The 2019 Nobel Prize in economics has been awarded to three economists -- Abhijit Banerjee, Esther Duflo and Michael Kremer -- “for their experimental approach to alleviating global poverty”. The award is not a surprise as it was widely expected that Banerjee and Duflo will get the economics Nobel. The 2019 award makes Duflo the youngest economics Nobel laureate and the second woman recipient after Elinor Ostrom. Banerjee and Duflo are also the first couple to jointly get the award.
Banerjee becomes the second Indian after Amartya Sen to be given the coveted prize. Both their works are connected. Sen’s work dealt in theory around poverty and famines whereas Banerjee’s is resolving the poverty conditions by using experiments.
Banerjee won the award with Duflo and Kremer for trying to find solutions to alleviate poverty through a technique called Randomised Control Trials (RCTs). These trials or experiments have for long been used in the medical field to understand effectiveness of a new medicine. So, you give a new medicine to one person or group (the treatment group) and not to other (the control group) and observe differences in outcomes.
These insights from medical research were applied by the recent awardees to all kinds of experiments in fields of microfinance, education, healthcare and so on. Kremer was first to use this experimental approach in Kenya, which then attracted Banerjee and Duflo.
These experiments gave researchers ideas about which development intervention worked and which did not. In earlier poverty and development research, the big question was on causation and these experiments helped understand the causation cycle more precisely. This in turn helped one guide and design better policies for poverty alleviation. One can read much more about application of their work in the Nobel prize citation. I would like to focus my energies elsewhere.
I will make two broader points here. First, some comments about the 2019 Prize and second on the criticism of Nobel economics.
The first general comment is the idea of randomisation is hardly anything new for researchers who have studied or followed Indian development. The Planning Commission started something called Programme Evaluation Studies way back in 1954 which more or less studied the same thing. Agriculturists -- both practitioners and researchers -- have also used similar techniques of RCT to see what agricultural intervention worked.
In my own research on banking history, I saw how Syndicate Bank started programmes on agricultural and rural development based on near similar ideas of randomisation. To be fair, the 2019 laureates have advanced these ideas using techniques from sampling, statistics, and econometrics to draw finer inferences.
Second, the award actually belongs to the Abdul Latif Jameel Poverty Action Lab or J-PAL, as popularly called by economists. Banerjee, Duflo, and Sendhil Mullainathan formed the Poverty Action Lab in 2003 at the MIT (Massachusetts Institute of Technology) with the goal of transforming the challenges of global poverty. In 2005, PAL was renamed to J-PAL in honour of Abdul Latif Jameel, the father of MIT alumnus Mohammed Abdul Latif Jameel and founder of the Saudi Arabia-based Abdul Latif Jameel company.
This financial support helped J-PAL move from a mere University centre to a global research powerhouse with offices all around the world. J-PAL has attracted talent from all across the world and many of them are involved in running these experiments. So, it is a whole team effort which has been led by Duflo and Banerjee. The Nobel economics jury could have broken the usual norms that an award has to be given only to researchers and instead awarded it to the whole organisation which has produced research papers like an ocean.
Third, with all this excitement and positivity comes negativity as well. Traditional development economists have attacked RCTs for making development research totally experimental-based, ruling out other methods of research. So much so that one hears stories about journals refusing development papers that do not have an RCT. It has divided the development research community which now call those who profess RCTS as Randomistas!
The main criticism of RCTs is that it rules out contexts, institutions, path dependencies etc from the developmental work. All these experiments are too narrow and based on certain conditions or times. They cannot be generalised and yet are generalized. They could also lead to unintended consequences. For instance, their research shows that for improving education, you need good teachers and in schools, teacher absenteeism is a major concern. Thus, the policy advice is to instead have teachers on a contract basis. This when implemented has led to not having any regular teachers in school making the administration problematic.
Poverty researchers such as Angus Deaton (2016 recipient) and Martin Ravallion of the World Bank have written stinging criticisms of RCT. Unfortunately, the Nobel Prize citation does not mention any such criticism. No research or idea is perfect and ideally, the Nobel citation should have pointed to the limitations or criticism of their work.
Now, we move to the second part of this article which deals in criticism of Nobel economics. The first point here is Nobel awards have mainly been given to neoclassical economics and hardly for researchers who work on the pressing issues facing world economy. Recently, a charity named ‘Promoting Economic Pluralism’ instituted “Not the Nobel Prize” to promote diversity in economics awards.
They said “ (in) the official descriptions for each Nobel Memorial Prize in Economics over the last 50 years, the words inequality, ecology, or crisis have never been used. Poverty and climate have only been mentioned once; welfare three times. In contrast, market or markets have been cited ten times, and theory 23 times”.
The recent Nobel award does try to correct this criticism, but there is a long way to go.
Second, in the 50 years of the Nobel economics history, most of the awards have been given to scholars in a few US Universities and even European ones feature rarely. It is startling that for a topic like poverty, the Nobel Committee could not find a single scholar in Asian or African Universities!
We might be happy that an Indian American has won the award, but he works at the same set of chosen universities. The Nobel Peace Prize was given to Mohammed Yunus and Grameen Foundation, which looked more realistic. There is criticism that the awarded poverty researchers are based in rich universities and have barely any experience of poverty conditions.
Third, the economics Nobel has often been criticised for not awarding women scholars. So far, only one woman has got the economics prize and thankfully, the committee has made its record a little better on this front, but again has a long way to go. The Not Nobel Prize team also awarded the first Prize to a woman economist: Mariana Mazzucato of University College of London for “reimaging the role of the State and the value in Economics”.
Overall, the Nobel Prize in economics for 2019 has been given to a team of scholars who have been expected to get the prize for a long time. One hopes that in future, the Nobel committee expands scope of the prize to scholars and researchers outside the standard choices. The committee calls up the winning scholars and usually ends up waking them as they are based in the US (given the time differences). Hopefully, in not very distant future, the call comes to scholars who are sipping afternoon tea!Amol Agrawal is faculty at Ahmedabad University. Views expressed are personal.