The Prize in Economic Sciences 2019 • Abhijit Banerjee Massachusetts Institute of Technology, Cambridge, USA • Esther Duflo Massachusetts Institute of Technology, Cambridge, USA • Michael Kremer Harvard University, Cambridge, USA Contribution • “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” • Despite recent dramatic improvements, one of humanity’s most urgent issues is the reduction of global poverty, in all its forms. • More than 700 million people still subsist on extremely low incomes. • Every year, around five million children (everyday 25000) under the age of five still die of diseases that could often have been prevented or cured with inexpensive treatments. • Half of the world’s children still leave school without basic literacy and numeracy skills. Poverty research and development economics • This prize is seen as a shot in the arm for development economics as a discipline, which faced onslaught from neoliberal economics as being irrelevant and as having largely failed in making policy recommendations. • Free market and consequent ‘efficiency’ have put the questions of equity and poverty on the back burner – and this seems to be a comeback. • Fighting global poverty - we must identify the most effective forms of action. • This year’s Laureates have shown how the problem of global poverty can be tackled by breaking it down into a number of smaller – but more precise – questions at individual or group levels. • They then answer each of these using a specially designed field experiment. • Over just twenty years, this approach has completely reshaped research in the field known as development economics. This new research is now delivering a steady flow of concrete results, helping to alleviate the problems of global poverty. Social Experiments? • What will happen to the policies – how that can be designed?- based on a better understanding of how people live, why the particular choices are made? • Now we know which drugs work and which doesn’t work through RCTs. In technology, we spend so much time experimenting, fine-tuning to get absolute cheapest way to do something, so why aren’t we doing with social policy? • The experiments designed have two distinctive features. First, the participants made actual decisions in their everyday environments, both in the intervention group and in the control group. This meant that the results of testing a new policy measure, for example, could often be applied on site. • Second, they relied on the fundamental insight that much of what we want to improve (such as educational outcomes) reflects numerous individual decisions (among pupils, parents and teachers). • Sustainable improvements thus require an understanding of why people make the decisions they do – the driving forces behind their decisions. • Banerjee, Duflo, and Kremer not only tested Whether a certain intervention worked (or not), but also why The school experiment • The first study- the school experiment • Result- neither more textbooks nor free school meals made any difference to learning outcomes. • Later field experiments have shown that the primary problem in many low-income countries is not a lack of resources. • Instead, the biggest problem is that teaching is not sufficiently adapted to the pupils’ needs. In the first of these experiments, Banerjee, Duflo et al.. studied remedial tutoring programmes for pupils in two Indian cities.. • Schools in Mumbai and Vadodara were given access to new teaching assistants who would support children with special needs The vaccination experiment – Last mile problem A Polarized discourse on aid? • Does aid help? Aid optimists and Aid pessimists. Without aid what would have happened? We don’t know! Economic interventions are political decisions? • Malaria -900,000 people die- insecticide-treated bed nets in Africa- leading cause of <5 mortality • If you have a few million dollars to spend on poor how do you go about it? Does the aid help or not? It might exacerbate corruption, dependence etc.? • • • • Fight against HIV- sugar daddy talks Various experiments Education has no effect The right information- risky sexual behavior among teens have gone down by 67% • • • • Deworming Children Not something seen as important in the beginning But extremely important in getting children to school Social experiment showed that, free meals and free uniforms have less impact (23%), but social awareness about the impact of education and deworming had interesting impacts (around 40%). • 20 million school children in 26 countries got dewormed in 2009 • Is Microcredit relevant? Rise of RCTs in development Michael Kremer’s lab in Gujarat • Precision Agriculture for Development (PAD): the empowerment of small farmers through harnessing innovations in technology and research. • In India, initial RCT conducted by Kremer found that introduction of low cost, mobile based agriculture extension system among 1200 cotton farmers may help. • Along with their technology partner awaaz.de and JPAL South Asia, PAD offered a refined service called krishi tarang, a voice based technology that provides free information via weekly voice messages and direct response to farmers questions. • This helps for better pragmatic decision making and better use of their inputs. • PAD also provided mobile soil analysis and access to soil data without any expenses. 40000 farmers benefited by the end of 2017. • Krishi tarang program impacts: 8.6% yield rise for cotton 28% for cumin, profits increased Rs. 6500 per acre and profit margin of small farmers increased ten times. Criticisms • Rigorous evidence can only come from RCTs? It created this trend: they are the only evidnece? • Not all policies can be tested with RCTs and there are many macroeconomic policy questions that RCT cannot answer • Preventing the control group from getting the intervention until the experiment is over. • Questions on generalizability of the findings: Just because something worked in one place does not work guarantee that it will work everywhere. • This approach tend to depoliticize policy making: something that get implemented is more of a political will than evidence in many occasions. • The structures and institutions that create poverty are not challenged and not discussed in this approach. • It belittles the agency and participation of people in policy making; not counting their experiences. Look forward.. • It’s a slow process. • No larger claims. • Some places it will work, some places it wont! • But it really prompted a change for the better.
