Macro dimensions of poverty brushed aside

THE award of the 2019 Nobel Prize in Economics to Abhijit Banerjee and Esther Duflo of the Massachusetts Institute of Technology (MIT) and Michael Kremer of Harvard University deserves not only to be celebrated but also critically reflected upon.

Macro dimensions of poverty brushed aside

Vulnerable poor: Transformational change is required to deal with mass poverty.

Pritam Singh

Pritam Singh
Visiting Fellow, Wolfson College, University of Oxford

THE award of the 2019 Nobel Prize in Economics to Abhijit Banerjee and Esther Duflo of the Massachusetts Institute of Technology (MIT) and Michael Kremer of Harvard University deserves not only to be celebrated but also critically reflected upon.

Duflo is only the second woman economist to win this prize since it was instituted in 1969. The first was Elinor Ostrom for her analysis of economic governance, especially relating to ‘common’ ecological resources, thus raising the status of ecological economics. Duflo (46), is also the youngest-ever winner of this prize along with being the only woman among this year’s 16 Nobel Prize winners. Gender bias remains an old problem of this prize. The most celebrated woman economist of all times, Joan Robinson of Cambridge University, was never given this prize due to ideological reasons though her work on imperfect competition has been pioneering in breaking the assumptions of perfectly competitive markets. 

It has been my experience on teaching development economics that whenever I taught the topic of gender bias in economic theory and policy, the women students have loved it and have felt inspired while most, not all, men students feel uncomfortable about being told that even the central concept of macro-economics i.e. gross domestic product (GDP) is gender-biased because it is based on measuring marketable goods and services, and consequently ignores women’s work in the household.

Abhijit Banerjee, Duflo’s husband and PhD supervisor, is a former student of Jawaharlal Nehru University. The faculty and students of this university have been under vicious attack for many years from the government of their own country. One hopes that this prize will make those who govern higher education in India feel proud of this university and value its academic resources — the faculty and the students.

The prize honours the field of development economics and draws attention to the global challenge of reducing poverty which continues to damage the lives of millions. Globally, more than 700 million people live in extreme poverty even if one accepts the questionable World Bank definition of poverty as living on less than $1.90 per day. Many millions live just marginally above this poverty line and are categorised as ‘vulnerable poor’. One in three children is malnourished, and most children in the developing world leave school without basic skills in reading, writing and mathematics.

Banerjee and Duflo have done work on India, and Kremer on Africa, especially Kenya. This prize will open more doors for their work, but it is also going to open to much sharper scrutiny than it has been subjected to so far. I read their book, Poor Economics: A radical rethinking of the way to fight global poverty, soon after it came out. I was impressed by their style but unconvinced by their argument.

The most serious criticism, from a methodological point of view, is that their approach individualises poverty and the route out of poverty. Since their randomised controlled trials (RCTs) method is borrowed from clinical medicine, one can take the example from that field to explain the problem with this method. A doctor can individualise an illness (say obesity), prescribe some medicine which can provide temporary relief to the patient, important in itself, but if that illness (obesity) is widespread, it will show a serious weakness of the medical profession if it were not to look into the general conditions of society that lead to obesity, namely, the pattern of food consumption, the nature of work and employment and the marketing of food products etc. As we cannot throw the entire blame for obesity on to an obese person, it is intellectually and morally flawed to blame a poor person for his/her poverty. 

The RCT method believes that the problem a poor person faces involves small modifications (called ‘interventions’) in the existing methods of his/her dealing with the problem, and the question is merely of testing which small modifications will eventfully work. The method, therefore, celebrates ‘what works’ and gives the false impression of being very practical and not theoretical.

A still higher order of methodological problem emerges when a suggested intervention is ‘scaled up’ i.e. generalised without considering different contexts. The macro dimensions of poverty i.e. structure of property relations, the pattern of income distribution, the unequal bargaining powers between employers and employees, the nature of patriarchal relations, the hierarchy of caste relations and identity issues of majority-minority are just brushed aside as ‘confounding’ variables.

The other serious methodological flaw of the RCT approach that has been pointed out by ethnographic studies of poverty is that its overemphasis on quantitative method has deprived it of the insights of qualitative methods. There is some recognition of this flaw by admitting that mixed method approach can be useful, but the approach remains intrinsically hostile to qualitative methods. The econometricians have attacked the RCT approach from the opposite angle i.e. identification problem in selecting the samples for testing the effectiveness of chosen interventions. Moral philosophers have raised questions of ethics in choosing the poorest Third World people for experimentation.

The reason this approach is popular with politicians, aid agencies and global policy-makers is that they want to see quick results of their specific interventions rather than troubling themselves with the structural causes of poverty and the transformational changes required to deal with mass poverty.

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