Economics Nobel goes to poverty-fighting science

A scientific approach to reducing poverty’s many harmful effects via field experiments in schools and other real-world settings has won the Nobel Memorial Prize in Economic Sciences.

Economists Abhijit Banerjee and Esther Duflo, both of MIT, and Michael Kremer of Harvard University will receive equal shares of the prize of 9 million Swedish kronor, equivalent to about $900,000.

Duflo is only the second woman ever to be awarded the economics Nobel. The first was Elinor Ostrom, who won in 2009 for studies of how people in small communities manage shared natural resources. Ostrom died in 2012. Duflo, who will turn 47 on October 25, is also the youngest recipient of the prize.

“Poverty has deep roots, and we use an experimental approach to examine particular aspects of this problem and determine what interventions work,” Duflo said over the phone on October 14 at the Royal Swedish Academy of Sciences news conference in Stockholm announcing the prize.

More than 700 million people globally live in extreme poverty. Half of the world’s children leave school without basic language or math skills. Roughly 5 million children under age 5 annually die from diseases that could have been prevented with inexpensive treatments.

The three laureates design and test interventions aimed at specific ways to alleviate poverty’s effects in education, health care and other areas. Such studies are especially important because policies intended to fight poverty can often backfire (SN: 3/4/19).

Development economics, a branch of economics founded in the 1960s that studies how emerging, poor nations grow into more prosperous nations, seemed unable to make any theoretical headway by the late 1980s, says economist Jörn-Steffen Pischke of the London School of Economics.

Then, “the three [2019] laureates transformed development economics from a field that was stagnant and unattractive for young talent into one of the most vibrant areas of economics today,” Pischke says. That transformation began in the mid-1990s, when Kremer led a team that tested a range of interventions aimed at improving learning among students attending schools in western Kenya.

Banerjee and Duflo, often with Kremer, then performed similar studies in other countries.

One important line of research developed “Teaching at the Right Level” programs, which enable teachers in low-income, developing nations to target instruction to students’ learning levels. Teachers in these programs learn ways to keep students from falling behind rather than forcing them through a one-size-fits-all curriculum for each grade.

A 2011 study led by Duflo, for instance, found that grade 1 test scores in a Kenyan school increased when teachers divided students into smaller classes based on their initial learning levels.

A string of studies in the same vein led by the 2019 laureates took randomized controlled trials and field experiments from outcast status to standard practice in development economics, says economist Tessa Bold of Stockholm University’s Institute for International Economic Studies.

Crucially, Bold says, those studies showed that the virtually unanswerable question “How can we fight global poverty?” could be broken into smaller, testable questions such as “Why do children not attend school?” and “Why do small-scale farmers not use technologies such as modern seeds and fertilizer that are known to be profitable?”

“The 2019 laureates’ research has had a huge impact on my own work,” Bold says.