Why fighting poverty is hard
Abhijit V. Banerjee, Department of Economics and Abdul Latif Jameel Poverty
Action Lab, Massachusetts Institute of Technology, September 2008
One reason anti-poverty policy has not worked better than it has is because we went into
it naively, without enough of an understanding of what makes it hard. 1 This essay is
about what I have learnt about this question from my own research, most of which is
based in India.
I. Finding the poor
Who are the poor?
Suppose someone wants to help the poor. How would he find them? A part of the
problem is inevitable: “poor” is an invented category, like tall or beautiful. While we
often have a sense of what we mean when we talk about the poor, getting to an
operational definition of poverty requires making many rather arbitrary choices. For
example, even if we were prepared to bite the bullet and say that people who are below a
certain level (“the poverty line”) are the poor and the rest are not, we would not know
how to set that critical level. For one, the level of what? Income, consumption and
wealth are the obvious candidates, but one could no doubt think of others. Of these
income might seem the most natural, till one starts worrying about challenges of
measuring incomes: after all, incomes vary a lot, especially for the poor who tend not to
have salaried jobs, and some of that day-to-day or month-to-month variation is expected
or even deliberate (think of the vendor who takes a day off each week) and does not
affect what they can buy or consume (because they spend out of their savings or borrow).
In other words we run the danger of calling the vendor poor because we measured his
income on his off day.
Averaging over longer periods of time obviously helps us here, but creates other
problems. People are not very good at remembering what happened several weeks or
months ago, especially if there is a lot of underlying variation. Moreover, it turns out
people have a very...