Friday, April 29, 2011

Are there really 1 billion hungry people?

MIT professors Abhijit Banerjee and Esther Duflo (winner of the 2010 John Bates Clark award to an outstanding economist under age 40, often a precursor of a Nobel Prize) have been challenging this conventional wisdom in their research, deftly summarized in the most recent issue of Foreign Policy

The prevailing wisdom is that many of the world's poorest souls lack the income to purchase the minimal amount of calories and nutrients needed to survive, resulting in diminished health and productivity (and thus very low earnings potential) that creates a poverty trap.  Economists such as Jeffrey Sachs have argued if wealthy nations would provide substantially more foreign aid, the improvements in nutrition, productivity and earnings would jumpstart development world-wide.   (Needless to say, other economists, most prominently William Easterly argue that such aid creates dependency and often never gets to its intended recipients.) 

Banerjee and Duflo have earned their sterling reputations by being among the first economists to do experimental fieldwork on food issues in third world countries.  For instance they compared what happened to rice consumption when one set of villages had a rice subsidy and were compared to a matched control group.  Guess what? People bought LESS rice in the villages that received the subsidy.

The FP article summarizes the implications of their research for the issue of what to do about low caloric consumption in so many countries.  Bottom line conclusion -- this issue is much more complicated than anyone ever imagined.  Money quote:
What we've found is that the story of hunger, and of poverty more broadly, is far more complex than any one statistic or grand theory; it is a world where those without enough to eat may save up to buy a TV instead, where more money doesn't necessarily translate into more food, and where making rice cheaper can sometimes even lead people to buy less rice.
Remember, this is field-based work from countries like China, India, and Indonesia -- not manipulation of nation-wide statistics published by the United Nations.  Is there a world hunger problem?  I would still say so, but I now realize that the stock answers do not seem to work as well as I originally thought.  Why?
We often see the world of the poor as a land of missed opportunities and wonder why they don't invest in what would really make their lives better. But the poor 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 and celebrating when occasion demands it.

We asked Oucha Mbarbk what he would do if he had more money. He said he would buy more food. Then we asked him what he would do if he had even more money. He said he would buy better-tasting food. We were starting to feel very bad for him and his family, when we noticed the TV and other high-tech gadgets. Why had he bought all these things if he felt the family did not have enough to eat? He laughed, and said, "Oh, but television is more important than food!"

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