1 00:00:00,040 --> 00:00:02,460 The following content is provided under a Creative 2 00:00:02,460 --> 00:00:03,970 Commons license. 3 00:00:03,970 --> 00:00:06,910 Your support will help MIT OpenCourseWare continue to 4 00:00:06,910 --> 00:00:10,660 offer high quality educational resources for free. 5 00:00:10,660 --> 00:00:13,460 To make a donation or view additional materials from 6 00:00:13,460 --> 00:00:17,390 hundreds of MIT courses, visit MIT OpenCourseWare at 7 00:00:17,390 --> 00:00:18,640 ocw.mit.edu. 8 00:00:26,040 --> 00:00:30,840 PROFESSOR: So today, we're going to be talking about 9 00:00:30,840 --> 00:00:34,470 today and on Thursday, we're going to be trying to answer 10 00:00:34,470 --> 00:00:35,720 this question. 11 00:00:37,950 --> 00:00:39,690 We're going to give a slightly different answer 12 00:00:39,690 --> 00:00:42,520 today than on Thursday. 13 00:00:42,520 --> 00:00:47,480 Just to give you a road map of where we are going, today is 14 00:00:47,480 --> 00:00:51,400 more going to be about the poverty trap in the sense that 15 00:00:51,400 --> 00:00:54,680 Pak Solhin described it to us in-- 16 00:00:54,680 --> 00:00:58,390 I think it was our first lecture together. 17 00:00:58,390 --> 00:01:01,330 We started from Pak Solhin description of a poverty trap, 18 00:01:01,330 --> 00:01:05,170 which was really based on the immediate impact of the 19 00:01:05,170 --> 00:01:09,010 calories on your productivity that very day. 20 00:01:09,010 --> 00:01:12,590 And then that's what we're going to look at today, which 21 00:01:12,590 --> 00:01:14,740 is try to answer [? Daiquiri's ?] 22 00:01:14,740 --> 00:01:18,930 question which I've been putting off until now, which 23 00:01:18,930 --> 00:01:22,340 is to say well, can we really believe his story? 24 00:01:22,340 --> 00:01:26,460 And then on Thursday, we are going to further our inquiry 25 00:01:26,460 --> 00:01:31,010 into nutrition based poverty trap by looking at things a 26 00:01:31,010 --> 00:01:34,130 little bit more subtle than the impact of calories on your 27 00:01:34,130 --> 00:01:38,320 productivity the very next day by looking at things like 28 00:01:38,320 --> 00:01:42,720 micro nutrients and by looking at things like feeding your 29 00:01:42,720 --> 00:01:48,520 children or feeding pregnant mother so that the kids that 30 00:01:48,520 --> 00:01:52,220 they bear grow up as different people, et cetera. 31 00:01:52,220 --> 00:01:59,040 So that's kind of the road map for our work 32 00:01:59,040 --> 00:02:00,960 today and on Thursday. 33 00:02:03,510 --> 00:02:10,680 At the end of last lecture, we discussed the important 34 00:02:10,680 --> 00:02:14,385 observation by Amartya Sen that maybe there are no 35 00:02:14,385 --> 00:02:17,500 famines in today's democracies, that the large 36 00:02:17,500 --> 00:02:22,960 big famines are gone or at least that when we observe 37 00:02:22,960 --> 00:02:25,330 them, they are due to some really extraordinary 38 00:02:25,330 --> 00:02:31,580 circumstances like a war or a civil war. 39 00:02:31,580 --> 00:02:34,370 So there is a paper that I didn't ask you to read because 40 00:02:34,370 --> 00:02:35,860 it's a little long. 41 00:02:35,860 --> 00:02:38,880 But the title is Is Famine History? 42 00:02:38,880 --> 00:02:43,720 And it sort of concludes that it might be outside of 43 00:02:43,720 --> 00:02:46,170 specific circumstances. 44 00:02:46,170 --> 00:02:50,240 I should say that it's history that might come back because 45 00:02:50,240 --> 00:02:54,580 we have no idea what global warming is going to do to the 46 00:02:54,580 --> 00:02:58,620 productivity of agriculture, and it may or may not be 47 00:02:58,620 --> 00:03:01,470 sufficiently bad that it might come back. 48 00:03:01,470 --> 00:03:06,240 But in the short term, we may be in a situation where people 49 00:03:06,240 --> 00:03:09,940 are not starving to death in very large number like they 50 00:03:09,940 --> 00:03:12,640 did in West Mongol outside of some big 51 00:03:12,640 --> 00:03:15,236 serious political crisis. 52 00:03:15,236 --> 00:03:21,140 However, malnutrition and under nutrition is not. 53 00:03:26,560 --> 00:03:29,085 You can see the food and agriculture organization 54 00:03:29,085 --> 00:03:33,890 that's based in Rome is in charge of trying to monitor 55 00:03:33,890 --> 00:03:34,790 people's situation. 56 00:03:34,790 --> 00:03:40,540 They try to estimate how many people are, they call, hungry. 57 00:03:40,540 --> 00:03:45,410 So they give periodically a number of the number of hungry 58 00:03:45,410 --> 00:03:47,030 people in the world. 59 00:03:47,030 --> 00:03:51,530 And not long ago, they came up with one billion. 60 00:03:51,530 --> 00:03:54,810 And that number, if you've seen, has been all about the 61 00:03:54,810 --> 00:03:58,990 newspaper, one billion hungry people in the world. 62 00:03:58,990 --> 00:04:03,590 To be completely honest, I am not fully understood how they 63 00:04:03,590 --> 00:04:07,805 compute the number of hungry people in the world, because I 64 00:04:07,805 --> 00:04:08,960 suppose you could ask them. 65 00:04:08,960 --> 00:04:11,150 But I don't think this is what they are doing. 66 00:04:11,150 --> 00:04:13,190 I think they are trying to estimate the calorie 67 00:04:13,190 --> 00:04:16,500 requirement that people might need to fit. 68 00:04:16,500 --> 00:04:19,070 And the question is do we really know what's a calorie 69 00:04:19,070 --> 00:04:20,360 requirement? 70 00:04:20,360 --> 00:04:21,839 And the answer to that is no. 71 00:04:21,839 --> 00:04:24,730 We don't really exactly know what's a calorie requirement. 72 00:04:24,730 --> 00:04:28,425 So maybe this notion of what's a hungry person is a little 73 00:04:28,425 --> 00:04:31,470 bit more hazy than we'd like it to be. 74 00:04:31,470 --> 00:04:32,980 But there is not really a lot of people 75 00:04:32,980 --> 00:04:36,010 who look very skinny. 76 00:04:36,010 --> 00:04:40,400 So do you know what the bodymass index? 77 00:04:40,400 --> 00:04:43,710 The bodymass index is your-- 78 00:04:43,710 --> 00:04:44,610 sorry, go ahead. 79 00:04:44,610 --> 00:04:46,023 AUDIENCE: 730 times your height divided 80 00:04:46,023 --> 00:04:47,910 by your weight squared. 81 00:04:47,910 --> 00:04:48,210 PROFESSOR: 730? 82 00:04:48,210 --> 00:04:49,920 I didn't know that that's 730. 83 00:04:49,920 --> 00:04:53,670 I think it's your weight divided by your 84 00:04:53,670 --> 00:04:56,460 height squared in meter. 85 00:04:56,460 --> 00:04:59,820 That's maybe the 730 coming from. 86 00:04:59,820 --> 00:05:04,620 It's your weight in kilograms divided by your height in 87 00:05:04,620 --> 00:05:06,870 meter squared. 88 00:05:06,870 --> 00:05:09,120 So sometimes I'm trying to think that this means that 89 00:05:09,120 --> 00:05:14,855 we're trying to elongate the person over a square meter and 90 00:05:14,855 --> 00:05:19,450 see how fat that rectangle would be. 91 00:05:19,450 --> 00:05:21,070 So that's the BMI. 92 00:05:21,070 --> 00:05:25,914 Do you know what the threshold for the BMI is. 93 00:05:25,914 --> 00:05:26,790 AUDIENCE: 18.5. 94 00:05:26,790 --> 00:05:28,390 PROFESSOR: 18.5. 95 00:05:28,390 --> 00:05:30,500 So 18.5 is undernourished. 96 00:05:30,500 --> 00:05:34,960 And there is a large number of people we know who are 97 00:05:34,960 --> 00:05:39,390 undernourished by this standard. 98 00:05:39,390 --> 00:05:41,720 Also there is about 2 billion people in the 99 00:05:41,720 --> 00:05:42,630 world who are anemic. 100 00:05:42,630 --> 00:05:44,780 That means they don't have enough 101 00:05:44,780 --> 00:05:46,850 hemoglobin in their blood. 102 00:05:46,850 --> 00:05:50,460 Now all of anemia is due to poor nutrition, but it's 103 00:05:50,460 --> 00:05:53,960 estimated that maybe half of this is due to 104 00:05:53,960 --> 00:05:55,930 iron deficiency anemia. 105 00:05:55,930 --> 00:05:57,660 So it's a deficiency in one particular 106 00:05:57,660 --> 00:06:00,010 micronutrient which is iron. 107 00:06:00,010 --> 00:06:03,090 So that's about one billion people who are anemic due to 108 00:06:03,090 --> 00:06:06,760 some deficiency in iron in their diet. 109 00:06:06,760 --> 00:06:08,970 Is there deficiency in iron or difficulty in 110 00:06:08,970 --> 00:06:11,350 absorbing the iron? 111 00:06:11,350 --> 00:06:14,090 A lot of these anemic people is in India. 112 00:06:14,090 --> 00:06:19,030 And sadly, Indians combine the fact that many of them are 113 00:06:19,030 --> 00:06:26,760 vegetarian and their diet is rich in rice which is rich in 114 00:06:26,760 --> 00:06:29,140 phytates, which is an inhibitant for the absorption 115 00:06:29,140 --> 00:06:34,180 of iron, which is one reason why the rate of anemia is 116 00:06:34,180 --> 00:06:37,140 particularly high in India, is that on the one hand, they get 117 00:06:37,140 --> 00:06:40,460 less iron in their diet than other people at comparable 118 00:06:40,460 --> 00:06:42,770 level of calorie intake just because those 119 00:06:42,770 --> 00:06:44,500 come less from meat. 120 00:06:44,500 --> 00:06:47,190 Then on the other hand, they are less good at absorbing 121 00:06:47,190 --> 00:06:48,440 them due to the rice. 122 00:06:51,330 --> 00:06:56,010 There was a large increase in food prices in 2006. 123 00:06:56,010 --> 00:06:59,580 And then again, they collapsed during the crisis. 124 00:06:59,580 --> 00:07:01,960 And they increased again in 2010 to be 125 00:07:01,960 --> 00:07:04,900 almost at 2008 level. 126 00:07:04,900 --> 00:07:08,640 And there are two consequences of an increase in food prices 127 00:07:08,640 --> 00:07:13,540 on those of the poor who are net consumer of food, that is 128 00:07:13,540 --> 00:07:17,670 those who produce less than they consume. 129 00:07:17,670 --> 00:07:20,590 Those are, for example, the urban poor. 130 00:07:20,590 --> 00:07:25,400 And those are on the one hand, a large proportion of the 131 00:07:25,400 --> 00:07:26,320 budget of the poor. 132 00:07:26,320 --> 00:07:28,730 A larger proportion of the budget of the poor is spent on 133 00:07:28,730 --> 00:07:33,980 food, so an increase in the price of food affect the 134 00:07:33,980 --> 00:07:38,063 poorest more than proportionally, compared to 135 00:07:38,063 --> 00:07:40,350 any other source of inflation. 136 00:07:40,350 --> 00:07:43,900 So if the source of inflation is sort of a general increase 137 00:07:43,900 --> 00:07:47,780 in priced or it's driven by the price of housing, then 138 00:07:47,780 --> 00:07:49,620 that affects everybody the same or that might 139 00:07:49,620 --> 00:07:51,160 affect the rich more. 140 00:07:51,160 --> 00:07:54,670 But if the inflation is as it is today, driven by an 141 00:07:54,670 --> 00:07:57,510 increase in the price of food, then it affects more the 142 00:07:57,510 --> 00:08:01,550 people who are relying the most, of course, on food. 143 00:08:01,550 --> 00:08:03,180 And that's the first story. 144 00:08:03,180 --> 00:08:06,490 That's one reason why organizations like the World 145 00:08:06,490 --> 00:08:10,060 Bank, the UN, they FAO are practically worried about an 146 00:08:10,060 --> 00:08:12,500 increase in food prices, because that's 147 00:08:12,500 --> 00:08:14,400 disproportionately affecting the poor. 148 00:08:14,400 --> 00:08:16,700 And it's also disproportionately affecting 149 00:08:16,700 --> 00:08:21,670 the urban poor, which may be one of the many reasons that 150 00:08:21,670 --> 00:08:24,557 have led to the unrest that you observe today in the 151 00:08:24,557 --> 00:08:25,990 Middle East. 152 00:08:25,990 --> 00:08:30,030 The reason why I'm mentioning that is that in 2008, at the 153 00:08:30,030 --> 00:08:35,155 height of the previous increase in food prices, there 154 00:08:35,155 --> 00:08:40,200 were food riots in Egypt that never had achieved the kind of 155 00:08:40,200 --> 00:08:45,320 intensity of what we saw in the last few weeks, but were 156 00:08:45,320 --> 00:08:48,520 clearly and very directly prompted by the price of food. 157 00:08:48,520 --> 00:08:54,220 And here, the whole rhetoric of the revolt was framed 158 00:08:54,220 --> 00:08:57,910 around political reform, but it is not impossible that part 159 00:08:57,910 --> 00:08:59,910 of the reason why so many people, in particular in urban 160 00:08:59,910 --> 00:09:06,260 centers, were willing to spending so much time outside 161 00:09:06,260 --> 00:09:09,380 protesting is because they were profoundly unhappy with 162 00:09:09,380 --> 00:09:11,860 the increase in the price of food. 163 00:09:11,860 --> 00:09:15,130 The second reason why we might be worried about an increase 164 00:09:15,130 --> 00:09:18,620 in the price of food is if we take Pak Solhin's story 165 00:09:18,620 --> 00:09:23,190 seriously and we are wondering that this increase in hunger 166 00:09:23,190 --> 00:09:25,415 is going to lead to some vicious circle. 167 00:09:25,415 --> 00:09:28,864 So If you read the World Bank document about-- 168 00:09:28,864 --> 00:09:33,630 the World Bank's job, in a sense, is to raise money for 169 00:09:33,630 --> 00:09:35,010 developing countries. 170 00:09:35,010 --> 00:09:38,220 So part of the World Bank's communication department job 171 00:09:38,220 --> 00:09:40,840 is to be slightly alarmist, so we need to take everything 172 00:09:40,840 --> 00:09:42,930 they say with a pinch of salt. 173 00:09:42,930 --> 00:09:46,680 But one of the thing that they would very frequently say is 174 00:09:46,680 --> 00:09:48,190 the price of food increase-- 175 00:09:48,190 --> 00:09:49,790 that makes the poor poorer. 176 00:09:49,790 --> 00:09:52,480 That makes them more difficult for them to get enough 177 00:09:52,480 --> 00:09:55,090 calories, which means they can't work as hard, which 178 00:09:55,090 --> 00:09:58,370 means they will be plunged back into poverty. 179 00:09:58,370 --> 00:10:04,810 And so this is the story that Pak Solhin told us in our 180 00:10:04,810 --> 00:10:05,430 first lecture. 181 00:10:05,430 --> 00:10:10,580 And that's what I want to investigate with you today, 182 00:10:10,580 --> 00:10:13,620 whether we have reasons to be worried about this kind of 183 00:10:13,620 --> 00:10:18,060 immediate vicious circle. 184 00:10:18,060 --> 00:10:21,707 So I want to give us a quick refresher of what's Pak 185 00:10:21,707 --> 00:10:23,970 Solhin's story. 186 00:10:23,970 --> 00:10:28,230 So with your daily wage, it's a short term nutrition, a 187 00:10:28,230 --> 00:10:30,010 nutrition based poverty trap. 188 00:10:30,010 --> 00:10:31,930 With your wage, you buy food. 189 00:10:31,930 --> 00:10:34,890 That gives you strength, and allows you to get some more 190 00:10:34,890 --> 00:10:37,070 wages at the end. 191 00:10:37,070 --> 00:10:39,960 So you buy more food, and that gives you strength. 192 00:10:39,960 --> 00:10:41,130 And you have more wages, et cetera. 193 00:10:41,130 --> 00:10:44,790 And that's how you survive maybe on a daily basis. 194 00:10:44,790 --> 00:10:48,410 So that means that it creates a relationship between how 195 00:10:48,410 --> 00:10:53,530 much you start from one fine evening and what is your 196 00:10:53,530 --> 00:10:54,610 income tomorrow. 197 00:10:54,610 --> 00:10:57,100 And that also means that it creates a relationship with 198 00:10:57,100 --> 00:11:00,930 the wage level and your ability to do any work at all. 199 00:11:00,930 --> 00:11:04,880 So Pak Solhin's story was that the wage had dropped because 200 00:11:04,880 --> 00:11:08,280 of the increase in input prices and the uncertainty 201 00:11:08,280 --> 00:11:10,520 that the farmer had about whether they were going to be 202 00:11:10,520 --> 00:11:13,590 able to raise their output prices corresponding. 203 00:11:13,590 --> 00:11:17,280 That had led to a decrease in the wage at the same time as 204 00:11:17,280 --> 00:11:19,775 there was an increase in the food prices, so big decrease 205 00:11:19,775 --> 00:11:23,340 in the real wage in term of the food entitlement of a day 206 00:11:23,340 --> 00:11:26,650 of work as Amartya Sen would say, which means that if you 207 00:11:26,650 --> 00:11:29,510 took this food entitlement and you had nothing else to 208 00:11:29,510 --> 00:11:32,815 supplement it with, this just was not enough to give you the 209 00:11:32,815 --> 00:11:35,710 strength to do the work to earn that wage. 210 00:11:35,710 --> 00:11:38,580 So that means that someone like Pak Solhin that had no 211 00:11:38,580 --> 00:11:42,330 extra resources was not able to work at all. 212 00:11:42,330 --> 00:11:47,376 So that creates an inequality among people. 213 00:11:47,376 --> 00:11:50,840 Take Pak Solhin and imagine that, in fact, he also had a 214 00:11:50,840 --> 00:11:52,550 little piece of land. 215 00:11:52,550 --> 00:11:56,240 Then what could he have done with this little piece of land 216 00:11:56,240 --> 00:11:57,490 once the wages had gone down? 217 00:11:59,624 --> 00:12:00,580 Ben? 218 00:12:00,580 --> 00:12:02,690 AUDIENCE: Sell some of it. 219 00:12:02,690 --> 00:12:05,660 PROFESSOR: So he could have sold some of it to get money. 220 00:12:05,660 --> 00:12:10,695 Or he could have rented some of it and get money. 221 00:12:10,695 --> 00:12:13,470 So suppose he rents some of it and gets money? 222 00:12:13,470 --> 00:12:18,170 So he starts the morning with 1000 rupee he has from the 223 00:12:18,170 --> 00:12:20,110 rent of his field. 224 00:12:20,110 --> 00:12:24,980 And that can be complimented with whatever wage he's earned 225 00:12:24,980 --> 00:12:26,550 yesterday for his work. 226 00:12:26,550 --> 00:12:30,140 And that might be enough to give him the strength to do a 227 00:12:30,140 --> 00:12:31,500 day of work. 228 00:12:31,500 --> 00:12:35,400 So if you compare Pak Solhin to his brother, for example-- 229 00:12:35,400 --> 00:12:37,010 he has a brother in the story, right? 230 00:12:37,010 --> 00:12:39,880 If you compare Pak Solhin with his brother, who had a piece 231 00:12:39,880 --> 00:12:42,980 of land, they might be exactly similar in term of their 232 00:12:42,980 --> 00:12:45,620 underlying body and their strength, et cetera. 233 00:12:45,620 --> 00:12:49,460 But the fact that one of them has a piece of land allow them 234 00:12:49,460 --> 00:12:52,160 to work, and therefore they start with a little bit more 235 00:12:52,160 --> 00:12:57,650 non-labor income, which gives them much more labor income. 236 00:12:57,650 --> 00:13:02,380 So the existing inequality in non-labor income is 237 00:13:02,380 --> 00:13:07,040 strengthened by the inequality in labor income, which is very 238 00:13:07,040 --> 00:13:09,900 different from what we would see in our standard models 239 00:13:09,900 --> 00:13:12,940 where the richer people would be less likely to work because 240 00:13:12,940 --> 00:13:15,490 they already have the non labor income money. 241 00:13:15,490 --> 00:13:19,540 So the labor market would serve to make people more 242 00:13:19,540 --> 00:13:22,590 similar rather than less similar. 243 00:13:22,590 --> 00:13:24,460 So that's the story he told us. 244 00:13:24,460 --> 00:13:28,020 And as we saw last time, the necessary condition for such a 245 00:13:28,020 --> 00:13:31,050 poverty trap is that the capacity curve, which relates 246 00:13:31,050 --> 00:13:34,325 your income to that, your income tomorrow via the 247 00:13:34,325 --> 00:13:37,780 biology of the body, has this S shape curve that we 248 00:13:37,780 --> 00:13:41,670 discussed that intersects below the 45 degree line, then 249 00:13:41,670 --> 00:13:44,180 at some point crosses it and then comes back. 250 00:13:44,180 --> 00:13:46,520 So we are not going to go back to that, because we saw it in 251 00:13:46,520 --> 00:13:47,770 detail last time. 252 00:13:50,560 --> 00:13:52,175 That was supposed to be the shape again. 253 00:13:52,175 --> 00:13:54,210 It doesn't want to come back. 254 00:13:54,210 --> 00:13:57,760 So the S shape is made of two relations. 255 00:13:57,760 --> 00:14:00,650 The S shape is the relationship between income 256 00:14:00,650 --> 00:14:04,930 today and income tomorrow, midrow since I can't have it 257 00:14:04,930 --> 00:14:06,180 on the slide. 258 00:14:20,060 --> 00:14:25,535 So this is income today and income tomorrow. 259 00:14:31,050 --> 00:14:34,370 And so the S shape is actually not one function, it's the 260 00:14:34,370 --> 00:14:36,510 product of two functions. 261 00:14:36,510 --> 00:14:41,140 One is given how much income you have, how much calories do 262 00:14:41,140 --> 00:14:43,080 you decide to eat? 263 00:14:43,080 --> 00:14:46,400 And then the calorie that you eat-- 264 00:14:46,400 --> 00:14:48,960 how much productive do that make you? 265 00:14:48,960 --> 00:14:54,590 So if we write it in math, it's like there is income, 266 00:14:54,590 --> 00:15:01,290 nutrition is equal to g, function g of income today. 267 00:15:05,540 --> 00:15:08,600 Because you get your wages and then you eat some good meal. 268 00:15:08,600 --> 00:15:16,440 And then income tomorrow is a function f of nutrition. 269 00:15:19,110 --> 00:15:21,010 That means that income tomorrow is f 270 00:15:21,010 --> 00:15:22,970 of g of income today. 271 00:15:22,970 --> 00:15:24,770 So this is what makes this S shape. 272 00:15:28,830 --> 00:15:32,150 So what we can do today is to look separately at these two 273 00:15:32,150 --> 00:15:32,990 relationships. 274 00:15:32,990 --> 00:15:35,980 What's the strength of the relationship between income 275 00:15:35,980 --> 00:15:38,140 tomorrow and nutrition today? 276 00:15:38,140 --> 00:15:41,290 And what's the relationship between nutrition today and 277 00:15:41,290 --> 00:15:42,610 income today? 278 00:15:42,610 --> 00:15:44,940 And here, when I mean today and tomorrow, I really mean 279 00:15:44,940 --> 00:15:45,900 today and tomorrow. 280 00:15:45,900 --> 00:15:48,950 This is a short run phenomenon that we are talking about. 281 00:15:48,950 --> 00:15:51,080 Maybe next week, but not a matter of 282 00:15:51,080 --> 00:15:52,340 generations or years. 283 00:15:55,020 --> 00:15:59,180 So suppose that there is indeed that this particular 284 00:15:59,180 --> 00:16:03,030 relationship, income tomorrow and nutrition, is indeed S 285 00:16:03,030 --> 00:16:09,030 shape, and suppose that you were a very poor person, so 286 00:16:09,030 --> 00:16:14,020 you are in a low part of the S, and suppose that you happen 287 00:16:14,020 --> 00:16:17,570 onto a bit of money, what would you do with this money? 288 00:16:21,030 --> 00:16:26,065 If this relationship between income and nutrition was S 289 00:16:26,065 --> 00:16:30,200 shape and you were a very poor person, but you find a pile of 290 00:16:30,200 --> 00:16:32,720 money on the ground, what would you do with the money? 291 00:16:37,390 --> 00:16:38,791 AUDIENCE: Well, if that holds true, then you 292 00:16:38,791 --> 00:16:40,420 would want to eat more. 293 00:16:40,420 --> 00:16:41,396 PROFESSOR: If that holds true, then I know you 294 00:16:41,396 --> 00:16:42,360 would want to eat more. 295 00:16:42,360 --> 00:16:45,490 So that means that if there is indeed an S shape between 296 00:16:45,490 --> 00:16:49,070 income tomorrow and nutrition, then we should see a very 297 00:16:49,070 --> 00:16:51,560 strong relationship between nutrition and income for the 298 00:16:51,560 --> 00:16:56,940 very poor, because it is like for an excellent investment. 299 00:16:56,940 --> 00:17:00,370 If you find yourself here, there is no better investment 300 00:17:00,370 --> 00:17:03,140 you can do than eating some more. 301 00:17:03,140 --> 00:17:07,030 So a first thing you can do is we can see whether poor people 302 00:17:07,030 --> 00:17:10,530 are really trying to put all of the 303 00:17:10,530 --> 00:17:12,752 possible money into food. 304 00:17:12,752 --> 00:17:15,640 Now the question is the possible money, so that means 305 00:17:15,640 --> 00:17:18,089 that we would find the share of food in the budget should 306 00:17:18,089 --> 00:17:20,640 be very high for the poor. 307 00:17:20,640 --> 00:17:23,530 And the second thing it would mean is that it would increase 308 00:17:23,530 --> 00:17:26,410 quite fast with income. 309 00:17:26,410 --> 00:17:30,010 And possibly, it would again have a form of S shape for the 310 00:17:30,010 --> 00:17:30,740 following reason. 311 00:17:30,740 --> 00:17:34,560 Suppose that you have some unavoidable expense to solve. 312 00:17:34,560 --> 00:17:38,070 For example, you need a house and you need some clothes. 313 00:17:38,070 --> 00:17:41,180 So unless you live in a very hot country where you don't 314 00:17:41,180 --> 00:17:44,790 really need much clothes, you need a house, you need a piece 315 00:17:44,790 --> 00:17:48,620 of land to put the house on, and you need some clothes. 316 00:17:48,620 --> 00:17:53,270 So someone who was a budget of 20 rupees will spend, say, 317 00:17:53,270 --> 00:17:56,470 five rupees on clothing and house. 318 00:17:56,470 --> 00:17:59,070 They can't do anything more than that. 319 00:17:59,070 --> 00:18:01,990 And 15 rupees on food. 320 00:18:01,990 --> 00:18:04,620 So that's the poorest person. 321 00:18:04,620 --> 00:18:09,000 And then if there is really this S shape here, this person 322 00:18:09,000 --> 00:18:10,595 would be somewhere here. 323 00:18:10,595 --> 00:18:13,430 So they would remain quite poor. 324 00:18:13,430 --> 00:18:18,170 And now another person, comparable in other aspect, 325 00:18:18,170 --> 00:18:20,830 but has a total budget of 30 rupees, let's say because they 326 00:18:20,830 --> 00:18:23,400 have some non labor income or because they have a bit more 327 00:18:23,400 --> 00:18:29,290 weight, than they would still spend unavoidable expenses on 328 00:18:29,290 --> 00:18:33,270 clothing and houses, but they would not do any more. 329 00:18:33,270 --> 00:18:35,980 They will still do just the minimum. 330 00:18:35,980 --> 00:18:39,710 And they would spend all the rest on food. 331 00:18:39,710 --> 00:18:44,660 That means that by how much did I increase the income of 332 00:18:44,660 --> 00:18:45,910 this person? 333 00:18:48,660 --> 00:18:49,434 Sorry? 334 00:18:49,434 --> 00:18:50,210 AUDIENCE: By 10. 335 00:18:50,210 --> 00:18:53,565 PROFESSOR: Yeah, 10 out of 20, and [INAUDIBLE]. 336 00:18:53,565 --> 00:18:53,850 AUDIENCE: 50% 337 00:18:53,850 --> 00:18:59,900 PROFESSOR: 50%, and this is how much of [INAUDIBLE]? 338 00:18:59,900 --> 00:19:01,870 AUDIENCE: [INAUDIBLE]. 339 00:19:01,870 --> 00:19:03,120 PROFESSOR: It's 25 out of 15. 340 00:19:05,650 --> 00:19:07,595 An increase from 15 to 25. 341 00:19:07,595 --> 00:19:09,750 It's 10 on the basis of 15. 342 00:19:09,750 --> 00:19:11,300 AUDIENCE: [INAUDIBLE]. 343 00:19:11,300 --> 00:19:11,710 PROFESSOR: I trust you. 344 00:19:11,710 --> 00:19:13,600 You are the MA student. 345 00:19:13,600 --> 00:19:17,840 So whatever it is, that's going to be on video. 346 00:19:17,840 --> 00:19:19,070 66? 347 00:19:19,070 --> 00:19:20,590 Let's go with 66. 348 00:19:20,590 --> 00:19:25,632 That means that when I increase your income by 50%, 349 00:19:25,632 --> 00:19:28,155 your expenditure on food increases by 66%. 350 00:19:31,790 --> 00:19:34,080 So if I divide by one of the other, what 351 00:19:34,080 --> 00:19:37,140 concept is it called? 352 00:19:37,140 --> 00:19:38,760 An elasticity. 353 00:19:38,760 --> 00:19:44,640 So this means the elasticity of food expenditure with 354 00:19:44,640 --> 00:19:48,390 respect to overall expenditure is more than one for the 355 00:19:48,390 --> 00:19:49,740 extremely poor. 356 00:19:49,740 --> 00:19:52,975 Because you start by taking care of 357 00:19:52,975 --> 00:19:54,580 your essentially needs. 358 00:19:54,580 --> 00:19:57,170 And after that you're putting all of the money into food 359 00:19:57,170 --> 00:20:01,010 because you think this is highly valuable. 360 00:20:01,010 --> 00:20:03,610 So this is one thing. 361 00:20:03,610 --> 00:20:07,160 And the second thing is now you go from someone who gets 362 00:20:07,160 --> 00:20:11,490 30 rupees to someone who gets 45 rupees. 363 00:20:11,490 --> 00:20:12,450 So I've rigged this so that it's nicely 364 00:20:12,450 --> 00:20:14,700 another increase of 50%. 365 00:20:14,700 --> 00:20:17,245 And now this person who makes 45 rupees-- 366 00:20:19,970 --> 00:20:23,050 they're already kind of over here somewhere, so the 367 00:20:23,050 --> 00:20:25,500 marginal value of one more rupees into 368 00:20:25,500 --> 00:20:26,950 food is not that high. 369 00:20:26,950 --> 00:20:30,050 So they are still going to spend a bit more on food, but 370 00:20:30,050 --> 00:20:31,900 only five rupees more. 371 00:20:31,900 --> 00:20:33,120 Going to spend a bit more to have a nicer 372 00:20:33,120 --> 00:20:34,920 clothing and some houses. 373 00:20:34,920 --> 00:20:39,590 And now they can bring in entertainment, because now 374 00:20:39,590 --> 00:20:41,620 they are basically just taken care of. 375 00:20:41,620 --> 00:20:45,160 The marginal value of extra is not that high. 376 00:20:45,160 --> 00:20:47,970 So they can get into doing other things. 377 00:20:47,970 --> 00:20:52,660 So now the elasticity is going to be 0.25 to 30. 378 00:20:52,660 --> 00:20:54,456 That's out of 25. 379 00:20:54,456 --> 00:20:55,884 Sorry? 380 00:20:55,884 --> 00:20:56,840 AUDIENCE: 20% 381 00:20:56,840 --> 00:20:58,600 PROFESSOR: 20%, is that? 382 00:20:58,600 --> 00:21:00,230 Yes, 20%. 383 00:21:00,230 --> 00:21:03,480 20% out of an increase in 50%. 384 00:21:03,480 --> 00:21:06,260 Now the elasticity is much less than 1. 385 00:21:06,260 --> 00:21:09,340 So what we would see is a group of people, the poorest 386 00:21:09,340 --> 00:21:11,810 people, where we have very high elasticity. 387 00:21:11,810 --> 00:21:14,350 And then for anybody who is somewhat richer, the 388 00:21:14,350 --> 00:21:17,520 elasticity of food consumption with overall budget would be 389 00:21:17,520 --> 00:21:21,185 less than 1, which is what people refer to as the Engel 390 00:21:21,185 --> 00:21:26,020 curve, which is the share of food of the budget increases 391 00:21:26,020 --> 00:21:28,050 less than proportionately. 392 00:21:28,050 --> 00:21:32,750 So the Engel curve refers to this phenomenon, which is the 393 00:21:32,750 --> 00:21:34,910 share of food increases less than proportionately as you 394 00:21:34,910 --> 00:21:38,452 become richer, but it's worth pointing out that in an S 395 00:21:38,452 --> 00:21:42,140 shaped world, we would probably have and reverse 396 00:21:42,140 --> 00:21:46,030 Engel curve phenomenon, where the share of food of the 397 00:21:46,030 --> 00:21:49,610 budget first increases and then decreases. 398 00:21:49,610 --> 00:21:53,560 So the question is, do we see this, that the poor spend as 399 00:21:53,560 --> 00:21:55,920 much money as they can on food? 400 00:21:55,920 --> 00:21:58,950 And the second question is, do we see this, which is do we 401 00:21:58,950 --> 00:22:03,400 see anybody who's elasticity of food consumption with 402 00:22:03,400 --> 00:22:06,760 respect to budget is more than 1? 403 00:22:06,760 --> 00:22:09,205 So that's kind of where I want to go next. 404 00:22:13,390 --> 00:22:16,460 So first, let's look at the food share in the budget 405 00:22:16,460 --> 00:22:17,870 around the world. 406 00:22:17,870 --> 00:22:20,950 And this comes from a data set that-- 407 00:22:23,970 --> 00:22:27,792 the World Bank collect data set in many countries called 408 00:22:27,792 --> 00:22:30,480 the Living Standard Measurement Surveys. 409 00:22:30,480 --> 00:22:34,290 And they very nicely put them on the website-- 410 00:22:34,290 --> 00:22:36,730 not all of their surveys, because in some case, they 411 00:22:36,730 --> 00:22:39,590 have agreement with governments that doesn't allow 412 00:22:39,590 --> 00:22:40,250 them to do that. 413 00:22:40,250 --> 00:22:42,270 But a lot of their surveys are on the web. 414 00:22:42,270 --> 00:22:44,320 You can actually download them and play with them. 415 00:22:44,320 --> 00:22:45,880 You're welcome to do that. 416 00:22:45,880 --> 00:22:48,310 And we did that. 417 00:22:48,310 --> 00:22:52,860 So we took the overall expenditure to compute 418 00:22:52,860 --> 00:22:59,520 people's budget transferred into PPP dollars. 419 00:22:59,520 --> 00:23:02,670 So this is people who live under a dollar a day, at 420 00:23:02,670 --> 00:23:07,150 pressures in power poverty, so in US prices. 421 00:23:07,150 --> 00:23:10,350 And look at the share of their budget. 422 00:23:10,350 --> 00:23:14,000 So this is what we find for a bunch of people living in the 423 00:23:14,000 --> 00:23:15,240 rural areas. 424 00:23:15,240 --> 00:23:19,760 And this is food, alcohol, tobacco, education and health. 425 00:23:19,760 --> 00:23:25,040 So what are your remarks when you see these numbers? 426 00:23:29,495 --> 00:23:31,475 AUDIENCE: I have a question about the education 427 00:23:31,475 --> 00:23:33,455 percentages. 428 00:23:33,455 --> 00:23:35,682 Do those mean that we'd be paying for tuition or 429 00:23:35,682 --> 00:23:39,400 educational [INAUDIBLE]? 430 00:23:39,400 --> 00:23:42,150 PROFESSOR: So this is only education expenditure. 431 00:23:42,150 --> 00:23:44,740 So this is tuition if the child is in a private school 432 00:23:44,740 --> 00:23:47,900 or if they get extra tuition, which a lot of people in 433 00:23:47,900 --> 00:23:49,260 developing countries do. 434 00:23:49,260 --> 00:23:52,820 They get extra help at home. 435 00:23:52,820 --> 00:23:56,850 This could be school uniform, school books, boarding school 436 00:23:56,850 --> 00:23:58,220 for kids who are in boarding school. 437 00:23:58,220 --> 00:24:02,500 Any education related expenditure would be in there. 438 00:24:02,500 --> 00:24:03,310 Yeah, Ben. 439 00:24:03,310 --> 00:24:06,130 AUDIENCE: I guess a couple confusions, [INAUDIBLE]. 440 00:24:20,680 --> 00:24:26,990 PROFESSOR: So in 2.1, Mexico is spending more on alcohol 441 00:24:26,990 --> 00:24:30,030 and tobacco than on education. 442 00:24:30,030 --> 00:24:32,350 Spends very, very little on health. 443 00:24:32,350 --> 00:24:34,200 That doesn't mean people are totally unhealthy. 444 00:24:34,200 --> 00:24:36,810 But actually, Mexico has an excellent health care system, 445 00:24:36,810 --> 00:24:39,940 but basically is free for most people. 446 00:24:39,940 --> 00:24:43,020 And in all of the countries, the share on alcohol and 447 00:24:43,020 --> 00:24:47,650 tobacco tends to be at least comparable to what we see for 448 00:24:47,650 --> 00:24:48,622 education and health. 449 00:24:48,622 --> 00:24:49,830 Yeah. 450 00:24:49,830 --> 00:24:51,470 AUDIENCE: Why don't the numbers add up to 100%? 451 00:24:51,470 --> 00:24:52,590 PROFESSOR: Because there are other things you do with your 452 00:24:52,590 --> 00:24:54,682 money other than food, alcohol, education or health. 453 00:24:58,984 --> 00:24:59,940 AUDIENCE: Got it. 454 00:24:59,940 --> 00:25:03,890 PROFESSOR: Going to the movies, putting some cloth on 455 00:25:03,890 --> 00:25:07,330 your back, that kind of stuff. 456 00:25:07,330 --> 00:25:10,130 If it adds up to more than 100, we're in trouble, which 457 00:25:10,130 --> 00:25:10,960 is quite possible. 458 00:25:10,960 --> 00:25:13,770 But I hope not, I hope not. 459 00:25:13,770 --> 00:25:16,210 I don't guarantee it, but I hope that that kind of 460 00:25:16,210 --> 00:25:20,220 mistakes would not always send scrutiny. 461 00:25:25,180 --> 00:25:28,505 Any other observation on this table? 462 00:25:39,770 --> 00:25:41,180 Let me ask one question then. 463 00:25:41,180 --> 00:25:44,510 Do you think the share of the budget on food is high or low? 464 00:25:51,150 --> 00:25:52,590 AUDIENCE: High. 465 00:25:52,590 --> 00:25:54,990 PROFESSOR: High, you think the share of food is high? 466 00:25:54,990 --> 00:25:55,950 Yes. 467 00:25:55,950 --> 00:25:57,200 [INAUDIBLE]. 468 00:26:02,534 --> 00:26:03,518 Ben? 469 00:26:03,518 --> 00:26:07,946 AUDIENCE: I mean, [INAUDIBLE], I don't think you'd have much 470 00:26:07,946 --> 00:26:10,898 wiggle room to spend your money on other [INAUDIBLE]. 471 00:26:16,310 --> 00:26:16,802 PROFESSOR: It's about right. 472 00:26:16,802 --> 00:26:19,850 Yeah, so the question is whether it's high or low. 473 00:26:19,850 --> 00:26:22,525 So one thing I should say is that it's kind of viability. 474 00:26:22,525 --> 00:26:28,290 It goes from pretty low in India, 56%, to pretty high in 475 00:26:28,290 --> 00:26:31,230 Timor, 77%. 476 00:26:31,230 --> 00:26:34,170 Remember, this is all people who are equally poor in term 477 00:26:34,170 --> 00:26:38,340 of their ability to consume things, because they're all 478 00:26:38,340 --> 00:26:40,570 below a dollar a day at PPP. 479 00:26:40,570 --> 00:26:42,650 They make very different choices. 480 00:26:42,650 --> 00:26:44,370 They are quite viable. 481 00:26:44,370 --> 00:26:46,422 Whether it's high or low, I think it's in 482 00:26:46,422 --> 00:26:47,790 the eye of the beholder. 483 00:26:47,790 --> 00:26:49,470 On the one hand, it's certainly a high part of the 484 00:26:49,470 --> 00:26:51,890 budget, compared to what people spend, for 485 00:26:51,890 --> 00:26:53,370 example, in the US. 486 00:26:53,370 --> 00:26:56,040 On the other hand, if you compare it with, for example, 487 00:26:56,040 --> 00:26:59,280 what they spent on tobacco, even on education, given that 488 00:26:59,280 --> 00:27:07,780 a lot of these countries have a free education system, the 489 00:27:07,780 --> 00:27:12,230 education expenditure they are making are extras, I'm sure 490 00:27:12,230 --> 00:27:13,685 surely value extras. 491 00:27:13,685 --> 00:27:18,710 But that means that there seems to be actually some 492 00:27:18,710 --> 00:27:23,060 wiggle room, that you could do something about your food 493 00:27:23,060 --> 00:27:27,320 budget and increase it without sacrificing anything else 494 00:27:27,320 --> 00:27:29,230 that's vital for the house. 495 00:27:29,230 --> 00:27:31,154 Yes. 496 00:27:31,154 --> 00:27:31,554 AUDIENCE: I just have a question 497 00:27:31,554 --> 00:27:32,597 about what you presented. 498 00:27:32,597 --> 00:27:34,761 The people who spend more on food, is 499 00:27:34,761 --> 00:27:35,483 their nutrition better? 500 00:27:35,483 --> 00:27:36,733 Or is it [INAUDIBLE]? 501 00:27:39,830 --> 00:27:40,770 PROFESSOR: So that's an excellent question. 502 00:27:40,770 --> 00:27:43,660 We're going to look into that, which is when you spend more 503 00:27:43,660 --> 00:27:47,540 money on food, it could be on more nutritious 504 00:27:47,540 --> 00:27:49,420 food or more calories. 505 00:27:49,420 --> 00:27:53,050 It could be on not so much more nutritious food. 506 00:27:53,050 --> 00:27:55,100 It could be on better tasting food. 507 00:27:55,100 --> 00:28:00,060 And the short answer is that the two are happening. 508 00:28:00,060 --> 00:28:02,600 I don't know whether it's true at the country level. 509 00:28:02,600 --> 00:28:04,825 For example, India is a country that spends very 510 00:28:04,825 --> 00:28:07,200 little on food and which has probably the worst nutritional 511 00:28:07,200 --> 00:28:11,290 stages for this group of people within the world. 512 00:28:11,290 --> 00:28:13,880 But at the individual level, we're going to see that very 513 00:28:13,880 --> 00:28:17,610 soon when people increase how much money they spend on food, 514 00:28:17,610 --> 00:28:20,610 they both get more food and they get better food, more 515 00:28:20,610 --> 00:28:24,050 expensive food for the calories and the nutrition 516 00:28:24,050 --> 00:28:24,590 they are getting. 517 00:28:24,590 --> 00:28:27,360 So both things happen together. 518 00:28:27,360 --> 00:28:29,810 AUDIENCE: What is the requirement for the 519 00:28:29,810 --> 00:28:32,260 [INAUDIBLE] 520 00:28:32,260 --> 00:28:33,510 children and [INAUDIBLE]? 521 00:28:36,190 --> 00:28:38,320 PROFESSOR: No, this is everyone. 522 00:28:38,320 --> 00:28:39,860 This is everyone who lives on less than a 523 00:28:39,860 --> 00:28:41,680 dollar a day per capita. 524 00:28:41,680 --> 00:28:43,720 So if there are five of them, they are entire 525 00:28:43,720 --> 00:28:45,300 budget divided by 5. 526 00:28:45,300 --> 00:28:47,790 And if no one has any children, then they won't 527 00:28:47,790 --> 00:28:50,100 spend anything on education. 528 00:28:50,100 --> 00:28:51,786 AUDIENCE: They migh have spent quite a bit more on education. 529 00:28:54,300 --> 00:28:56,770 PROFESSOR: This means that per child, they spend a fair 530 00:28:56,770 --> 00:28:58,020 amount on education. 531 00:29:02,870 --> 00:29:04,349 AUDIENCE: [INAUDIBLE] 532 00:29:04,349 --> 00:29:08,293 is more expensive in South Africa or Timor, so 533 00:29:08,293 --> 00:29:11,004 [INAUDIBLE] basically be buying the same quantity of 534 00:29:11,004 --> 00:29:12,260 food to be spending more. 535 00:29:12,260 --> 00:29:15,930 PROFESSOR: Right, so that's an excellent point. 536 00:29:15,930 --> 00:29:19,310 The point is in answer to the unstated question, which is 537 00:29:19,310 --> 00:29:23,160 what explains this variation across countries, our first 538 00:29:23,160 --> 00:29:25,160 possible explanation is the relative 539 00:29:25,160 --> 00:29:27,790 price of food is different. 540 00:29:27,790 --> 00:29:32,750 So food could be relatively more expensive in Timor Leste, 541 00:29:32,750 --> 00:29:36,010 which is why people are spending more money to get the 542 00:29:36,010 --> 00:29:37,250 same thing. 543 00:29:37,250 --> 00:29:41,150 What is interesting is that the opposite seems to be true, 544 00:29:41,150 --> 00:29:48,405 which is because India is a very large economy that is 545 00:29:48,405 --> 00:29:52,640 able to produce very many things in India, the relative 546 00:29:52,640 --> 00:29:58,280 price of things like toothbrush, even DVDs, 547 00:29:58,280 --> 00:29:59,350 cellphones-- 548 00:29:59,350 --> 00:30:01,740 that kind of things relative to food-- 549 00:30:01,740 --> 00:30:03,790 is lower in India. 550 00:30:03,790 --> 00:30:08,645 So one of the reasons why people seem to be spending, or 551 00:30:08,645 --> 00:30:09,670 one possible reason-- 552 00:30:09,670 --> 00:30:11,650 I'm not saying this is a tirant. 553 00:30:11,650 --> 00:30:14,160 But this is a conjecture, let's say-- is one of the 554 00:30:14,160 --> 00:30:18,040 reasons why people in India spend much less on food and 555 00:30:18,040 --> 00:30:21,410 more on other things compared to people in Papua New Guinea, 556 00:30:21,410 --> 00:30:23,790 is that there is nothing to get in Papua New 557 00:30:23,790 --> 00:30:25,930 Guinea except food. 558 00:30:25,930 --> 00:30:28,720 So if you are poor, like what can you buy? 559 00:30:28,720 --> 00:30:32,150 Well, in India, you can buy shampoo of this kind, and 560 00:30:32,150 --> 00:30:34,170 everything is produced locally, hence the relative 561 00:30:34,170 --> 00:30:36,330 prices are lower. 562 00:30:36,330 --> 00:30:40,780 So that's a possible explanation for this pattern. 563 00:30:40,780 --> 00:30:41,280 Yeah. 564 00:30:41,280 --> 00:30:43,030 AUDIENCE: In terms of the different prices across 565 00:30:43,030 --> 00:30:46,280 countries for food, I thought that the one dollar a day 566 00:30:46,280 --> 00:30:48,780 standard was in terms of purchasing power, so 567 00:30:48,780 --> 00:30:50,100 [INAUDIBLE]. 568 00:30:50,100 --> 00:30:51,270 PROFESSOR: For your entire budget. 569 00:30:51,270 --> 00:30:55,740 So the one dollar a day standard takes a basket of 570 00:30:55,740 --> 00:30:56,560 consumption good. 571 00:30:56,560 --> 00:30:59,175 Of course, food is an important part o it, but there 572 00:30:59,175 --> 00:31:01,520 is also other things that people consume. 573 00:31:01,520 --> 00:31:07,390 So one dollar a day takes the basket of goods. 574 00:31:07,390 --> 00:31:10,730 In fact, the way it's computed here, it's 16 575 00:31:10,730 --> 00:31:12,240 rupees a day, actually-- 576 00:31:12,240 --> 00:31:16,895 takes the basket of good that is consumed by the poor rather 577 00:31:16,895 --> 00:31:21,915 than your basket of good or my basket of good, and price it 578 00:31:21,915 --> 00:31:24,210 in the different places and adjust with that. 579 00:31:24,210 --> 00:31:25,940 So good plays an important part. 580 00:31:25,940 --> 00:31:28,130 But other things play as well. 581 00:31:28,130 --> 00:31:30,890 And then within a single dollar a day, it could be 582 00:31:30,890 --> 00:31:34,750 that, say in India, for example, food is relatively 583 00:31:34,750 --> 00:31:37,370 expensive relative to other things just because the other 584 00:31:37,370 --> 00:31:40,270 things are so cheap and available. 585 00:31:40,270 --> 00:31:41,964 Yes, Eve. 586 00:31:41,964 --> 00:31:45,310 AUDIENCE: Could it be that it's hotter in India than the 587 00:31:45,310 --> 00:31:47,700 other places, so in other places people need to eat more 588 00:31:47,700 --> 00:31:50,120 food to have more fat to preserve heat, whereas in 589 00:31:50,120 --> 00:31:54,008 India, they don't need to eat as much food because it's hot 590 00:31:54,008 --> 00:31:54,320 all the time? 591 00:31:54,320 --> 00:31:56,006 PROFESSOR: So it could be. 592 00:31:56,006 --> 00:31:57,150 It's a very interesting point, and we are going 593 00:31:57,150 --> 00:31:57,500 to make this point. 594 00:31:57,500 --> 00:31:59,830 We are going to see this point coming up in 595 00:31:59,830 --> 00:32:01,770 another guide very soon. 596 00:32:01,770 --> 00:32:06,940 The point is that we don't know what's the calorie 597 00:32:06,940 --> 00:32:09,270 requirement for a human being, partly because it depends on 598 00:32:09,270 --> 00:32:11,600 the climate and it depends on what you are doing. 599 00:32:11,600 --> 00:32:14,100 And it depends on how much calories you are losing to 600 00:32:14,100 --> 00:32:17,100 illnesses and other things like that. 601 00:32:17,100 --> 00:32:21,730 One piece of evidence that suggests it's not the entire 602 00:32:21,730 --> 00:32:27,270 story is that if it were the case, if I looked at the size 603 00:32:27,270 --> 00:32:30,820 of the Indian people compared to the size of anyone else, 604 00:32:30,820 --> 00:32:32,070 what should I see? 605 00:32:34,404 --> 00:32:36,734 Sorry? 606 00:32:36,734 --> 00:32:37,530 AUDIENCE: [INAUDIBLE]. 607 00:32:37,530 --> 00:32:39,420 PROFESSOR: Well, in your hypothesis where the 608 00:32:39,420 --> 00:32:42,330 difference is due to the fact that they need less calories 609 00:32:42,330 --> 00:32:47,900 because it's warm, if everything was explained here 610 00:32:47,900 --> 00:32:50,520 by the fact that Indian people don't need that much calorie 611 00:32:50,520 --> 00:32:51,840 compare to-- 612 00:32:51,840 --> 00:32:53,840 see, all these countries are warm. 613 00:32:53,840 --> 00:32:57,590 But compared to South Africa, South Africa is a bit more 614 00:32:57,590 --> 00:33:01,260 temperate, so poor people in South Africa need to eat a lot 615 00:33:01,260 --> 00:33:06,130 because it's cold when it's the winter there. 616 00:33:06,130 --> 00:33:10,970 Then if all the differences in calorie consumption were to be 617 00:33:10,970 --> 00:33:13,760 explained by these needs, we would find people whose 618 00:33:13,760 --> 00:33:16,890 nutrition status would be comparable. 619 00:33:16,890 --> 00:33:19,060 So their height would be the same and their weight 620 00:33:19,060 --> 00:33:20,680 would be the same. 621 00:33:20,680 --> 00:33:24,480 And in fact, Indian people are very, very short and they are 622 00:33:24,480 --> 00:33:26,200 very, very skinny. 623 00:33:26,200 --> 00:33:30,560 Now you might say, yes, but that's genetic. 624 00:33:30,560 --> 00:33:33,720 It's just, like, Indian people are short. 625 00:33:33,720 --> 00:33:40,160 But that's actually not true, because the children, when 626 00:33:40,160 --> 00:33:45,780 Indian migrants come to the US, they start eating US food, 627 00:33:45,780 --> 00:33:48,570 their children are still smaller. 628 00:33:48,570 --> 00:33:50,640 But the children of their children-- 629 00:33:50,640 --> 00:33:53,910 some of you might be that-- 630 00:33:53,910 --> 00:33:57,700 are exactly as tall as anybody else. 631 00:33:57,700 --> 00:34:01,580 So it suggests that the genetic potential of Indian 632 00:34:01,580 --> 00:34:05,390 people in term of height and body size is no different than 633 00:34:05,390 --> 00:34:06,990 that of anybody else. 634 00:34:06,990 --> 00:34:12,690 But it's their nutritional status that is different. 635 00:34:12,690 --> 00:34:14,380 And that affects them directly, and that affects 636 00:34:14,380 --> 00:34:18,830 their children just because of when you're in utero in 637 00:34:18,830 --> 00:34:19,830 someone who doesn't eat enough, 638 00:34:19,830 --> 00:34:22,300 you'll also be smaller. 639 00:34:22,300 --> 00:34:23,870 For the longest time, people said 640 00:34:23,870 --> 00:34:26,690 Japanese people were short. 641 00:34:26,690 --> 00:34:28,969 But it turns out that the height in Japan are converging 642 00:34:28,969 --> 00:34:32,260 to the height of everybody else in the world. 643 00:34:32,260 --> 00:34:35,889 So this is more of a nutrition thing than all this cereal and 644 00:34:35,889 --> 00:34:39,518 maize that we are consuming, than a 645 00:34:39,518 --> 00:34:42,889 genetic potential probably. 646 00:34:42,889 --> 00:34:46,360 So going back to sort of the two punch lines here-- 647 00:34:46,360 --> 00:34:51,149 one is that this is moving a lot, which suggests that there 648 00:34:51,149 --> 00:34:54,755 is some margin of choices, at least in India, for example. 649 00:34:54,755 --> 00:34:57,860 Second is we have this alcohol and tobacco that we could, in 650 00:34:57,860 --> 00:34:59,480 principle, get rid of. 651 00:34:59,480 --> 00:35:02,400 And then all of that would be extra calories. 652 00:35:02,400 --> 00:35:05,280 So that suggests that this is high, this is important. 653 00:35:05,280 --> 00:35:09,300 But there seems to be some amount of wiggle room take 654 00:35:09,300 --> 00:35:10,110 Ben's word. 655 00:35:10,110 --> 00:35:13,340 There is some amount of wiggle room here. 656 00:35:13,340 --> 00:35:17,390 And to look at other form of wiggle room, so another way to 657 00:35:17,390 --> 00:35:23,000 look at it is to look at this question, which is what is the 658 00:35:23,000 --> 00:35:29,220 elasticity of calorie consumption with respect to 659 00:35:29,220 --> 00:35:31,730 your income? 660 00:35:31,730 --> 00:35:36,140 So this log per capita outlay is some fancy way of saying 661 00:35:36,140 --> 00:35:38,570 log per capita expenditure, which is a good measure of 662 00:35:38,570 --> 00:35:40,270 your wealth. 663 00:35:40,270 --> 00:35:41,800 And what you can see is that this is the 664 00:35:41,800 --> 00:35:44,130 log per capita calorie. 665 00:35:44,130 --> 00:35:47,980 This is looking at Maharashtra in 1993. 666 00:35:47,980 --> 00:35:51,380 India has grown a lot since 1993, but Maharashtra in 1993 667 00:35:51,380 --> 00:35:54,300 was a pretty poor place. 668 00:35:54,300 --> 00:35:57,650 And what you find is that as people become richer, they do 669 00:35:57,650 --> 00:35:58,880 consume more. 670 00:35:58,880 --> 00:36:02,100 The slope of this line is about 0.3. 671 00:36:02,100 --> 00:36:04,400 And the slope of this line when I run a regression of log 672 00:36:04,400 --> 00:36:08,430 per capita calorie on log per capita outlay, what is the 673 00:36:08,430 --> 00:36:11,150 slope giving me? 674 00:36:11,150 --> 00:36:12,330 The elasticity. 675 00:36:12,330 --> 00:36:14,410 So whenever I go log log regression, I get the 676 00:36:14,410 --> 00:36:15,270 elasticity. 677 00:36:15,270 --> 00:36:17,640 Interestingly, this is not a regression. 678 00:36:17,640 --> 00:36:20,540 I mean, this is a regression, but not a linear regression. 679 00:36:20,540 --> 00:36:24,050 This is a non parametric regression, which means that 680 00:36:24,050 --> 00:36:27,640 if the shape had been what I told you it could be, which is 681 00:36:27,640 --> 00:36:32,370 very high elasticity early on, and then a lower one, so 682 00:36:32,370 --> 00:36:36,060 something we would expect if we were in the S shape world 683 00:36:36,060 --> 00:36:38,790 of the elasticity being above one for the poor and then 684 00:36:38,790 --> 00:36:42,105 less, the way they have estimated this regression 685 00:36:42,105 --> 00:36:44,500 allows for this to be the case. 686 00:36:44,500 --> 00:36:46,010 But that's not what they find. 687 00:36:46,010 --> 00:36:50,910 They find the elasticity of 1.5 pretty much constant 688 00:36:50,910 --> 00:36:52,920 across the range in the data. 689 00:36:52,920 --> 00:36:55,650 Now no one here is very rich, so it's quite possible that it 690 00:36:55,650 --> 00:36:57,390 starts going down here. 691 00:36:57,390 --> 00:37:00,700 But the point is that even for the very poorest, that 692 00:37:00,700 --> 00:37:05,090 elasticity is not above one, so even the very poorest have 693 00:37:05,090 --> 00:37:08,950 an Engel curve phenomenon, which is as they become 694 00:37:08,950 --> 00:37:11,470 richer, they don't start eating as much as possible, 695 00:37:11,470 --> 00:37:13,760 eating the extra calories up. 696 00:37:13,760 --> 00:37:17,570 They're eating, in terms of calories, if I increase your 697 00:37:17,570 --> 00:37:19,450 income by 10%, you increase your calorie 698 00:37:19,450 --> 00:37:21,820 consumption by 30%. 699 00:37:21,820 --> 00:37:25,450 So these two first things suggest that maybe this is 700 00:37:25,450 --> 00:37:30,290 somewhat unlikely that there would be this very strong S 701 00:37:30,290 --> 00:37:33,200 shape, because otherwise people would be behaving in a 702 00:37:33,200 --> 00:37:34,450 very bizarre way. 703 00:37:47,220 --> 00:37:49,990 So we've seen that. 704 00:37:49,990 --> 00:37:53,260 So I think we've covered this. 705 00:37:53,260 --> 00:37:58,470 So the calories increased with overall consumption, but not 706 00:37:58,470 --> 00:37:59,610 one for one. 707 00:37:59,610 --> 00:38:01,850 When total expenditure increased by 10%, the 708 00:38:01,850 --> 00:38:05,250 consumption of calorie increased by 3.5%. 709 00:38:05,250 --> 00:38:06,840 So we have an Engel curve. 710 00:38:06,840 --> 00:38:09,800 That is true for everyone. 711 00:38:09,800 --> 00:38:14,550 So why is the slope of the Engel curve less than one? 712 00:38:14,550 --> 00:38:19,280 So what happens is what was suggested earlier, which is 713 00:38:19,280 --> 00:38:24,330 when people get a bit more money, they do increase the 714 00:38:24,330 --> 00:38:26,940 share of the budget going to other things. 715 00:38:26,940 --> 00:38:29,960 So the elasticity of overall food expenditure 716 00:38:29,960 --> 00:38:30,760 is less than one. 717 00:38:30,760 --> 00:38:32,260 It's about 0.7. 718 00:38:32,260 --> 00:38:36,300 So if I increase your budget by 10%, you increase your food 719 00:38:36,300 --> 00:38:38,170 consumption by 7%. 720 00:38:38,170 --> 00:38:40,240 And then it means you increase something else more than 721 00:38:40,240 --> 00:38:41,350 proportionally. 722 00:38:41,350 --> 00:38:45,020 So maybe you start spending money on the movies, which you 723 00:38:45,020 --> 00:38:46,920 were not doing before. 724 00:38:46,920 --> 00:38:48,320 So that's the first thing. 725 00:38:48,320 --> 00:38:54,520 So 7% is not 3, though. 726 00:38:54,520 --> 00:38:57,270 So what is the difference between 7 and 3? 727 00:38:57,270 --> 00:39:01,690 When I increase your budget by 10%, you increase your food 728 00:39:01,690 --> 00:39:03,530 budget by 7%. 729 00:39:03,530 --> 00:39:06,550 But your calories only increase by 3.5. 730 00:39:06,550 --> 00:39:08,846 So what happened in the meantime? 731 00:39:08,846 --> 00:39:10,830 [INAUDIBLE]. 732 00:39:10,830 --> 00:39:13,310 AUDIENCE: Maybe all your food wasn't as high in calories. 733 00:39:13,310 --> 00:39:15,320 PROFESSOR: They bought more expensive food anyway. 734 00:39:15,320 --> 00:39:18,980 Maybe because that food was yummier, maybe because it was 735 00:39:18,980 --> 00:39:21,760 more nutritious, but certainly more expensive food. 736 00:39:21,760 --> 00:39:24,650 So what happens is that when you spend more on food, you 737 00:39:24,650 --> 00:39:29,310 start buying more expensive calories and you do that in 738 00:39:29,310 --> 00:39:30,820 various ways. 739 00:39:30,820 --> 00:39:34,505 You start eating meat instead of eating cereals, and you 740 00:39:34,505 --> 00:39:37,185 start eating more expensive cereals instead of the course 741 00:39:37,185 --> 00:39:40,730 cereals you were eating before. 742 00:39:40,730 --> 00:39:43,650 And even within the more expensive cereals, rice for 743 00:39:43,650 --> 00:39:45,860 example, you buy more expensive rice. 744 00:39:45,860 --> 00:39:47,900 So all of this margin happens. 745 00:39:47,900 --> 00:39:50,390 And we can see it here in the table. 746 00:39:50,390 --> 00:39:54,450 We can see this is Maharashtra, 1983. 747 00:39:54,450 --> 00:39:58,420 These are the poorest 10% and the top 10%. 748 00:39:58,420 --> 00:40:02,720 We can see that the poorest 10% spent 46% of their budget 749 00:40:02,720 --> 00:40:06,760 on cereals, and the top 10%, 31%. 750 00:40:06,760 --> 00:40:12,290 And if we look at meat, meat is 8.5% for the poorest and 751 00:40:12,290 --> 00:40:14,460 12% for the richest. 752 00:40:14,460 --> 00:40:17,130 Things like are constant, however, in terms of fraction 753 00:40:17,130 --> 00:40:18,230 of the budget is sugar. 754 00:40:18,230 --> 00:40:24,160 And the sugar actually goes down 7.425%, and oil. 755 00:40:24,160 --> 00:40:25,530 That remains about the same. 756 00:40:25,530 --> 00:40:29,250 The fraction of the budget spent on oil is 9% for both. 757 00:40:29,250 --> 00:40:34,130 But you get cereal going down, and you get meat going up. 758 00:40:34,130 --> 00:40:37,690 And the price per calorie of cereal is much cheaper 759 00:40:37,690 --> 00:40:41,950 compared to the price per calorie of meat. 760 00:40:41,950 --> 00:40:46,090 And now within cereal, people who are poor spend 9% of their 761 00:40:46,090 --> 00:40:48,220 budget on the rice. 762 00:40:48,220 --> 00:40:50,700 And the rich are spending almost 11% of 763 00:40:50,700 --> 00:40:52,500 their budget on rice. 764 00:40:52,500 --> 00:40:59,360 And then the price of rice is also cheaper than the price of 765 00:40:59,360 --> 00:41:00,850 other things. 766 00:41:00,850 --> 00:41:03,030 Price is more expensive, sorry, than other things like 767 00:41:03,030 --> 00:41:04,650 the course cereal. 768 00:41:04,650 --> 00:41:07,300 And even within rice, the poor are buying cheaper 769 00:41:07,300 --> 00:41:08,840 rice than the rich. 770 00:41:08,840 --> 00:41:15,070 The poor are spending 18 paise per calorie for the rice, and 771 00:41:15,070 --> 00:41:18,650 one rupee per calorie for the richer people. 772 00:41:18,650 --> 00:41:22,800 So all of this margin happen, which again suggests that 773 00:41:22,800 --> 00:41:25,930 there is some amount of flexibility. 774 00:41:25,930 --> 00:41:29,255 Because otherwise, what you would do is to, within the 775 00:41:29,255 --> 00:41:32,520 same budget, continue to eat the same thing, but more of 776 00:41:32,520 --> 00:41:33,880 the same thing. 777 00:41:33,880 --> 00:41:38,560 So if you were at subsistence level, the share of your 778 00:41:38,560 --> 00:41:41,440 calories that comes from the staple food 779 00:41:41,440 --> 00:41:43,740 would remain constant. 780 00:41:43,740 --> 00:41:45,890 And it's only after you've reached some level of 781 00:41:45,890 --> 00:41:48,250 subsistence that you would say, now I can 782 00:41:48,250 --> 00:41:49,680 start eating more meat. 783 00:41:49,680 --> 00:41:52,180 It's more expensive, but it's yummier. 784 00:41:52,180 --> 00:41:55,270 And so the fact that even for these relatively poor people 785 00:41:55,270 --> 00:42:00,770 who see that the share of calories that comes from rice 786 00:42:00,770 --> 00:42:07,270 declines is an indication that they probably see themselves 787 00:42:07,270 --> 00:42:08,820 having some margin of choice. 788 00:42:29,450 --> 00:42:31,730 So even among the very poor people, an increase in 789 00:42:31,730 --> 00:42:34,430 economic well being has positive, but not a huge, 790 00:42:34,430 --> 00:42:36,500 impact on calories consumed. 791 00:42:36,500 --> 00:42:38,750 So you take the poorest person here and you increase their 792 00:42:38,750 --> 00:42:41,220 budget by 10%, they will increase their calories by 793 00:42:41,220 --> 00:42:45,550 3.5%, partly because there are other things they like to do, 794 00:42:45,550 --> 00:42:48,043 partly because within food, they also like 795 00:42:48,043 --> 00:42:50,710 to eat better food. 796 00:42:50,710 --> 00:42:55,330 So that brings us to this Jensen and Miller idea, which 797 00:42:55,330 --> 00:42:57,630 is the idea of a Giffen good. 798 00:42:57,630 --> 00:42:58,880 So what's a Giffen good? 799 00:43:02,660 --> 00:43:06,180 AUDIENCE: It's a good that when the price increases, 800 00:43:06,180 --> 00:43:08,670 there's an increase in demand. 801 00:43:08,670 --> 00:43:10,195 PROFESSOR: When the price increase, there is 802 00:43:10,195 --> 00:43:12,175 an increase in demand. 803 00:43:12,175 --> 00:43:12,670 That's right. 804 00:43:12,670 --> 00:43:16,135 Why is that surprising? 805 00:43:16,135 --> 00:43:19,255 AUDIENCE: Because generally the demand curves-- 806 00:43:19,255 --> 00:43:20,614 PROFESSOR: Yeah, go ahead. 807 00:43:20,614 --> 00:43:24,408 AUDIENCE: Generally as the price increases, there's a 808 00:43:24,408 --> 00:43:26,050 decrease in the demand for the quantity. 809 00:43:26,050 --> 00:43:27,253 PROFESSOR: Generally, we think of the demand 810 00:43:27,253 --> 00:43:28,320 curve as looking down. 811 00:43:28,320 --> 00:43:30,070 So if there is an increase in the price, you 812 00:43:30,070 --> 00:43:32,320 decrease your demand. 813 00:43:32,320 --> 00:43:36,520 So why is it not a violation of everything 814 00:43:36,520 --> 00:43:37,770 we know about economics? 815 00:43:42,153 --> 00:43:47,510 AUDIENCE: Because if the price of some good increases, then 816 00:43:47,510 --> 00:43:49,945 you wouldn't be able to substitute out [INAUDIBLE] 817 00:43:49,945 --> 00:43:50,919 pretty easily. 818 00:43:50,919 --> 00:43:52,950 So the example of rice and meat-- if the price of rice 819 00:43:52,950 --> 00:43:56,649 increases, then in order to get the calories you need, you 820 00:43:56,649 --> 00:43:59,740 might have to buy more rice and just stop buying meat. 821 00:43:59,740 --> 00:44:05,220 PROFESSOR: Right, Mr. Giffen is referred to by who for the 822 00:44:05,220 --> 00:44:07,275 first time? 823 00:44:07,275 --> 00:44:11,306 Are there some writings by Mr. Giffen? 824 00:44:11,306 --> 00:44:13,590 AUDIENCE: Indiana Jones. 825 00:44:13,590 --> 00:44:14,600 PROFESSOR: Indiana Jones-- 826 00:44:14,600 --> 00:44:16,062 but before that. 827 00:44:16,062 --> 00:44:18,980 So Mr. Giffen-- we have no writing from him directly, but 828 00:44:18,980 --> 00:44:21,710 he was referred to by Adam Smith. 829 00:44:21,710 --> 00:44:23,100 And Adam Smith gives the example 830 00:44:23,100 --> 00:44:27,010 of potatoes in Ireland. 831 00:44:27,010 --> 00:44:30,210 The price of potatoes goes up, but potatoes is such an 832 00:44:30,210 --> 00:44:32,830 important part of the budget that when the price of 833 00:44:32,830 --> 00:44:35,750 potatoes goes up, it does an income effect, so that is 834 00:44:35,750 --> 00:44:36,260 always true. 835 00:44:36,260 --> 00:44:39,860 When the price of a good goes up, it has an income effect 836 00:44:39,860 --> 00:44:41,620 and it has a substitution effect. 837 00:44:41,620 --> 00:44:44,070 What do we know about the substitution effect? 838 00:44:47,950 --> 00:44:50,375 Yeah. 839 00:44:50,375 --> 00:44:53,770 AUDIENCE: Generally when the price of one good goes up, 840 00:44:53,770 --> 00:44:56,680 [INAUDIBLE]. 841 00:44:56,680 --> 00:45:01,360 PROFESSOR: Right, so when the price of a good goes up, you 842 00:45:01,360 --> 00:45:02,580 substitute to another good. 843 00:45:02,580 --> 00:45:05,700 So the substitution effect is always negative. 844 00:45:05,700 --> 00:45:10,820 But the income effect can be either positive or negative. 845 00:45:10,820 --> 00:45:13,390 So the income effect-- 846 00:45:13,390 --> 00:45:14,640 in what case is it positive? 847 00:45:22,490 --> 00:45:29,100 So for example, if you look at iPod consumption, would that 848 00:45:29,100 --> 00:45:30,710 tend to have a positive income effect or a 849 00:45:30,710 --> 00:45:31,960 negative income effect? 850 00:45:40,610 --> 00:45:42,818 So the goods that are more like luxury goods, that are a 851 00:45:42,818 --> 00:45:44,770 bit expensive, will have positive income effect, 852 00:45:44,770 --> 00:45:48,540 meaning as you become richer, you will consume more of them. 853 00:45:48,540 --> 00:45:50,380 The goods that are cheaper and that are not particularly 854 00:45:50,380 --> 00:45:52,990 desirable will have negative income effect. 855 00:45:52,990 --> 00:45:56,850 For example, think about your own budget. 856 00:45:56,850 --> 00:45:59,505 As you become richer, maybe you are going to buy more 857 00:45:59,505 --> 00:46:00,480 orange juice. 858 00:46:00,480 --> 00:46:02,050 That is a positive income effect. 859 00:46:02,050 --> 00:46:05,460 Maybe you are going to get fewer macaroni and cheese 860 00:46:05,460 --> 00:46:06,640 pre-packed. 861 00:46:06,640 --> 00:46:09,180 That has a negative income effect. 862 00:46:09,180 --> 00:46:12,260 So the income effect could be positive or could be negative. 863 00:46:12,260 --> 00:46:14,050 It's positive if it's a normal good. 864 00:46:14,050 --> 00:46:16,420 It's negative if it's an inferior good. 865 00:46:16,420 --> 00:46:18,940 So now something like potato is 866 00:46:18,940 --> 00:46:20,400 presumably an inferior good. 867 00:46:20,400 --> 00:46:21,400 That's not something people love. 868 00:46:21,400 --> 00:46:24,042 It's something that as they become richer, they will try 869 00:46:24,042 --> 00:46:26,870 and substitute to another thing. 870 00:46:26,870 --> 00:46:30,620 So the question is whether the income effect of an inferior 871 00:46:30,620 --> 00:46:34,030 good like potato is so large-- 872 00:46:34,030 --> 00:46:37,640 not only it's negative, but it is so large that it out does 873 00:46:37,640 --> 00:46:41,190 the substitution effect. 874 00:46:41,190 --> 00:46:44,180 So if the income effect is so large that it more than 875 00:46:44,180 --> 00:46:46,780 compensates for the substitution effect, then you 876 00:46:46,780 --> 00:46:49,170 might be getting a different good. 877 00:46:49,170 --> 00:46:53,180 So that is the story of the potato famine, which is 878 00:46:53,180 --> 00:46:56,720 possibly apocryphal, the story being the 879 00:46:56,720 --> 00:46:59,050 price of potato increases. 880 00:46:59,050 --> 00:47:02,245 But that makes people poorer, so that actually increases 881 00:47:02,245 --> 00:47:04,900 their consumption of potatoes, because they stop eating meat, 882 00:47:04,900 --> 00:47:06,680 and they eat only potatoes because they have no money 883 00:47:06,680 --> 00:47:08,590 left to buy any meat. 884 00:47:08,590 --> 00:47:10,840 So this is a different good. 885 00:47:10,840 --> 00:47:14,840 So until this paper, I think there was a strong suspicion 886 00:47:14,840 --> 00:47:17,120 among economists that different goods-- 887 00:47:17,120 --> 00:47:19,410 actually, they didn't exist, but they were a nice 888 00:47:19,410 --> 00:47:22,850 theoretical possibility, but that in practice, you don't 889 00:47:22,850 --> 00:47:25,830 see a good where the income effect is so large that it 890 00:47:25,830 --> 00:47:29,990 outdoes the substitution effect, so that if you become 891 00:47:29,990 --> 00:47:32,040 richer, you eat fewer potatoes. 892 00:47:32,040 --> 00:47:34,170 But if the price of potatoes declines, 893 00:47:34,170 --> 00:47:37,150 you eat more potatoes. 894 00:47:37,150 --> 00:47:41,790 So this is the story. 895 00:47:41,790 --> 00:47:45,590 So a staple food that constitutes a large part of 896 00:47:45,590 --> 00:47:48,400 the budget, like potatoes for Irish famine or the example 897 00:47:48,400 --> 00:47:49,650 they have in China are what? 898 00:47:53,834 --> 00:47:56,750 AUDIENCE: These were two provinces in the North 899 00:47:56,750 --> 00:47:58,000 [INAUDIBLE]. 900 00:48:04,050 --> 00:48:05,740 PROFESSOR: Wheat and rice. 901 00:48:05,740 --> 00:48:09,340 So these are foods which are a fairly large part of the food 902 00:48:09,340 --> 00:48:12,720 budget and a fairly large part of the overall budget. 903 00:48:12,720 --> 00:48:16,060 So this is a good confident for a different good. 904 00:48:16,060 --> 00:48:19,620 Because for the income effect to have any chance to be large 905 00:48:19,620 --> 00:48:22,340 enough, it has to be something that takes a large part of 906 00:48:22,340 --> 00:48:23,660 your budget. 907 00:48:23,660 --> 00:48:26,980 So that's why they decided on this thing. 908 00:48:26,980 --> 00:48:29,690 So the first thing they've done is they looked at these 909 00:48:29,690 --> 00:48:32,260 two provinces and they observed that, for example, in 910 00:48:32,260 --> 00:48:36,260 a rice consuming region, they observed that in cities where 911 00:48:36,260 --> 00:48:40,450 the price of rice is higher, people consume more rice. 912 00:48:40,450 --> 00:48:42,480 And first, they are very happy, and they said oh, we 913 00:48:42,480 --> 00:48:44,020 have found our Giffen good. 914 00:48:44,020 --> 00:48:46,120 But then they get depressed and they realize maybe it is 915 00:48:46,120 --> 00:48:47,320 not a Giffen good. 916 00:48:47,320 --> 00:48:50,420 So why do they conclude that it doesn't give 917 00:48:50,420 --> 00:48:53,560 them a Giffen good? 918 00:48:53,560 --> 00:48:55,528 AUDIENCE: [INAUDIBLE] 919 00:48:55,528 --> 00:48:58,726 is it because the price is higher that people consume 920 00:48:58,726 --> 00:49:01,333 more rice, which would make it an incident? or is it that 921 00:49:01,333 --> 00:49:02,930 people consume more rice, so the price becomes higher? 922 00:49:02,930 --> 00:49:03,880 PROFESSOR: Right, we don't know. 923 00:49:03,880 --> 00:49:06,830 We are trying to trace a demand curve. 924 00:49:06,830 --> 00:49:09,860 But if we only observe prices and quantity, we might be 925 00:49:09,860 --> 00:49:11,900 tracing the supply curve. 926 00:49:11,900 --> 00:49:15,230 So we don't know whether we have traced the demand curve 927 00:49:15,230 --> 00:49:16,470 or the supply curve. 928 00:49:16,470 --> 00:49:21,100 And this would be the normal shape for a supply curve. 929 00:49:21,100 --> 00:49:25,070 So this is exactly the same type of problems that we were 930 00:49:25,070 --> 00:49:28,890 facing when we were trying to look at the effect of malaria 931 00:49:28,890 --> 00:49:34,080 prices on bednets, which is if we just look at the variation 932 00:49:34,080 --> 00:49:37,710 in the world, there is the effect that we are trying to 933 00:49:37,710 --> 00:49:40,330 identify, and there is a possible of a reverse 934 00:49:40,330 --> 00:49:42,960 causality, in this case, very clear, which is we also have a 935 00:49:42,960 --> 00:49:45,550 supply curve that we are trying to trace. 936 00:49:45,550 --> 00:49:47,800 So that's why they decided that's not working. 937 00:49:47,800 --> 00:49:49,080 So what did they decide to do? 938 00:49:54,558 --> 00:49:57,048 AUDIENCE: They subsidized rice and wheat. 939 00:49:57,048 --> 00:49:58,930 [INAUDIBLE]. 940 00:49:58,930 --> 00:50:00,870 PROFESSOR: Exactly, what they decided to do is to run the 941 00:50:00,870 --> 00:50:04,490 maize experiment where they subsidized the price of rice 942 00:50:04,490 --> 00:50:06,370 in the rice consuming region and wheat in the wheat 943 00:50:06,370 --> 00:50:09,310 consuming region at various levels. 944 00:50:09,310 --> 00:50:12,370 I think there are three levels of subsidies. 945 00:50:12,370 --> 00:50:14,620 So they take a sample of households. 946 00:50:14,620 --> 00:50:17,735 They distribute a voucher for the reduced price of rice in 947 00:50:17,735 --> 00:50:22,840 Hunan and reduced price of wheat in Gangsu to a random 948 00:50:22,840 --> 00:50:28,470 sub sample for more than a month's supply every month. 949 00:50:28,470 --> 00:50:30,330 They made sure that the household 950 00:50:30,330 --> 00:50:32,560 wouldn't extend them. 951 00:50:32,560 --> 00:50:37,620 Otherwise, what would be a problem if households started 952 00:50:37,620 --> 00:50:38,870 trading them? 953 00:50:44,589 --> 00:50:45,575 AUDIENCE: [INAUDIBLE]. 954 00:50:45,575 --> 00:50:48,950 PROFESSOR: Exactly, in particular you try 955 00:50:48,950 --> 00:50:49,690 to reduce the price. 956 00:50:49,690 --> 00:50:53,020 But if you give voucher and people start exchanging them, 957 00:50:53,020 --> 00:50:56,200 think of food stamps when people sell their food stamps. 958 00:50:59,430 --> 00:51:01,710 When they sell their food stamps, they are getting 959 00:51:01,710 --> 00:51:03,900 money, which is-- 960 00:51:03,900 --> 00:51:04,980 I mean, it's not bad. 961 00:51:04,980 --> 00:51:09,420 But why do we think it's an issue? 962 00:51:09,420 --> 00:51:11,600 And why would there be a theoretical 963 00:51:11,600 --> 00:51:13,530 issue in their cases? 964 00:51:17,442 --> 00:51:20,870 AUDIENCE: Essentially, the price of the rice would need 965 00:51:20,870 --> 00:51:22,510 to be changed. 966 00:51:22,510 --> 00:51:23,760 PROFESSOR: It wouldn't be changing. 967 00:51:25,670 --> 00:51:29,660 So the people would get their voucher, and then they would 968 00:51:29,660 --> 00:51:30,430 sell it to someone. 969 00:51:30,430 --> 00:51:32,150 So they would get money instead. 970 00:51:32,150 --> 00:51:34,330 And then they would, with that many, perhaps buy some rice 971 00:51:34,330 --> 00:51:36,920 and wheat and buy some other things as well. 972 00:51:36,920 --> 00:51:41,320 So their experiment where they tried to change the price of 973 00:51:41,320 --> 00:51:43,940 rice or wheat would end up just changing their income 974 00:51:43,940 --> 00:51:45,710 without changing the price. 975 00:51:45,710 --> 00:51:47,790 Because the marginal price that they are facing once they 976 00:51:47,790 --> 00:51:50,690 have sold their voucher is the same, except they now have 977 00:51:50,690 --> 00:51:51,840 more money. 978 00:51:51,840 --> 00:51:54,800 So now all they would identify is the income effect. 979 00:51:54,800 --> 00:51:57,420 And of course, the income effect would be negative 980 00:51:57,420 --> 00:51:58,990 because that's an inferior good. 981 00:51:58,990 --> 00:52:00,510 So they would be finding a Giffen good. 982 00:52:00,510 --> 00:52:02,770 But that would not be a real one. 983 00:52:02,770 --> 00:52:05,590 That would be a fake one due to the fact that their price 984 00:52:05,590 --> 00:52:08,480 experiment would be transformed into an income 985 00:52:08,480 --> 00:52:11,080 experiment. 986 00:52:11,080 --> 00:52:14,180 So it's very important for them to keep the price 987 00:52:14,180 --> 00:52:15,490 experiment in tact. 988 00:52:15,490 --> 00:52:18,160 So they tried to do that and they tried to argue in the 989 00:52:18,160 --> 00:52:20,535 paper and in the post that you read in Freakonomics that 990 00:52:20,535 --> 00:52:23,250 they've done this properly. 991 00:52:23,250 --> 00:52:25,380 And after six months, they came back, and then they asked 992 00:52:25,380 --> 00:52:28,100 detailed questions about the consumption of rice, wheat and 993 00:52:28,100 --> 00:52:30,490 other things. 994 00:52:30,490 --> 00:52:32,040 So what do they find? 995 00:52:32,040 --> 00:52:35,010 So I'm going to show you the regression table which gives 996 00:52:35,010 --> 00:52:37,520 us the results directly and explain to you what's in the 997 00:52:37,520 --> 00:52:39,000 regression table. 998 00:52:39,000 --> 00:52:39,640 So it's a long table. 999 00:52:39,640 --> 00:52:42,450 But for now, focus on the first column. 1000 00:52:42,450 --> 00:52:46,480 So what they regress is the percent increase in rice 1001 00:52:46,480 --> 00:52:50,880 consumption over the percent subsidy. 1002 00:52:50,880 --> 00:52:52,370 There are three groups of subsidies. 1003 00:52:52,370 --> 00:52:55,055 I was looking everywhere in the paper for you to have the 1004 00:52:55,055 --> 00:52:59,144 three prices and the three reductions so that I could 1005 00:52:59,144 --> 00:53:01,170 plot them, but they were not there. 1006 00:53:01,170 --> 00:53:04,490 So this is the overall result. 1007 00:53:04,490 --> 00:53:06,185 So basically, the way you read this graph-- 1008 00:53:06,185 --> 00:53:11,780 it's saying that your consumption of rice reduces by 1009 00:53:11,780 --> 00:53:21,050 23.5% when the subsidy increases by 100%. 1010 00:53:21,050 --> 00:53:23,920 It's directly a percentage of a percentage. 1011 00:53:23,920 --> 00:53:31,770 So your consumption of rice reduces in percentage about a 1012 00:53:31,770 --> 00:53:34,550 quarter of the reduction in price. 1013 00:53:34,550 --> 00:53:36,160 So the important thing here is, of 1014 00:53:36,160 --> 00:53:38,210 course, that it's negative. 1015 00:53:38,210 --> 00:53:40,410 And below the coefficient here, you get 1016 00:53:40,410 --> 00:53:42,600 the standard error. 1017 00:53:42,600 --> 00:53:44,900 So the coefficient is 0.235. 1018 00:53:44,900 --> 00:53:47,840 The standard error 0.14. 1019 00:53:47,840 --> 00:53:50,500 If you divide by one the other, you get the familiar T 1020 00:53:50,500 --> 00:53:51,590 statistics. 1021 00:53:51,590 --> 00:53:55,920 This one is above 1.7, so this means this is significant at 1022 00:53:55,920 --> 00:53:58,860 10% level, which tells you that this is not 1023 00:53:58,860 --> 00:54:00,620 entirely due to chance. 1024 00:54:00,620 --> 00:54:02,880 This negative is not some fluke. 1025 00:54:02,880 --> 00:54:06,070 It is something which is indeed significantly 1026 00:54:06,070 --> 00:54:07,980 different from 0. 1027 00:54:07,980 --> 00:54:10,770 So that's what they find for Hunan. 1028 00:54:10,770 --> 00:54:16,110 And then they find the opposite for seafood, where 1029 00:54:16,110 --> 00:54:19,670 the elasticity of seafood consumption with respect to 1030 00:54:19,670 --> 00:54:23,590 the price of rice is very positive. 1031 00:54:23,590 --> 00:54:25,980 So what happened in their experiment-- 1032 00:54:25,980 --> 00:54:29,040 this is your typical Giffen good behavior-- 1033 00:54:29,040 --> 00:54:32,130 is the price of rice increases, but increases 1034 00:54:32,130 --> 00:54:34,420 because rice is such an important part of your budget. 1035 00:54:34,420 --> 00:54:36,780 It amounts to increasing your income. 1036 00:54:36,780 --> 00:54:38,990 And because of this increase in your income, you feel that 1037 00:54:38,990 --> 00:54:42,600 you can now get more of your calories from shrimps and 1038 00:54:42,600 --> 00:54:45,810 fewer from food. 1039 00:54:45,810 --> 00:54:47,060 So that's for Hunan. 1040 00:54:53,420 --> 00:54:56,240 So this is the explanation. 1041 00:54:56,240 --> 00:55:02,380 And for Gansu, we have a positive elasticity. 1042 00:55:02,380 --> 00:55:04,470 So it means that wheat doesn't appear to be a 1043 00:55:04,470 --> 00:55:05,810 Giffen good in Gansu. 1044 00:55:05,810 --> 00:55:07,650 It appears to be an inferior good. 1045 00:55:07,650 --> 00:55:12,340 It increased less than one for one, but in fact, it's not 1046 00:55:12,340 --> 00:55:14,240 significantly positive. 1047 00:55:14,240 --> 00:55:16,510 But it's certainly not negative. 1048 00:55:16,510 --> 00:55:20,650 And they explain why they find a different result in a 1049 00:55:20,650 --> 00:55:22,340 different place. 1050 00:55:22,340 --> 00:55:23,250 [INAUDIBLE]. 1051 00:55:23,250 --> 00:55:25,297 AUDIENCE: What prevented then from just [INAUDIBLE] rice 1052 00:55:25,297 --> 00:55:29,420 they got to give more money by substituting goods? 1053 00:55:29,420 --> 00:55:32,646 PROFESSOR: Right, so they tried to stop that. 1054 00:55:32,646 --> 00:55:38,940 But we don't know for sure that they succeeded. 1055 00:55:38,940 --> 00:55:40,660 What they were very worried about is the 1056 00:55:40,660 --> 00:55:42,990 resale of the voucher. 1057 00:55:42,990 --> 00:55:45,675 And their view then is once you had resold the voucher, 1058 00:55:45,675 --> 00:55:48,400 then you wouldn't have resold the rice. 1059 00:55:48,400 --> 00:55:51,070 And what they did after that is they did a survey. 1060 00:55:51,070 --> 00:55:57,950 So the data here doesn't come from the administrative data 1061 00:55:57,950 --> 00:55:59,760 of what was sold in the shop. 1062 00:55:59,760 --> 00:56:02,560 The survey comes from what people consumed at 1063 00:56:02,560 --> 00:56:04,260 the end of the day. 1064 00:56:04,260 --> 00:56:06,670 So to the extent that people didn't lie to them, this is 1065 00:56:06,670 --> 00:56:09,220 the actually consumption. 1066 00:56:09,220 --> 00:56:13,250 So it could still be the case that they bought the rice. 1067 00:56:13,250 --> 00:56:14,200 They sold the rice. 1068 00:56:14,200 --> 00:56:16,160 They bought the rice with the voucher because they couldn't 1069 00:56:16,160 --> 00:56:17,360 exchange the voucher. 1070 00:56:17,360 --> 00:56:20,920 But then, they went to the trouble of selling the rice. 1071 00:56:20,920 --> 00:56:24,080 And that's why it's just an income effect that we are 1072 00:56:24,080 --> 00:56:27,950 estimating, which is why it's negative. 1073 00:56:27,950 --> 00:56:30,250 They tried to argue that it didn't happen, but that's, of 1074 00:56:30,250 --> 00:56:32,300 course, a key concept. 1075 00:56:32,300 --> 00:56:36,220 So what do they say about wheat, that why did the wheat 1076 00:56:36,220 --> 00:56:38,206 show them a different good for the wheat, but they have one 1077 00:56:38,206 --> 00:56:39,820 for the rice? 1078 00:56:39,820 --> 00:56:42,170 AUDIENCE: Because people aren't eating wheat itself. 1079 00:56:42,170 --> 00:56:45,940 They're eating wheat products, like noodles. 1080 00:56:45,940 --> 00:56:47,552 PROFESSOR: Exactly, you are saying that it's not their own 1081 00:56:47,552 --> 00:56:48,765 group, that people rice. 1082 00:56:48,765 --> 00:56:52,030 They don't buy big packets of wheat, so that it was kind of 1083 00:56:52,030 --> 00:56:53,280 the wrong idea. 1084 00:57:00,300 --> 00:57:02,300 This, of course, has implication for nutrition, and 1085 00:57:02,300 --> 00:57:05,980 in particular for a very frequent policy that we find 1086 00:57:05,980 --> 00:57:09,620 in developing world, which is food price's subsidy for 1087 00:57:09,620 --> 00:57:11,290 greater nutrition. 1088 00:57:11,290 --> 00:57:15,170 So for example, in Indonesia, we have the ration program. 1089 00:57:15,170 --> 00:57:16,990 If you remember, in Pak Solhin's stories, he got some 1090 00:57:16,990 --> 00:57:19,300 free rice from the ration program. 1091 00:57:19,300 --> 00:57:25,020 In India, India just introduced the Right to Food 1092 00:57:25,020 --> 00:57:26,900 Act and a subsidy scheme for rice in 1093 00:57:26,900 --> 00:57:29,430 rice consuming regions. 1094 00:57:29,430 --> 00:57:33,090 So India has something called a public distribution system 1095 00:57:33,090 --> 00:57:37,140 where they distribute food to households at reduced prices, 1096 00:57:37,140 --> 00:57:39,000 to poor households at reduced prices. 1097 00:57:39,000 --> 00:57:46,110 Egypt spent something like 3% of its GDP on food subsidies. 1098 00:57:46,110 --> 00:57:51,330 So food subsidies is a very important part of help to the 1099 00:57:51,330 --> 00:57:53,010 poor in developing countries. 1100 00:57:53,010 --> 00:57:55,350 It's also a very important part of our-- 1101 00:57:55,350 --> 00:57:56,740 our meaning the US-- 1102 00:57:56,740 --> 00:58:01,420 aid to poor countries is in the form of food aid, directly 1103 00:58:01,420 --> 00:58:04,830 food which we send to poor countries. 1104 00:58:04,830 --> 00:58:07,080 Why are we spending a lot of our aid in terms of food aid? 1105 00:58:11,336 --> 00:58:12,827 AUDIENCE: [INAUDIBLE] 1106 00:58:12,827 --> 00:58:14,815 lot of food [INAUDIBLE]. 1107 00:58:14,815 --> 00:58:17,797 It's easier for us to just take that [INAUDIBLE]. 1108 00:58:17,797 --> 00:58:20,212 PROFESSOR: Yes, so part of the reason why a lot of our aid is 1109 00:58:20,212 --> 00:58:21,440 in the form of food aid is that it's also 1110 00:58:21,440 --> 00:58:24,010 aid for our own farmers. 1111 00:58:24,010 --> 00:58:26,130 And it's a way of kind of buying the [INAUDIBLE] 1112 00:58:26,130 --> 00:58:28,110 and sending them out. 1113 00:58:28,110 --> 00:58:31,280 So when the weather has been good in the US and the harvest 1114 00:58:31,280 --> 00:58:34,980 is very big, a lot more food aid is being spent 1115 00:58:34,980 --> 00:58:36,510 all over the world. 1116 00:58:36,510 --> 00:58:40,830 But with that aside, this is a policy that many countries 1117 00:58:40,830 --> 00:58:44,430 have to try to subsidize the price of food. 1118 00:58:44,430 --> 00:58:49,840 But if we have something like the Giffen good, what may 1119 00:58:49,840 --> 00:58:56,710 happen if you make the price of the staple less high, if 1120 00:58:56,710 --> 00:58:58,370 you make the price of the staple lower? 1121 00:58:58,370 --> 00:59:00,250 Yes. 1122 00:59:00,250 --> 00:59:02,791 AUDIENCE: Then they'll spend their income on other sorts of 1123 00:59:02,791 --> 00:59:04,870 stuff, not on the [INAUDIBLE]. 1124 00:59:04,870 --> 00:59:06,560 PROFESSOR: Yes, we might find that something like this 1125 00:59:06,560 --> 00:59:11,990 happens, which is the price of rice has now gone down. 1126 00:59:11,990 --> 00:59:13,930 Instead of eating more rice, you ate less rice and more 1127 00:59:13,930 --> 00:59:17,540 shrimps and maybe also more cellphones. 1128 00:59:17,540 --> 00:59:23,490 So if rice is indeed a Giffen good, the increase in the 1129 00:59:23,490 --> 00:59:26,640 calories you are getting from a decline in the price of rice 1130 00:59:26,640 --> 00:59:29,770 might actually not be very high. 1131 00:59:29,770 --> 00:59:32,150 In fact, it might even be negative. 1132 00:59:32,150 --> 00:59:35,810 Because if the income effect is sufficiently large, it made 1133 00:59:35,810 --> 00:59:38,005 outdo, again, the price effect. 1134 00:59:38,005 --> 00:59:40,860 And we might find that as we make food cheaper, people eat 1135 00:59:40,860 --> 00:59:43,710 less instead of eating more. 1136 00:59:43,710 --> 00:59:46,920 And that's exactly what they found in Hunan where rice was 1137 00:59:46,920 --> 00:59:48,480 a Giffen good. 1138 00:59:48,480 --> 00:59:57,000 They find that as you decrease the price of rice, people eat 1139 00:59:57,000 --> 01:00:00,790 fewer calories, not more. 1140 01:00:00,790 --> 01:00:09,230 So this would be the very standard poor price policy in 1141 01:00:09,230 --> 01:00:12,390 your average developing countries, to try to subsidize 1142 01:00:12,390 --> 01:00:13,810 the staple. 1143 01:00:13,810 --> 01:00:20,240 And the justification of this policy will typically be in 1144 01:00:20,240 --> 01:00:23,110 the form of we need to increase the calorie 1145 01:00:23,110 --> 01:00:26,140 consumption because people are trapped in poverty trap like 1146 01:00:26,140 --> 01:00:27,580 our friend, Pak Solhin. 1147 01:00:27,580 --> 01:00:30,370 But in fact, if you look at this for this urban household 1148 01:00:30,370 --> 01:00:34,310 in China, you find the opposite, which is subsidizing 1149 01:00:34,310 --> 01:00:36,570 the price of rice actually leads to 1150 01:00:36,570 --> 01:00:38,640 fewer calories consumed. 1151 01:00:38,640 --> 01:00:42,572 And it's not because people gain in terms of other micro 1152 01:00:42,572 --> 01:00:43,926 nutrients, though we don't have all 1153 01:00:43,926 --> 01:00:45,420 the other micro nutrient. 1154 01:00:45,420 --> 01:00:50,850 But we get fewer portions being consumed as well. 1155 01:00:50,850 --> 01:00:52,850 So this is what they find in Hunan, but they 1156 01:00:52,850 --> 01:00:54,550 don't have it in Gansu. 1157 01:00:54,550 --> 01:00:56,830 So it's not to say that it happens necessarily 1158 01:00:56,830 --> 01:01:00,950 everywhere, but it is something that might happen. 1159 01:01:00,950 --> 01:01:04,070 So it is not a total given that a reduction in the price 1160 01:01:04,070 --> 01:01:08,310 of food will lead to an increase in nutrition. 1161 01:01:08,310 --> 01:01:10,615 On the bright side, it also means that it's not 1162 01:01:10,615 --> 01:01:13,025 necessarily a given that the current increase in the food 1163 01:01:13,025 --> 01:01:15,720 prices that we are observing will lead to people eating 1164 01:01:15,720 --> 01:01:17,220 fewer calories. 1165 01:01:17,220 --> 01:01:21,440 Because it might have this progress effect of making them 1166 01:01:21,440 --> 01:01:26,286 poorer and therefore leading them to eat more of calories. 1167 01:01:26,286 --> 01:01:30,678 AUDIENCE: Yeah, I think one way [INAUDIBLE] 1168 01:01:30,678 --> 01:01:32,142 food [INAUDIBLE]. 1169 01:01:32,142 --> 01:01:35,558 Because, for example, if you eat shrimps, shrimps may not 1170 01:01:35,558 --> 01:01:36,534 be very calorie rich. 1171 01:01:36,534 --> 01:01:39,462 In India, people eat a lot of lentils. 1172 01:01:39,462 --> 01:01:43,632 And the next thing that they eat to rice is durum, which is 1173 01:01:43,632 --> 01:01:46,648 actually full of protein. 1174 01:01:46,648 --> 01:01:50,995 So eating less rice, and if they spend more on protein, 1175 01:01:50,995 --> 01:01:52,927 [INAUDIBLE]. 1176 01:01:52,927 --> 01:01:55,580 PROFESSOR: Right, so this is, of course, completely 1177 01:01:55,580 --> 01:01:59,290 dependent on what you substitute with. 1178 01:01:59,290 --> 01:02:01,530 If you substitute rice with lentils, actually it might be 1179 01:02:01,530 --> 01:02:04,220 more nutrition, and more iron, more nutrition, et cetera. 1180 01:02:04,220 --> 01:02:07,490 So we might find an increase in nutrition due to subsidy in 1181 01:02:07,490 --> 01:02:08,700 the price the rice. 1182 01:02:08,700 --> 01:02:11,100 So the only point here was not to say that it 1183 01:02:11,100 --> 01:02:11,930 has to be the case. 1184 01:02:11,930 --> 01:02:14,780 It was to say that it doesn't have to be the case that 1185 01:02:14,780 --> 01:02:17,470 subsidizing the price the rice will lead to more rice and 1186 01:02:17,470 --> 01:02:19,440 more calories being consumed. 1187 01:02:19,440 --> 01:02:22,960 Now let's look at India, precisely. 1188 01:02:22,960 --> 01:02:27,910 So before that, there is something that should surprise 1189 01:02:27,910 --> 01:02:33,360 you in when you put together this Jenson and Miller result 1190 01:02:33,360 --> 01:02:35,390 and what we had before in India. 1191 01:02:35,390 --> 01:02:42,430 We found that a household that are 10% richer eat about 3.5 1192 01:02:42,430 --> 01:02:44,180 more calories. 1193 01:02:44,180 --> 01:02:45,830 But the Jenson and Miller result-- 1194 01:02:45,830 --> 01:02:47,940 what does it suggest about the income effect? 1195 01:02:51,440 --> 01:02:54,780 We are finding that when the price of rice decreases, you 1196 01:02:54,780 --> 01:02:56,460 eat less, not more. 1197 01:02:56,460 --> 01:02:58,573 What the income effect has to be? 1198 01:02:58,573 --> 01:02:59,300 AUDIENCE: It's negative. 1199 01:02:59,300 --> 01:03:01,935 PROFESSOR: It has to be negative. 1200 01:03:01,935 --> 01:03:04,280 So on the one hand, I showed you positive income effect-- 1201 01:03:04,280 --> 01:03:06,290 maybe not very large, but certainly positive for India. 1202 01:03:06,290 --> 01:03:10,510 On the other hand, I'm showing you price effect in China 1203 01:03:10,510 --> 01:03:15,230 which suggest that the income effect has to be negative, and 1204 01:03:15,230 --> 01:03:16,610 in fact, very negative. 1205 01:03:16,610 --> 01:03:18,120 So how can this be? 1206 01:03:18,120 --> 01:03:22,080 How can we have the two things together? 1207 01:03:22,080 --> 01:03:25,170 So the first thing is that in India, we were comparing 1208 01:03:25,170 --> 01:03:26,170 different households. 1209 01:03:26,170 --> 01:03:28,100 We were not comparing the same household to 1210 01:03:28,100 --> 01:03:32,340 which I give more money. 1211 01:03:32,340 --> 01:03:34,950 And different households are different. 1212 01:03:34,950 --> 01:03:36,750 Maybe they're households that are a bit richer. 1213 01:03:36,750 --> 01:03:39,280 They are also more educated and they understand the value 1214 01:03:39,280 --> 01:03:42,110 of nutrition, and that's why they eat more. 1215 01:03:42,110 --> 01:03:45,193 So the idea in experiment would be to give people a 1216 01:03:45,193 --> 01:03:48,270 little bit more money, really literally do that and see 1217 01:03:48,270 --> 01:03:50,560 whether they spend this money on food or not. 1218 01:03:50,560 --> 01:03:53,060 And that would allow us to estimate the income effect. 1219 01:03:53,060 --> 01:03:55,250 To my knowledge, no one has done that. 1220 01:03:55,250 --> 01:03:58,630 It's a little bit difficult to parachute [INAUDIBLE] 1221 01:03:58,630 --> 01:04:00,600 drops of money on people-- 1222 01:04:00,600 --> 01:04:04,550 not impossible, but it's not been done, I don't think. 1223 01:04:04,550 --> 01:04:08,050 So what we have when we looked at the India curve, we find 1224 01:04:08,050 --> 01:04:10,930 that people who have more money eat more. 1225 01:04:10,930 --> 01:04:13,580 But it may be because they have different tastes or it 1226 01:04:13,580 --> 01:04:16,490 might be because they eat more, and therefore they're 1227 01:04:16,490 --> 01:04:18,480 more productive, therefore they have more money, so the 1228 01:04:18,480 --> 01:04:20,780 opposite relationship. 1229 01:04:20,780 --> 01:04:24,700 So that may be an underestimate. 1230 01:04:24,700 --> 01:04:27,400 That positive estimate, which was already not that high of 1231 01:04:27,400 --> 01:04:30,690 the income effect, might have been an over estimate. 1232 01:04:30,690 --> 01:04:32,830 And one thing that's suggested-- 1233 01:04:32,830 --> 01:04:35,330 and it goes back to [? Swati's ?] point earlier-- 1234 01:04:35,330 --> 01:04:40,000 is when we plug the Engel curve over time in India, we 1235 01:04:40,000 --> 01:04:45,250 see two interesting things. 1236 01:04:45,250 --> 01:04:48,700 Number one, all of the Engel curve for the rural areas are 1237 01:04:48,700 --> 01:04:51,230 above the Engel curve for the urban areas. 1238 01:04:51,230 --> 01:04:52,850 Why do you think that would be the case? 1239 01:04:55,410 --> 01:04:58,534 AUDIENCE: The work in the rural area is much more labor 1240 01:04:58,534 --> 01:05:00,363 intensive, so you need to eat more to 1241 01:05:00,363 --> 01:05:01,630 have physical strength. 1242 01:05:01,630 --> 01:05:03,430 PROFESSOR: Exactly, the work in rural area is more 1243 01:05:03,430 --> 01:05:06,060 intensive, and so they need more calories. 1244 01:05:06,060 --> 01:05:08,480 So this is interesting that you are making this point, 1245 01:05:08,480 --> 01:05:10,560 because this is the point you were making earlier about 1246 01:05:10,560 --> 01:05:14,640 maybe the needs of calorie in South Africa are bigger 1247 01:05:14,640 --> 01:05:16,410 because it's colder. 1248 01:05:16,410 --> 01:05:17,920 So that's the first things we notice. 1249 01:05:17,920 --> 01:05:19,530 So this we can explain. 1250 01:05:19,530 --> 01:05:21,740 And what's the other interesting trend in this 1251 01:05:21,740 --> 01:05:29,460 picture is that over time, the Engel curves are falling down. 1252 01:05:29,460 --> 01:05:34,360 People are eating less, and less, and less for the same 1253 01:05:34,360 --> 01:05:36,520 level of income. 1254 01:05:36,520 --> 01:05:38,860 So what happened in India over time is that, of course, 1255 01:05:38,860 --> 01:05:40,880 people got richer. 1256 01:05:40,880 --> 01:05:43,480 So if the Engel curves had been stable, they would have 1257 01:05:43,480 --> 01:05:45,430 eaten more. 1258 01:05:45,430 --> 01:05:47,750 But because the Engel curves are also falling down at the 1259 01:05:47,750 --> 01:05:53,100 same time, what happened over time is that people are moving 1260 01:05:53,100 --> 01:05:55,990 first across to another Engel curve and then up along an 1261 01:05:55,990 --> 01:05:57,100 Engel curve. 1262 01:05:57,100 --> 01:06:01,590 So take someone who would be at a log income of 5. 1263 01:06:01,590 --> 01:06:05,810 15 years later, they have a log income maybe of 5.5, but 1264 01:06:05,810 --> 01:06:07,060 the Engel curve have also moved. 1265 01:06:14,290 --> 01:06:18,630 Take someone who is at 5, and then 15 years later, they 1266 01:06:18,630 --> 01:06:20,410 would be, let's say, at 6. 1267 01:06:20,410 --> 01:06:24,520 But now we need to find the 6 on the much lower Engel curve. 1268 01:06:24,520 --> 01:06:27,790 So instead of eating more, as they would have if the Engel 1269 01:06:27,790 --> 01:06:30,490 curve had become stable, we find that people in India eat 1270 01:06:30,490 --> 01:06:32,680 less and less. 1271 01:06:32,680 --> 01:06:36,140 So over time, the poor in India are eating less and less 1272 01:06:36,140 --> 01:06:40,010 instead of eating more and more, which does suggest some 1273 01:06:40,010 --> 01:06:42,690 negative income elasticity for the country as a whole. 1274 01:06:42,690 --> 01:06:45,410 The country is becoming richer and those people are becoming 1275 01:06:45,410 --> 01:06:48,570 richer, but they are eating less and less. 1276 01:06:48,570 --> 01:06:52,890 So this now starts to make sense with the two results, 1277 01:06:52,890 --> 01:06:55,570 where maybe the income elasticity of food 1278 01:06:55,570 --> 01:06:56,530 consumption-- 1279 01:06:56,530 --> 01:07:00,361 not only it's not above one, which is what we would have in 1280 01:07:00,361 --> 01:07:02,900 a poverty trap kind of a world, but it might be 1281 01:07:02,900 --> 01:07:06,252 negative, which is as people become richer, they-- a funny 1282 01:07:06,252 --> 01:07:07,525 thing-- eat fewer calories. 1283 01:07:15,600 --> 01:07:18,330 So if we look at nutrition in India, we have a pretty 1284 01:07:18,330 --> 01:07:22,900 interesting phenomenon, which is this is the share of people 1285 01:07:22,900 --> 01:07:27,840 who are eating below 2,100 in urban areas and 1286 01:07:27,840 --> 01:07:30,900 2,400 in rural areas. 1287 01:07:30,900 --> 01:07:33,600 This is the number of calories they consume per head. 1288 01:07:33,600 --> 01:07:36,760 Why are these interesting thresholds? 1289 01:07:36,760 --> 01:07:38,010 Yeah. 1290 01:07:40,380 --> 01:07:42,845 You had a question or you were just moving? 1291 01:07:42,845 --> 01:07:43,338 AUDIENCE: Yeah, I was going to ask [INAUDIBLE]. 1292 01:07:43,338 --> 01:07:43,831 PROFESSOR: Go ahead, go ahead. 1293 01:07:43,831 --> 01:07:47,257 AUDIENCE: I was wondering if that couldn't just be 1294 01:07:47,257 --> 01:07:50,682 explained because of inflation and not necessarily for a 1295 01:07:50,682 --> 01:07:52,630 negative effect. 1296 01:07:52,630 --> 01:07:54,841 PROFESSOR: Very good, I could be that the 1297 01:07:54,841 --> 01:07:57,090 price of food has changed. 1298 01:07:57,090 --> 01:08:01,090 People have become richer, but food is now more expensive. 1299 01:08:01,090 --> 01:08:03,370 Remember, it has to be relative prices, because 1300 01:08:03,370 --> 01:08:04,640 people have become richer in real term. 1301 01:08:08,320 --> 01:08:11,140 Even corrected for inflation, India is richer now. 1302 01:08:11,140 --> 01:08:13,770 And there are also fewer poor people. 1303 01:08:13,770 --> 01:08:16,460 But it could be that food prices increase relative to 1304 01:08:16,460 --> 01:08:17,810 other things. 1305 01:08:17,810 --> 01:08:21,540 And that's actually not the case until 2005. 1306 01:08:21,540 --> 01:08:24,630 And then it became very much the case after 2005. 1307 01:08:24,630 --> 01:08:28,870 But these results are until 2005, where the relative price 1308 01:08:28,870 --> 01:08:30,899 of food were relatively stable. 1309 01:08:30,899 --> 01:08:33,790 That's a very good point. 1310 01:08:33,790 --> 01:08:35,050 2,100, 2,400. 1311 01:08:35,050 --> 01:08:36,028 Yeah. 1312 01:08:36,028 --> 01:08:37,495 AUDIENCE: So I was just wondering the calculation that 1313 01:08:37,495 --> 01:08:40,918 was done for people who are doing sort of intensive labor, 1314 01:08:40,918 --> 01:08:43,689 how many calories they would need as a bare minimum to be 1315 01:08:43,689 --> 01:08:46,050 able to succeed in that? 1316 01:08:46,050 --> 01:08:48,060 PROFESSOR: Again, we don't really know how many calories 1317 01:08:48,060 --> 01:08:49,460 we need, but this is what the Indian 1318 01:08:49,460 --> 01:08:51,750 government says you need. 1319 01:08:51,750 --> 01:08:55,000 And maybe they get it a bit wrong, because this is the 1320 01:08:55,000 --> 01:08:57,290 fraction of people in rural area who are getting 1321 01:08:57,290 --> 01:08:58,930 less than they need. 1322 01:08:58,930 --> 01:09:00,750 So it's very high. 1323 01:09:00,750 --> 01:09:04,790 Yet these people are still all alive. 1324 01:09:04,790 --> 01:09:08,429 But what is striking is that this is increasing both in 1325 01:09:08,429 --> 01:09:12,970 rural area and in urban area, but even more in rural area. 1326 01:09:12,970 --> 01:09:15,939 So one first explanation was yours, is maybe it's the 1327 01:09:15,939 --> 01:09:17,535 relative price of food. 1328 01:09:17,535 --> 01:09:22,160 That would be true after 2005, but not until 2005. 1329 01:09:22,160 --> 01:09:25,029 What could be other explanation? 1330 01:09:25,029 --> 01:09:27,202 AUDIENCE: Maybe a lot of poor people have come from rural 1331 01:09:27,202 --> 01:09:30,825 areas, and very poor [INAUDIBLE] 1332 01:09:30,825 --> 01:09:33,723 rural areas and then sort of broke up into rural areas 1333 01:09:33,723 --> 01:09:36,665 [INAUDIBLE]. 1334 01:09:36,665 --> 01:09:37,920 PROFESSOR: So that's a very good suggestion. 1335 01:09:37,920 --> 01:09:42,160 Maybe that the people who are in rural area now are the 1336 01:09:42,160 --> 01:09:45,260 very, very poor, so they are relatively poorer, so we get 1337 01:09:45,260 --> 01:09:48,090 more of them who are eating less. 1338 01:09:48,090 --> 01:09:49,790 And the urban area also getting poorer, because the 1339 01:09:49,790 --> 01:09:51,790 people from the rural area move to them. 1340 01:09:51,790 --> 01:09:55,940 That's a very good suggestion, a composition effect. 1341 01:09:55,940 --> 01:09:58,230 That probably doesn't explain it, because if you look at 1342 01:09:58,230 --> 01:10:02,420 that overall consumption per capita of these people, are 1343 01:10:02,420 --> 01:10:04,990 the function of people who live below a dollar a day, 1344 01:10:04,990 --> 01:10:08,190 that is going down here and down here. 1345 01:10:08,190 --> 01:10:09,440 So that's probably not-- 1346 01:10:14,220 --> 01:10:15,206 AUDIENCE: There has been more technology. 1347 01:10:15,206 --> 01:10:19,150 They're going to spend other money on other stuff. 1348 01:10:19,150 --> 01:10:21,710 PROFESSOR: Right, so this would be another explanation, 1349 01:10:21,710 --> 01:10:24,040 which is the similar explanation from what we are 1350 01:10:24,040 --> 01:10:26,050 seeing on the wall, which is there are more 1351 01:10:26,050 --> 01:10:27,085 and more things available. 1352 01:10:27,085 --> 01:10:30,810 In particular, one thing that has clearly happened is the 1353 01:10:30,810 --> 01:10:33,020 advent of cell phone. 1354 01:10:33,020 --> 01:10:35,530 And so now cell phones weren't there, and now they are there. 1355 01:10:35,530 --> 01:10:39,640 In India, you can get a cell phone and airtime everywhere. 1356 01:10:39,640 --> 01:10:41,880 And so that's one thing. 1357 01:10:41,880 --> 01:10:44,296 So more things become available, very good. 1358 01:10:44,296 --> 01:10:45,108 Yeah. 1359 01:10:45,108 --> 01:10:47,130 AUDIENCE: I think this might be what you meant, but 1360 01:10:47,130 --> 01:10:49,680 technology that might make the work easier, so you require 1361 01:10:49,680 --> 01:10:52,420 fewer calories because the work is not as difficult. 1362 01:10:52,420 --> 01:10:54,760 PROFESSOR: Right, this is not what she meant just now, but 1363 01:10:54,760 --> 01:10:55,660 that's what she meant earlier. 1364 01:10:55,660 --> 01:10:58,070 So I was surprised she is not making this point again. 1365 01:10:58,070 --> 01:11:01,280 But that's exactly a very good point, which is maybe these 1366 01:11:01,280 --> 01:11:03,890 are what the Indian government says, but who 1367 01:11:03,890 --> 01:11:06,360 knows what they know. 1368 01:11:06,360 --> 01:11:08,890 And maybe the calorie requirements have changed. 1369 01:11:08,890 --> 01:11:11,195 One of the reasons would be that you're less likely to do 1370 01:11:11,195 --> 01:11:14,220 back breaking work, or maybe because there is more 1371 01:11:14,220 --> 01:11:16,880 irrigation, there is more mechanisation of agriculture. 1372 01:11:16,880 --> 01:11:19,030 People are less likely to be in agriculture, 1373 01:11:19,030 --> 01:11:21,030 even in rural areas. 1374 01:11:21,030 --> 01:11:23,360 What would be another reason why the calorie requirement 1375 01:11:23,360 --> 01:11:24,610 would have gone down? 1376 01:11:28,870 --> 01:11:31,080 So one is clearly, you are less likely to work. 1377 01:11:31,080 --> 01:11:34,760 What competes with calories with you? 1378 01:11:37,284 --> 01:11:39,740 AUDIENCE: Are you talking about worms and health? 1379 01:11:39,740 --> 01:11:43,670 PROFESSOR: Worms, and health and diarrhea, and other nice 1380 01:11:43,670 --> 01:11:45,030 things like that. 1381 01:11:45,030 --> 01:11:48,800 Generally being sick consumes a lot of calories. 1382 01:11:48,800 --> 01:11:52,820 And so one thing that has happened in India is drinking 1383 01:11:52,820 --> 01:11:55,890 water has become more available and cleaner, so 1384 01:11:55,890 --> 01:11:58,130 people are much less likely to be sick. 1385 01:11:58,130 --> 01:12:01,680 Another thing that uses a lot of calories is being pregnant, 1386 01:12:01,680 --> 01:12:06,090 and you have many fewer children being born. 1387 01:12:06,090 --> 01:12:08,440 So that's also compete less for calories. 1388 01:12:08,440 --> 01:12:12,730 So one possible reason for all of these, for these changes, 1389 01:12:12,730 --> 01:12:16,400 is that the calorie requirements have just changed 1390 01:12:16,400 --> 01:12:20,260 and people are staying at the same level as before. 1391 01:12:20,260 --> 01:12:20,880 They spend less. 1392 01:12:20,880 --> 01:12:22,800 And they are used to a particular level, so they just 1393 01:12:22,800 --> 01:12:25,900 stay there, and it costs them less money than before. 1394 01:12:35,010 --> 01:12:37,390 So this leads us to a possibility for why people are 1395 01:12:37,390 --> 01:12:38,870 not easy more generally. 1396 01:12:38,870 --> 01:12:40,870 Maybe they're not eating because that's not such a 1397 01:12:40,870 --> 01:12:43,250 great investment. 1398 01:12:43,250 --> 01:12:47,370 And so when we went through out little theory section 1399 01:12:47,370 --> 01:12:51,020 here, we said that if you happen to be right here in the 1400 01:12:51,020 --> 01:12:54,660 capacity curve, it's very valuable for you to eat. 1401 01:12:54,660 --> 01:12:58,240 But if, in the real world, the effect of calories on 1402 01:12:58,240 --> 01:13:02,430 productivity is not that loud, then you might as well do 1403 01:13:02,430 --> 01:13:04,690 something else with your money. 1404 01:13:04,690 --> 01:13:10,070 And in fact, what we find when we look at the effect is that 1405 01:13:10,070 --> 01:13:14,500 this is the effect of calories consumed on your productivity 1406 01:13:14,500 --> 01:13:16,950 if you're a farmer in Sierra Leone. 1407 01:13:16,950 --> 01:13:20,710 And it's hard to find a job that requires less strength 1408 01:13:20,710 --> 01:13:22,565 than being a farmer in Sierra Leone. 1409 01:13:22,565 --> 01:13:25,800 And what you find is that while it is increasing, 1410 01:13:25,800 --> 01:13:28,300 certainly, people who eat more-- 1411 01:13:28,300 --> 01:13:31,830 this is your calorie consumption, and this is how 1412 01:13:31,830 --> 01:13:33,250 productive you are-- 1413 01:13:33,250 --> 01:13:36,130 people are more productive when they eat more. 1414 01:13:36,130 --> 01:13:38,702 But what's the shape of the curve? 1415 01:13:38,702 --> 01:13:40,310 AUDIENCE: [INAUDIBLE]. 1416 01:13:40,310 --> 01:13:43,260 PROFESSOR: It's our inverted L shape, and it's not 1417 01:13:43,260 --> 01:13:44,710 greater than one. 1418 01:13:44,710 --> 01:13:46,630 So now we finally can answer the question that 1419 01:13:46,630 --> 01:13:48,880 you asked ages ago. 1420 01:13:48,880 --> 01:13:49,990 There is no real sign. 1421 01:13:49,990 --> 01:13:53,273 This is probably the most favorable case, which is why I 1422 01:13:53,273 --> 01:13:54,960 put it on the board. 1423 01:13:54,960 --> 01:13:59,270 There is no real sign that this phenomenon that you need 1424 01:13:59,270 --> 01:14:01,570 to eat enough calories, otherwise you can't be 1425 01:14:01,570 --> 01:14:04,900 productive enough to do anything is really there. 1426 01:14:04,900 --> 01:14:08,270 So in the very short run, everything starts to fit, 1427 01:14:08,270 --> 01:14:11,640 which is people don't really need the extra calories that 1428 01:14:11,640 --> 01:14:13,820 much, because the extra calories makes them 1429 01:14:13,820 --> 01:14:16,260 productive, but not that much more productive. 1430 01:14:16,260 --> 01:14:18,090 Hence, they are not eating them. 1431 01:14:18,090 --> 01:14:20,787 And in fact, we see over time that they are eating less and 1432 01:14:20,787 --> 01:14:22,240 less of the calories because they need 1433 01:14:22,240 --> 01:14:23,510 less and less of them. 1434 01:14:23,510 --> 01:14:25,900 And they have a level of strength that allows them to 1435 01:14:25,900 --> 01:14:28,560 do their day to day work, and with the rest of their money, 1436 01:14:28,560 --> 01:14:32,450 they do other things, and that makes now perfect sense. 1437 01:14:32,450 --> 01:14:35,030 So in terms of policies, what does it mean? 1438 01:14:35,030 --> 01:14:37,260 Well in term of policies, it means that policies that are 1439 01:14:37,260 --> 01:14:41,790 going to insist that the big problem is starvation in terms 1440 01:14:41,790 --> 01:14:44,610 of not eating enough grain are probably going to be 1441 01:14:44,610 --> 01:14:47,370 misleading, and are probably going to lead to a 1442 01:14:47,370 --> 01:14:51,630 fair amount of waste. 1443 01:14:59,570 --> 01:15:01,930 So in summary, at the maximum when your income today 1444 01:15:01,930 --> 01:15:06,150 increases by 10%, your calorie consumption increase by 3.5%. 1445 01:15:06,150 --> 01:15:08,455 That's what we saw in India, and that's almost surely a 1446 01:15:08,455 --> 01:15:10,130 wild over estimate. 1447 01:15:10,130 --> 01:15:13,400 But let's say that it's a maximum possible. 1448 01:15:13,400 --> 01:15:14,650 And then your productivity-- 1449 01:15:16,880 --> 01:15:21,250 you multiply that by another 4%, so when your income 1450 01:15:21,250 --> 01:15:26,850 increases by 10%, your income increases by 1.4% tomorrow. 1451 01:15:26,850 --> 01:15:29,720 That would be the S shape, except it's not S, because 1452 01:15:29,720 --> 01:15:34,320 there is no point where it would cause the 45 degree line 1453 01:15:34,320 --> 01:15:38,630 from below, because the elasticity is much, much less 1454 01:15:38,630 --> 01:15:41,050 than one instead of being above one. 1455 01:15:41,050 --> 01:15:44,040 So we don't have a place where the curve is crossing the 45 1456 01:15:44,040 --> 01:15:45,420 degree line from below. 1457 01:15:45,420 --> 01:15:49,235 The curve is just not steep enough to create a poverty 1458 01:15:49,235 --> 01:15:52,440 trap from this phenomenon. 1459 01:15:52,440 --> 01:15:55,690 Just to be sure that you don't go away thinking everything is 1460 01:15:55,690 --> 01:15:58,670 well, this may be very different from other things 1461 01:15:58,670 --> 01:16:01,510 than calories, for example iron. 1462 01:16:01,510 --> 01:16:04,490 And this may be very different for children, because the 1463 01:16:04,490 --> 01:16:07,990 investment in a child, the investment you're making at 1464 01:16:07,990 --> 01:16:10,590 one specific time is going to help them for their entire 1465 01:16:10,590 --> 01:16:13,490 life instead of just for tomorrow. 1466 01:16:13,490 --> 01:16:16,510 So what we are going to do on Thursday is look at what I 1467 01:16:16,510 --> 01:16:19,100 call the hidden trap, which is that there might be a 1468 01:16:19,100 --> 01:16:23,760 nutrition productivity poverty trap, but it's not in the 1469 01:16:23,760 --> 01:16:25,870 usual sense where we were looking for. 1470 01:16:25,870 --> 01:16:30,110 It's in these more subtle things, nutrients, 1471 01:16:30,110 --> 01:16:32,260 micronutrients, children's nutrition, 1472 01:16:32,260 --> 01:16:33,510 pregnant women's nutrition.