Three economists win Nobel for Experimental Approach to Alleviating Poverty

Abhijit Banerjee, Esther Duflo and Michael Kremer share Nobel Prize for Economics

  • Abhijit Banerjee, his colleague and wife Esther Duflo and fellow researcher  Michael Kremer win the 2019 Nobel Prize for Economics. The Prize Committee has said, “The research conducted by this year’s Laureates has considerably improved our ability to fight global poverty. In just two decades, their new experiment-based approach has transformed development economics, which is now a flourishing field of research.”
  • Field experiments in the late 1990s and early 2000s by Abhijit Banerjee, Esther Duflo, and Michael Kremer found that subsidies helped increase use of preventative healthcare. Those studies helped shift the World Health Organisation and the UN to promote subsidised healthcare for the poor.
  • At 46, Paris-born Duflo is the youngest ever – and only second woman (after Elinor Ostrom in 2009) – to win an economics Nobel. She was Banerjee’s doctoral student at MIT. Currently the Ford Foundation International Professor of Economics at MIT, the 1961-born Banerjee, born to a Maharashtrian mother and Bengali father, and Duflo are best known for anti-poverty research emphasising the use of field experiments. Banerjee is the second Indian to win an Economics Nobel after Amartya Sen.
  • In an interview with Times of India on winning the Nobel, Abhijit Banerjee said “I think of us as being a whole movement, people looking for hard evidence and not shooting their mouths off. This is a sort of validation for that (randomised control trials) movement. To that extent, it is an important moment, not just for us. We were lucky to be at the beginning, but we are part of a larger movement. And the movement has succeeded to a much greater extent than we ever thought. We have over 400 professors doing research and we get some reflected glory from that. The movement is based on important principles of skepticism, not being intimidated by authority, willingness to ask questions about established truths and common wisdom. That’s how our work goes…. we have very good partnerships with a bunch of governments in India. We typically don’t work with the federal government in India because it doesn’t do so much implementation. Our connections are more with state governments and we work with Tamil Nadu, West Bengal, Punjab, Haryana, Bihar, Rajasthan, Orissa…a bunch of state governments.
  • Upturning conventional wisdom is not new to this year’s economics Nobel laureates. Banerjee, Duflo, and Kremer pioneered the use of field experiments into social behaviour to understand and solve problems faced by the poor, especially with randomised control trials (or RCTS, used to test drugs), in which an intervention is assigned to one of two similar groups to test its effectiveness. In doing so, they brought what the Nobel committee called “a new approach to obtaining reliable answers about the best ways to fight global poverty”.
  • Development economics is split between those who believe that external aid is necessary to help people out of poverty traps, and those who think that this would distort local capacity to find their own solutions. RCTs brought a more fine-grained “evidence-based approach” to development research by randomly choosing groups, running experiments, and evaluating effectiveness of an intervention. Their topics have ranged from how to fix teacher absenteeism to corruption in issuance of driving licenses.
  • Kremer used this approach in western Kenya in the late 1990s; in 2003, Banerjee and Duflo, along with Sendhil Mullainathan, set up the Abdul Lateef Jameel Poverty Action Lab (J-PAL) at MIT.
  • When Banerjee and Duflo’s experiments were first began to be published 20 years ago, their findings often ran counter to popular thinking in international development circles. Their studies helped demolish darlings of the global aid industry such as smokeless chulhas and microfinance (see box).
  • But their methods have become hugely influential, especially with the publication of their book ‘Poor Economics’. Randomised experiments offered policymakers and donors what Bill Gates called “an empirically rigourous” way to find solutions that could be scaled up or ones that should be scrapped or avoided. In 2016, some 400 projects financed by World Bank were being evaluated by randomised trials. J-PAL alone has run 941RCTs in 81countries on everything from agriculture and crime to education and health. According to the lab, their evaluations have helped scale up welfare programs to reach 400 million people globally.
  • Not everyone is a fan of the “randomistas”, however. Economists like Angus Deaton and science philosopher Nancy Cartwright have noted randomised trials don’t produce generalisable results — what works in one place may not work in another.

The Poor are no less rational than anyone else – quite the contrary. They have to be sophisticated economists just to survive.

Abhijit Banerjee and Esther Duflo

Select excerpts from Times of Of India, Oct 15, 2019

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