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PROFESSOR: This is 1473,
Challenges of World Poverty.

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I'm Abhijit Banerjee, I'm going
to be lecturing on and

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off in tandem with
Esther Duflo.

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Can you hear me at the back?

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I can't figure the acoustics.

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Can you hear me well?

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OK.

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So I guess, just to give a short
description of what this

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class is, this is a class which
is meant to introduce

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you to conversations--

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00:01:04,709 --> 00:01:06,750
very broad conversations--

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00:01:06,750 --> 00:01:09,910
about the questions relating
to world poverty.

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So it's not a technical class,
it's not a class that's meant

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to teach you very sharp
analytical tools, it's a class

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that's meant to teach you how
to participate in the great

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debates of the world, and sort
of get you involved in the

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great debates of the world.

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It's very much, in that sense,
the spirit of the class is

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quite different from many other
MIT classes, and that's

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deliberate, because I think it's
wonderful that we have a

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lot of technical classes at MIT,
but it's also very useful

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to occasionally step back and
think of what this means for

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the big picture, and for
how we think about

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living in the world.

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So this is very much a
class of that kind.

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It's based very specifically
on this book which--

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the book is called
Poor Economics.

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That's--

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00:02:09,229 --> 00:02:13,580
depending on who you ask,
a good or bad pun.

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It's a play on the idea of A,
a different way of thinking

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about economics and, B, on the
idea that this is economics

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relevant to poverty.

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So it's a play on that.

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It's a book that we
just finished.

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It hasn't been published, so
you'll be, literally, the

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first people, other than our
close friends, who will get a

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chance to read it.

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And the--

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Laura, can you make sure that
everybody has these?

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Or somebody make sure?

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This is the process, we
just have to manage.

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Otherwise this would--

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So the goal of this book
is to, sort of--

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the book was written to
integrate a whole bunch of

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stuff that we've been working on
for 20 years, nearly, into

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a common narrative on how
to think about poverty.

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So the book is--

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the book has a bunch
of chapters.

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Each chapter-- and we're
going to be basically

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following the book.

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So the book is not available
in the market.

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You'll all be able to buy
a copy of the manuscript

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version of it now.

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And we're going to follow the
book, chapter by chapter,

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forward from beginning to end.

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So that's sort of--

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this is a class, as I said, it's
a class that's not based

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on technical material, you will
not have problem sets.

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On the other hand, we expect you
to read both what's in our

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book, and what's in the--

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else that's in the syllabus,
quite carefully.

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We're going to have
pop quizzes.

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One of the ways in which this
class will be graded is with

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pop quizzes that will be
randomly, on random dates, on

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the topic of the week.

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So we expect to have
read stuff.

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That's one.

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Second thing that is different
about this class is it's a

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class that's--

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as I said, it's meant to kind
of get you involved in big

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picture thinking, but that
doesn't mean that it's a class

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that doesn't expect you to
know the details of what

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whatever's being talked about.

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In fact, the running theme of
this class is that you can't

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fix the problems of the world
unless you pay attention to

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the details.

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So what we're going to ask you
to do is, as part of the

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requirement for the
class, is to write

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at least five essays--

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short essays, very
short essays--

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which will be graded and which
will be on specific aspects of

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the topics covered in class.

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So you'll have to write.

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The way we're going to do the
grading is that there'll be--

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you can write up to 12 essays.

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Basically 12 topics, you
can write 12 essays.

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We're going to give you the
grades for the best five.

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And so if you feel like writing
one every week, you

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can write one.

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If you feel like writing just
five, that's good too.

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You're going to get graded
on the best five.

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You have to write one longer
essay at some point in the

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semester, and there will
be a final exam.

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So it's, as I said, it's a
different from many MIT

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classes, different from any
other MIT class I've ever

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taught in that it's not based on
problem sets, it's based on

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these essays--

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MIT economics class, I don't
know about literature classes.

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But MIT economics classes
typically have problem sets.

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This is going to have essays.

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It's going to focus on being
able to articulate coherent

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interesting thoughts about
the problems of poverty.

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So it is very much about--

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these essays are going to be
important, and reading and

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writing will be important.

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So we want you to--

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and what goes with that
naturally is discussions will

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be important.

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We're going to have classes
where there will be a lot of

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discussion.

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That's why we want you to
have read the pieces.

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We are not going to go line by
line through those pieces, we

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want to have a combination of
some lecturing and a lot of

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discussion.

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One of the things that--

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where that becomes relevant, is
that we're going to have--

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this class is being
videotaped.

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If you noticed, there's
a camera up there.

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Classes will be videotaped,
but the only part of the

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videotape that will be used,
will we publicly available,

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will be the lecture
part of it.

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The rest of it will be--

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the discussions will not be
on the OCW website, so

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they will not be--

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they'll eventually
be expunged.

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So you should not feel
uncomfortable

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about speaking out.

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We want you to be involved
with the discussion,

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passionate in the discussion,
argue with each

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other, argue with us.

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So you should feel comfortable,
it's not that

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you're being put on camera and
everything you ever said that

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was potentially maybe incorrect
or is going to be

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recorded for all history and
made available on the web.

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So we're going to be
very careful in

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only keeping the lecture.

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So it's a very much a class
that needs the discussion.

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It won't be fun if there isn't
a lot of discussion.

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And having done this before,
I would say the

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converse is also true.

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When there's a lot of discussion
it's a lot of fun.

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The issues are fundamental, at
some level very live issues,

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and it's things where you
have thought about

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them, many of them.

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Maybe this will change the
way you think about it.

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But it is--

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these are things
that are fairly

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elemental and immediate.

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And I think you will, if you get
into the spirit of it, I

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think you will enjoy.

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So I think that's my
way of background.

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Do you have a question
right now?

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00:09:07,600 --> 00:09:08,850
OK.

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So the way we will plan
to start this is by--

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you notice you've been
given one randomly

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picked sheet each.

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The sheet comes with a little
form to fill out.

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You can read the sheet and
think about what your

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reaction will be.

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Remember that this
is for real.

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So you will get some--

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10 of you will get the money.

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So it's real money that you are
assigning to one of these

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two [INAUDIBLE].

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You have a choice between giving
the money to save the

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children or not giving it.

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And we don't expect--

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there's no obligation.

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So the way it's going to work is
you're going to select how

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much you're going to give, then
we will have a lottery

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and you will get some.

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10 of you will win the money,
and when you win the money

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that money will be deducted
from the amount you have

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proposed, and the rest
[INAUDIBLE] will go to you.

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OK?

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Is that clear how that works?

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Some of you will get nothing.

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You're just hypothetically
written down

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an amount of money.

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Others will actually get
that money, $10.

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And out of that you would have
said, I want to give these

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people $0.50, and then $0.50
will be deducted and you'll

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00:10:55,760 --> 00:11:00,220
get $9.50 given to you.

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00:11:00,220 --> 00:11:04,510
So that's the plan for
this experiment.

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So we'll find out what the
results are and we'll discuss

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00:11:10,960 --> 00:11:12,610
what they mean in
a little bit.

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In the meanwhile, I'm going
to play two videos.

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I'm going to play two
videos which are--

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which represent two very
specific and very well known

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points of view on what to
do about world poverty.

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The first one features
somebody who was my--

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who taught me when I was a
graduate student at Harvard,

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Jeffrey Sachs, and
Angelina Jolie.

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Angelina Jolie and Jeffrey Sachs
go to Africa and they

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discover world poverty.

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00:12:09,020 --> 00:12:21,300
Or Angelina discovers poverty
under Jeff's tutelage and then

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they very clearly articulate a
theory of poverty and what to

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do about it, et cetera.

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And then from--

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so Jeff is now at Columbia
University in New York.

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His archenemy is a man called
Billy Easterly who is a

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00:12:42,370 --> 00:12:44,330
professor at NYU.

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00:12:44,330 --> 00:12:51,320
So the next video is just-- we
go south from Columbia to NYU

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and we play Mr. Easterly's
video next.

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So what you're doing is
we're going to sit

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and watch some videos.

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00:13:03,220 --> 00:13:09,800
This is not an exemplar of kind
of material you will have

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00:13:09,800 --> 00:13:10,430
to deal with.

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00:13:10,430 --> 00:13:11,940
This is--

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00:13:11,940 --> 00:13:16,320
there will be much denser
material than this.

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00:13:16,320 --> 00:13:19,640
This is little fluffier than
most things you're going to

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00:13:19,640 --> 00:13:24,090
have to deal with, but I think
they're interesting and they

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00:13:24,090 --> 00:13:26,750
take very well defined
positions.

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00:13:26,750 --> 00:13:31,600
So listen to them while thinking
of what the position

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is that these people are
taking, and why those

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positions--

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00:13:37,195 --> 00:13:41,950
what is the underlying theory
of poverty, the response to

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00:13:41,950 --> 00:13:44,140
it, all of those are
being articulated

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00:13:44,140 --> 00:13:45,450
through this process.

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00:13:45,450 --> 00:13:53,850
And you should kind of come--
and then we'll--

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00:13:53,850 --> 00:13:54,860
once it ends--

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00:13:54,860 --> 00:13:59,920
we're going to actually spend
a little bit of time

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00:13:59,920 --> 00:14:03,830
discussing what we learned
from the video.

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00:14:03,830 --> 00:14:08,130
So think of questions or
comments you're going to make.

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00:14:18,280 --> 00:14:21,260
I want this to sink
in for a minute.

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00:14:21,260 --> 00:14:28,020
And in the meanwhile let me
talk about what we just--

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00:14:28,020 --> 00:14:29,420
we just compiled the results.

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Let's start with
those results.

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We'll come back to
[INAUDIBLE].

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00:14:32,230 --> 00:14:34,920
We'll spend the rest of
the time talking about

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00:14:34,920 --> 00:14:36,170
[INAUDIBLE].

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00:14:38,460 --> 00:14:51,580
So the results suggest either
that many experiments that

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00:14:51,580 --> 00:14:55,340
other people have done were
wrong, or that we didn't do it

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00:14:55,340 --> 00:15:00,540
right, or more likely, you guys
are more generous than

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00:15:00,540 --> 00:15:01,950
the rest of the world.

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00:15:01,950 --> 00:15:06,390
So this is an experiment that's
been done many times.

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00:15:06,390 --> 00:15:08,410
Let me explain what
the experiment is.

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00:15:08,410 --> 00:15:11,360
And the experiment, typically,
the way it's done, it's very

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00:15:11,360 --> 00:15:12,290
different here.

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00:15:12,290 --> 00:15:14,450
Because you couldn't figure--

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00:15:14,450 --> 00:15:18,610
we wanted to do it in class and
do it for real, so that

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made it a little--

250
00:15:20,390 --> 00:15:25,250
so instead of giving people $10,
the way it's usually done

251
00:15:25,250 --> 00:15:29,180
is that somebody
walks through--

252
00:15:29,180 --> 00:15:32,520
the most famous version of
this was done at the

253
00:15:32,520 --> 00:15:33,860
University of Pennsylvania.

254
00:15:33,860 --> 00:15:39,160
Somebody walked through the
cafeteria distributing $5 to

255
00:15:39,160 --> 00:15:44,630
people, without much
explanation really.

256
00:15:44,630 --> 00:15:48,400
And then about a few minutes
later, somebody came up and

257
00:15:48,400 --> 00:15:52,480
handed each of these people--
they're all randomly chosen--

258
00:15:52,480 --> 00:15:55,540
one or the other of
these letters.

259
00:15:55,540 --> 00:15:57,375
There were actually two
different letters.

260
00:16:00,940 --> 00:16:03,090
None of you should have
seen both, but I

261
00:16:03,090 --> 00:16:04,730
don't know if you have.

262
00:16:04,730 --> 00:16:05,790
They're basically--

263
00:16:05,790 --> 00:16:13,690
both the letters are telling a
story of some reason to help.

264
00:16:13,690 --> 00:16:14,620
So the first--

265
00:16:14,620 --> 00:16:18,580
there was one letter, which is
a letter that tells sort of a

266
00:16:18,580 --> 00:16:21,090
very general story.

267
00:16:21,090 --> 00:16:26,940
The story is about, here are
many problems in the world,

268
00:16:26,940 --> 00:16:29,050
there is, whatever, children--

269
00:16:29,050 --> 00:16:30,220
children are--

270
00:16:30,220 --> 00:16:32,726
let me just read out.

271
00:16:32,726 --> 00:16:35,000
Give me two.

272
00:16:35,000 --> 00:16:36,250
For those of you who--

273
00:16:38,868 --> 00:16:39,780
Yeah.

274
00:16:39,780 --> 00:16:45,600
So the 9 million children die
before their fifth birthday--

275
00:16:45,600 --> 00:16:47,870
actually, I think I have
them on the slide.

276
00:16:47,870 --> 00:16:51,260
Let me just see if I do,
in which case we'll--

277
00:16:51,260 --> 00:16:52,510
that'll be easier.

278
00:16:58,190 --> 00:17:00,510
Nope.

279
00:17:00,510 --> 00:17:01,110
OK.

280
00:17:01,110 --> 00:17:04,146
9 million children die before
their fifth birthday.

281
00:17:04,146 --> 00:17:05,396
A woman--

282
00:17:08,369 --> 00:17:11,650
the probability that a woman in
sub-Saharan Africa will die

283
00:17:11,650 --> 00:17:16,819
before in childbirth
is one in 30.

284
00:17:16,819 --> 00:17:19,599
If you did the same number
for the rich

285
00:17:19,599 --> 00:17:22,520
countries, it's one in 5,600.

286
00:17:22,520 --> 00:17:29,650
So in 25 countries in the
world, most of them in

287
00:17:29,650 --> 00:17:34,400
sub-Saharan Africa, where the
life expectancy at birth is

288
00:17:34,400 --> 00:17:37,140
less than 55 years, and so on.

289
00:17:37,140 --> 00:17:42,560
And so one of the letters that
half of you read was kind of a

290
00:17:42,560 --> 00:17:51,830
catalog of these problems, and
then asks you to decide how

291
00:17:51,830 --> 00:17:55,230
much money you want to give to
Save the Children, which is a

292
00:17:55,230 --> 00:17:59,840
well known organization who try
to solve these problems.

293
00:17:59,840 --> 00:18:03,440
The rest of you got a letter
which described the life of

294
00:18:03,440 --> 00:18:07,700
one individual child,
called Rokia.

295
00:18:07,700 --> 00:18:18,180
And that child has a whole range
of problems, and then

296
00:18:18,180 --> 00:18:24,240
again asks you to give money
towards helping a child, let's

297
00:18:24,240 --> 00:18:28,760
say Rokia herself or
a child like her.

298
00:18:28,760 --> 00:18:31,690
Now what's your guess
about which--

299
00:18:31,690 --> 00:18:39,450
the point of this experiment was
that one of these letters

300
00:18:39,450 --> 00:18:42,020
raised a lot more money
than the other.

301
00:18:42,020 --> 00:18:44,840
What would your guess be?

302
00:18:44,840 --> 00:18:46,150
AUDIENCE: Personal story.

303
00:18:46,150 --> 00:18:47,190
PROFESSOR: Personal story.

304
00:18:47,190 --> 00:18:52,290
Personal story typically raised
about twice as much,

305
00:18:52,290 --> 00:18:54,470
more than twice as much,
as the other one.

306
00:18:54,470 --> 00:18:59,230
Now that turned out to be
not true in this room.

307
00:18:59,230 --> 00:19:02,230
It raised exactly
the same amount.

308
00:19:02,230 --> 00:19:03,460
It raised--

309
00:19:03,460 --> 00:19:10,570
the personal story raised $8.63,
and the other story

310
00:19:10,570 --> 00:19:14,930
raised $7.96, which
is statistically

311
00:19:14,930 --> 00:19:16,090
indistinguishable.

312
00:19:16,090 --> 00:19:20,740
So the experiment basically
failed here.

313
00:19:20,740 --> 00:19:22,800
Now why it failed, my guess--

314
00:19:25,390 --> 00:19:28,840
we'll come back to this
question, actually, maybe if

315
00:19:28,840 --> 00:19:30,960
we have time.

316
00:19:30,960 --> 00:19:36,340
But I think that, my guess is
that you just selected in

317
00:19:36,340 --> 00:19:38,070
being in this classroom, and

318
00:19:38,070 --> 00:19:39,400
therefore you're more generous.

319
00:19:39,400 --> 00:19:43,750
But we could think of
other reasons why.

320
00:19:43,750 --> 00:19:47,910
But the point of the experiment,
had it succeeded--

321
00:19:47,910 --> 00:19:51,060
the point of the way people have
usually interpreted it,

322
00:19:51,060 --> 00:19:55,220
so the average person seems to
react in this very different--

323
00:19:55,220 --> 00:19:57,310
why do you think we all react
very differently?

324
00:19:57,310 --> 00:20:00,090
All of you had the same-- seemed
to agree on the answer.

325
00:20:00,090 --> 00:20:07,550
Basically, out of $5, you gave
$2.60 to Rokia, $1.30 to the

326
00:20:07,550 --> 00:20:09,610
general problem, or something
like that.

327
00:20:09,610 --> 00:20:14,750
And when you tell people that
you give more to Rokia, then

328
00:20:14,750 --> 00:20:18,250
it goes down to $1.30
for both.

329
00:20:18,250 --> 00:20:23,980
So that sort of brings out very
nicely one of the key

330
00:20:23,980 --> 00:20:26,370
issues here, which is that,
I think, once you

331
00:20:26,370 --> 00:20:28,810
start thinking about--

332
00:20:28,810 --> 00:20:33,920
once you're made to think that
the Rokia problem is somehow

333
00:20:33,920 --> 00:20:36,970
an exemplar of a general
problem, you start now

334
00:20:36,970 --> 00:20:40,080
thinking it's like the general
problem, and then

335
00:20:40,080 --> 00:20:41,100
we can't solve it.

336
00:20:41,100 --> 00:20:42,950
And then it's like,
people step back.

337
00:20:42,950 --> 00:20:45,890
So I think this sort of--
this scale effect.

338
00:20:45,890 --> 00:20:48,620
This idea that, well, it's a big
problem, we're scared and

339
00:20:48,620 --> 00:20:57,310
we don't to deal with it, is
sort of one of the starting

340
00:20:57,310 --> 00:21:04,580
points of where we want to start
from, and maybe get away

341
00:21:04,580 --> 00:21:12,810
from is this idea that this is
an enormous problem and,

342
00:21:12,810 --> 00:21:15,170
therefore, we can't do
anything about it.

343
00:21:20,150 --> 00:21:24,540
So if you think of one goal we
want to have in this class is,

344
00:21:24,540 --> 00:21:27,900
in a sense, to move exactly
away from that feeling.

345
00:21:27,900 --> 00:21:32,410
In other words, what we want
to do is to move away from

346
00:21:32,410 --> 00:21:36,850
thinking about one day--

347
00:21:36,850 --> 00:21:39,175
we're thinking of the challenge
as big-- one day

348
00:21:39,175 --> 00:21:42,966
we're going to take a big
shovel, and we're going to

349
00:21:42,966 --> 00:21:44,570
throw all poverty out.

350
00:21:44,570 --> 00:21:48,040
That's not how anything
ever happens.

351
00:21:48,040 --> 00:21:51,260
And so there's no reason to
think of it that way.

352
00:21:51,260 --> 00:21:54,510
And you clearly don't, but the
rest of the world does.

353
00:21:54,510 --> 00:21:58,740
So there is a sense in which--

354
00:21:58,740 --> 00:22:01,770
what we want to do in this
class is to think of the

355
00:22:01,770 --> 00:22:08,710
problem of poverty as a set of
specific efforts that, if we

356
00:22:08,710 --> 00:22:12,150
do it right we will solve them,
and if we don't do it

357
00:22:12,150 --> 00:22:14,900
right, we'll make
things worse.

358
00:22:14,900 --> 00:22:18,880
So we want to turn it into a
set of specific challenges.

359
00:22:18,880 --> 00:22:21,360
Maybe we can't solve those
challenges, but at least let's

360
00:22:21,360 --> 00:22:25,300
first move away from thinking of
it as being this one grand

361
00:22:25,300 --> 00:22:30,710
problem, to thinking about it
as 100 individual problems,

362
00:22:30,710 --> 00:22:33,550
each of which with a
potential solution.

363
00:22:33,550 --> 00:22:35,390
So that's sort of where
we want to get to.

364
00:22:35,390 --> 00:22:39,530
At the end of this semester, we
won't have an answer to how

365
00:22:39,530 --> 00:22:41,850
do you solve world poverty.

366
00:22:41,850 --> 00:22:43,250
I can guarantee you that.

367
00:22:43,250 --> 00:22:47,660
What we might get is a sense
that these are actually

368
00:22:47,660 --> 00:22:50,810
individual problems
that we can--

369
00:22:50,810 --> 00:22:54,100
a set of individual problems we
can start thinking about as

370
00:22:54,100 --> 00:23:01,670
solvable things that we can sort
of apply our minds to.

371
00:23:01,670 --> 00:23:04,310
Some of them we'll have answers
to, some of them we'll

372
00:23:04,310 --> 00:23:07,550
just throw them out as
challenges, and we'll see what

373
00:23:07,550 --> 00:23:09,920
happens at the end.

374
00:23:09,920 --> 00:23:11,370
So that's where we
want to get to.

375
00:23:11,370 --> 00:23:14,870
We want to turn this grand
problem into a set of specific

376
00:23:14,870 --> 00:23:16,060
individual problems.

377
00:23:16,060 --> 00:23:17,230
That's sort of--

378
00:23:17,230 --> 00:23:21,010
and so the whole semester will
be in thinking about specific

379
00:23:21,010 --> 00:23:25,260
issues like the ones that Sachs
brought up, and the ones

380
00:23:25,260 --> 00:23:28,210
that Easterly brought up, and
try to turn them into problems

381
00:23:28,210 --> 00:23:31,980
that we can have some kind
of a leverage over.

382
00:23:35,310 --> 00:23:36,150
Let me just--

383
00:23:36,150 --> 00:23:39,610
so at some level this
is stuff that--

384
00:23:42,210 --> 00:23:52,210
some of this-- just to go
back to the videos--

385
00:23:52,210 --> 00:23:58,210
Sachs does a very good job of
kind of posing the problem.

386
00:23:58,210 --> 00:24:00,530
I think he--

387
00:24:00,530 --> 00:24:03,230
I mean, Easterly, I think,
won't disagree on that.

388
00:24:03,230 --> 00:24:09,380
I think if you think about
what the problem is,

389
00:24:09,380 --> 00:24:12,320
[? with ?] many ways to say it,
one way to say it is just

390
00:24:12,320 --> 00:24:15,660
that people are extremely
poor.

391
00:24:15,660 --> 00:24:22,050
Just a measure of poverty is in
some ways itself a kind of

392
00:24:22,050 --> 00:24:24,800
a useful way to think about--

393
00:24:24,800 --> 00:24:26,570
just to take just
a scale of it.

394
00:24:26,570 --> 00:24:28,950
The scale of it is--

395
00:24:28,950 --> 00:24:30,780
think about those numbers.

396
00:24:30,780 --> 00:24:35,420
The poverty line turns out that
mostly, by some peculiar

397
00:24:35,420 --> 00:24:39,600
accident, India is both the
country which has the maximum

398
00:24:39,600 --> 00:24:43,820
number of poor people in the
world, and it's the country

399
00:24:43,820 --> 00:24:44,840
which has--

400
00:24:44,840 --> 00:24:47,360
if you take the poverty line in
India, do you know what the

401
00:24:47,360 --> 00:24:49,740
poverty line is?

402
00:24:49,740 --> 00:24:53,312
Who knows what a poverty
line is?

403
00:24:53,312 --> 00:24:55,284
Yeah?

404
00:24:55,284 --> 00:24:57,913
AUDIENCE: It's a measure by
which that if someone makes

405
00:24:57,913 --> 00:25:00,707
less than that they believe
[INAUDIBLE] income they're

406
00:25:00,707 --> 00:25:01,710
considered poor.

407
00:25:01,710 --> 00:25:02,100
PROFESSOR: Right.

408
00:25:02,100 --> 00:25:04,050
It's just a way to define
for, how do you

409
00:25:04,050 --> 00:25:05,310
say somebody's poor?

410
00:25:05,310 --> 00:25:10,930
You say, in the US, you say
somebody is poor if their

411
00:25:10,930 --> 00:25:15,760
consumption is less than
$14 per head per day.

412
00:25:15,760 --> 00:25:17,030
That includes lots of stuff.

413
00:25:17,030 --> 00:25:20,690
It includes housing and all
those things, so it's not--

414
00:25:20,690 --> 00:25:23,830
$14 is not $14 in Big Macs.

415
00:25:23,830 --> 00:25:27,760
It's $14 in clothes
and everything.

416
00:25:27,760 --> 00:25:29,990
So that's how you define
poor in the US.

417
00:25:29,990 --> 00:25:33,130
For the rest of the world, the
weights typically people use

418
00:25:33,130 --> 00:25:34,470
is $1 a day.

419
00:25:34,470 --> 00:25:37,440
$1 a day is roughly--

420
00:25:37,440 --> 00:25:47,130
turns out the equivalent of the
poverty line of India, or

421
00:25:47,130 --> 00:25:51,270
equivalently the average of the
poverty lines for the 50

422
00:25:51,270 --> 00:25:54,230
countries where the most
of the poor live.

423
00:25:54,230 --> 00:25:58,590
So if you take the 50 countries
where all of the

424
00:25:58,590 --> 00:26:03,670
poor people live, take the
average of the poverty lines

425
00:26:03,670 --> 00:26:06,940
and say that--

426
00:26:06,940 --> 00:26:09,160
and the poverty lines vary
across countries because

427
00:26:09,160 --> 00:26:14,110
countries, some countries, think
that $14 is the bare

428
00:26:14,110 --> 00:26:16,060
minimum that you need to live.

429
00:26:16,060 --> 00:26:21,210
Other countries have a even more
accepting of misery, and

430
00:26:21,210 --> 00:26:24,040
say that even if you have $1
that's fine, but if you have

431
00:26:24,040 --> 00:26:26,120
less than $1 you're poor.

432
00:26:26,120 --> 00:26:29,210
So it turns out that the
effective definition that a

433
00:26:29,210 --> 00:26:34,640
lot of people use is $1
a day, or $0.99 a day.

434
00:26:34,640 --> 00:26:37,720
This number is now used a lot.

435
00:26:37,720 --> 00:26:39,610
It's called $1 a day poverty.

436
00:26:39,610 --> 00:26:46,650
And you look at this set of
people who live under $1 a

437
00:26:46,650 --> 00:26:49,840
day, 865 million people.

438
00:26:49,840 --> 00:26:50,390
This is our--

439
00:26:50,390 --> 00:26:56,300
Jeff Sachs says 850 million
people live under $1 a day.

440
00:26:56,300 --> 00:27:01,000
So that's just to get a scale
how many poor people out there

441
00:27:01,000 --> 00:27:01,660
in the world.

442
00:27:01,660 --> 00:27:05,530
Well, if you define it with $1
a day, which is 1/14 of what

443
00:27:05,530 --> 00:27:08,080
it is in the US, you
still end up with

444
00:27:08,080 --> 00:27:10,510
about a billion people.

445
00:27:10,510 --> 00:27:14,400
So that's one way to think about
how big the problem is.

446
00:27:14,400 --> 00:27:18,240
It also is a way to think about
how sort of surprising

447
00:27:18,240 --> 00:27:19,150
the problem is.

448
00:27:19,150 --> 00:27:20,400
You would think that--

449
00:27:22,940 --> 00:27:24,260
that says that--

450
00:27:31,090 --> 00:27:37,470
average GDP per capita
in the US is $47,000.

451
00:27:37,470 --> 00:27:39,760
That's like $50,000.

452
00:27:39,760 --> 00:27:46,100
So 50,000 people
could live on--

453
00:27:46,100 --> 00:27:49,010
no, sorry--

454
00:27:49,010 --> 00:27:51,790
50,000 divided by 365.

455
00:27:51,790 --> 00:27:53,040
So that's like--

456
00:27:55,620 --> 00:27:56,870
how much is that?

457
00:28:00,960 --> 00:28:05,580
50,000 divided by 500 is 100.

458
00:28:05,580 --> 00:28:13,100
So 100 people, or 150 people, in
the rest of the world live

459
00:28:13,100 --> 00:28:18,290
on less than the average
income of one average

460
00:28:18,290 --> 00:28:19,670
person in the US.

461
00:28:19,670 --> 00:28:22,400
So that's one way to scale the
problem, is to say that the

462
00:28:22,400 --> 00:28:30,140
average person in the US lives
150 times better than the

463
00:28:30,140 --> 00:28:32,900
average person in the--
the average poor

464
00:28:32,900 --> 00:28:34,720
person in the world.

465
00:28:34,720 --> 00:28:39,220
And that's a minimum because
these people are not at the

466
00:28:39,220 --> 00:28:42,140
poverty line, they're below
the poverty line.

467
00:28:42,140 --> 00:28:45,040
So just to sort of get a sense
of these magnitudes, what's

468
00:28:45,040 --> 00:28:46,330
enormously--

469
00:28:46,330 --> 00:28:48,810
what, in a sense, is surprising
about this is that

470
00:28:48,810 --> 00:28:53,100
there is, like, somehow
the gap is so huge.

471
00:28:53,100 --> 00:28:57,420
It's like it's not that there
is a gap of 10% or

472
00:28:57,420 --> 00:29:00,960
15% or 50% or 200%.

473
00:29:00,960 --> 00:29:06,210
It's a gap of 150 times or
something like that.

474
00:29:06,210 --> 00:29:09,360
So we're just talking of the
order of magnitude is just

475
00:29:09,360 --> 00:29:11,320
stunning here.

476
00:29:11,320 --> 00:29:14,940
And somehow that would seem that
it should be easy to fix.

477
00:29:14,940 --> 00:29:18,030
I mean, if there's such big
gaps, then isn't a little bit

478
00:29:18,030 --> 00:29:21,030
of aid from the US
would make a huge

479
00:29:21,030 --> 00:29:22,580
difference in these countries.

480
00:29:22,580 --> 00:29:26,130
And so it should be easy to make
these countries richer.

481
00:29:26,130 --> 00:29:28,820
And somehow, that's where this
conversation is stuck.

482
00:29:28,820 --> 00:29:31,290
So if you think of where this
conversation is coming out of,

483
00:29:31,290 --> 00:29:33,970
it's coming out of feeling
well, we are so rich, and

484
00:29:33,970 --> 00:29:36,120
these people are so poor,
why can't we do

485
00:29:36,120 --> 00:29:38,340
something about it?

486
00:29:38,340 --> 00:29:43,280
Now, let's go, maybe--

487
00:29:50,100 --> 00:29:52,830
we talked about this.

488
00:29:52,830 --> 00:29:58,460
So let's now go back to the
video with that sort of

489
00:29:58,460 --> 00:30:00,260
background.

490
00:30:00,260 --> 00:30:02,510
I'm going to say
one last thing.

491
00:30:02,510 --> 00:30:05,270
I just want you to look at this
one picture just as a

492
00:30:05,270 --> 00:30:06,700
last parting thought.

493
00:30:06,700 --> 00:30:08,852
So this is what Easterly's--

494
00:30:08,852 --> 00:30:12,450
this is Easterly's
famous picture.

495
00:30:12,450 --> 00:30:13,430
It shows that--

496
00:30:13,430 --> 00:30:16,880
the picture shows the
blue bars are aid.

497
00:30:16,880 --> 00:30:19,370
It keeps going up and down, but
it's basically going up,

498
00:30:19,370 --> 00:30:20,620
up over time.

499
00:30:25,540 --> 00:30:32,220
And you see that despite the
fact that aid is sort of going

500
00:30:32,220 --> 00:30:36,010
up, and the cumulative of all
this-- when he says that

501
00:30:36,010 --> 00:30:38,060
that's how much aid
has gone in--

502
00:30:38,060 --> 00:30:40,040
the cumulative of all this
is the total aid

503
00:30:40,040 --> 00:30:41,740
that has gone in.

504
00:30:41,740 --> 00:30:45,970
You can see that the GDP per
capita seems basically flat.

505
00:30:45,970 --> 00:30:48,940
So aid is going in-- aid is
being pushed in and in and in

506
00:30:48,940 --> 00:30:52,040
and in, and you see that
each blue bar is

507
00:30:52,040 --> 00:30:55,240
adding up the next one.

508
00:30:55,240 --> 00:30:58,300
And this is sort of his
reading of history.

509
00:30:58,300 --> 00:31:04,390
Now one of the things we're
going to worry about here is

510
00:31:04,390 --> 00:31:06,850
what we're going to call
the counterfactual.

511
00:31:06,850 --> 00:31:12,780
So what I think Easterly
has in mind, is

512
00:31:12,780 --> 00:31:14,490
that without the aid--

513
00:31:14,490 --> 00:31:18,920
so the question is, what would
have happened without the aid?

514
00:31:18,920 --> 00:31:22,180
And I think the first problem
in reading any

515
00:31:22,180 --> 00:31:25,100
of this data is--

516
00:31:25,100 --> 00:31:29,260
and this is a key idea, so
I want to stop on this--

517
00:31:29,260 --> 00:31:33,700
is figuring out what would have
happened if we hadn't

518
00:31:33,700 --> 00:31:34,900
given the aid.

519
00:31:34,900 --> 00:31:38,310
So one possibility is
that yellow line is

520
00:31:38,310 --> 00:31:40,610
what would have happened.

521
00:31:40,610 --> 00:31:43,570
That's kind of--

522
00:31:43,570 --> 00:31:46,080
without aid the yellow line
would have happened.

523
00:31:46,080 --> 00:31:49,020
With aid you've got the red
line and the red line is

524
00:31:49,020 --> 00:31:50,040
better than the yellow line.

525
00:31:50,040 --> 00:31:54,640
The alternative, which Easterly
seems to assert, is

526
00:31:54,640 --> 00:31:58,420
that the green line is what
would have happened absent the

527
00:31:58,420 --> 00:32:02,400
aid, and that the difference
between the two-- the negative

528
00:32:02,400 --> 00:32:04,170
difference--

529
00:32:04,170 --> 00:32:05,810
is the consequence of aid.

530
00:32:05,810 --> 00:32:07,590
So in some sense,
this is the--

531
00:32:07,590 --> 00:32:09,750
so this is sort of where--

532
00:32:09,750 --> 00:32:13,740
the problem is that, this now,
once you get to this point, to

533
00:32:13,740 --> 00:32:16,590
be honest, we have
nothing to say.

534
00:32:16,590 --> 00:32:18,570
Because we don't know what
have happened of aid.

535
00:32:18,570 --> 00:32:18,860
Right?

536
00:32:18,860 --> 00:32:21,890
We have only one history to look
at, and if you look at

537
00:32:21,890 --> 00:32:26,070
this one history, this history
could be anything you want.

538
00:32:26,070 --> 00:32:28,930
So in other words, I'll
disappoint you from the

539
00:32:28,930 --> 00:32:32,120
beginning and tell you that this
is a question we'll never

540
00:32:32,120 --> 00:32:33,380
know the answer to.

541
00:32:33,380 --> 00:32:35,900
In fact, we know that we
never going to know.

542
00:32:35,900 --> 00:32:41,030
Whether historically aid was a
mistake or not, is not one of

543
00:32:41,030 --> 00:32:43,430
the questions we'll answer.

544
00:32:43,430 --> 00:32:47,150
To calibrate expectations for
this class, what we will try

545
00:32:47,150 --> 00:32:51,700
to answer is, suppose you
had to give aid, how

546
00:32:51,700 --> 00:32:52,670
would you give it?

547
00:32:52,670 --> 00:32:56,260
That's a question that
we can answer.

548
00:32:56,260 --> 00:32:57,740
And that there--

549
00:32:57,740 --> 00:32:59,870
all the issues you raised
are important.

550
00:32:59,870 --> 00:33:03,640
The issues of whether
people will take up

551
00:33:03,640 --> 00:33:04,720
things you give them.

552
00:33:04,720 --> 00:33:07,040
Is there a demand for
the bed nets?

553
00:33:07,040 --> 00:33:09,020
That's a very key issue.

554
00:33:09,020 --> 00:33:12,990
Is it the case that when we try
to give it to them, the

555
00:33:12,990 --> 00:33:15,700
mechanism to which we
deliver the aid--

556
00:33:15,700 --> 00:33:18,110
let's say the bed nets--

557
00:33:18,110 --> 00:33:20,700
the government tries to give
them out for free and all the

558
00:33:20,700 --> 00:33:23,470
private market shut down.

559
00:33:23,470 --> 00:33:25,810
As you raised, that's
another concern.

560
00:33:25,810 --> 00:33:30,070
A third concern will be about
whether local volunteers can

561
00:33:30,070 --> 00:33:34,590
deliver bed nets or do
we need markets?

562
00:33:34,590 --> 00:33:40,750
A fourth concern will be, is it
the case that when we start

563
00:33:40,750 --> 00:33:44,850
delivering bed nets to local
volunteers, local volunteers

564
00:33:44,850 --> 00:33:47,770
become too powerful politically
and they exploit

565
00:33:47,770 --> 00:33:50,840
their political power
for other purposes.

566
00:33:50,840 --> 00:33:54,250
Each of these concerns that I
think you raised implicitly,

567
00:33:54,250 --> 00:33:56,710
will become a central
concern in

568
00:33:56,710 --> 00:33:57,920
thinking about this question.

569
00:33:57,920 --> 00:34:01,840
So we're going to think about
questions not of the kind of

570
00:34:01,840 --> 00:34:06,130
this kind, because this question
has no answer.

571
00:34:06,130 --> 00:34:08,739
Alas, we'd love to know the
answer to this question, but I

572
00:34:08,739 --> 00:34:10,639
don't think anybody can.

573
00:34:10,639 --> 00:34:16,219
The kind of question we will be
able to answer are if you

574
00:34:16,219 --> 00:34:19,020
had to give out aid, what's
the best way to do it?

575
00:34:19,020 --> 00:34:21,130
So that's the kind of question
we'll try to answer.

576
00:34:21,130 --> 00:34:23,650
And we'll spend a whole
semester, in a

577
00:34:23,650 --> 00:34:25,250
sense, on that question.

578
00:34:25,250 --> 00:34:29,370
So hope to see you
next lecture.