Wisdom of crowds
In developing nations, anti-poverty programs face a basic hurdle: Who, exactly, is poor enough to qualify for the aid being given out? Emerging states often lack the official records, such as income and tax documents, that are used to make those judgments in wealthier countries.Now, a novel study co-authored by two MIT economists has identified a surprisingly effective way of deciding who, in the developing world, is especially poor: Let the citizens sit down and decide among themselves.The study, done by Abhijit Banerjee and Benjamin Olken of MIT’s Department of Economics along with three colleagues at other institutions, is based on fieldwork conducted in 640 Indonesian villages. Indonesia, like many other developing countries, lacks the comprehensive data needed for means testing; that is, it cannot create objective measures of personal wealth to indicate which citizens need aid most badly. There are two striking results in the new paper, to be...