Andrew Leigh

PRIZED MINDS ARE HERE TO HELP — BY SHOWING THE WORLD WHAT DOESN’T

The Australian, 17 October 2019

‘If I can predict what you are going to think of pretty much any prob­lem,’ argues MIT economics professor Esther Duflo, ‘it is likely that you will be wrong on stuff.’

This week, Duflo shared the economics Nobel Prize with MIT’s Abhijit Banerjee and Harvard’s Michael Kremer. They weren’t rewarded for devising a grand theory. In fact, their work has probably debunked more theories than it’s vindicated. Instead, the trio were honoured for bringing a new approach to development economics: randomised trials.

Just as advanced countries test new drugs by randomly assigning patients to treatment and control groups, the development randomistas evaluate anti-poverty programs by the toss of a coin. Heads, you get the program. Tails, you don’t. The beauty of this simple methodology is that it provides a rigorous test of whether a program works.

Take cooking stoves. In an experiment in Orissa, India, households were randomly given better cooking stoves, with the goal of cutting indoor air pollution and improving health. The idea sounded fine, but it turned out that the effect was temporary. In the first year, the stoves had a positive impact. Two years in, the benefits had vanished. Many families didn’t bother cleaning the chimneys, the stoves ceased to work effectively, and usage dropped off.

In Kenya, another experiment explored how to increase fertilizer use among farmers. By randomly offering free delivery of fertilizer at different times of the year, the researchers discovered that what mattered most was timing. When the offer was made just after harvest, farmers had plenty of cash in their pockets, and were more likely to say yes. But later in the season, farmers were much less likely to take up the invitation. The research showed that Kenyan maize farmers – like the rest of us – tend to be overly focused on the present. If farmers have the chance to pre-purchase fertilizer when they’re flush with cash, it’s possible to significantly raise annual incomes.

Working with police in the Indian state of Rajasthan, Banerjee and Duflo worked with co-authors to evaluate drink-driving enforcement. Is it better for police to set up in the best location, or surprise drivers by moving breathalyser stations around the city? Rotating checkpoints, the researchers found, reduced night-time road deaths by one-quarter. But when the police set up at the same location night after night, drunk drivers quickly learned to avoid it. The takeaway is simple: if sobriety testing is always done at a single spot, it becomes predictable, and doesn’t save lives.

A commitment to rigorous evaluation doesn’t come from a scepticism about the value of helping the poor. Banerjee, Duflo and Kremer spend months each year in developing nations, working with implementation teams to discuss the challenges of extreme poverty in urban slums and remote villages. But the randomistas distinguish between a passion for the problem and a commitment to the program.

As Duflo puts it, ‘When someone of good will comes and wants to do something to affect education or the role of women or local governments, I want them to have a menu of things they can experiment with.’ Just as most pharmaceuticals that emerge from the laboratory fail to make it through clinical trials, so too we should expect many promising anti-poverty programs to fall short. This isn’t because there’s a secret conspiracy against the poor – it’s simply due to the fact that people are complex.

For economists, this year’s Nobel winners are a pretty interesting group. Banerjee was once jailed for participating in a sit-in at his university. Duflo cites her favourite hobby as rock climbing (an apt sport for someone who prizes flexibility of thought). Kremer founded Precision Agriculture for Development, which provides farmers in poor countries with localised information via their mobile phones. It also happens that Banerjee and Duflo are married, which led Indian newspaper The Economic Times to report the news under the headline ‘Indian-American MIT Prof Abhijit Banerjee and wife wins Nobel in Economics’ (the story was later corrected).

Randomised trials in development economics began as a way to test individual programs in specific contexts. But over the years, randomistas like Banerjee, Duflo and Kremer have refined their findings through replication: testing whether something that works in Kenya is also effective in Indonesia. Increasingly, their strategy is to test deeper economic theories, helping forge a better understanding of how to foster innovation, promote healthier living, and develop infrastructure.

Just as biologists and physicists build up from the results of individual experiments to construct a model of how larger systems operate, randomistas combine the results of multiple experiments to inform policymakers. In 2003, the Nobel winners founded the Abdul Latif Jameel Poverty Action Lab, or J-PAL for short. J-PAL both runs randomised trials and seeks to synthesise the evidence. For example, its summary of what works in education looks at dozens of randomised trials of programs designed to raise test scores in developing countries. J-PAL gives high marks to programs that increase the authority of the local school committee, that encourage teachers to show up (in one case by having them take a daily class photo) and that track students by achievement levels. But in developing countries, J-PAL gives a failing grade to free laptops, smaller class sizes and flipcharts.

When it comes to what works, the randomistas start out humble. ‘One of my great assets,’ Duflo says, ‘is I don’t have many opinions to start with. I have one opinion – one should evaluate things – which is strongly held. I’m never unhappy with the results. I haven’t yet seen a result I didn’t like.’

To watch the news today, you might be forgiven for thinking that the world has reached peak ideology. In such an environment, we should welcome this year’s Nobel Prize in Economics more than ever before. When it comes to solving big problems, a little modesty goes a very long way.

Andrew Leigh is the author of Randomistas: How Radical Researchers Changed Our World. A former economics professor, he now sits in the federal parliament. 

Authorised by Paul Erickson, ALP, Canberra.