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elea’s FOUNDATION AND OPER ATING MODEL

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similar characteristics, with the exception of their political institutions (such as the region around the U.S.-Mexican border), and concluded that the single most significant factor explaining the difference in prosperity between the Mexican and American sides of the border was the effec- tiveness of institutions, such as government administration or rule of law (Acemoglu & Robinson, 2013). 3 At the microeconomic level of households and individuals, Esther Duflo and Abhijit Banerjee (two MIT economists who, together with their col- league Michael Kremer, received the 2019 Nobel Prize in Economics) pub- lished the book Poor Economics . This book summarized their insights in analyzing poverty, and highlighted factors such as lack of knowledge, skills, and expertise, as well as deeply held misperceptions and rigid norms, as fac- tors leading to poverty that were at least as important as a lack of financial resources. For example, health problems often arise because people do not have the most basic knowledge of the critical importance of clean water and hygienic practices (e.g., washing hands) or because they blindly trust unqualified doctors who prescribe expensive, yet ineffective, medication. Skills levels are often low because teachers are absent or do not have the necessary qualifications. Furthermore, a lack of productivity and income generation in agriculture is often caused by a lack of understanding about how to deploy fertilizers or by insufficient price transparency, which leads to dependency on the middleman (Banerjee & Duflo, 2011). In recent years, there has been a quantum leap in the depth of knowl- edge about poverty, with growing evidence that poverty can be effec- tively and systematically reduced. In addition to the progress achieved in China, which has made the greatest contribution to lifting people out of poverty globally (i.e., the proportion of Chinese people living in extreme poverty was reduced from 60% to 12% between 1990 and 2010), some other examples are •• India : Extreme poverty (i.e., less than USD 1.90 in daily income) was reduced from 38% to 13% from 2004 to 2015, thanks to robust economic growth (The World Bank, 2019). •• Peru : The share of the population that is poor fell from 55% in 2001 to 21% in 2016 (The Economist, 2018). An important factor for this success was a policy that favored open markets while keeping mon- etary stability based on a strong, independent central bank.