This authoritative book is an anthology, and Tolstoy, whose line in Anna Karenina about happy families being alike and unhappy families being unhappy in different ways, justifies a sometimes overwhelming array of models and insights. The anthology is likely to be very successful. P.K. Bardhan and C. Udry are more modest than Miguel de Cervantes, but the latter’s self-congratulatory assessment of Don Quixote seems appropriate in describing the likely fate of their own book: "It is thumbed and read and got by heart by people of all sorts; the children turn its leaves, the young people read it, the grown men understand it, the old folk praise it."

The first half of the book reviews theoretical results explaining agricultural household decisions in the context of imperfect markets, discusses the nature of deviations from perfect markets, and derives implications of equilibria in these imperfect rural factor markets. Chapters on fertility and migration decisions round out the discussion. The chapters are meant to convince the reader that the theories have satisfying explanatory power. The authors caution that this does not justify kneejerk intervention: no policy prescriptions are offered. There are neither empirical examinations of the effects of alternative policies (with a few single-line exceptions) nor empirical tests of hypotheses (left, apparently, for a future volume).

The second half is more scattered, but perhaps held together by the theme of ‘poverty traps’. The authors consider a number of models that answer the question of why more efficient technologies or institutions remain unused by poor individuals or societies. Basically, the innovations either have fixed costs that must be covered through borrowing, or have high returns that depend on the coordinated actions of others, and loans and coordination are unavailable. Again, policy prescriptions are largely absent, but the reader comes away sensing a bias towards redistribution in a market context as opposed to bypassing market mechanisms entirely.

A review of a textbook/anthology such as this need not concern itself with the models themselves. They have all been peer-reviewed, and many are commonly used in graduate classes today. The first edition contained a small number of mistakes and typographical errors, but these have mostly been corrected in subsequent editions. One may, though, raise two questions: Have the authors done justice to the models? Are the right models included in the work?

On the question of doing justice to the models, there can be no doubt that graduate students will be grateful. The authors have taken great pains to simplify, with considerable elegance, the essence of many models. The chapter on credit, for example, offers quick insight into market equilibria with moral hazard and adverse selection. Likewise, the chapter on rural labor markets covers much ground with straightforward clarity. On the other hand, some theorists are likely to feel slighted. Why did their model not warrant any math, and instead receive a simple sentence or paragraph? One example that comes to mind is Gelbach and Pritchett’s very relevant model of the political economy of targeting. The paradox they formalize is that better targeting might undermine political support for redistribution, ending up with less assistance for the poor. A worse fate awaits another group of theorists: their models are presented in such simple, intuitive, and compact notation that one fights the urge to accuse the original authors of holding up candles to the sun. A backward bending labor supply curve generates dual labor market equilibria, one with children working the other without. A work requirement for receiving government assistance will dissuade the rich from masquerading as poor to claim benefits. Finally, a few models are so tersely specified as to be quite difficult to figure out without going to the source. In the discussion of Hoff and Lyon’s model of ‘leaky bucket’ poverty alleviation the reader is at a loss when trying to figure out the nature of the interaction between borrower and lender, the contracts offered, and the information available to each (the model as presented seems to suggest the lender knows the wealth of the borrower, but not the riskiness of the project, when perhaps the reality of developing countries is the reverse, with lenders having expertise in evaluating projects, but not knowing too much about their potential borrowers). These are relative quibbles, though. The bulk of the book is dead-on.

On the question of including the right models, here the reviewer is entitled to personal predilections. My own fall towards political economy, unfairly slighted in the book, with a lone (but good) chapter concluding the volume. In fact, I think this is the only real substantive criticism I have of the book. The authors have unwittingly recreated a neoclassical-type world where the state is absent. Is it really right to proceed in explaining phenomenon we observe in a world of pervasive state presence by imagining what would happen in a stateless world? Especially in the first half on rural factor markets the authors perhaps should have followed Sherlock Holmes: Where was the dog that did not bark? Perhaps the source of many imperfections in rural factor markets is ultimately the state, with its clumsy and wrong-headed interventions and lapses. The usual story is that market imperfections make people poor, and poverty limits the ability to innovate institutionally to correct market imperfections. An alternative story is that the state distorts markets, and this makes people poor, and poverty hinders collective action to harness the state. The two stories are similar, but the optimistic first has an implicit exogenous actor (the state) while the pessimistic second has none.

These few caveats aside, there is no doubt that the authors have made a major contribution to the life and death questions at hand. Because of their effort, we are now better equipped to teach, learn, advise, and persuade.