Response to “‘Poor Economics’ Needs a Theory” by Eric Meade

Earlier this month, Eric Meade wrote a post about Abhijit Banerjee and Esther Duflo’s new book Poor Economics. I’m a huge admirer of Banerjee and Duflo’s work, and of their book. My review will appear in the Fall issue of SSIR, but since that’s still a few months away, I wanted to respond to Meade’s review. I fear that he and many of the commenters on his post have missed key points of Banerjee’s and Duflo’s work.

1) Far from being silent on the question of the psychological mechanisms that drive decision-making among the poor, as Meade suggests, Banerjee and Duflo discuss it at length—though not in terms of either sociological determinism, or some theoretical damage from psychological or physical deprivation. We know from cognitive neuroscience work over the last decade that every human being’s ability to exert self-control and make good choices is finite. The poor are forced to make far more of these decisions and self-control choices. In the rich world, we have many of these choices made for us, or they are irrelevant (e.g. your savings are not going to disappear; buying that Frappaccino today is not going to affect your ability to send your child to school). Imagine, for a moment, that you were actually faced with a daily choice of whether your oldest child should attend school, with unknown benefits, or should engage in day labor in order to afford a visit to the doctor for your youngest child. Making such choices every day is difficult, and exhausts the judgment and rationality necessary to make other good choices.

No human being could possibly make wise choices and constantly put the future above the present every moment of every day. We should not expect the poor to do so or blame them when they do not. Thus, we need not accept sociological determinism or theorize some unknown mechanism that affects the quality of decision making of poor people.

These are points that Banerjee and Duflo make abundantly clear in the book.

2) Meade’s conclusion from reading Poor Economics is that we need a new epistemology of poverty that is not addressed in the book. Banerjee and Duflo do propose a new epistemology, but it is entirely opposed to Meade’s suggestion. Perhaps the central point of the book is that such grand epistemologies are doomed to failure, and are a tragic distraction that continues to cost lives and potential. The correlations and causalities and contexts of poverty are too complex for such an epistemology to be worthwhile or useful for practical application.

Banerjee and Duflo would agree with Meade that their work does not speak to meso- or macro-theory questions. That’s because they do not believe that working at that level is the best path forward. Any look at history would force the objective observer to agree that they have a point.

Instead, they propose that the way forward is thinking smaller. Rather than driving large actions based on new epistemologies and grand theories, we should instead be focused on incrementally tweaking programs and interventions based on evidence of what works and how to improve. After all, this is the mechanism that has yielded the most successful development program of all time: nature. Biology shows us that small tweaks and adaptations can lead to the most astonishing successes.

3) Finally, I have to point out that Meade hints that Banerjee and Duflo’s work is somehow lacking in theory—this is simply uninformed. Both authors are among the most published and cited economists of the last decade—metrics driven by respect for their theoretical work. Even the harshest critics of the randomista movement, which they had a part in inspiring, acknowledge that the critique of theory-free RCT work does not apply to them.

For those interested in learning more about Banerjee and Duflo’s thinking, see my interview with them from 2008; Part 1 and Part 2 (with 2 more parts forthcoming) of my interview with them last April; and my review of Poor Economics in the next issue of SSIR.

Read “‘Poor Economics’ Needs a Theory” by Eric Meade.

Read more stories by Timothy Ogden.

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