Poverty is a cryptic subject to those who do not suffer its ravages. Often enough in aid work and development policymaking, wrong assumptions are made about the billions of people in the world living on less than the equivalent of one US dollar per day. As a result, the wrong help is given to those in dire need, or worse, or problems are ignored because they appear too colossal to confront. 

In their highly lauded work, Poor Economics, MIT Professors Abhijit V. Banjerje and Esther Duflo attempt to rethink the problem of world poverty by starting from scratch. It is the “attempt to knit together a coherent story of how poor people live their lives.” Using the right parameters is most difficult yet most important in the creation of an economic model. The authors try to move the discussion beyond an abstract level and break it up by finding and providing evidence of what poverty means in today’s global community.

According to the authors, there are solutions to many of the problems of inadequate health care, even within the limited means available to impoverished communities. To corroborate this bold claim, the Banjerje and Duflo cite a study they carried out in the Indian town of Udaipur where large numbers of children die of diarrhoea every year. Their mothers refuse to provide them with a treatment that would have cured them: a simple and cheap oral rehydration solution, showing the consequences of the widely held belief in the community that only antibiotics could cure these water-borne diseases. In this instance, the authors argue that spending money on health infrastructure would not necessarily result in better health outcomes to the people of Udaipur, at least to the same extent as a relatively simple awareness campaign.

Eloquent and easy to read, the book situates its discussion of poverty on a local level, vividly describing the tribulations of individuals and lamenting missed opportunities within the current framework of development aid. Along with positing relatively cheap solutions to specific problems, the authors make a damning indictment of the billions of dollars of aid money that is wasted each year.  

Berthold Brecht once wrote, satirising the East German government, that the people had lost confidence in their government; the easiest solution would be to dissolve the people and elect another. Models that described and predicted the movements of real estate markets failed to foresee the US subprime meltdown in 2007. According to these models, bubbles don’t exist. The solution of many economists has been reminiscent of Brecht’s poem: rather than rethink their models, they have doubled down on them, refusing to reconsider their assumptions when they don’t match observed reality.

The great achievement of Banjerje and Duflo is the dissolution of long-held shibboleths which no longer adhere to the realities of poverty, instead posing more plausible descriptions and solutions to entrenched problems. Anyone involved in the fight against poverty must read this book.

Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty is available from Monument Books for $18.50.