What's a "useful" purchase after all?

Just read a fantastic article that Tyler forwarded to me from Foreign Policy entitled: "More than 1 billion people are hungry in the world: But what if the experts are wrong?", written by Abhijit Banerjee and Esther Duflo, the founders of J-PAL.

The article is essentially about the reasons that the poor don't make the purchasing decisions that we think they should -- for instance, more food to feed their families.

They write: "In Udaipur, India, for example, we find that the typical poor household could spend up to 30 percent more on food, if it completely cut expenditures on alcohol, tobacco, and festivals. The poor seem to have many choices, and they don't choose to spend as much as they can on food. Equally remarkable is that even the money that people do spend on food is not spent to maximize the intake of calories or micronutrients. Studies have shown that when very poor people get a chance to spend a little bit more on food, they don't put everything into getting more calories. Instead, they buy better-tasting, more expensive calories."

This certainly resonated with my visit to the communities today. Above the four story buildings that the government set up for low-income families (where families live free of charge, with the exception of paying for electricity), other families have set up corrugated tin shacks, covered with tarp and other materials. Walking up to the roof and peering into these tents, I was quite surprised to see that this one, below, has a large television set. Clearly development tools such as Grameen's Progress out of Poverty Index, which measures the poverty of households based on the presence of certain goods, do not tell the whole story.

As the Foreign Policy article points out, these tend not to be impulse decisions, purchased on credit. Rather, decisions to buy something like a television set are carefully thought up, with money saved over time. And these purchases may not be so illogical after all. There's boredom, after all -- the desire for entertainment and perhaps to escape one's surroundings. This phenomenon doesn't seem to be restricted to suburban Americans.

The article ends with the authors speaking with an Indonesian farmer: "We asked Oucha Mbarbk what he would do if he had more money. He said he would buy more food. Then we asked him what he would do if he had even more money. He said he would buy better-tasting food. We were starting to feel very bad for him and his family, when we noticed the TV and other high-tech gadgets. Why had he bought all these things if he felt the family did not have enough to eat? He laughed, and said, "Oh, but television is more important than food!"

I'd bet that the woman living in this shack would agree, as well.