A review of Martin Ravallion’s new book: The Economics of Poverty

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Martin Ravallion has spent over 30 years working on poverty, with his career as the leading expert on the topic at the World Bank more recently augmented by his more recent position as a professor at Georgetown which has involved teaching an undergraduate class on the topic. From this depth of knowledge comes his new textbook The Economics of Poverty: History, Measurement, and Policy. At over 700 pages it is a fitting treatise on this career. It aims to be both a textbook as well as a more general book that can be of interest to researchers and professionals in government and international organizations.

What is it about?
As the subtitle indicates, the book has three main parts. The history part of the subtitle is a history of thought around the topic of poverty, tracing out the view over centuries of issues such as why the poor are poor, whether it is inevitable that the poor will remain poor, and whether poverty is something that society should and can do something about. This is a very comprehensive account of the ideas behind anti-poverty policy, building on and expanding a handbook chapter he wrote on the topic. We learn here of the long tradition of concerns about the incentive effects of efforts to help the poor, and the change in emphasis from only hoping to provide some bare level of protection against shocks to more active promotion policies that aim to permanently lift the poor out of poverty. A notable feature here is a focus on both the developed and developing world, with discussion of the war on poverty in America and historical approaches in the UK in addition to the more recent focus on developing countries.

The measurement side of the subtitle forms the second part of the book, and reflects the comprehensive knowledge and contributions Martin has made to this topic of the years. There is careful explanation of the different issues involved in conceptualizing poverty, discussion of how poverty lines are set, lots of careful and nuanced discussion of issues such as how to deal with adult-equivalency scales, prices, subjective scales, etc. There are some nice examples here such as how the U.S. poverty line was set, how Russia sets a poverty line based on pricing different consumer baskets which vary across the country and by household composition, and of work using vignettes to anchor subjective poverty scales.

The final part of the book on policy provides both an overview of trends in poverty around the world, along with a helicopter tour of a whole range of different approaches to tackling poverty, including both macro/sectoral policies and specific targeted policies. The emphasis here is typically on explaining the ideas behind the policies, along with some discussion of why they might not always work as planned.

What are some of the things I learned or that got me thinking?
The book is a useful read even for someone who has worked on many of these topics over the years, and there were a number of new things I learned or re-learned, as well as points that caused me to reflect on the way I do my own work. Some examples are:
  • In thinking about whether poverty traps exist, Martin makes the point that they may be hard to see in practice even if they do exist, since social and government behaviors may mean the trap is avoided in normal times, so that it is only with large shocks (like a famine or other aggregate shock) that the trap is exposed.
  • A discussion of the way that what looks like anti-poverty policy in rural areas has often also been about protecting the interests of rich people. So in particular, providing rural public-works programs in lean seasons has been a way of deterring outmigration and so avoiding labor shortages or higher wages for rich farmers in the peak season. This got me thinking about whether India’s flagship NREGA program may actually be harming long-run development by preventing more of the migration that needs to take place to move people out of unproductive rural areas. (There may be a paper that helps provide empirical evidence on the impact of this program on internal migration, but I haven’t seen one).
  • A discussion of the Watts Index of poverty which is apparently an old measure that got rediscovered and is arguably better than a lot of the more commonly used measures.
  • The idea that the targeting of poverty programs may not be that useful in telling us about their anti-poverty potential: well-targeted programs with little leakage to the non-poor may be much worse at coverage, and evidence from China’s Dibao program shows that the cities that had better targeting were generally not the ones that had the greater impacts on poverty.
  • A useful point on how to measure impacts of workfare and consistency of measurement with program details – Martin makes the point that the key idea behind workfare is that it is highly unpleasant and only the most desperate should therefore participate – but then if we try to measure the impact of such programs only on consumption and income and ignore the loss in utility from doing unpleasant work, we are ignoring the main rationale for the program.
  • New Zealand introduced the first minimum wage law in the world (in 1894).
What are my quibbles or critiques?
The book is already pretty long, so complaining about what is not included either means suggesting it get even longer or that some content could be chopped (I would chop some of the growth theory and Econ 101 boxes), and I realize I am not the core target audience for the book. With that caveat, my main complaint is that I would have liked to see a lot more of Martin’s life experience in a book based on 30 years of research life. I mean this in two ways:
  1.  Being a bit bolder on policy advice and policy critique: Martin states that “the key point is to avoid sweeping generalizations about policies”. But the result is that he is frustratingly even-handed about every policy – we get a discussion of a laundry list of policies ranging from rural sectoral policies to rent controls, minimum wages, structural adjustment, basic income guarantees, land policies, training programs, etc. But for each what we hear is the idea behind them, and perhaps one case study. What we don’t get is “this type of policy is really hard to implement in practice” or “the overwhelming evidence from a whole range of empirical studies is that these policies really struggle to show impact and don’t pass cost-benefit tests”.  There is no discussion of the recent debate of benchmarking a lot of direct programs against just giving cash directly, or any guidance for policymakers on what to prioritize among all these different policies. This might be appropriate for a textbook introduction to the topic, but less so for the second audience of policy-oriented readers.
  2. Sharing his experiences on this. As opposed to books by Easterly, Banerjee and Duflo, Karlan and Appel, or Acemoglu and Robinson, you get no stories here from Martin’s life working on this topic. The dedication reads “In 1980 two students at the LSE met and started talking about the economics of poverty. For Dominique, with love.” But after that we don’t learn what drove him to the topic, what were some of the experiences he faced and realpolitik in dealing with governments in particular countries or with trying to implement these methods in the World Bank, where he feel things went wrong, what he has changed his mind on most over the years, or what he is most proud of from all his work on the topic. I get that this isn’t a memoir, but my preference will be for at least a smattering of the personal experience here.
Overall the book is a very worthwhile read both for those considering teaching a course on poverty, as well as those who work on the topic or want a refresher on key concepts and topics. Martin has also set up a website for the book, which has sample review questions (although like other development books it doesn’t emphasize using data enough to my liking) and other materials for those considering using this as a textbook (one nice feature is a link to recent media stories that could be a basis for classroom discussion), along with a blog.

Disclaimer: Martin was my former director at the World Bank, the person responsible for helping me move to the Bank from Stanford, and a key supporter in getting this blog up and going. I owe him an enormous debt of gratitude, but have tried to be as objective as possible in reviewing his book.

In case you missed them, here are some of our other book reviews:
Imbens and Rubin’s Causal Inference book
Easterly’s Tyranny of Experts
Gerber and Green’s Field Experiments
Glennerster and Takavarasha’s Running Randomized Evaluations
Townsend’s Chronicles from the Field
Manzi’s Uncontrolled
Banerjee and Duflo’s Poor Economics
Karlan and Appel’s More than Good Intentions
 

Authors

David McKenzie

Lead Economist, Development Research Group, World Bank

Join the Conversation

Ali
January 11, 2016

NREGA and internal migration. Great piece! To your point about evidence of NREGA's impact on migration and welfare - there is a paper by Clement Imbert and John Papp that looks at migration and GE impacts of NREGA titled "Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee" (here: http://bit.ly/1mQvfxy). In fact, there's a sister piece titled "Short-term Migration, Rural Public Works and Urban Labor Markets: Evidence from India" (here: http://bit.ly/1N35pLA).