Poverty Economics

I have read the ‘Foreign Policy’ article that contained excerpts from the book by Abhijit Banerjee and Esther Duflo. It would not be fair to comment on their work without reading the book. But, one could be excused for walking away with the impression, on reading the above article, that the poor remain poor because they could not care less. 

That would be an unfortunate interpretation and probably not the right one either.  As a devleopment practitioner and a civil servant told me recently, there are information gaps, input gaps and cognitive gaps.  There are clearly systemic failures.

Imagine a poor household with several children, no running water and electricity.  Assume further that the housewife is pregnant with another child. She has to go to the health centre to get her iron and folic acid tablets. What energy would she be left with to go there after making sure that her husband is fed, sent off to work, kids are bathed, fed, clothed and sent to school, assuming that the household has the resources to do all of this, in the first place.

This friend told me that only 13% of all women in India in the pre-natal stage – regardless of income, education and status – consume the prescribed iron and folic acid dosage.  Clearly, not all of them were too lazy to do that. There must be clear and compelling reasons for them not to make that effort.

That said, cognitive failures do exist. The culture of the day – for the rich and poor countries and societies  – is instant gratification over delayed gratification.  Why should the poor be exempt from that? Therefore, there is merit in teaching them – as there is merit in telling even the well-off about delayed gratification  – the virtues of putting in efforts today that would deliver pay-offs some time down the road.

This is where the admirable life-skills enhancement programme designed by my good friend Bharath Krishna Shankar could deliver invaluable benefits down the road. [Disclosure: I am one of the Trustees of the Aparajitha Foundation that he had set up for this purpose]

In Kenya, children who were given deworming pills in school for two years went to school longer and earned, as young adults, 20 percent more than children in comparable schools who received deworming for just one year. Worms contribute to anemia and general malnutrition, essentially because they compete with the child for nutrients. And the negative impact of undernutrition starts before birth. In Tanzania, to cite just one example, children born to mothers who received sufficient amounts of iodine during pregnancy completed between one-third and one-half of a year more schooling than their siblings who were in utero when their mothers weren’t being treated. It is a substantial increase, given that most of these children will complete only four or five years of schooling in total. In fact, the study concludes that if every mother took iodine capsules, there would be a 7.5 percent increase in the total educational attainment of children in Central and Southern Africa. This, in turn, could measurably affect lifetime productivity.

Better nutrition matters for adults, too. In another study, in Indonesia, researchers tested the effects of boosting people’s intake of iron, a key nutrient that prevents anemia. They found that iron supplements made men able to work harder and significantly boosted income. A year’s supply of iron-fortified fish sauce cost the equivalent of $6, and for a self-employed male, the yearly gain in earnings was nearly $40 — an excellent investment.

These paragraphs are eye-openers in many ways.  Some interventions are simple and must start early. Second, explanations for some seemingly complex problems might be less complex and might lie some time back in the past.

In spite of simple solutions – like deworming and consuming iodised salt – the authors report that …

in Kenya, when the NGO that was running the deworming program asked parents in some schools to pay a few cents for deworming their children, almost all refused, thus depriving their children of hundreds of dollars of extra earnings over their lifetime.

One line of thinking that this opens up is not that we need to drum up or dream of more expensive solutions for poverty-elimination and more esoteric ones such as the ‘Right to Food’, etc., but deliver basic care more imaginatively and effectively  such that the poor – for whom the solutions are meant – would embrace them.

Something similar to how folks at Econstories dish out economic wisdom?

Further, as my civil-servant friend pointed out, this attitude towards ‘delayed gratification’ does raise some questions about the wisdom of cash transfers. I must admit that. That is, they might simply spend it on the HERE & NOW. But, this friend had some safeguards in mind. With those safeguards, it is worth trying. Tried without those safeguards, it could fail and if it failed, it would be the end of the idea of ‘cash transfers’ in lieu of expensive and inefficient system of subsidies now in place in India.

Finally, no matter how much we all write and discuss, if policy is paying only lip-service and has no real sensitivity for the concerns of the aam-aadmi, India would not make a dent on poverty. Why is the NAC silent on export bans on farm produce?

Somehow, it seems appropriate to recall these wise words of Friedrich August von Hayek:

To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. [More quotes here]

I saw these words flash by my screen as I watched the latest episode of Keynes vs. Hayek. Thoroughly enjoyed it. Highly recommend it.

This post originally appeared at The Gold Standard and is reproduced here with permission.