ATIENZA, Danielle Nicole L 11575700ECONDEV/ V25 January 31, 2018There were a lot of issues that were raised in the first chapterof the book, titled “Poor Economics” by Abhijit Banerjee and Esther Duflo.First, the general view of the poor is not unilateral nor is it bilateral butmore of complex, a grey area. It was raised that the policies of addressing thepoor were not inclusive to those who were the “average” poor. These policiesmostly target the lower end of the spectrum of the marginalized.
Throughrandomized control trials (RCTs), the authors were able to develop an analysisof determining how the poor determine their choices in life. Because ofinsufficient data in developing countries, many rely on the data of developedcountries like the U.S. or the U.K. and this creates problems in analysisbecause what is “poor” in a developed countries does not necessarily mean poorof developing countries, this is due to the fact that the global estimate forthe poverty line is different from a country’s local poverty line. For India,it is 16 Indian Rupees or about 36 U.
S. cents per person per day. For peoplethat live below 16 Indian Rupees per person per day is considered to be poor bythe India’s government. But being poor is relative depending on the country aperson is in. If a person is in a developed county, the poverty line is muchhigher than those in developing countries. As of 2011, the World Bank recordsthe poverty line to be about 1.90 dollars per person.
The authors raise anissue that the poor do not enough income to grow financially as Individuals.Most of the marginalized usually have a higher proportion of people dying,increased illiteracy, as well as a higher proportion of income allocated tofood and this gives problems to a miniature amount or none at all going toother things such as savings, financial planning, education and the like. Anissue whether or not it is advisable to give a certain beneficial good forfree, subsidized or paid in full.
I think that for the marginalized, there arecertain levels of income that should be taken into account. For those who arecan afford to pay for a product, they should pay for it in full. For those whocannot afford to pay in full, give them subsidies and for the extremely marginalized,give it for free. However, they should be educated that the first round ofproducts to be sold, whether for a certain price or free, that they should beable pay for the next or at least partially. Sachs argues that it foreign aid oraid could help an individual (marginalized) reach their potential where asEasterly argues otherwise, that an individual (marginalized) could only reachtheir potential through hard work. Both are actually true. The problem actuallylies within the government. With the right actions and enforcement, foreign aidcan go directly where it is needed, which are the climate-stricken areaswherein the marginalized communities cannot help themselves at all.
Those whocan actually fend for themselves should be given other opportunities to learnhow to better themselves with projects such as livelihood education and thelike. The poverty trap suggested by Sachs states that the poor are poor becausethey are poor, meaning they are incapable of providing for themselves. Givenaid, they are able to increase their potential and this can continue withregular intervals of aid. However, Easterly argues the opposite that foreignaid or aid will make the general poor more lax and unproductive.
I think thatboth of these ideas are true in a sense yet false in another. An individualshould not be generalized. Again, it is always a grey area when it comes tohumans because no one human is alike, which is why I agree to the use of RCTsto be able to simulate “equal” chances via different methods.