Understanding the Poor to Help the Poor

MUMBAI, November 8, 2011 — Lifting people out of poverty is a complex business that requires nuanced understandings and recognition of the poor as individuals pursuing pleasure along with more basic desires like nutrition and shelter.

The authors of Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, MIT Professors Esther Duflo and Abhijit Banerjee advanced this thesis in an Asia Society panel discussion in Mumbai where they were joined by Omkar Goswami, Founder and Chairman of Corporate & Economic Research Group (CERG) Advisory Private Limited, and Krishan Sree Kumar, CEO of Intellecap.

Both Goswami and Kumar acknowledged the merit of Poor Economics in avoiding sweeping generalizations and in probing individual decisions of the poor to provide a clearer understanding of what benefits them. They added that without such an approach, many economic predictions and policies meant to help the poor have been utterly erroneous.

The authors elaborated that the poor are often associated with clichés such as their being lazy or suffering — and accepting these clichés as a full truth undermines the range of preferences that people have. To help the poor, they said, we must work with their preferences, not against them. For instance, instead of thinking of the poor as individuals pursuing nutrition, we should understand that they also purse pleasure in better-tasting food, and provide them food options that combine these elements — like providing biscuits infused with vitamins.

The authors also explained entrepreneurship's limited ability to pull people from poverty. For their businesses to grow enough to achieve this, high amounts of investment are required in most cases, and the poor can rarely access such resources. This further demonstrates the need to look into the lives of the poor and craft policies to help them based on their realities.

This programme was presented in partnership with BSE Ltd., Intellecap and the MIT Alumni Club.

Video: Highlights of the Poor Economics discussion (9 min., 49 sec.)