Peasant families represent approximately 25% of the population in Latin America. They get their family income mostly from their small plots of land. Despite the undoubted importance of peasant economies, there are as yet no satisfactory accounts or explanations of their economic functioning and dynamics. The peasant economy constitutes a ‘reality without a theory’.

The importance of the peasantry comes not only from the number of people but also from the fact that they represent the poorest social group in Latin America. Several studies have shown that poverty in Latin America is concentrated in rural areas and particularly in the peasant families. Inequality and poverty will continue to be an unfortunate characteristic of this region unless the real incomes of peasant families are increased substantially. Economic policy to reduce poverty must have the peasantry as one of the most important target groups. Policies without theory however will not be successful, except by accident. Again, our understanding of this particular reality becomes a necessity.

This study is concerned with the peasant economy of Peru. This country presents one of the extreme cases of inequality and rural poverty in Latin America. Also the peasant population in Peru is a large fraction of the total population (around 30%) and of the rural population (around 66%). The historical process has, on the other hand, generated in Peru one of the most extreme cases of cultural duality, if one compares the sierra peasants and the upper and middle classes living in Lima. Nowhere else does the notion of economic duality seem more applicable than in Peru.