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Nobel Prize winners in economics revealed – what did they do?

By Connor Freitas
October 22, 2019, 5:53 PM GMT
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    A trio of researchers from the US used field experiments to reveal which initiatives are failing to fight poverty – with some eye-opening results

    This year’s Nobel Prize winners in economics were recently announced. They are a trio of researchers who worked together to understand the fight against poverty, the initiatives that work and the measures that don’t.

    Joining Michael Kremer and Abhijit Banerjee in receiving the prestigious honour is Esther Duflo. At 46 years old, she is the youngest ever winner of the prize, and only the second female recipient.

    Duflo and Banerjee work at the Massachusetts Institute of Technology, while Kremer is at Harvard. The trio’s hypothesis was simple: to design an approach that lifts the world’s poorest out of poverty, you need to understand the nuances of their day-to-day lives – and the rationale behind the tough decisions they have to make.

    To test this hypothesis, the winners of the Nobel Prize in economics carried out a series of field experiments to observe how people living in impoverished areas were responding to initiatives aimed at improving the provision of healthcare and education – initiatives designed to lift them out of poverty. With billions of dollars in aid at stake, the results really mattered.

    What the Nobel Prize winners in economics found

    Some of the headlines from the trio’s research were truly eye-opening. For years – even decades – the Western world has been focused on improving education by providing funding for more textbooks and teachers as well as school meals.

    However, on-the-ground experiments in India and Kenya found that none of these interventions actually improved children’s learning. Instead, they found that adapting the curriculum to make schoolwork more relevant to students, devoting more attention to struggling pupils, and reducing teacher absence rates through the introduction of short-term contracts were more effective.

    Their recommendations are now being implemented to help an estimated five million Indian children across 100,000 schools make the most of their education.

    And so to healthcare. Here, Kremer, Banerjee and Duflo uncovered some stark statistics. In cases where deworming pills for parasitic infections were heavily subsidised, to the point where they cost less than $1, just 18 per cent of parents would give the pills to their children. This rose to 75 per cent when the medicine was free – findings that have prompted the World Health Organisation to urge that these treatments are distributed at no cost to 800 million children in areas where infection rates exceed 20 per cent.

    Immunisation rates were often low in areas with traditional clinics that suffered from poor levels of staffing. But mobile units that can travel to local areas received far higher adoption rates, especially if parents were given lentils as an incentive for ensuring their children were vaccinated.

    There has also been much talk about microfinance – initiatives that give small loans to aspiring entrepreneurs in poorer areas. However, the winners of the Nobel Prize in economics have found that microloans rarely deliver results.

    What’s next?

    The three researchers share a passion for treating economics like medicine – using random samples to examine which schemes have an impact on poverty. This meant that some groups had free deworming pills and incentivised teachers, while others went without. Their approach is not dissimilar to the clinical trials used to put new drugs through their paces.

    For Banerjee and Duflo, who are husband and wife, the beauty of field experiments is that they can be intricately structured, replicated and scaled-up to provide detailed, real-world answers to the people who need them most. More than 700 million people around the world live in extreme poverty, and every year five million children die before they reach the age of five.

    Although substantial challenges lie ahead, it’s essential that every dollar of aid is used effectively – and the trio’s findings suggest that, so far, this hasn’t always been the case.

    The work undertaken by the winners of the Nobel Prize in economics also shows a shift in how the big issues facing the world are researched and understood. Instead of taking an abstract view that’s disconnected from the realities people face on the ground, the trio asked a series of smaller, more specific questions – delivering the concrete evidence that governments and charities need to ensure their work has the most impact.

    As a result of the trio’s approach to development economics, organisations tackling global poverty have now started to embrace field experiments before deciding on which new measures to put in place. It’s estimated that more than 400 million people have benefited from the trio’s research, often after programmes have been scaled up.

    Kremer, Banerjee and Duflo say they are stunned and humbled to receive the Nobel Prize in economics 2019. Duflo now hopes to inspire other women in her profession – and hopes it will lead to more female economists receiving the recognition they deserve.

    The trio will share a gold medal, a diploma and a cash prize of $918,000. But for Banerjee and Duflo, who have two young children, life goes back to normal for now – with high-level talks about economics reserved for walks to work rather than at the dinner table.

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