Poor Economics: Rethinking Poverty & the Ways to End It, written by Nobel Laureates Abhijit V. Banerjee and Esther Duflo, is an insightful and empirically grounded exploration of global poverty. Both professors at the Massachusetts Institute of Technology (MIT) and co-founders of the Abdul Latif Jameel Poverty Action Lab (J-PAL), Banerjee and Duflo bring a refreshing and much-needed evidence-based approach to understanding the complex lives of the poor and how to design more effective strategies to alleviate poverty.
What sets Poor Economics apart from many other books on development is its reliance to data and giving attention to each dimension of poverty. Rather than relying on general approach that proposes theoretical solutions, the authors support their arguments with hundreds of randomised controlled trials (RCTs: A study where participants are randomly assigned to different groups to compare a new treatment with a standard one) conducted around the world. This scientific and data-driven approach allows them to explore the dimensions of poverty, exposing not only the economic but also the psychological, behavioural, and institutional factors that influence decision-making among the poor.
The book’s central theme is that the poor are not fundamentally different. They make decisions based on constraints, incentives, and the information available to them. However, they often operate in environments characterised by uncertainty, risk, and poor infrastructure. Their choices—whether in health, education, family planning, or finance—may appear irrational from a distance but make sense when understood in the context of the circumstances they live in. For example, the authors show that poor families most of the times prioritise tastier food over nutritious food when their income rises. They also avoid preventive healthcare, not out of ignorance, but because of mistrust, low income and behavioural biases.
The authors suggest that a single solution cannot address the issue of poverty, but it needs to be analysed from the unique perspective. They challenge the efficacy of big push strategies and top-down reforms that ignore local context. Each problem can be handled in a unique way, with small, targeted interventions that are rigorously tested—such as providing free chlorine for water purification, or offering small incentives for immunisation. Such interventions done correctly can be effective in improving the lives of the poor without requiring massive financial investments.
The authors challenge the general opinion about poverty—as a result of lack of money. Instead, they explain that poverty is a constant state of stress and vulnerability. A small shock, like an illness or crop failure, can push a household into deep crisis. The poor often rely on informal dealing mechanisms that are costly, such as selling productive assets or taking on multiple jobs. Formal insurance, credit, and savings services, if made accessible and trustworthy, can help provide the poor with the stability they need to plan for the future.
Importantly, Poor Economics also reveals the condition of entrepreneurs from poor backgrounds. While microfinance is a widely advocated tool in development, the book reveals that many small businesses run by the poor are not driven by innovation or ambition but by necessity. The lack of formal employment options forces people into self-employment, often with limited growth potential. Microcredit provides access to capital, but it rarely leads to transformative change. The book argues that the real need is creation of “good jobs—stable employment that offers security and benefits.
The authors explore how deeply embedded social norms and power imbalances, particularly related to gender, affect family planning and household decisions. Women often have limited autonomy in decisions related to child-birth and finance, though empowering them leads to better outcomes for children and communities. Through examples such as joint land rights in Peru or targeted welfare programmes like Mexico’s PROGRESA, the authors illustrate how policy design can address these imbalances and drive social progress.
Politics and governance cannot be ignored. The best-designed programmes can fail due to corruption, poor implementation, or weak institutions. Yet, the authors offer hope through examples of reforms that have made a difference, such as public audits in Uganda, or village elections in Indonesia. These interventions show that political will, accountability, and transparency can lead to better service delivery.
Poor Economics delivers the message that the poor are not helpless; they are rational actors trying to survive within a very limited means. They do not need pity or promises but policies that reflect the realities of their lives. The book calls for humility in development work, an acknowledgment that we do not have all the answers and that progress comes from listening, testing, and adapting.
In conclusion, Poor Economics is an essential read for anyone interested in development, policy-making, or global justice. It does not offer miracle solutions but rather a method, rigorous experimentation, evidence-based interventions, and respect for the lives and decisions of the poor. The book redefines how we think about poverty, urging us to move beyond ideology and assumptions and toward a future built on facts, empathy, and small yet consistent improvement. The authors show that sustainable progress lies in working on small changes keeping in mind the big picture—enabling the poor to live with dignity.
Kunal is a Research Intern, National Security vertical at PIC.