We can learn a lot from Nobel laureates who have changed the lives of millions of poor people around the world
Nobel Prize for Economics for the year 2019 was awarded to Abhijit Banerjee, Esther Duflo, and Michael Kremer "for their experimental approach to alleviating global poverty."
"The research conducted by this year’s laureates has considerably improved our ability to fight global poverty," The Royal Swedish Academy of Sciences said on Monday. "In just two decades, their new experiment-based approach has transformed development economics, which is now a flourishing field of research."
As a direct result of one of their studies, more than five million Indian children have benefitted from effective programmes of remedial tutoring in schools. Another example is the heavy subsidies for preventive healthcare that have been introduced in many countries.
The work of the laureates which changed the lives of millions of poor people around the world demands in-depth analysis. The laureates were essentially honoured "for their experimental approach to alleviating global poverty". They built a scientific framework and used hard data to identify causes of poverty, estimate the effects of different policies and then evaluate their cost-effectiveness. Specifically, they developed randomized control trials (RCTs) to do this. They used these to study different policies in action and to promote those that were most effective.
The crucial ingredient that distinguishes randomised trials from other research methods is the random assignment of treatments to the people, places, or other objects of study involved in a research project. In a typical observational study, analysts do not assign a treatment to the people whose behaviours or other characteristics are the topic of interest. Instead, the analyst collects information about a sample of people and attempts to draw conclusions about the effects of naturally-occurring environmental or policy differences that are believed to affect the behaviors or outcomes of sample members.
Previously, economists largely focused on big questions about national economic policy in poor countries -- questions that were hard to answer satisfyingly and that didn’t lend themselves to obvious tests or solutions. Kremer broke down the questions he was interested in until he had concrete policy proposals to test and then ran a series of experiments to determine which ones worked.
Since then, the approach has been expanded and refined and has utterly transformed the field. Development economics research using the tools and methods Duflo, Banerjee, and Kremer established and improved on is now conducted by hundreds of researchers and used by governments and NGOs all over the world to make critical policy decisions -- from how to improve education to how to assist their poorest citizens to how to make a public health intervention work.
The works of the laureates have become all the more relevant because global poverty remains one of the biggest challenges of our lives today. More than 700 million people live in extreme poverty. Five million children die before age 5, often from diseases that can be prevented or cured easily and inexpensively. Half the world’s children leave school without basic literacy and mathematical skills.
Pakistan also suffers from extremely high levels of poverty and inequality. Around 30 percent of the people in Pakistan live below the poverty line. According to one estimate, Pakistan exported 500,000 tons of wheat from May 2018 until April 2019, and 7.4 million tons of rice in the same period.
According to the International Food Policy Research Institute, around one in five people in Pakistan are malnourished. Noted economist, Dr Kaisar Bengali, has said in a report that there are alarming levels of poverty and deprivation in Karachi, which is the financial hub of Pakistan. "In our surveys, we came across kids who had never eaten an apple. When we offered them an apple they were reluctant to take a bite wondering whether it was an edible thing or not," Bengali said. "In another case, a family had never had eggs in their whole lives."
Though the fieldwork was done in most parts of the world, most of the work of Banerjee and Duflo was conceptualised at Abdul Latif Jameel Poverty Action Lab (J-Pal) which was founded at MIT in 2003 to study poverty. Some of the insights from the Nobel Laureates challenge the existing stereotypes. Banerjee and Duflo wrote in their seminal work Poor Economics, "[The] urge to reduce the poor to a set of clichés has been with us for as long as there has been poverty. The poor appear, in social theory, as much as in literature, by turns lazy or enterprising, noble or thievish, angry or passive, helpless or self-sufficient."
"It is no surprise that the policy stances that correspond to these views of the poor also tend to be captured in simple formulas: ‘Free markets for the poor’, ‘Make human rights substantial,’, ‘Deal with conflict first,’ ‘Give more money to the poorest,’ ‘Foreign aid kills development’ and the like."
The problem, according to Banerjee and Duflo, was that the poor get admired or pitied. They are also not considered knowledgeable and that there is nothing interesting about their economic existence.
"Unfortunately, this misunderstanding severely undermines the fight against global poverty: Simple problems beget simple solutions. The field of anti-poverty policy is littered with the detritus of instant miracles that proved less than miraculous."
The need was "to stop reducing the poor to cartoon characters and take the time to really understand their lives, in all their complexity and richness."
The work on education also reveals important insights. Dr Kremer did a lot of experimental work with groups of Kenyan schoolchildren in the mid-1990s. It found that access to extra textbooks did not improve most student outcomes -- suggesting that a simple lack of resources was not the main impediment to learning. In a subsequent experiment, Duflo and Banerjee identified a true barrier to student achievement: teaching methods that were insufficiently shaped to student needs. Tutors for low-performing pupils in India improved achievement measurably, and lastingly.
Kremer and others found that providing free health care makes a big difference: only 18 percent of parents gave their children deworming pills for parasitic infections when they had to pay for them, even though the heavily subsidized price was less than $1. But 75 percent gave their kids the pills when they were free. The World Health Organization now recommends that the medicine be distributed for free in areas with high rates of parasitic worm infections.
Banerjee, Duflo, and others found that mobile vaccination clinics in India dramatically increased the immunization rates compared to traditional health centres that often went unstaffed. The immunization rate rose further if parents received a bag of lentils as a bonus for vaccinating their children.
Banerjee and Duflo also found that micro-credit programmes, which provide small loans to encourage poor people to start businesses, did little to help the poor in the Indian city of Hyderabad; studies in Bosnia-Herzegovina, Ethiopia, Morocco, Mexico, and Mongolia, produced similar results.
Among other lessons that can be made part of policy prescription in Pakistan, hope is one of the most powerful lessons which the people in Pakistan and around the world can learn from the work of the laureates. Duflo and Banerjee hold out hope that "poor countries are not doomed to failure because they are poor, or because they have had an unfortunate history." What often needs to be fought, they say, is "ignorance, ideology, and inertia".
Kremer noted that "it can often seem like the problems of global poverty are intractable, but over the course of my lifetime and career, the fraction of the world’s people living in poverty has dropped dramatically," he said in a news release from Harvard, adding, "Over the years, we have learned a lot about what works and what doesn’t work, and why. Governments and non-profit organisations have become much more effective in addressing, and there is much wider recognition of how researchers and policymakers can work together in the fight against poverty."