Easterly on Poor Economics

William Easterly has a thought-provoking book review in the Wall Street Journal of Poor Economics by Abhijit Banerjee and Ester Duflo. The authors’ case studies into how the effectiveness of aid programs shows that what appears to be “irrational behavior” can be explained with deeper investigation. For example, a flower-seller in India is in constant debt. Rather than pay off her loans she admits she would rather not take more money home because her husband drinks the profits. That is, it’s better to pay the moneylender than enable a drunk spouse.

Another take-away by Easterly – beware of drawing overly-general policy lessons from context-specific field work.