2 Oct 2022 – Give cash to the poor, and they’ll squander it? This Nobel laureate has a different opinion

Published by rudy Date posted on October 2, 2022

Would someone without enough to eat buy a television instead of more food? Yes, and economist Esther Duflo explains why.

Neo Chai Chin
Larissa Ong
17 Sep 2022 06:00AM
(Updated: 17 Sep 2022 05:08PM)

SINGAPORE: If you think poor people are less sensible about money than the wealthy, Esther Duflo can probably persuade you to think again, not through rhetoric but through the anti-poverty research she has done.

It is research that has made an impact in the real world and made her the youngest winner of the Nobel Prize in economics.

So why, for example, does someone who does not have enough to eat buy a television instead of more food?

“Because there’s much more to life than just food,” the 49-year-old told the programme In Conversation. “Food is important, but when people have a life that’s very difficult and, to some extent, very boring because there’s not too much work … you do need some entertainment.”

This was how a man in rural Morocco explained to her why TV was more important than food, she recalled.

Known for her field experiments in development economics, she was awarded her Nobel Prize in 2019 together with her husband and Massachusetts Institute of Technology colleague, Abhijit Banerjee, as well as economist Michael Kremer.

Their citation said they had introduced a new approach to obtaining reliable answers on the best ways to fight poverty — by dividing the issue into “smaller, more manageable questions” — such as the most effective interventions to improve educational outcomes or child health.

“As a direct result of one of their studies, more than five million Indian children have benefitted from effective programmes of remedial tutoring in schools,” noted the Royal Swedish Academy of Sciences, which selected the laureates.

“Another example is the heavy subsidies for preventive healthcare that have been introduced in many countries.”

In general, the poor are “quite sensible” about money, Duflo said. The problem is that thinking about money uses much of the available space in their lives, “precisely because they’re so keen on getting it right”.

“It takes away some of the energy and ability to think about other things,” she said. “They have to think about whether they’ll manage the school fees for the children and so on.

That takes (up) so much brain space that you don’t have the luxury of … deeper thought that makes life also worth living.”
That’s not to say humans, rich or poor, always make the best choices, such as spending the least amounts possible on the most nutritious foods. If that were the case, people would probably eat eggs and bananas all the time, which “might not be very fun or not fun at all”, she quipped.

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