WEBVTT

00:00:00.040 --> 00:00:02.460
The following content is
provided under a Creative

00:00:02.460 --> 00:00:03.970
Commons license.

00:00:03.970 --> 00:00:06.910
Your support will help MIT
OpenCourseWare continue to

00:00:06.910 --> 00:00:10.660
offer high quality educational
resources for free.

00:00:10.660 --> 00:00:13.460
To make a donation, or view
additional materials from

00:00:13.460 --> 00:00:17.390
hundreds of MIT courses, visit
MIT OpenCourseWare at

00:00:17.390 --> 00:00:18.640
ocw.mit.edu.

00:00:25.600 --> 00:00:32.900
PROFESSOR: This is 1473,
Challenges of World Poverty.

00:00:32.900 --> 00:00:37.900
I'm Abhijit Banerjee, I'm going
to be lecturing on and

00:00:37.900 --> 00:00:42.635
off in tandem with
Esther Duflo.

00:00:42.635 --> 00:00:44.660
Can you hear me at the back?

00:00:44.660 --> 00:00:46.260
I can't figure the acoustics.

00:00:46.260 --> 00:00:47.390
Can you hear me well?

00:00:47.390 --> 00:00:49.020
OK.

00:00:49.020 --> 00:00:55.720
So I guess, just to give a short
description of what this

00:00:55.720 --> 00:01:01.980
class is, this is a class which
is meant to introduce

00:01:01.980 --> 00:01:04.709
you to conversations--

00:01:04.709 --> 00:01:06.750
very broad conversations--

00:01:06.750 --> 00:01:09.910
about the questions relating
to world poverty.

00:01:09.910 --> 00:01:14.420
So it's not a technical class,
it's not a class that's meant

00:01:14.420 --> 00:01:18.970
to teach you very sharp
analytical tools, it's a class

00:01:18.970 --> 00:01:22.960
that's meant to teach you how
to participate in the great

00:01:22.960 --> 00:01:26.630
debates of the world, and sort
of get you involved in the

00:01:26.630 --> 00:01:27.760
great debates of the world.

00:01:27.760 --> 00:01:31.880
It's very much, in that sense,
the spirit of the class is

00:01:31.880 --> 00:01:35.200
quite different from many other
MIT classes, and that's

00:01:35.200 --> 00:01:39.030
deliberate, because I think it's
wonderful that we have a

00:01:39.030 --> 00:01:43.170
lot of technical classes at MIT,
but it's also very useful

00:01:43.170 --> 00:01:47.440
to occasionally step back and
think of what this means for

00:01:47.440 --> 00:01:50.760
the big picture, and for
how we think about

00:01:50.760 --> 00:01:51.800
living in the world.

00:01:51.800 --> 00:01:55.410
So this is very much a
class of that kind.

00:01:55.410 --> 00:01:59.250
It's based very specifically
on this book which--

00:02:04.600 --> 00:02:07.980
the book is called
Poor Economics.

00:02:07.980 --> 00:02:09.229
That's--

00:02:09.229 --> 00:02:13.580
depending on who you ask,
a good or bad pun.

00:02:13.580 --> 00:02:20.880
It's a play on the idea of A,
a different way of thinking

00:02:20.880 --> 00:02:25.650
about economics and, B, on the
idea that this is economics

00:02:25.650 --> 00:02:26.940
relevant to poverty.

00:02:26.940 --> 00:02:29.100
So it's a play on that.

00:02:29.100 --> 00:02:31.060
It's a book that we
just finished.

00:02:31.060 --> 00:02:34.030
It hasn't been published, so
you'll be, literally, the

00:02:34.030 --> 00:02:39.190
first people, other than our
close friends, who will get a

00:02:39.190 --> 00:02:40.440
chance to read it.

00:02:43.480 --> 00:02:46.480
And the--

00:02:46.480 --> 00:02:49.660
Laura, can you make sure that
everybody has these?

00:02:49.660 --> 00:02:51.360
Or somebody make sure?

00:02:53.950 --> 00:02:57.650
This is the process, we
just have to manage.

00:02:57.650 --> 00:02:58.955
Otherwise this would--

00:03:10.100 --> 00:03:17.330
So the goal of this book
is to, sort of--

00:03:17.330 --> 00:03:22.100
the book was written to
integrate a whole bunch of

00:03:22.100 --> 00:03:27.660
stuff that we've been working on
for 20 years, nearly, into

00:03:27.660 --> 00:03:33.230
a common narrative on how
to think about poverty.

00:03:33.230 --> 00:03:34.920
So the book is--

00:03:34.920 --> 00:03:38.330
the book has a bunch
of chapters.

00:03:38.330 --> 00:03:40.260
Each chapter-- and we're
going to be basically

00:03:40.260 --> 00:03:41.330
following the book.

00:03:41.330 --> 00:03:43.270
So the book is not available
in the market.

00:03:43.270 --> 00:03:50.830
You'll all be able to buy
a copy of the manuscript

00:03:50.830 --> 00:03:52.430
version of it now.

00:03:52.430 --> 00:03:55.830
And we're going to follow the
book, chapter by chapter,

00:03:55.830 --> 00:03:57.720
forward from beginning to end.

00:03:57.720 --> 00:04:00.280
So that's sort of--

00:04:00.280 --> 00:04:03.390
this is a class, as I said, it's
a class that's not based

00:04:03.390 --> 00:04:08.330
on technical material, you will
not have problem sets.

00:04:08.330 --> 00:04:14.780
On the other hand, we expect you
to read both what's in our

00:04:14.780 --> 00:04:16.899
book, and what's in the--

00:04:16.899 --> 00:04:19.579
else that's in the syllabus,
quite carefully.

00:04:19.579 --> 00:04:21.440
We're going to have
pop quizzes.

00:04:21.440 --> 00:04:24.180
One of the ways in which this
class will be graded is with

00:04:24.180 --> 00:04:34.660
pop quizzes that will be
randomly, on random dates, on

00:04:34.660 --> 00:04:35.860
the topic of the week.

00:04:35.860 --> 00:04:39.290
So we expect to have
read stuff.

00:04:39.290 --> 00:04:40.810
That's one.

00:04:40.810 --> 00:04:44.230
Second thing that is different
about this class is it's a

00:04:44.230 --> 00:04:45.310
class that's--

00:04:45.310 --> 00:04:49.190
as I said, it's meant to kind
of get you involved in big

00:04:49.190 --> 00:04:53.950
picture thinking, but that
doesn't mean that it's a class

00:04:53.950 --> 00:04:58.380
that doesn't expect you to
know the details of what

00:04:58.380 --> 00:05:00.030
whatever's being talked about.

00:05:00.030 --> 00:05:03.000
In fact, the running theme of
this class is that you can't

00:05:03.000 --> 00:05:05.510
fix the problems of the world
unless you pay attention to

00:05:05.510 --> 00:05:06.610
the details.

00:05:06.610 --> 00:05:12.810
So what we're going to ask you
to do is, as part of the

00:05:12.810 --> 00:05:15.260
requirement for the
class, is to write

00:05:15.260 --> 00:05:18.150
at least five essays--

00:05:18.150 --> 00:05:20.290
short essays, very
short essays--

00:05:20.290 --> 00:05:27.040
which will be graded and which
will be on specific aspects of

00:05:27.040 --> 00:05:28.450
the topics covered in class.

00:05:28.450 --> 00:05:32.100
So you'll have to write.

00:05:32.100 --> 00:05:35.900
The way we're going to do the
grading is that there'll be--

00:05:35.900 --> 00:05:38.370
you can write up to 12 essays.

00:05:38.370 --> 00:05:42.350
Basically 12 topics, you
can write 12 essays.

00:05:42.350 --> 00:05:44.570
We're going to give you the
grades for the best five.

00:05:44.570 --> 00:05:47.250
And so if you feel like writing
one every week, you

00:05:47.250 --> 00:05:48.030
can write one.

00:05:48.030 --> 00:05:52.480
If you feel like writing just
five, that's good too.

00:05:52.480 --> 00:05:55.375
You're going to get graded
on the best five.

00:05:55.375 --> 00:06:00.820
You have to write one longer
essay at some point in the

00:06:00.820 --> 00:06:04.530
semester, and there will
be a final exam.

00:06:04.530 --> 00:06:09.090
So it's, as I said, it's a
different from many MIT

00:06:09.090 --> 00:06:13.120
classes, different from any
other MIT class I've ever

00:06:13.120 --> 00:06:17.600
taught in that it's not based on
problem sets, it's based on

00:06:17.600 --> 00:06:19.300
these essays--

00:06:19.300 --> 00:06:21.870
MIT economics class, I don't
know about literature classes.

00:06:21.870 --> 00:06:25.370
But MIT economics classes
typically have problem sets.

00:06:25.370 --> 00:06:26.870
This is going to have essays.

00:06:26.870 --> 00:06:31.650
It's going to focus on being
able to articulate coherent

00:06:31.650 --> 00:06:35.910
interesting thoughts about
the problems of poverty.

00:06:35.910 --> 00:06:39.420
So it is very much about--

00:06:39.420 --> 00:06:42.660
these essays are going to be
important, and reading and

00:06:42.660 --> 00:06:43.940
writing will be important.

00:06:43.940 --> 00:06:45.490
So we want you to--

00:06:45.490 --> 00:06:50.020
and what goes with that
naturally is discussions will

00:06:50.020 --> 00:06:51.880
be important.

00:06:51.880 --> 00:06:54.030
We're going to have classes
where there will be a lot of

00:06:54.030 --> 00:06:56.010
discussion.

00:06:56.010 --> 00:07:00.230
That's why we want you to
have read the pieces.

00:07:00.230 --> 00:07:03.810
We are not going to go line by
line through those pieces, we

00:07:03.810 --> 00:07:09.510
want to have a combination of
some lecturing and a lot of

00:07:09.510 --> 00:07:11.820
discussion.

00:07:11.820 --> 00:07:14.290
One of the things that--

00:07:14.290 --> 00:07:19.540
where that becomes relevant, is
that we're going to have--

00:07:19.540 --> 00:07:21.250
this class is being
videotaped.

00:07:21.250 --> 00:07:25.220
If you noticed, there's
a camera up there.

00:07:25.220 --> 00:07:28.380
Classes will be videotaped,
but the only part of the

00:07:28.380 --> 00:07:32.530
videotape that will be used,
will we publicly available,

00:07:32.530 --> 00:07:34.490
will be the lecture
part of it.

00:07:34.490 --> 00:07:37.220
The rest of it will be--

00:07:37.220 --> 00:07:43.380
the discussions will not be
on the OCW website, so

00:07:43.380 --> 00:07:44.700
they will not be--

00:07:44.700 --> 00:07:46.170
they'll eventually
be expunged.

00:07:46.170 --> 00:07:49.135
So you should not feel
uncomfortable

00:07:49.135 --> 00:07:50.220
about speaking out.

00:07:50.220 --> 00:07:53.300
We want you to be involved
with the discussion,

00:07:53.300 --> 00:07:57.290
passionate in the discussion,
argue with each

00:07:57.290 --> 00:07:58.750
other, argue with us.

00:07:58.750 --> 00:08:02.710
So you should feel comfortable,
it's not that

00:08:02.710 --> 00:08:07.310
you're being put on camera and
everything you ever said that

00:08:07.310 --> 00:08:11.480
was potentially maybe incorrect
or is going to be

00:08:11.480 --> 00:08:14.640
recorded for all history and
made available on the web.

00:08:14.640 --> 00:08:17.690
So we're going to be
very careful in

00:08:17.690 --> 00:08:20.160
only keeping the lecture.

00:08:20.160 --> 00:08:23.250
So it's a very much a class
that needs the discussion.

00:08:23.250 --> 00:08:26.640
It won't be fun if there isn't
a lot of discussion.

00:08:26.640 --> 00:08:31.520
And having done this before,
I would say the

00:08:31.520 --> 00:08:32.850
converse is also true.

00:08:32.850 --> 00:08:35.530
When there's a lot of discussion
it's a lot of fun.

00:08:35.530 --> 00:08:40.510
The issues are fundamental, at
some level very live issues,

00:08:40.510 --> 00:08:43.299
and it's things where you
have thought about

00:08:43.299 --> 00:08:44.500
them, many of them.

00:08:44.500 --> 00:08:46.840
Maybe this will change the
way you think about it.

00:08:46.840 --> 00:08:47.940
But it is--

00:08:47.940 --> 00:08:49.680
these are things
that are fairly

00:08:49.680 --> 00:08:51.990
elemental and immediate.

00:08:51.990 --> 00:08:56.153
And I think you will, if you get
into the spirit of it, I

00:08:56.153 --> 00:08:58.450
think you will enjoy.

00:08:58.450 --> 00:09:01.610
So I think that's my
way of background.

00:09:01.610 --> 00:09:02.920
Do you have a question
right now?

00:09:07.600 --> 00:09:08.850
OK.

00:09:13.180 --> 00:09:18.020
So the way we will plan
to start this is by--

00:09:20.900 --> 00:09:24.530
you notice you've been
given one randomly

00:09:24.530 --> 00:09:28.160
picked sheet each.

00:09:28.160 --> 00:09:34.300
The sheet comes with a little
form to fill out.

00:09:34.300 --> 00:09:43.020
You can read the sheet and
think about what your

00:09:43.020 --> 00:09:45.500
reaction will be.

00:09:45.500 --> 00:09:48.120
Remember that this
is for real.

00:09:48.120 --> 00:09:50.940
So you will get some--

00:09:50.940 --> 00:09:53.760
10 of you will get the money.

00:09:53.760 --> 00:09:59.720
So it's real money that you are
assigning to one of these

00:09:59.720 --> 00:10:01.330
two [INAUDIBLE].

00:10:01.330 --> 00:10:06.170
You have a choice between giving
the money to save the

00:10:06.170 --> 00:10:10.860
children or not giving it.

00:10:10.860 --> 00:10:13.380
And we don't expect--

00:10:13.380 --> 00:10:15.850
there's no obligation.

00:10:15.850 --> 00:10:18.065
So the way it's going to work is
you're going to select how

00:10:18.065 --> 00:10:21.580
much you're going to give, then
we will have a lottery

00:10:21.580 --> 00:10:24.480
and you will get some.

00:10:24.480 --> 00:10:27.320
10 of you will win the money,
and when you win the money

00:10:27.320 --> 00:10:30.420
that money will be deducted
from the amount you have

00:10:30.420 --> 00:10:33.942
proposed, and the rest
[INAUDIBLE] will go to you.

00:10:33.942 --> 00:10:34.406
OK?

00:10:34.406 --> 00:10:36.225
Is that clear how that works?

00:10:39.460 --> 00:10:41.050
Some of you will get nothing.

00:10:41.050 --> 00:10:44.110
You're just hypothetically
written down

00:10:44.110 --> 00:10:45.150
an amount of money.

00:10:45.150 --> 00:10:48.980
Others will actually get
that money, $10.

00:10:48.980 --> 00:10:51.440
And out of that you would have
said, I want to give these

00:10:51.440 --> 00:10:55.760
people $0.50, and then $0.50
will be deducted and you'll

00:10:55.760 --> 00:11:00.220
get $9.50 given to you.

00:11:00.220 --> 00:11:04.510
So that's the plan for
this experiment.

00:11:04.510 --> 00:11:10.960
So we'll find out what the
results are and we'll discuss

00:11:10.960 --> 00:11:12.610
what they mean in
a little bit.

00:11:12.610 --> 00:11:21.110
In the meanwhile, I'm going
to play two videos.

00:11:21.110 --> 00:11:23.010
I'm going to play two
videos which are--

00:11:32.290 --> 00:11:39.810
which represent two very
specific and very well known

00:11:39.810 --> 00:11:44.200
points of view on what to
do about world poverty.

00:11:44.200 --> 00:11:56.390
The first one features
somebody who was my--

00:11:56.390 --> 00:11:59.150
who taught me when I was a
graduate student at Harvard,

00:11:59.150 --> 00:12:03.290
Jeffrey Sachs, and
Angelina Jolie.

00:12:03.290 --> 00:12:07.480
Angelina Jolie and Jeffrey Sachs
go to Africa and they

00:12:07.480 --> 00:12:09.020
discover world poverty.

00:12:09.020 --> 00:12:21.300
Or Angelina discovers poverty
under Jeff's tutelage and then

00:12:21.300 --> 00:12:26.590
they very clearly articulate a
theory of poverty and what to

00:12:26.590 --> 00:12:28.620
do about it, et cetera.

00:12:28.620 --> 00:12:31.370
And then from--

00:12:31.370 --> 00:12:37.510
so Jeff is now at Columbia
University in New York.

00:12:37.510 --> 00:12:42.370
His archenemy is a man called
Billy Easterly who is a

00:12:42.370 --> 00:12:44.330
professor at NYU.

00:12:44.330 --> 00:12:51.320
So the next video is just-- we
go south from Columbia to NYU

00:12:51.320 --> 00:12:56.310
and we play Mr. Easterly's
video next.

00:12:56.310 --> 00:12:58.240
So what you're doing is
we're going to sit

00:12:58.240 --> 00:12:59.490
and watch some videos.

00:13:03.220 --> 00:13:09.800
This is not an exemplar of kind
of material you will have

00:13:09.800 --> 00:13:10.430
to deal with.

00:13:10.430 --> 00:13:11.940
This is--

00:13:11.940 --> 00:13:16.320
there will be much denser
material than this.

00:13:16.320 --> 00:13:19.640
This is little fluffier than
most things you're going to

00:13:19.640 --> 00:13:24.090
have to deal with, but I think
they're interesting and they

00:13:24.090 --> 00:13:26.750
take very well defined
positions.

00:13:26.750 --> 00:13:31.600
So listen to them while thinking
of what the position

00:13:31.600 --> 00:13:35.830
is that these people are
taking, and why those

00:13:35.830 --> 00:13:37.195
positions--

00:13:37.195 --> 00:13:41.950
what is the underlying theory
of poverty, the response to

00:13:41.950 --> 00:13:44.140
it, all of those are
being articulated

00:13:44.140 --> 00:13:45.450
through this process.

00:13:45.450 --> 00:13:53.850
And you should kind of come--
and then we'll--

00:13:53.850 --> 00:13:54.860
once it ends--

00:13:54.860 --> 00:13:59.920
we're going to actually spend
a little bit of time

00:13:59.920 --> 00:14:03.830
discussing what we learned
from the video.

00:14:03.830 --> 00:14:08.130
So think of questions or
comments you're going to make.

00:14:18.280 --> 00:14:21.260
I want this to sink
in for a minute.

00:14:21.260 --> 00:14:28.020
And in the meanwhile let me
talk about what we just--

00:14:28.020 --> 00:14:29.420
we just compiled the results.

00:14:29.420 --> 00:14:30.790
Let's start with
those results.

00:14:30.790 --> 00:14:32.230
We'll come back to
[INAUDIBLE].

00:14:32.230 --> 00:14:34.920
We'll spend the rest of
the time talking about

00:14:34.920 --> 00:14:36.170
[INAUDIBLE].

00:14:38.460 --> 00:14:51.580
So the results suggest either
that many experiments that

00:14:51.580 --> 00:14:55.340
other people have done were
wrong, or that we didn't do it

00:14:55.340 --> 00:15:00.540
right, or more likely, you guys
are more generous than

00:15:00.540 --> 00:15:01.950
the rest of the world.

00:15:01.950 --> 00:15:06.390
So this is an experiment that's
been done many times.

00:15:06.390 --> 00:15:08.410
Let me explain what
the experiment is.

00:15:08.410 --> 00:15:11.360
And the experiment, typically,
the way it's done, it's very

00:15:11.360 --> 00:15:12.290
different here.

00:15:12.290 --> 00:15:14.450
Because you couldn't figure--

00:15:14.450 --> 00:15:18.610
we wanted to do it in class and
do it for real, so that

00:15:18.610 --> 00:15:20.390
made it a little--

00:15:20.390 --> 00:15:25.250
so instead of giving people $10,
the way it's usually done

00:15:25.250 --> 00:15:29.180
is that somebody
walks through--

00:15:29.180 --> 00:15:32.520
the most famous version of
this was done at the

00:15:32.520 --> 00:15:33.860
University of Pennsylvania.

00:15:33.860 --> 00:15:39.160
Somebody walked through the
cafeteria distributing $5 to

00:15:39.160 --> 00:15:44.630
people, without much
explanation really.

00:15:44.630 --> 00:15:48.400
And then about a few minutes
later, somebody came up and

00:15:48.400 --> 00:15:52.480
handed each of these people--
they're all randomly chosen--

00:15:52.480 --> 00:15:55.540
one or the other of
these letters.

00:15:55.540 --> 00:15:57.375
There were actually two
different letters.

00:16:00.940 --> 00:16:03.090
None of you should have
seen both, but I

00:16:03.090 --> 00:16:04.730
don't know if you have.

00:16:04.730 --> 00:16:05.790
They're basically--

00:16:05.790 --> 00:16:13.690
both the letters are telling a
story of some reason to help.

00:16:13.690 --> 00:16:14.620
So the first--

00:16:14.620 --> 00:16:18.580
there was one letter, which is
a letter that tells sort of a

00:16:18.580 --> 00:16:21.090
very general story.

00:16:21.090 --> 00:16:26.940
The story is about, here are
many problems in the world,

00:16:26.940 --> 00:16:29.050
there is, whatever, children--

00:16:29.050 --> 00:16:30.220
children are--

00:16:30.220 --> 00:16:32.726
let me just read out.

00:16:32.726 --> 00:16:35.000
Give me two.

00:16:35.000 --> 00:16:36.250
For those of you who--

00:16:38.868 --> 00:16:39.780
Yeah.

00:16:39.780 --> 00:16:45.600
So the 9 million children die
before their fifth birthday--

00:16:45.600 --> 00:16:47.870
actually, I think I have
them on the slide.

00:16:47.870 --> 00:16:51.260
Let me just see if I do,
in which case we'll--

00:16:51.260 --> 00:16:52.510
that'll be easier.

00:16:58.190 --> 00:17:00.510
Nope.

00:17:00.510 --> 00:17:01.110
OK.

00:17:01.110 --> 00:17:04.146
9 million children die before
their fifth birthday.

00:17:04.146 --> 00:17:05.396
A woman--

00:17:08.369 --> 00:17:11.650
the probability that a woman in
sub-Saharan Africa will die

00:17:11.650 --> 00:17:16.819
before in childbirth
is one in 30.

00:17:16.819 --> 00:17:19.599
If you did the same number
for the rich

00:17:19.599 --> 00:17:22.520
countries, it's one in 5,600.

00:17:22.520 --> 00:17:29.650
So in 25 countries in the
world, most of them in

00:17:29.650 --> 00:17:34.400
sub-Saharan Africa, where the
life expectancy at birth is

00:17:34.400 --> 00:17:37.140
less than 55 years, and so on.

00:17:37.140 --> 00:17:42.560
And so one of the letters that
half of you read was kind of a

00:17:42.560 --> 00:17:51.830
catalog of these problems, and
then asks you to decide how

00:17:51.830 --> 00:17:55.230
much money you want to give to
Save the Children, which is a

00:17:55.230 --> 00:17:59.840
well known organization who try
to solve these problems.

00:17:59.840 --> 00:18:03.440
The rest of you got a letter
which described the life of

00:18:03.440 --> 00:18:07.700
one individual child,
called Rokia.

00:18:07.700 --> 00:18:18.180
And that child has a whole range
of problems, and then

00:18:18.180 --> 00:18:24.240
again asks you to give money
towards helping a child, let's

00:18:24.240 --> 00:18:28.760
say Rokia herself or
a child like her.

00:18:28.760 --> 00:18:31.690
Now what's your guess
about which--

00:18:31.690 --> 00:18:39.450
the point of this experiment was
that one of these letters

00:18:39.450 --> 00:18:42.020
raised a lot more money
than the other.

00:18:42.020 --> 00:18:44.840
What would your guess be?

00:18:44.840 --> 00:18:46.150
AUDIENCE: Personal story.

00:18:46.150 --> 00:18:47.190
PROFESSOR: Personal story.

00:18:47.190 --> 00:18:52.290
Personal story typically raised
about twice as much,

00:18:52.290 --> 00:18:54.470
more than twice as much,
as the other one.

00:18:54.470 --> 00:18:59.230
Now that turned out to be
not true in this room.

00:18:59.230 --> 00:19:02.230
It raised exactly
the same amount.

00:19:02.230 --> 00:19:03.460
It raised--

00:19:03.460 --> 00:19:10.570
the personal story raised $8.63,
and the other story

00:19:10.570 --> 00:19:14.930
raised $7.96, which
is statistically

00:19:14.930 --> 00:19:16.090
indistinguishable.

00:19:16.090 --> 00:19:20.740
So the experiment basically
failed here.

00:19:20.740 --> 00:19:22.800
Now why it failed, my guess--

00:19:25.390 --> 00:19:28.840
we'll come back to this
question, actually, maybe if

00:19:28.840 --> 00:19:30.960
we have time.

00:19:30.960 --> 00:19:36.340
But I think that, my guess is
that you just selected in

00:19:36.340 --> 00:19:38.070
being in this classroom, and

00:19:38.070 --> 00:19:39.400
therefore you're more generous.

00:19:39.400 --> 00:19:43.750
But we could think of
other reasons why.

00:19:43.750 --> 00:19:47.910
But the point of the experiment,
had it succeeded--

00:19:47.910 --> 00:19:51.060
the point of the way people have
usually interpreted it,

00:19:51.060 --> 00:19:55.220
so the average person seems to
react in this very different--

00:19:55.220 --> 00:19:57.310
why do you think we all react
very differently?

00:19:57.310 --> 00:20:00.090
All of you had the same-- seemed
to agree on the answer.

00:20:00.090 --> 00:20:07.550
Basically, out of $5, you gave
$2.60 to Rokia, $1.30 to the

00:20:07.550 --> 00:20:09.610
general problem, or something
like that.

00:20:09.610 --> 00:20:14.750
And when you tell people that
you give more to Rokia, then

00:20:14.750 --> 00:20:18.250
it goes down to $1.30
for both.

00:20:18.250 --> 00:20:23.980
So that sort of brings out very
nicely one of the key

00:20:23.980 --> 00:20:26.370
issues here, which is that,
I think, once you

00:20:26.370 --> 00:20:28.810
start thinking about--

00:20:28.810 --> 00:20:33.920
once you're made to think that
the Rokia problem is somehow

00:20:33.920 --> 00:20:36.970
an exemplar of a general
problem, you start now

00:20:36.970 --> 00:20:40.080
thinking it's like the general
problem, and then

00:20:40.080 --> 00:20:41.100
we can't solve it.

00:20:41.100 --> 00:20:42.950
And then it's like,
people step back.

00:20:42.950 --> 00:20:45.890
So I think this sort of--
this scale effect.

00:20:45.890 --> 00:20:48.620
This idea that, well, it's a big
problem, we're scared and

00:20:48.620 --> 00:20:57.310
we don't to deal with it, is
sort of one of the starting

00:20:57.310 --> 00:21:04.580
points of where we want to start
from, and maybe get away

00:21:04.580 --> 00:21:12.810
from is this idea that this is
an enormous problem and,

00:21:12.810 --> 00:21:15.170
therefore, we can't do
anything about it.

00:21:20.150 --> 00:21:24.540
So if you think of one goal we
want to have in this class is,

00:21:24.540 --> 00:21:27.900
in a sense, to move exactly
away from that feeling.

00:21:27.900 --> 00:21:32.410
In other words, what we want
to do is to move away from

00:21:32.410 --> 00:21:36.850
thinking about one day--

00:21:36.850 --> 00:21:39.175
we're thinking of the challenge
as big-- one day

00:21:39.175 --> 00:21:42.966
we're going to take a big
shovel, and we're going to

00:21:42.966 --> 00:21:44.570
throw all poverty out.

00:21:44.570 --> 00:21:48.040
That's not how anything
ever happens.

00:21:48.040 --> 00:21:51.260
And so there's no reason to
think of it that way.

00:21:51.260 --> 00:21:54.510
And you clearly don't, but the
rest of the world does.

00:21:54.510 --> 00:21:58.740
So there is a sense in which--

00:21:58.740 --> 00:22:01.770
what we want to do in this
class is to think of the

00:22:01.770 --> 00:22:08.710
problem of poverty as a set of
specific efforts that, if we

00:22:08.710 --> 00:22:12.150
do it right we will solve them,
and if we don't do it

00:22:12.150 --> 00:22:14.900
right, we'll make
things worse.

00:22:14.900 --> 00:22:18.880
So we want to turn it into a
set of specific challenges.

00:22:18.880 --> 00:22:21.360
Maybe we can't solve those
challenges, but at least let's

00:22:21.360 --> 00:22:25.300
first move away from thinking of
it as being this one grand

00:22:25.300 --> 00:22:30.710
problem, to thinking about it
as 100 individual problems,

00:22:30.710 --> 00:22:33.550
each of which with a
potential solution.

00:22:33.550 --> 00:22:35.390
So that's sort of where
we want to get to.

00:22:35.390 --> 00:22:39.530
At the end of this semester, we
won't have an answer to how

00:22:39.530 --> 00:22:41.850
do you solve world poverty.

00:22:41.850 --> 00:22:43.250
I can guarantee you that.

00:22:43.250 --> 00:22:47.660
What we might get is a sense
that these are actually

00:22:47.660 --> 00:22:50.810
individual problems
that we can--

00:22:50.810 --> 00:22:54.100
a set of individual problems we
can start thinking about as

00:22:54.100 --> 00:23:01.670
solvable things that we can sort
of apply our minds to.

00:23:01.670 --> 00:23:04.310
Some of them we'll have answers
to, some of them we'll

00:23:04.310 --> 00:23:07.550
just throw them out as
challenges, and we'll see what

00:23:07.550 --> 00:23:09.920
happens at the end.

00:23:09.920 --> 00:23:11.370
So that's where we
want to get to.

00:23:11.370 --> 00:23:14.870
We want to turn this grand
problem into a set of specific

00:23:14.870 --> 00:23:16.060
individual problems.

00:23:16.060 --> 00:23:17.230
That's sort of--

00:23:17.230 --> 00:23:21.010
and so the whole semester will
be in thinking about specific

00:23:21.010 --> 00:23:25.260
issues like the ones that Sachs
brought up, and the ones

00:23:25.260 --> 00:23:28.210
that Easterly brought up, and
try to turn them into problems

00:23:28.210 --> 00:23:31.980
that we can have some kind
of a leverage over.

00:23:35.310 --> 00:23:36.150
Let me just--

00:23:36.150 --> 00:23:39.610
so at some level this
is stuff that--

00:23:42.210 --> 00:23:52.210
some of this-- just to go
back to the videos--

00:23:52.210 --> 00:23:58.210
Sachs does a very good job of
kind of posing the problem.

00:23:58.210 --> 00:24:00.530
I think he--

00:24:00.530 --> 00:24:03.230
I mean, Easterly, I think,
won't disagree on that.

00:24:03.230 --> 00:24:09.380
I think if you think about
what the problem is,

00:24:09.380 --> 00:24:12.320
[? with ?] many ways to say it,
one way to say it is just

00:24:12.320 --> 00:24:15.660
that people are extremely
poor.

00:24:15.660 --> 00:24:22.050
Just a measure of poverty is in
some ways itself a kind of

00:24:22.050 --> 00:24:24.800
a useful way to think about--

00:24:24.800 --> 00:24:26.570
just to take just
a scale of it.

00:24:26.570 --> 00:24:28.950
The scale of it is--

00:24:28.950 --> 00:24:30.780
think about those numbers.

00:24:30.780 --> 00:24:35.420
The poverty line turns out that
mostly, by some peculiar

00:24:35.420 --> 00:24:39.600
accident, India is both the
country which has the maximum

00:24:39.600 --> 00:24:43.820
number of poor people in the
world, and it's the country

00:24:43.820 --> 00:24:44.840
which has--

00:24:44.840 --> 00:24:47.360
if you take the poverty line in
India, do you know what the

00:24:47.360 --> 00:24:49.740
poverty line is?

00:24:49.740 --> 00:24:53.312
Who knows what a poverty
line is?

00:24:53.312 --> 00:24:55.284
Yeah?

00:24:55.284 --> 00:24:57.913
AUDIENCE: It's a measure by
which that if someone makes

00:24:57.913 --> 00:25:00.707
less than that they believe
[INAUDIBLE] income they're

00:25:00.707 --> 00:25:01.710
considered poor.

00:25:01.710 --> 00:25:02.100
PROFESSOR: Right.

00:25:02.100 --> 00:25:04.050
It's just a way to define
for, how do you

00:25:04.050 --> 00:25:05.310
say somebody's poor?

00:25:05.310 --> 00:25:10.930
You say, in the US, you say
somebody is poor if their

00:25:10.930 --> 00:25:15.760
consumption is less than
$14 per head per day.

00:25:15.760 --> 00:25:17.030
That includes lots of stuff.

00:25:17.030 --> 00:25:20.690
It includes housing and all
those things, so it's not--

00:25:20.690 --> 00:25:23.830
$14 is not $14 in Big Macs.

00:25:23.830 --> 00:25:27.760
It's $14 in clothes
and everything.

00:25:27.760 --> 00:25:29.990
So that's how you define
poor in the US.

00:25:29.990 --> 00:25:33.130
For the rest of the world, the
weights typically people use

00:25:33.130 --> 00:25:34.470
is $1 a day.

00:25:34.470 --> 00:25:37.440
$1 a day is roughly--

00:25:37.440 --> 00:25:47.130
turns out the equivalent of the
poverty line of India, or

00:25:47.130 --> 00:25:51.270
equivalently the average of the
poverty lines for the 50

00:25:51.270 --> 00:25:54.230
countries where the most
of the poor live.

00:25:54.230 --> 00:25:58.590
So if you take the 50 countries
where all of the

00:25:58.590 --> 00:26:03.670
poor people live, take the
average of the poverty lines

00:26:03.670 --> 00:26:06.940
and say that--

00:26:06.940 --> 00:26:09.160
and the poverty lines vary
across countries because

00:26:09.160 --> 00:26:14.110
countries, some countries, think
that $14 is the bare

00:26:14.110 --> 00:26:16.060
minimum that you need to live.

00:26:16.060 --> 00:26:21.210
Other countries have a even more
accepting of misery, and

00:26:21.210 --> 00:26:24.040
say that even if you have $1
that's fine, but if you have

00:26:24.040 --> 00:26:26.120
less than $1 you're poor.

00:26:26.120 --> 00:26:29.210
So it turns out that the
effective definition that a

00:26:29.210 --> 00:26:34.640
lot of people use is $1
a day, or $0.99 a day.

00:26:34.640 --> 00:26:37.720
This number is now used a lot.

00:26:37.720 --> 00:26:39.610
It's called $1 a day poverty.

00:26:39.610 --> 00:26:46.650
And you look at this set of
people who live under $1 a

00:26:46.650 --> 00:26:49.840
day, 865 million people.

00:26:49.840 --> 00:26:50.390
This is our--

00:26:50.390 --> 00:26:56.300
Jeff Sachs says 850 million
people live under $1 a day.

00:26:56.300 --> 00:27:01.000
So that's just to get a scale
how many poor people out there

00:27:01.000 --> 00:27:01.660
in the world.

00:27:01.660 --> 00:27:05.530
Well, if you define it with $1
a day, which is 1/14 of what

00:27:05.530 --> 00:27:08.080
it is in the US, you
still end up with

00:27:08.080 --> 00:27:10.510
about a billion people.

00:27:10.510 --> 00:27:14.400
So that's one way to think about
how big the problem is.

00:27:14.400 --> 00:27:18.240
It also is a way to think about
how sort of surprising

00:27:18.240 --> 00:27:19.150
the problem is.

00:27:19.150 --> 00:27:20.400
You would think that--

00:27:22.940 --> 00:27:24.260
that says that--

00:27:31.090 --> 00:27:37.470
average GDP per capita
in the US is $47,000.

00:27:37.470 --> 00:27:39.760
That's like $50,000.

00:27:39.760 --> 00:27:46.100
So 50,000 people
could live on--

00:27:46.100 --> 00:27:49.010
no, sorry--

00:27:49.010 --> 00:27:51.790
50,000 divided by 365.

00:27:51.790 --> 00:27:53.040
So that's like--

00:27:55.620 --> 00:27:56.870
how much is that?

00:28:00.960 --> 00:28:05.580
50,000 divided by 500 is 100.

00:28:05.580 --> 00:28:13.100
So 100 people, or 150 people, in
the rest of the world live

00:28:13.100 --> 00:28:18.290
on less than the average
income of one average

00:28:18.290 --> 00:28:19.670
person in the US.

00:28:19.670 --> 00:28:22.400
So that's one way to scale the
problem, is to say that the

00:28:22.400 --> 00:28:30.140
average person in the US lives
150 times better than the

00:28:30.140 --> 00:28:32.900
average person in the--
the average poor

00:28:32.900 --> 00:28:34.720
person in the world.

00:28:34.720 --> 00:28:39.220
And that's a minimum because
these people are not at the

00:28:39.220 --> 00:28:42.140
poverty line, they're below
the poverty line.

00:28:42.140 --> 00:28:45.040
So just to sort of get a sense
of these magnitudes, what's

00:28:45.040 --> 00:28:46.330
enormously--

00:28:46.330 --> 00:28:48.810
what, in a sense, is surprising
about this is that

00:28:48.810 --> 00:28:53.100
there is, like, somehow
the gap is so huge.

00:28:53.100 --> 00:28:57.420
It's like it's not that there
is a gap of 10% or

00:28:57.420 --> 00:29:00.960
15% or 50% or 200%.

00:29:00.960 --> 00:29:06.210
It's a gap of 150 times or
something like that.

00:29:06.210 --> 00:29:09.360
So we're just talking of the
order of magnitude is just

00:29:09.360 --> 00:29:11.320
stunning here.

00:29:11.320 --> 00:29:14.940
And somehow that would seem that
it should be easy to fix.

00:29:14.940 --> 00:29:18.030
I mean, if there's such big
gaps, then isn't a little bit

00:29:18.030 --> 00:29:21.030
of aid from the US
would make a huge

00:29:21.030 --> 00:29:22.580
difference in these countries.

00:29:22.580 --> 00:29:26.130
And so it should be easy to make
these countries richer.

00:29:26.130 --> 00:29:28.820
And somehow, that's where this
conversation is stuck.

00:29:28.820 --> 00:29:31.290
So if you think of where this
conversation is coming out of,

00:29:31.290 --> 00:29:33.970
it's coming out of feeling
well, we are so rich, and

00:29:33.970 --> 00:29:36.120
these people are so poor,
why can't we do

00:29:36.120 --> 00:29:38.340
something about it?

00:29:38.340 --> 00:29:43.280
Now, let's go, maybe--

00:29:50.100 --> 00:29:52.830
we talked about this.

00:29:52.830 --> 00:29:58.460
So let's now go back to the
video with that sort of

00:29:58.460 --> 00:30:00.260
background.

00:30:00.260 --> 00:30:02.510
I'm going to say
one last thing.

00:30:02.510 --> 00:30:05.270
I just want you to look at this
one picture just as a

00:30:05.270 --> 00:30:06.700
last parting thought.

00:30:06.700 --> 00:30:08.852
So this is what Easterly's--

00:30:08.852 --> 00:30:12.450
this is Easterly's
famous picture.

00:30:12.450 --> 00:30:13.430
It shows that--

00:30:13.430 --> 00:30:16.880
the picture shows the
blue bars are aid.

00:30:16.880 --> 00:30:19.370
It keeps going up and down, but
it's basically going up,

00:30:19.370 --> 00:30:20.620
up over time.

00:30:25.540 --> 00:30:32.220
And you see that despite the
fact that aid is sort of going

00:30:32.220 --> 00:30:36.010
up, and the cumulative of all
this-- when he says that

00:30:36.010 --> 00:30:38.060
that's how much aid
has gone in--

00:30:38.060 --> 00:30:40.040
the cumulative of all this
is the total aid

00:30:40.040 --> 00:30:41.740
that has gone in.

00:30:41.740 --> 00:30:45.970
You can see that the GDP per
capita seems basically flat.

00:30:45.970 --> 00:30:48.940
So aid is going in-- aid is
being pushed in and in and in

00:30:48.940 --> 00:30:52.040
and in, and you see that
each blue bar is

00:30:52.040 --> 00:30:55.240
adding up the next one.

00:30:55.240 --> 00:30:58.300
And this is sort of his
reading of history.

00:30:58.300 --> 00:31:04.390
Now one of the things we're
going to worry about here is

00:31:04.390 --> 00:31:06.850
what we're going to call
the counterfactual.

00:31:06.850 --> 00:31:12.780
So what I think Easterly
has in mind, is

00:31:12.780 --> 00:31:14.490
that without the aid--

00:31:14.490 --> 00:31:18.920
so the question is, what would
have happened without the aid?

00:31:18.920 --> 00:31:22.180
And I think the first problem
in reading any

00:31:22.180 --> 00:31:25.100
of this data is--

00:31:25.100 --> 00:31:29.260
and this is a key idea, so
I want to stop on this--

00:31:29.260 --> 00:31:33.700
is figuring out what would have
happened if we hadn't

00:31:33.700 --> 00:31:34.900
given the aid.

00:31:34.900 --> 00:31:38.310
So one possibility is
that yellow line is

00:31:38.310 --> 00:31:40.610
what would have happened.

00:31:40.610 --> 00:31:43.570
That's kind of--

00:31:43.570 --> 00:31:46.080
without aid the yellow line
would have happened.

00:31:46.080 --> 00:31:49.020
With aid you've got the red
line and the red line is

00:31:49.020 --> 00:31:50.040
better than the yellow line.

00:31:50.040 --> 00:31:54.640
The alternative, which Easterly
seems to assert, is

00:31:54.640 --> 00:31:58.420
that the green line is what
would have happened absent the

00:31:58.420 --> 00:32:02.400
aid, and that the difference
between the two-- the negative

00:32:02.400 --> 00:32:04.170
difference--

00:32:04.170 --> 00:32:05.810
is the consequence of aid.

00:32:05.810 --> 00:32:07.590
So in some sense,
this is the--

00:32:07.590 --> 00:32:09.750
so this is sort of where--

00:32:09.750 --> 00:32:13.740
the problem is that, this now,
once you get to this point, to

00:32:13.740 --> 00:32:16.590
be honest, we have
nothing to say.

00:32:16.590 --> 00:32:18.570
Because we don't know what
have happened of aid.

00:32:18.570 --> 00:32:18.860
Right?

00:32:18.860 --> 00:32:21.890
We have only one history to look
at, and if you look at

00:32:21.890 --> 00:32:26.070
this one history, this history
could be anything you want.

00:32:26.070 --> 00:32:28.930
So in other words, I'll
disappoint you from the

00:32:28.930 --> 00:32:32.120
beginning and tell you that this
is a question we'll never

00:32:32.120 --> 00:32:33.380
know the answer to.

00:32:33.380 --> 00:32:35.900
In fact, we know that we
never going to know.

00:32:35.900 --> 00:32:41.030
Whether historically aid was a
mistake or not, is not one of

00:32:41.030 --> 00:32:43.430
the questions we'll answer.

00:32:43.430 --> 00:32:47.150
To calibrate expectations for
this class, what we will try

00:32:47.150 --> 00:32:51.700
to answer is, suppose you
had to give aid, how

00:32:51.700 --> 00:32:52.670
would you give it?

00:32:52.670 --> 00:32:56.260
That's a question that
we can answer.

00:32:56.260 --> 00:32:57.740
And that there--

00:32:57.740 --> 00:32:59.870
all the issues you raised
are important.

00:32:59.870 --> 00:33:03.640
The issues of whether
people will take up

00:33:03.640 --> 00:33:04.720
things you give them.

00:33:04.720 --> 00:33:07.040
Is there a demand for
the bed nets?

00:33:07.040 --> 00:33:09.020
That's a very key issue.

00:33:09.020 --> 00:33:12.990
Is it the case that when we try
to give it to them, the

00:33:12.990 --> 00:33:15.700
mechanism to which we
deliver the aid--

00:33:15.700 --> 00:33:18.110
let's say the bed nets--

00:33:18.110 --> 00:33:20.700
the government tries to give
them out for free and all the

00:33:20.700 --> 00:33:23.470
private market shut down.

00:33:23.470 --> 00:33:25.810
As you raised, that's
another concern.

00:33:25.810 --> 00:33:30.070
A third concern will be about
whether local volunteers can

00:33:30.070 --> 00:33:34.590
deliver bed nets or do
we need markets?

00:33:34.590 --> 00:33:40.750
A fourth concern will be, is it
the case that when we start

00:33:40.750 --> 00:33:44.850
delivering bed nets to local
volunteers, local volunteers

00:33:44.850 --> 00:33:47.770
become too powerful politically
and they exploit

00:33:47.770 --> 00:33:50.840
their political power
for other purposes.

00:33:50.840 --> 00:33:54.250
Each of these concerns that I
think you raised implicitly,

00:33:54.250 --> 00:33:56.710
will become a central
concern in

00:33:56.710 --> 00:33:57.920
thinking about this question.

00:33:57.920 --> 00:34:01.840
So we're going to think about
questions not of the kind of

00:34:01.840 --> 00:34:06.130
this kind, because this question
has no answer.

00:34:06.130 --> 00:34:08.739
Alas, we'd love to know the
answer to this question, but I

00:34:08.739 --> 00:34:10.639
don't think anybody can.

00:34:10.639 --> 00:34:16.219
The kind of question we will be
able to answer are if you

00:34:16.219 --> 00:34:19.020
had to give out aid, what's
the best way to do it?

00:34:19.020 --> 00:34:21.130
So that's the kind of question
we'll try to answer.

00:34:21.130 --> 00:34:23.650
And we'll spend a whole
semester, in a

00:34:23.650 --> 00:34:25.250
sense, on that question.

00:34:25.250 --> 00:34:29.370
So hope to see you
next lecture.