Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty

Author: Esther Duflo
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by MarkMc   2021-01-01
Here's interesting observation by by Nobel prize-winners Abhijit Banerjee, Esther Duflo:

"We have already seen, in the previous chapter, another example of people who had lucrative opportunities to save but did not use them: the fruit vendors from Chennai, who borrowed about 1,000 rupees ($45.75 USD PPP) each morning at the rate of 4.69 percent per day. Suppose that the vendors decided to drink two fewer cups of tea for three days. This would save them 5 rupees a day, which could be used to cut down on the amount they would have to borrow. After the first day with less tea, they would have to borrow 5 rupees less. This means that at the end of the second day, they would have to repay 5.23 rupees less (the 5 rupees they did not borrow, plus 23 paisas in interest), which, when added to the 5 rupees they saved that second day by again drinking less tea, would allow them to borrow 10.23 rupees less. By the same logic, by the fourth day, they would have 15.71 rupees that they could use for buying fruit instead of borrowing. Now, say they go back to drinking their two cups more tea but continue to plough the 15.71 rupees they had saved from three days of not drinking so much tea back into the business (that is, borrowing that much less). That accumulated amount continues to grow (just as the 10 rupees had turned into 10.71 after two days) and after exactly ninety days, they would be completely debt-free. They would save 40 rupees a day, which is the equivalent of about half a day’s wages. All just for the price of six cups of tea! The point is that these vendors are sitting under what appears to be as close to a money tree as we are likely to find anywhere. Why don’t they shake it a bit more?"

From "Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty"

https://www.amazon.com.au/Poor-Economics-Radical-Rethinking-...

by MarkMc   2018-11-10
Toilets can be cheaper than you expect - in some places cultural barriers may be the main problem. Here's an extract from an excellent book called Poor Economics [1]:

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The conventional wisdom is that today, at $20 per household per month, providing piped water and sanitation is too expensive for the budget of most developing countries. The experience of Gram Vikas, an NGO that works in Orissa, India, shows, however, that it is possible to do it much more cheaply. Its CEO, Joe Madiath, a man with a self-deprecating sense of humor who attends the annual meeting of the worlds rich and powerful at the World Economic Forum in Davos, Switzerland, in outfits made from homespun cotton, is used to doing things differently. Madiaths career as an activist started early: He was twelve when he first got into troublefor organizing the labor on the plantation that his father owned. He came to Orissa in the early 1970s with a group of left-wing students to help out after a devastating cyclone. After the immediate relief work was over, he decided to stay and see if he could find some more permanent ways to help the poor Oriya villagers. He eventually settled on water and sanitation. What attracted him to the issue was that it was simultaneously a daily challenge and an opportunity to initiate long-term social change. He explained to us that in Orissa, water and sanitation are social issues. Madiath insists that every single household in the villages where Gram Vikas operates should be connected to the same water mains: Water is piped to each house, which contains a toilet, a tap, and a bathing room, all connected to the same system. For the high-caste households, this means sharing water with low-caste households, which, for many in Orissa, was unacceptable when first proposed. It takes the NGO a while to get the agreement of the whole village and some villages eventually refuse, but it has always stuck to the principle that it would not start its work in a village until everyone there agreed to participate. When agreement is finally reached, it is often the first time that some of the upper-caste households participate in a project that involves the rest of the community.

Once a village agrees to work with Gram Vikas, the building work starts and continues for one to two years. Only after every single house has received its tap and toilet is the system turned on. In the meantime, Gram Vikas collects data every month on who has gone to the health center to get treated for malaria or diarrhea. We can thus directly observe what happens in a village as soon as the water starts flowing. The effects are remarkable: Almost overnight, and for years into the future, the number of severe diarrhea cases falls by one-half, and the number of malaria cases falls by one-third. The monthly cost of the system for each household, including maintenance, is 190 rupees, or $4 per household (in current USD), only 20 percent of what is conventionally assumed to be the cost of such a system.

[1] https://www.amazon.com/Poor-Economics-Radical-Rethinking-Pov...