Risk and Insurance

These are a couple interesting facts I learned from the lecture:

• As mentioned in the lecture, Prof. Banerjee, together with a reporter from the New York Times, found no perceived effect of the global financial crisis on India’s poor laborers.
• Prof. Banerjee argues the reason that India’s poor laborers were not aware of the financial crisis is because they commonly lose their jobs and are used to having to find another job.
• In Townsend’s study of the Thai Economics Crisis of 1998, 2% of the variation in the income of households in the poorer parts of northern Thailand was attributable to the crisis.
• During the 1998 Indonesian economic crisis, the real income of rice farmers increased.
• Urban employees tend to be the people most directly hurt by big global financial shocks.
• The Princeton experiments described in the lecture demonstrated that cortisol can have an impact on decision-making ability. 
• When there is a drought and people cannot farm, everyone starts selling their labor, causing wages to decrease.
• The most common way in which the poor may avoid risk is by ensuring that every member of the family has several different jobs, sometimes even temporary jobs that are out of town.

CONVENTIONAL WISDOM AND FERTILITY POLICIES

In this section the two policies of fertility were discussed which were:
Larger families are poorer therefore have less spending abilities.
Poor families are larger because they are unable to control their fertility.

The professor as well as myself believe that these statements are wrong. One of the reason why poor families are larger is because they depend and benefit from the labor of their children once they are able to work for the family. In some places it is even a cultural idea to have a large family. The statement that larger families are poor because they are large is also a false statement. In certain areas large families are poor because they are either oppressed by their government or have very few economic opportunities.

Reflecting back on this section made me personally think about my family. I grew up in a family of 10 with 7 other siblings and two parents. In both of my homes in Sudan and Egypt we had other families living with us which doubled the size of my family. We were not in extreme poverty but we were definitely not better off than most families. My father was laid off from a very important government position when a new president came to power. My mother had never worked a paid job a day in her life and mainly was responsible for taking care of my siblings (This was before I was born).

 Well, after my dad was laid off my mom had to find some sort of work to cover our everyday expenses. She was a great cook so she decided to sell school lunches at the school markets. Although it was a difficult period for my family my mom knew she wanted more kids, especially more girls since she had 4 boys and only 1 girl girls. My mother had 8 kids because it was a cultural except-able thing to have. In my culture it is believed that the children will take care of their parents when they are older so having several kids gives a parent several options on where to stay.Another fact that most people do know about is that it is against my religion to take birth control pills and for that reason my mother and many other women in north Africa cannot take them.

So, when I hear statements such as "poor people have so many kids because they cannot control themselves" really upsets me because it is a vague statement that is no where close to the truth.

Beyond Supply and Demand Wars

In this section of the MIT poverty course the discussion about misconceptions on education continues. One major misconception is that the rate of return or the outcomes of the investment in education is always the same when in reality it can differ from one country to another. Factors that affect rate of return is a country's education quality, overall GDP, and health of its citizens. The higher the quality in education, the higher the rate of return. The higher the the GDP is, the more likely a country will invest in education and the healthier a countries over all population is, the more likely there will be available funds to invest in education.


Another huge misconception that parents believe is that if a child gets through high school they will be able to automatically get a government job. When they make a 12 year investment and realize that this may not be so true, they are discouraged from continuing to educated their child and are less likely to educate another child if they have one. The thing is not that the parent does not believe education is valuable, they just do not know which part of it is valuable.

This made me develop the following questions.

Why is their not a system that supports education if it is so valuable?

Why is education not easy to improve?

I have not found an answer to these questions yet but for the last one I suggest that education is easy to improve on a small scale but harder on a larger scale.

How to Make Schools Work for the Poor

There is often a huge assumption made about education which is that if a child goes to school then they are automatically educated or should be quite educated. This assumption is actually quite misleading. Just because a child attends school school does not mean they are receiving quality education. Another case is that when a child falls behind on a years curriculum, the next year they are enrolled in a new grade they fall even more behind because they were never able to get caught up. 

 An interesting program that has been started in India called Pratham aims to address this issue by creating mentoring programs that help behind students in the summer. What I really like about the program is that some of these mentors are actually students- high school students and college students. They cover every single village in India. The government has even gotten involved with this project by providing some of the supplies and facilities for these mentoring to occur. 

The main idea behind making education work for the poor is that you have to involve the community as a whole. When an entire community comes together to solve an issue, the issue becomes a lot smaller and more achievable. Pratham and for an example the Boys and Girls club in the United States are both great examples of programs that involve the community to better the lives of the youth. There is no excuse for not having such programs in every country because for Pratham the costs of running the program was very minimal. 

Another major issue the absent rates seen in many countries by both students and teachers. In India alone teacher absence rate was at 25%. Once they are in school it is not even given that they are even teaching. Some reports have shown that some of the teachers are actually spending their time drinking tea or drawing political cartoons. 

Education and Growth

Education is of the most addressed issues in the world after poverty and health care. The professor brought up concerns about the usefulness of education and whether increase in education actually significantly contributes to a countries growth. Other topics that we addressed were the affects of cost of education on secondary schooling enrollment and how the availability of employment affects the demand for education.

What I believe is a great approach to increasing the literacy rate of a country is by lessening schools costs or even providing free education, an incentive for education such as guaranteed employment within the first year of graduation, and a bigger incentive such as free healthcare for forever or at least the first of year 5 of employment. Using my rural Burmese family for an example, the children were not encouraged or expected to attend school because deciding to spend their day to day savings on something that they were not sure would guarantee them a better future ahead was to big of a risk to make. Although it may be difficult to relate to, it is very understandable to make such as decision for a poor rural family in Burma. It is very difficult and very risky for a family to make such as decision which is why I believe that the government is responsible for generating popularity for education. When a family knows what they are making an investment towards and the reward that may come after than they more likely to understand the importance of education. This long term investment not only benefits the income of an individual or a family but also the economy and growth of a country as a whole.

Education can benefit a country in a number of ways such as by helping decrease disease by increasing awareness, end early child marriages, decrease teen pregnancies, decrease crime, and even increase the over all health of a country.

Low-hanging Fruit

It is quite obvious that a healthy person is most likely to have a better job and better wage than someone who has been sick all their lives. I thought it was really interesting that if you deworm children at an early age when they are not sick with worms, in their adulthood they will be making 23% more every year which is a great rate of return especially for families living in great poverty. This increase in 23% could mean a healthy more nutritious food, education, or even a better home. We are basically looking at a gain of more than $1,400 over a child's lifetimes with just an investment of less than $1. 

If you are looking at an even greater investment than vaccinations  for malaria may give you the greatest output. Statistics provided in the online MIT course state that a child not exposed to malaria in childhood would have an income 50% higher for all of their lifetime than a child exposed to malaria. Investment in malaria control measures are quite highly cost effective. 

This leads to my  question which is...

Why are countries and people not making such an investment if there is such as small input for such a great output?

There is not one answer to this question but possible suggestions could be that a country can not afford to make such an investment because even thought it may seem so little, when you multiply it by its population, the cost becomes much greater. I would still really like to know other reasons as to why countries are not making such an investment.