IN MEDICINE, the gold standard of testing potential new treatments is creating a randomized controlled trial, where a randomly chosen set of patients receives the new treatment while another set, the control group, does not. Researchers then track them closely and measure their results.
In economics, such experiments were nearly unheard-of two decades ago, when three Boston area economists began adapting the concept to create a groundbreaking approach to solving society’s ills. Using randomized controlled trials, Massachusetts Institute of Technology colleagues Esther Duflo and Abhijit Banerjee and Harvard’s Michael Kremer began tracking the efficacy of public policy at helping the poor. This year, their work in development economics was acknowledged with a Nobel Prize for helping alleviate poverty and for transforming the field.
The laureates have “introduced a new approach to obtaining reliable answers about the best ways to fight global poverty,” the Nobel committee said in its announcement, saying the work “dramatically improved” such efforts.
Most Nobel Prizes for economics are awarded for theories. That this year’s award was grounded in real-world experiments that helped the poor was hailed as an achievement and a major shift in the profession. Lawrence Katz, a Harvard economist, told The New York Times it was “probably the first 21st-century prize in economics.”
And many celebrated that Duflo, who at 46 is the youngest Nobel Prize recipient in her field, also is only the second woman ever to receive the award. Duflo was born in Paris, where her mother was a pediatrician. She says it wasn’t her mother’s medical training that inspired her, but a desire to upend longstanding stereotypes about the poor. Duflo is proud that the award might also change stereotypes about economists. “There are not enough women in economics, and there are not enough underrepresented minorities,” she says. “That I’m a woman and young and I have two small kids is kind of useful in showing ‘look, this can be done.’ ”
She’s hopeful the prize will also inspire a new, more diverse generation of economists to realize that the field is not just about interest rates, but social issues as well. “A lot of people go into economics with the idea that they’re going to make a difference in the world,” she says. “But now there is this tool and way of working that allows you to immediately be helpful and have an impact beyond any individual project.”
She and Banerjee helped cofound the Abdul Latif Jameel Poverty Action Lab at MIT in 2003, and were married in 2015. They often work closely with Kremer, who also cofounded Precision Agriculture for Development, which brings technology to small farms. Duflo estimates the research coming out of the lab and from her economic development peers has affected the lives of 400 million poor people.
At first, the trio were considered part of a subset of economists called the “randomistas.” Many looked at their work with skepticism. “It sort of evokes a vision of economists in white coats sitting around and putting people into different cages or something,” Banerjee says.
Banerjee grew up in a middle-class family in India, but his proximity to deeply disadvantaged people gave him a context he says many economists in his field lacked.
“When I became an economist, it was bizarre that I was in a field where there was little talk of how poor people lived their lives. It didn’t seem like there was a topic that economics really had much to say about,” he says. Banerjee, Duflo, and Kremer’s novel approach involved drilling down into communities and asking small questions: What are the factors that are hindering educational outcomes here? Can a public health campaign actually prevent the spread of disease?
Their results were considered revolutionary. When Kremer studied the Kenyan educational system in the 1990s, he found that instead of subsidizing expenses like tuition and uniforms to increase school attendance, it was far more effective to give children medication for parasitic worms.
And among their many projects, Banerjee and Duflo’s work helped reorganize the public schools system in India, placing an emphasis on grouping children by learning level rather than age or grade level. That project has helped 5 million children access remedial tutoring in their schools. And Duflo found that asking teachers to take a daily photo with their students in Indian classrooms helped increase student achievement.
The couple’s work also questioned the effectiveness of microfinance lending in India, finding that the loans had little to no effect on women’s empowerment or children’s education.
Naturally, many of these ideas were met with pushback within the development sector. And some say the approach is unfair to the populations for whom opportunity is withheld. But Banjeree says that, in most instances, the experiments operate within the time frame it takes for a policy initiative to be rolled out throughout a region. The beauty of economics, he adds, is in the data — the numbers are difficult to dispute. And, thankfully, they’re getting access to more data, as governments around the world step up their collection efforts.
As the researchers look forward, they’re pooling their Nobel winnings to create a fund to aid graduate students and young faculty to do this type of work in developing countries, Duflo says. She notes, too, that her research will increasingly rely on artificial intelligence, which will let them identify populations and communities where experiments will have the most impact. “The government can target the program to areas that have the largest need,” she says. “It’s the equivalent of individualized medicine.”