stay healthy and to work to earn further income. This makes me wonder about what are the underlying reasons behind these decisions. Would poor people be more likely to purchase more nutritious food if they are educated on the lower nutritional value of rice vs a more efficient grain? Do they feel inclined to purchase TVs due to a need to fit in or demonstrate their wealth? Or is it possible that they are looking for a means to mentally escape their situation? Furthermore, I'm interested in exploring if there is a connection between the percentage of income spent on festivals and the importance of such festivals to the culture of the country. It would be to contrast this percentage of income spent with the percentage spent by U.S. households on holidays, such as Christmas, Labor Day, Halloween, ect. If there is a statistically significant similarity between the percentages, would it be possible to conclude that certain percentage of income is needed for spirituality purposes or for an individual to feel like he is part of society? It is also interesting to consider that the individual who is not regularly eating believes that spending money on such entertainment has more utility to them than actual food.

Another facet of this article that intrigued me was the prevalence of the poor being small time entrepreneurs. The typical assumption of people with low income is that they are unemployed, which makes it more interesting to me that often these low income households run their own businesses. However, it is concerning that they often produce commodity products and with the many players in that commodity market and little differentiation. This means they often make little money off their work. It would be interesting if economists could determine an underserviced industry that would allow for these people to have less competition (and charge higher prices) or find a way to differentiate their products. Also, I think it would be worthwhile for economists to recommend ways to increase the efficiency of these small scale operations until they can grow to a size that they can take advantage of economy of scale.

Maggie Kidder

Banerjee and Duflo describe how vastly multifaceted poverty is in its essence and provide an overview of the dynamic problems of poverty that need to be addressed in order to fulfill the Millennium Development Goals and alleviate all extreme deprivation by 2030. Sen’s definition of development emphasizes human beings having the choice to live the lives they value, and although the poor’s ability to make choices is considerably hindered by their monetary position, I found the degree of choice that both the extremely and merely poor have surprising with such a stringent amount of available spending money. As stated, the typical poor in Udaipur could spend up to 30% more on food than they currently do, based on money allocated to alcohol, tobacco, and festivals.

I have spent some time volunteering at a café that serves restaurant-style meals to the Los Angeles homeless and have heard from homeless people firsthand that they choose to spend a decent portion of what little money they come across on alcohol and tobacco because it helps them to cope with the struggles of poverty and living on the streets. I understand why the poor spend such a substantial amount on personal indulgences like alcohol, tobacco and entertainment in order to provide relief to their immeasurable economic and personal stresses, but it is troubling to me that the poor still pass down the ability to eat healthier with their current budgets, especially when it concerns children. Banerjee and Duflo report that “eating more and eating better (more grains and iron-rich foods, less sugar) would help them build up BMI (which we noted tends to be very low).” Children are not involved in the household consumption decisions but are most severely impacted by under-nourishment in the early years of their lives. I remember reading a past Economist article that explains that the MDG goals that aligned with nutrition, like lower infant mortality rates for infants, children and mothers, have only decreased by about half of the target amount necessary to fulfill these goals. In the early years of life, good nutrition is vitally important to growth and development needs, and can cause irreversible damage on future development. This is problematic as it can lead to a poverty cycle that can become intergenerational.

Additionally, I found it interesting how much greater the number of young people there were in the identified poor countries in comparison to the US. The extremely poor households have a typical adult to youth ratio of 0.2 to 0.3, compared to 0.6 for the US. Therefore, investment in education is necessary for a demographic dividend to begin as well as working to lower fertility rates.

Beverley_xia

"The Economic Lives of the Poor" researched on 13 countries with relatively large populations of poor people, namely people living under $2 per day, and came up with characteristics of their lives.
The fact that most families in poverty include extended family members intrigues me. While the book explains this phenomenon with the fact that living together helps each share fixed costs of living and poor men usually have multiple wives who produce children, I wonder if the family size of poor households relates to their culture. Uncoincidentally, many less developed countries are Asian and African countries that have a long history of extended families. In China, for example, it is normal for many nuclear families of the same ancestor to live in one household and treat each other as siblings. On the other hand, European and North American countries value individuality. It is common for children to leave their families to establish their own home. Could it be the case that the adventurous spirit of European and North American citizens, developed as they leave their families for the world, led them on quests on the sea to discover, colonize, and accumulate wealth? Maybe extended families, and the norm to stay home than explore new possibilities limited the 18th-century people of modern developing countries from industrializing, which led them to remain undeveloped for many years.
The life of poor people seems like a Möbius loop. While poor people always attempt various methods to increase their income or spread risks, they are brought back to poverty whatever their attempt may be. For instance, poor people who want to better their lives need to earn more. However, at home, they could not borrow money at reasonable prices to expand their lands and upgrade their tools; away from home, they only temporarily migrate to work, making promotions or the accumulation of skills impossible. Besides, poor people, with the free choice to spend parts of their money the way they want to, shockingly spend them, not to invest in capital or human capital, but to entertainments like intoxicants and festivals. While it is understandable that they, like all human beings, need mental support to face the hardships of life, as a bystander, I hope to see them spend to feed themselves nutrition, to educate themselves, and to purchase radios. Radio is a good source of information that is relatively cheap and does not require literacy. It can enable a family to increase their knowledge of the world, understand policies in their country, and eventually develop the desire to explore beyond their villages. In a paper about Nepal, statistics show that access to radio reduced the gap between men and women's literacy rate in the area. Since half of the population there became more literate, the region has more effective laborers to help lift it out of poverty.
Reading the article, I realize how important insurance can be to a disadvantaged family. Without insurances, the poor need to deal with instabilities in their income on their own. Since they do not have many resources to occupy, they usually cut short in food or education supply, both of which are vital for the family to alleviate poverty. Eating less, the family work less productively and become more susceptible to sickness; learning less knowledge limits the children from skills that may earn the family a higher living. Since the article suggests that families understand the importance of education--they send children to school--it may be more important for governments to prioritize providing a stable economy and income insurances so that its people can feel more comfortable to invest in their children or programs like fertilizers that, in the long term, would generate more money for them.

alliecarmody

One of the major takeaways from the article was the language and perspective with which the author uses while studying the complexities surrounding economic decision making on the individual level for the poor and extremely poor. What surprised me most about the article came about through the discussion of percent of earnings the poor spend on food and what they "ought" to spend based on nutritional recommendations. The lens with which the author presents poor people is otherly and irrational, a people who may be able to make a more rational decision once they gain more proper "planning skills".

The author points to the decision to spend approximately 5% of annual income on entertainment such as radios, tvs, and festivals as irrational; however when considering the alternative it becomes apparent why these spending habits are unsurprisingly the most common case scenario. While the author brings up the discussion of marginal utility from the extra calories needed for their diet being less than the marginal utility gained from entertainment outlets, he projects his opinion that with proper planning the poor will be able to overcome this short sight and obtain proper nutritional substance. I believe expecting humans to operate as machines and always value marginal nutrition over freedom of choice or happiness that one may gain through redirection of funds into other avenues is shortsighted to say the least. It would be interesting and insightful, from my opinion, to repeat this study from a more ethnographically based discipline and see if we can create a more concrete answer to the whys of the spending habits of the poor as opposed to deducing most likely case scenarios when the author like many of us is so far removed from the heart of the matter.

Jack_curtis25

Jack Curtis
The Banerjee and Duflo paper about how the poor live is incredibely thorough and eye opening. It shows how the poor often face large psychological barriers to making decision to improving their lives. It seems as though many of the hurdles the extremely poor face come from the vicious cycle they are constantly trapped in. The paper talked about how if the poor increased their food spending it may not make a significant impact of their health and productivity because they would inevitably get sick, due to the poor sanitation conditions and lack to tap or clean water, and lose whatever weight and energy they may have gained. Also I was puzzles as to why the poor didn’t save more, despite having the pure monetary capability to do so. It often arises that because the savings they would be able to accrue in a relatively short time period would be quite small, and because they see the temptation using the funds for non-productive means, they mentally cannot or will not save. Since this piece came out in 2006 I think a few parts of it are quite dated as well. In many areas, urban and rural, mobile phone penetration and access to more formalized institutional financial services through micro-finance and access to the internet is allowing even extremely poor people to setup savings and bank accounts which make misusing savings harder and provide a tangible mental incentive to continue to act in this productive manner.
Another aspect of the paper I found to be quite reinforcing to basic human needs to feel like you fit in, belong, and to interact in the community in a social manner was how many of the extremely poor spend relatively significant amounts of their income on festivals and other entertainment products. It allows these people how are under constant and tremendous pressure to feel like they belong and a part of something bigger. Indeed it connects to the self-esteem aspect the Sen preaches as being one of the three pillars of well-being. I think this is also generally a shortcoming of traditional economics. These people live day by day under incredible pressure just to survive and the discipline of economics treats them as perfectly rational beings which they aren’t, nobody is. While in terms of maximizing the utility of every cent they have, yes they should save, not spend any money on entertainment or sweat, but they are human too and want to experience the many joys of life like the rest of us. When dealing with the extreme poor I think a more holistically human approach is needed in order to cater policy to best fit what these people will actually do, not what they should do.

Kristina Lozinskaya

When I was reading “The Economic Lives of the Poor,” one thought that so obtrusively popped up in my head throughout the process was how ambiguous or relative poverty actually is.

Undoubtedly, there are incredibly many complicated issues surrounding even the very term of poverty that the paper touches on including how to define it and how to adequately determine poverty lines, to name a few. But as somebody who is interested in Social Sciences and International Relations, the challenge posed by poverty to the global community that I find to be one of the most magnificent, at least for me, is how strikingly different people perceive poverty in different countries.

When in class on Tuesday we were talking about poverty lines, I was astonished that somewhere in the world, living on a dollar per day makes you fall below the poverty line while in the U.S. earning less than $12,000 per year means you are poor. The numbers seem incomparable, to say the least. At the same time, somebody who lives on that dollar per day in Udaipur, as mentioned in the paper, can actually spend up to 30 percent more on food than he or she actually does while having a $12,000 income per year somewhere in Los Angeles can find you on the street asking passers-by for money to carry you through the day.

I guess this kind of a striking impression that the paper made on me can be explained by my background and where I come from. As a post-Soviet country, Belarus is usually regarded to be a part of the “second world,” so somewhere in the middle. It is the country where the government has not so long ago announced that one of its primary goals is to make it possible for every citizen to earn $500 per month. This would amount to $6000 per year, and currently, people don’t earn that much. The minimum wage is a little over $150 per month, so that would give some of the more low-skilled workers $5 per day, and our government thinks that they can survive when an average meal at a relatively inexpensive café costs roughly $7, and then those workers also have to pay for housing, transportation, healthcare, and the list for most of them goes on.

The prices of goods differ between countries, of course. Living on $7 per day in America, Belarus, and Papua New Guinea, urban or rural areas, is all different. And people perceive poverty differently: when I am in America, I think that buying a cup of coffee for $4.50 is crazy expensive while more than 60% of the population of Papua New Guinea have no basic access to clean water. And sometimes when I am debating whether or not to buy yet another cup of coffee replying jokingly to my friends that “I am too broke,” I fail to acknowledge that I am too lucky to have this choice and this opportunity. Based on the income of my family, we fall way below the American poverty line and amount to a very average in Belarus, yet we have housing, clothing, food, and access to quality education and healthcare. When we laugh with my friends back home at the fact that all of us are “too poor” to buy the fourth pair of shoes for the summer looking at how on Instagram, Kylie Jenner complains that her special made-for-shoes closet of a size of a double room can no longer fit any new pairs, we don’t see that somewhere in this world, people have to walk wearing no shoes, moreover, having no opportunity to buy any shoes.

This is how strikingly relative poverty is.

EricDragon9

The paper titled, “The Economic Lives of the Poor” (Banerjee & Duflo, 2006), gave me a new perspective on many of the issues plaguing the poor and extremely poor. One of the topics that went against my expectations was how the poor spend money on food. Intuitively, one would expect the poor to spend as much of their money on food until they are no longer malnourished. It was surprising that often people in poverty devote a sizable chunk of their income to entertainment rather than food purchases. Whether it be spending on TVs or festivals, it seems wasteful to devote resources to such activities. Even then, when they do purchase food they don't prioritize nutrition and will spend on foods that do not provide the most nutrition per dollar. This seems very inefficient, especially since malnutrition impacts their ability to stay healthy and to work to earn further income. This makes me wonder what are the underlying reasons behind these decisions? Would poor people be more likely to purchase more nutritious food if they are educated on the nutritional value of rice vs a more efficient grain? Do they feel inclined to purchase TVs due to a need to fit in or demonstrate their wealth? Or is it possible that they are looking for a means to mentally escape their situation? Furthermore, I'm interested in exploring if there is a connection between the percentage of income spent on festivals and the importance of such festivals to the culture of the country. It would be to contrast this percentage of income spent with the percentage spent by U.S. households on holidays, such as Christmas, Labor Day, Halloween, ect. If there is a statistically significant similarity between the percentages, would it be possible to conclude that certain percentage of income is needed for spirituality purposes or for an individual to feel like he is part of society? It is also interesting to consider that the individual who is not regularly eating believes that spending money on such entertainment has more utility to them than actual food.

Another facet of this article that intrigued me was the prevalence of the poor being small time entrepreneurs. The typical assumption of people with low income is that they are unemployed, which makes it more interesting to me that often these low income households run their own businesses. However, it is concerning that they often produce commodity products and with the many players in that commodity market and little differentiation, they often make little money off their work. It would be interesting if economists could determine an underserviced industry that would allow for these people to have less competition (and charge higher prices) or find a way to differentiate their products. Also, I think it would be worthwhile for economists to recommend ways to increase the efficiency of these small scale operations until they can grow to a size that they can take advantage of economy of scale.

The comments to this entry are closed.