Think Again, Again
Too much of the action we take to help the poor is well-intended by over-generalized and lacking an substantial evidence that it’s the right action to take.
Poverty leads to a waste of talent
There are two broadly influential schools of thought. Those who believe in aid for the poor and those who believe that aid largely doesn’t help and impinges on freedoms. They tend to generalize their positions across every category of aid for the poor. This books acknowledges both sides and finds where one is wrong while the other is right.
The first category is right in cases where there is an S-shape curve and the second is right in cases where there’s an inverted L-shape curve.
Each aspect of the lives of the poor is affected by different things, and so we have to analyze each aspect to know how to help them as a whole.
Part 1: Private Lives
A Billion Hungry People?
Evidences shows that directly investing in children and mothers has massive benefits in the long-run
Nutrition is severely important, but the poor often put excess money into more tasty foods. The poor like to spend on luxuries. The main problem in global feeding isn’t calories, but nutrients since we have enough resources to feed everyone the necessary amount of calories.
This means that food policies that simply aim to provide cheaper staple foods are often based on incorrect beliefs and are likely to be ineffective. We need to focus not on quantity but on quality food solutions. Pack tasty foods with additional nutrients and incentivize nutritious food consumption.
Low-Hanging Fruit for Better (Global) Health?
The poor reject cheap preventive measures for costly cures
Absenteeism causes lack of trust in public facilities. Also, when people don’t make rational decisions in developed nations about their health, how can you expect that from the poor?
Even when people know something’s good, they’ll avoid doing it just like the rich. Build in better incentives and provide nudges that will make it the default option
You might say that this seems like too much of our force of will, but that’s easy to say when you’re in an environment that’s made it so easy to make all the right choices. Your water is automatically treated, vaccinations are normalized, health visits, etc.
Top of the Class
A lot of the problems with education among the poor is wrong expectations about what education should deliver. It’s seen as an investment that can pay off for the family in the future. And a particularly risky investment at that. This means that from that pov it makes sense for most families to invest the most resources into the one that seems to be the most promising to increase the chances that the investment pays off. This causes elitist bias instead of helping kids learn. There’s a deadly combination of high expectations of what everyone should be learning and low faith in the abilities of most children (in parents and in teachers).
Parents and teachers focus on helping the good get better while giving up on the stragglers. This creates an education poverty trap where there doesn’t need to be one.
Ways to fix this
- scale down expectations
- focus on core skills
- use tech more to make up for absentee or biased teachers “Recognizing that schools have to serve the students they do have, rather than the ones they perhaps hope to have, may be the first step to having a school system that gives a chance to every child.”
Pak Sudarno’s Big Family
A common argument in favor of family planning is that when there are more kids, each one is lower “quality”, because there’s less investment per head. However, the authors of Poor Economics claim that there’s no “smoking gun to prove that larger families are bad for children.” Something that intuitively makes sense for this is that kids are often seen as investment opportunities. Less kids means that the parents need to save more for themselves.
Just making contraceptives more available doesn’t change much. You have to change social norms
The rates of girls to boys is unnatural in the developing world, and the gap widens whenever there are situations where boys are more economically valuable.
Maybe we don’t need family planning. We need effective safety nets such as health insureance or old age pensions. This could lead to a reduction in fertility and less sexism.
Part 2: Institutions
Barefoot Hedge-Fund Managers
The poor are like hedge fund managers in terms of the risk they deal with. The only difference is that the poor have lower rewards.
Insurance schemes for the poor: low demand despite high understanding of how insurance works.
Reasons: crediblity? What should be done is govts should subsidize insurance until it becomes normalized.
The Men from Kabul and the Eunuchs of India: The (Not So) Simple Economics of Lending to the Poor
When you’re lending to poor people, they have to be thoroughly checked to make sure that they can actually return the money. This is only feasible for local moneylenders.
Microcredit isn’t as popular and impactful as you might think because it doesn’t have the flexibility the poor often need.
- Microfinance becomes a problems once it comes to more entrepreneurial ventures. These things are set up to have low risk tolerances (that’s basically the only way they can survive), which can make it hard to start big companies.
- Potential opportunity???
Saving Brick by Brick
The view of the poor as lazy and stupid blinds us from actually finding effective ways to help them. In fact, their poverty often forces them to find more innovative ways of saving and investing.
The poor find many ways to save. They form savings clubs and self-help groups, which can give loans out of cumulative savings.
Building in further control mechanisms that automate decisions can help drastically.
- Even after farmers were given fertilizer and saw how effective it was, they were only 10 percentage points more likely to use the fertilizer in the future. But when fertilizer was delivered to their home when they wanted it, in advance, the fraction of farmers using fertilizer increased by 50 percent.
Why it’s harder for the poor to save
- fewer commitment devices (pension plans, etc)
- higher stress, which leads to poor decision-making
- long-term goals are further from reach and it can feel hopeless of ever reaching them. All of those things mean that the poor are in a S-curve poverty trap when it comes to saving. Getting them out of this trap necessitates encouraging long-term thinking. We can do this via:
- Microcredit (have to save for lonas)
- Providing a greater sense of security (this counter-intuitively impacts saving positively because it makes the future look more hopeful and something you should save for. When things look bad, it’s harder to justify saving.)
Reluctant Entrepreneurs
There’s this prevailing myth that the poor are natural entrepreneurs because there’s so many businesses among the poor. That’s mostly false wishful thinking because businesses are usually alternatives to having a job, and usually leads to more stress and less profit. Those who start businesses often do so because they don’t have stable jobs, and the types of businesses they run are doomed to cap out at a certain point (selling goods on the street, having a small shop). This is reflected in the fact that the most common dream the poor have for their children is to be stable salaried government employees. By thinking they’re natural born entrepreneur, we’re projecting Western culture on them (which has tended to lionize entrepreneurship in recent years).
One of the easiest ways to push the poor into the middle class is to provide easier access to stable jobs. This means building better infrastructure for moving to cities and expanding more jobs to rural regions.
Policies, Politics
The three Is of ineffective policies
- Ideology
- Ignorance
- Inertia
Instead of feeling helpless abt the corruptness and ineptitude of developing governments, find slack within those govts to improve policy at the margins through careful understanding of each case. Terrible and corrupt govts will sometimes allow good policy while more trustworthy governments will have terrible ones. This can lead to incremental changes that will hopefully compound.
In Place of a Sweeping Conclusion
We don’t completely know what makes some countries take off, but we should use whatever knowledge and tools we have to help make it more likely for developing countries to take off, and make the wait more tolerable.
Part of Part 1 in the next thing: Information campaigns are successful when
- Non-general statements that ppl don’t already know
- simple and attractive
- come from credible sources
5 key things that we can change to improve the lives of the poor
- There is an information gap
- The poor don’t have enough commitment mechanisms. Some examples are:
- piped water
- making sure they get enough nutrients
- no automatic way to save
- Finding ways to help them build these commitment mechanisms is important.
- There are good reasons that demands to some things. In those cases, it might make sense to give things for free.
- Poor countries aren’t doomed because of a history of corruption
- Expectations of ability turn into self-fulfilling prophecies.
We can and must be patient. Even if you’re well-intentioned, going too fast because you believe in a cure-all will often do more damage than good.
”Poverty has been with us for many thousands of years; if we have to wait another fifty or hundred years for the end of poverty, so be it. At least we can stop pretending that there is some solution at hand and instead join hands with millions of well-intentioned people across the world—elected officials and bureaucrats, teachers and NGO workers, academics and entrepreneurs—in the quest for the many ideas, big and small, that will eventually take us to that world where no one has to live on 99 cents per day.”