Sunday, October 6, 2013

Studying the Economic Lives of Poor People is Important

This week's Economist has a fascinating article about the economic logic of owning cows in rural, poor India that everyone should check out. The findings are a great example of the continuing the trend, popularized by Abhijit Bannerjee and Esther Duflo in their book Poor Economics, of looking at the actual fine-grained details of the economic decisions poor people make every day, and how they differ from those of rich-world consumers. Often these findings are counter-intuitive, but have big implications for development and aid (such as the preference for fewer tastier calories over bags of cheap rice). This approach contrasts with the top-down "big push" idea (promoted by Jeffrey Sachs most notably), which has seen its popularity wane in the face of powerful critiques emphasizing "Big Aid's" planning and public choice problems.

While it's possible these small-scale studies (and associated policy recommendations) will someday aggregate into a larger theory, the epistemic humility is actually a strength--interventions are more assuredly useful, and unforeseen consequences have limited scope for causing damage.

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