Abhijit Banerjee and Esther Duflo’s book Poor Economics continues to live up to its promise. If you’ve missed it, here’s the teaser excerpts I captured last week. I’ve been tweeting insights from the book fairly regularly (using the hashtag #banerjeeduflo). But not all insights can be packaged into 140 character tweets. So here are some relevant paragraphs that answer the title of this post – what could possibly be more important than food?
The basic human need for a pleasant life might explain why food spending has been declining in India. Today, television signals reach into remote areas, and there are more things to buy, even in remote villages. Cell phones work almost everywhere, and talk time is extremely cheap by global standards. This would also explain why countries with a large domestic economy, where a lot of consumer goods are available cheaply, like India and Mexico, tend to be the countries where food spending is the lowest. Every village in India has at least one small shop, usually more, with shampoo sold in in individual sachets, cigarettes by the stick, very cheap combs, pens, toys, or candies, whereas in a country like Papua New Guinea, where the share of food in the household budget is above 70 percent (it is 50 percent in India), there may be fewer things available to the poor. Orwell captured this well in The Road to Wigan Pier when he described how poor families managed to survive the depression.
Instead of raging against their destiny, they have made things tolerable by reducing their standards. But they don’t necessarily reduce their standards by cutting out luxuries and concentrating on necessities; more often it is the other way around — the more natural way, if you come to think of it — hence the fact that in a decade of unparalleled depression, the consumption of all cheap luxuries has increased.
These “indulgences” are not the impulsive purchases of people who are not thinking hard about what they are doing. They are carefully thought out, and reflect strong compulsions, whether internally driven or externally imposed. Oucha Mbarbk [a poor man in a remote village in Morocco referred earlier in the chapter] did not buy his TV on credit — he saved up as the mother in India starts saving for her eight-year-old daughter’s wedding some ten years or more into the future, by buying a small piece of jewelery here and a stainless steel bucket there.
The conclusions drawn by the authors in this final paragraph below are sobering and deeply sad — it’s not that the poor are depressed, it’s that they are seemingly so sure that a significant change in their fortunes is a very remote possibility.
We are often inclined to see the world of the poor as a land of missed opportunities and to wonder why they don’t put these purchases on hold and invest in what would really make their lives better. The poor, on the other hand, may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives. They often behave as if they think that any change that is significant enough to be worth sacrificing for will simply take too long. This could explain why they focus on the here and now, on living their lives as pleasantly as possible, celebrating when occasion demands it.
Next post in this series – Health Insights from Banerjee Duflo’s Poor Economics.