A Nobel prize that gives us hope | HT Editorial
To know what works and what doesn’t to end global povertyUpdated: Oct 14, 2019 19:33 IST
Whether economics is a science or not is a longstanding debate. Developing sophisticated models and powerful theories have captured the imagination of thousands of young economics students. There is an equal number of practitioners that believes such abstract modelling is very distant from the real world. These are not esoteric debates. Even though the global economy has grown faster than ever under capitalism, millions have failed to reap its benefits. Capitalism’s defence, especially in a democracy, is that it is possible to help the have-nots by making policies directed towards them. Many such policies have been made and implemented. Yet, poverty persists. What’s to blame?
The Nobel Committee’s decision to award this year’s prize to Abhijit Banerjee, Esther Duflo and Michael Kremer is an endorsement of the fact that those seeking to reduce poverty would do better to know how the poor behave. It might not be enough to announce a free vaccination programme to reduce child mortality. Giving a couple of kilogrammes of pulses or a steel bowl might be the critical factor in determining whether mothers walk the extra mile to bring their children to the vaccination centre. Banerjee and Duflo have set up what they call a poverty action lab at MIT to develop these insights. They and their comrades devote a lot of time conducting randomised controlled field trials (RCTs), particularly in India, to find out what works and what doesn’t to fight poverty. That they’ve been awarded the highest honour in the discipline is recognition of the fact that there’s still hope to fight poverty without succumbing to the polarising debate between right and left wing populism.
Like all scholars, Banerjee et al too have been criticised. Their peers have accused them of belittling theoretical and structural constraints in the fight against poverty. It is true that RCTs cannot replace macroeconomics. RCTs can’t help us understand recessions which can throw millions into poverty at once. That is no reason to ignore their work and contribution in the fight against poverty, though. If there’s one reason why this year’s Nobel in economics should be celebrated, it is the following: Poverty can’t be eradicated without recognising that the poor have an agency and RCTs are needed to understand how exactly such agencies work.