This year’s Nobel Prize for Economics has been awarded to the trio responsible for revolutionising the field of development economics: Abhijit Banerjee, Esther Duflo, and Michael Kremer. In this post, Siwan Anderson discusses their pioneering work and its impact on the lives of millions of poor people across the globe. She contends that this year’s Prize is also a long-awaited acknowledgement of women in the economics profession.
The 2019 Nobel Prize for Economics has gone to Abhijit Banerjee, Esther Duflo, and Michael Kremer – the trio responsible for revolutionising the field of development economics. They tackle the most fundamental and burdensome question in economics: how can global poverty be reduced? In contrast to the weight and complexities of this question in terms of human welfare, their methodological approach is direct and simple. They just want to find out which policies work and which do not? Their scientific approach is equally straightforward and intuitive. Measuring the impact of an anti-poverty policy can be just like a medical trial for a new drug. From a given population, randomly select part of the group to receive the drug and the other part of the group to receive the placebo. If the outcome of interest significantly changes across the treated (those who received the drug) compared to the untreated (those who received the placebo), then the drug had an important impact.
It was absolutely ingenious to bring this experimental approach from medicine into the field of development economics. This is exactly what Michael Kremer first did in Kenya in the mid-1990s. Kremer suggested the randomised control trial (RCT) method to non-profit organisations, working amongst the very poor in rural areas, who wanted to better understand the effectiveness of their education programmes. This very early collaborative work, between Kremer and local non-governmental organisations (NGOs) in rural Kenya, led to non-obvious conclusions. Something as straightforward as making sure schools had access to textbooks, did not necessarily improve educational outcomes, instead it was the content of the textbooks that actually mattered. This early work highlighted the basic fact that we do not actually know which policies will work best until we go into the field and simply find out by measuring their impacts using rigorous scientific methods.
Around this time, Abhijit Banerjee who had already made seminal theoretical contributions to the field, transitioned to more empirical work and was influenced by the methodological contribution of Kremer’s early studies. At this time, Esther Duflo, also began working collaboratively both with Kremer and Banerjee towards implementing more RCTs in the field to directly measure the impacts of small-scale anti-poverty schemes. Duflo and Kremer’s initial testing ground was in western Kenya. There they experimented with policies ranging from fertiliser use amongst small farmers to teacher incentives in primary schools. Banerjee and Duflo began their work in India. There they tested remedial education policies for young children in the poor areas of Mumbai and Vadodara. Numerous seminal papers came out of these early collaborations together, and with other co-authors, that analysed important educational, health, and investment policies most relevant to improving the lives of the poor.
These early papers made serious academic contributions on their own, but even more profoundly they would form the genesis of the revolution that was soon to come. In no other sub-field within the discipline of economics, has a single empirical methodology taken over so completely and so quickly. In large part, due to the creation of the Abdul Latif Jameel Poverty Action Lab (J-PAL), a Massachusetts Institute of Technology (MIT) based poverty-action lab co-founded by Banerjee and Duflo in 2003, which constitutes a global network of anti-poverty researchers conducting RCT field experiments. For this type of experimental field work – first pioneered by Banerjee, Duflo, and Kremer – to seriously impact policy, it must be conducted collaboratively and scaled up. To this end, a number of experiments on a given policy across many different contexts are necessary, and their success in turn requires enormous collaborative efforts across researchers, implementing NGOs, and governments. J-PAL was able to achieve just that, and in less than two decades. That Esther Duflo is the youngest ever Nobel Laureate in Economics, reflects the speed with which this unprecedented revolution took place. To date nearly 1,000 experiments in more than 80 developing countries by almost 400 researchers have been run through J-PAL. Teaching at the right level (TaRL), an approach developed by the Indian NGO Pratham is a programme which now reaches millions of children in India and Africa. Fifteen years of randomised evaluations by J-PAL affiliates on the many facets of the programme helped to refine and improve its effectiveness, and also provided the necessary evidence to convince governments to scale-up. Likewise the success of school-based de-worming programmes that now reach close to 300 million children around the world can be traced back to evidence provided by J-PAL. The revolution that began with Banerjee, Duflo, and Kremer, which in turn led to a vast portfolio of evidence and research embodied in J-PAL has transformed the way governments and NGOs approach policy reform and has directly impacted the lives of millions of people across the globe.
Banerjee and Duflo’s contribution to development economics not only emphasises a pragmatic methodological approach, through rigorous RCT testing, but also represents a movement away from abstract speculative theories to explain poverty – favouring instead a more humanist approach. They advocate travelling into the field, recognising and observing diverse needs and social contexts, and most importantly listening to what the poor themselves have to say. They take very seriously how complex human behaviour and motivations determine decisions. They acknowledge the varied responsibilities and strains that the poor face. They realise that small costs, barriers, and mistakes, that many people would not notice, loom very large for those who have little. They deeply appreciate the complex set of challenges to escaping poverty, but are optimistic that even small-scale, well-informed, and carefully targeted policies can have large benefits. Banerjee and Duflo’s dedication towards a deeper understanding has overwhelmingly inspired the next generations of researchers to follow in their footsteps and be a part of their revolutionary battle against global poverty.
This year’s Nobel has gone to three extremely humble and deserving researchers who care passionately about the poor, and finding evidence-based policies to directly improve their lives. It acknowledges the power of economics to directly impact the lives of millions.
This year’s Prize also reflects a long awaited acknowledgement of women in the profession. Esther Duflo is not only the youngest Nobel Laureate in Economics but also only the second woman ever to win the Prize out of 84 laureates. This year’s Prize will also serve as an inspiration to all women.