Poor Economics?
Abhijit Banerje and Esther Duflo are in the market with a new book titled “Poor Economics”. The second chapter goes by the name “A Billion Hungry People”, they say:
“The basic idea of a nutrition-based poverty trap is that there exists a critical level of nutrition, above or below which dynamic forces push people either further down into poverty and hunger or further up into better-paying jobs and higher-calorie diets. These virtuous or vicious cycles can also last over generations: early childhood under-nutrition can have long-term effects on adult success. Maternal health impacts in utero development. And it’s not just quantity of food — quality counts, too. Micronutrients like iodine and iron can have direct impacts on health and economic outcomes.
But if nutrition is so important, why don’t people spend every available extra cent on more calories? From the look of our eighteen-country dataset, people spent their money on food… and festivals, funerals, weddings, televisions, DVD players, medical emergencies, alcohol, tobacco and, well, better-tasting food. So what stands in the way of better nutrition for the poor? And what policies can eradicate the “hidden hunger” of a population who may feel sated but whose diet lacks essential micronutrients?”
Nothing new here. Let me break it down.
1. Vicious Cycle of Hunger, just another version of the good old vicious cycle of poverty. Abhijit Banerje and Esther Duflo call for government intervention to break this vicious cycle, just like the good old socialists called for government intervention through protectionism to break free of the vicious cycle of poverty.
2. The Poor are Dumb, they eat more calories when they’d be better-off eating more nutrients. Abhijit Banerje and Esther Duflo call for government education to help these poor dumb you know what.
Our view on this is pretty clear. We believe that the only way India will feed itself better is by allowing more business freedom in production, packaging and distribution of food. The collective complex activity of millions of entrepreneur is the only (yes only) way India can shift hundreds of millions of people up the nutrition scale. And this is the only way its happened in history. The white people starting eating better and growing pink not because some politician or wise economist dreamed up a way to break the Vicious Cycle of Malnutrition, they ate better because they discovered more efficient methods of production. We brown people are no different — all we need is liberty to feed ourselves.
As for the Poor Are Dumb argument. Choosing deep fried chicken over salad is simply a matter of preference. It is at least partly a question of time-preference. Typically rising incomes also mean a fall in time discounting factor, i.e. people start valuing their future more, and this may lead to healthier eating habits. Rather than finding ways to force the poor to value their future more India ought to find ways to create wealth. The question Abhijit Banerje and Esther Duflo are asking is: given the income levels what should the poor buy to maximize nutrition intake? And if they don’t buy that then how can we push them to become more healthy? (Don’t be aghast by the paternalism of it all.) Frankly, the question is all wrong. The big question is why aren’t the poor rich?
On a more rhetorical day we might have concluded by saying ‘Banerje and Duflo make up for all the flaws in the book by choosing an apt title’, but today is not one such day.
