It might seem strange but there are many choices that poor people make that could save tens of dollars a year, that people don’t take advantage of. I would weakly disagree that poor people are good at saving money, especially if it requires a small investment first. The book Poor Economics has a really good section on this. Here are some classic examples where poor people don’t spend a few dollars to save in the future.
1. Prioritising handwashing devices at home. These prevent illness and hospital bills. Here in Uganda people will almost always buy a couch and a TV before they will even buy a 10 dollar handwashing bucket, it’s kind of insane. Along the same lines consider the failure of the Evidence action Chlorine dispenser project (read the great post about this by the way). People could spend a few dollars to improve their family’s hygeine but don’t.
2. People could buy in even moderate bulk rather than buying tiny amounts every day. If people spent $5 vs. the usual 50c buying foodstuffs there are many cases where they could save money by spending just a bit more.
3. Selling crops out of season. People could often wait just two months and sell crops for over 20% more than in peak season. But almost everyone wants all the money right now. Then after selling people put the money in a village saving group which makes zero interest, rather than selling two months later for afar more money. Its quite incredible.
I’ll also note that women are often especially economically disempowered and have even less scope to spend a bit of money to make their lives better.
In terms of the market in general, there is indeed huge market failure when it comes to period products. “Big Period” as it were has zero incentive to advocate for a product which you buy once for $5 and then never again. They sell tampons and pads every month at huge profits, and will do everything that they can to avoid products that will make them less money.
Indeed Living Goods would actually be the perfect kind of organisation to be a distribution network. But for cups to go big it would require a concerted effort across multiple actors, probably needing some kind of serious lobby group and co-ordination. I’m not suggesting that yet as I’m not sure there’s good enough effort to warrant that.
Yes there are a lot of people selling reusable pads in Uganda and other countries. I’m partially challenging whether there should be more of a focus on cups than pads.
It might seem strange but there are many choices that poor people make that could save tens of dollars a year, that people don’t take advantage of. I would weakly disagree that poor people are good at saving money, especially if it requires a small investment first.
I think part, but not all of that, is due to rationally putting a high premium on avoiding catastrophe, with poor families often operating barely above the limits of survival. You want to wait to sell your crops in 2 months when the market is better but what if your crops get eaten by pests, or the market actually collapses? For a poor family, that could spell total disaster, whereas at least by selling the crops today, at the low harvest season prices, you are guaranteed to get something. (That doesn’t explain the TV though! But I think cash transfer studies suggest that marginal funds are normally spent more wisely than on TVs)
That points to the value of interventions that reduce that risk, e.g. “I’ll lend you money at harvest time and you only pay me back if you can sell your crops at a higher price in the low season” type deals.
On the TV thing, here’s an extended quote from Poor Economics in case it’s of interest to others as well (emphasis mine):
The decision to spend money on things other than food may not be due entirely to social pressure. We asked Oucha Mbarbk, a man we met in a remote village in Morocco, 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 a television, a parabolic antenna, and a DVD player in the room where we were sitting. We asked him why he had 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!”
After spending some time in that Moroccan village, it was easy to see why he thought that. Life can be quite boring in a village. There is no movie theater, no concert hall, no place to sit and watch interesting strangers go by. And not a lot of work, either. Oucha and two of his neighbors, who were with him during the interview, had worked about seventy days in agriculture and about thirty days in construction that year. For the rest of the year, they took care of their cattle and waited for jobs to materialize. This left plenty of time to watch television. These three men all lived in small houses without water or sanitation. They struggled to find work, and to give their children a good education. But they all had a television, a parabolic antenna, a DVD player, and a cell phone.
Generally, it is clear that things that make life less boring are a priority for the poor. This may be a television, or a little bit of something special to eat—or just a cup of sugary tea. Even Pak Solhin had a television, although it was not working when we visited him. Festivals may be seen in this light as well. …
Orwell captured this phenomenon as well in The Road to Wigan Pier when he described how poor families managed to survive the depression.
Instead of raging against their destiny, they have made things tolerable by reducing their standards. But they don’t necessarily reduce their standards by cutting out luxuries and concentrating on necessities; more often it is the other way around—the more natural way, if you come to think of it—hence the fact that in a decade of unparalleled depression, the consumption of all cheap luxuries has increased.
These “indulgences” are not the impulsive purchases of people who are not thinking hard about what they are doing. They are carefully thought out, and reflect strong compulsions, whether internally driven or externally imposed. Oucha Mbarbk did not buy his TV on credit—he saved up over many months to scrape enough money together, just as the mother in India starts saving for her eight-year-old daughter’s wedding some ten years or more into the future, by buying a small piece of jewelry here and a stainless steel bucket there.
We are often inclined to see the world of the poor as a land of missed opportunities and to wonder why they don’t put these purchases on hold and invest in what would really make their lives better. The poor, on the other hand, may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives. They often behave as if they think that any change that is significant enough to be worth sacrificing for will simply take too long. This could explain why they focus on the here and now, on living their lives as pleasantly as possible, celebrating when occasion demands it.
Thanks Nick for your thoughts. I’ve read Poor Economics but I’m not sure that the arguments there apply to this situation.
I definitely agree that the poor struggle with purchases that require capital investment, such as buying in bulk. My sense is that partly that is because capital is just vary scarce, and partly that is because of pressure to share any accumulated capital. But the menstrual cups aren’t very expensive and would be a one-time purchase, so I’m not sure that argument applies here; although I suppose that in a sense the cup is the bulk version of disposable products.
I am less familiar with the phenomenon of selling crops out of season. Could this be a social pressure thing where everyone feels compelled to invest in the village saving group?
And, I definitely agree that preventative measures are a tough sell to the poor, pretty much across the board. That is why we fund free bednet distribution, by the way! In fact in general diffusion of preventative innovations is quite slow, which is one reason why they are often subsidized or compelled by governments. Insofar as the menstrual cups constitute a preventative, I absolutely agree we should not expect the poor to buy them. But, your analysis suggests the main benefit is financial, and with a pretty quick return on investment, so this situation seems different from that.
Thanks Ian those are great points!
It might seem strange but there are many choices that poor people make that could save tens of dollars a year, that people don’t take advantage of. I would weakly disagree that poor people are good at saving money, especially if it requires a small investment first. The book Poor Economics has a really good section on this. Here are some classic examples where poor people don’t spend a few dollars to save in the future.
1. Prioritising handwashing devices at home. These prevent illness and hospital bills. Here in Uganda people will almost always buy a couch and a TV before they will even buy a 10 dollar handwashing bucket, it’s kind of insane. Along the same lines consider the failure of the Evidence action Chlorine dispenser project (read the great post about this by the way). People could spend a few dollars to improve their family’s hygeine but don’t.
2. People could buy in even moderate bulk rather than buying tiny amounts every day. If people spent $5 vs. the usual 50c buying foodstuffs there are many cases where they could save money by spending just a bit more.
3. Selling crops out of season. People could often wait just two months and sell crops for over 20% more than in peak season. But almost everyone wants all the money right now. Then after selling people put the money in a village saving group which makes zero interest, rather than selling two months later for afar more money. Its quite incredible.
I’ll also note that women are often especially economically disempowered and have even less scope to spend a bit of money to make their lives better.
In terms of the market in general, there is indeed huge market failure when it comes to period products. “Big Period” as it were has zero incentive to advocate for a product which you buy once for $5 and then never again. They sell tampons and pads every month at huge profits, and will do everything that they can to avoid products that will make them less money.
Indeed Living Goods would actually be the perfect kind of organisation to be a distribution network. But for cups to go big it would require a concerted effort across multiple actors, probably needing some kind of serious lobby group and co-ordination. I’m not suggesting that yet as I’m not sure there’s good enough effort to warrant that.
Yes there are a lot of people selling reusable pads in Uganda and other countries. I’m partially challenging whether there should be more of a focus on cups than pads.
I think part, but not all of that, is due to rationally putting a high premium on avoiding catastrophe, with poor families often operating barely above the limits of survival. You want to wait to sell your crops in 2 months when the market is better but what if your crops get eaten by pests, or the market actually collapses? For a poor family, that could spell total disaster, whereas at least by selling the crops today, at the low harvest season prices, you are guaranteed to get something. (That doesn’t explain the TV though! But I think cash transfer studies suggest that marginal funds are normally spent more wisely than on TVs)
That points to the value of interventions that reduce that risk, e.g. “I’ll lend you money at harvest time and you only pay me back if you can sell your crops at a higher price in the low season” type deals.
On the TV thing, here’s an extended quote from Poor Economics in case it’s of interest to others as well (emphasis mine):
Thanks Nick for your thoughts. I’ve read Poor Economics but I’m not sure that the arguments there apply to this situation.
I definitely agree that the poor struggle with purchases that require capital investment, such as buying in bulk. My sense is that partly that is because capital is just vary scarce, and partly that is because of pressure to share any accumulated capital. But the menstrual cups aren’t very expensive and would be a one-time purchase, so I’m not sure that argument applies here; although I suppose that in a sense the cup is the bulk version of disposable products.
I am less familiar with the phenomenon of selling crops out of season. Could this be a social pressure thing where everyone feels compelled to invest in the village saving group?
And, I definitely agree that preventative measures are a tough sell to the poor, pretty much across the board. That is why we fund free bednet distribution, by the way! In fact in general diffusion of preventative innovations is quite slow, which is one reason why they are often subsidized or compelled by governments. Insofar as the menstrual cups constitute a preventative, I absolutely agree we should not expect the poor to buy them. But, your analysis suggests the main benefit is financial, and with a pretty quick return on investment, so this situation seems different from that.