Over at Aidwatch William Easterly & Laura Freschi have a great post on a puzzle of economic development. The world's poor (those living on $1-$2 a day) might actually have enough money to pay for things that would aid their economic success. In short research shows the poor spend 10% of their incomes on what we might think of as luxury goods alcohol, tobacco, soft drinks, and celebrations (e.g. weddings, funerals, holidays).
I have two thoughts:
1.) Easterly and Freschi are right people rich and poor make questionable decisions I like their line about a white American middle class dad "driving while talking on his cell-phone after having a few beers, risking the lives of his children in the car." So to get people to spend more money on school or not drink and pay attention on the road you have to convince them it’s the right thing to do.
2.) Relating to point #1 it is really hard to convince those living on $1-$2 that the strategies that development agencies think work will actually help. I like to think of the example of agricultural production. Several studies have shown that poor farmers will not use new crops or new techniques until they see that it works for others like them. With crops you can show that fertilizer increases yields or that farm profits increase with growing pineapples in a year or two. With bed nets and school two items mentioned in the post it is really hard to convince people they work, since the benefits are hard to observe.