אוק. 15, 2019

​​​​​​​Miri Stryjan and Ada Gonzales-Torres, Development economists at the deparment:

Esther Duflo, Abhijit Banerjee and Michael Kremer, three researchers in development economics, share the 2019 economics prize in the memory of Alfred Nobel.

They receive the award for their experimental approach to alleviating global poverty. For the field of development economics, this year's laureates have had an immense impact. The focus of this research field has been shifted from a macro level, with topics such as why some countries are poor and not others, and how country level growth can be increased, to the micro and individual level where we are interested in how poor people actually live, how they reason and how they make decisions. This shift in focus has been largely driven by the three laureates, and has gone hand in hand with a turn to more field work, and using field experiments for evaluating policy and learning “what works". This knowledge can be used to draw conclusions about what policies should be pursued and better understand how resources should be allocated in the fight against poverty. Their approach has also helped advance economic theory. For instance, they have contributed to network theory, by providing both theory and evidence about which individuals are central in the diffusion of information, using data from a large microfinance program (Banerjee, Duflo, Chandrasekhar and Jackson, 2013). In the last 20 years, these three researchers have changed and influenced a whole field of research to start working with aid organizations, governments and NGOs to combat poverty through rigorous program evaluations using the experimental approach.

A few examples of the questions asked in their research are “What is the most important factor for increasing the quality of learning in poor rural schools in developing countries?", “Why do farmers in poor contexts not use new technologies, such as improved seeds or fertilizer, even if it would be profitable for them?" “How does political representation of women affect policy?", “Does microfinance have an impact on poverty, and for whom?" “What are the most effective tools for increasing police efficiency and improve police officer interactions with the public in India?"

The experimental approach means that in order to test a theory or measure an effect of something, the researcher can set up a randomized control trial (RCT). Suppose we want to end malaria. Two well-known researchers, William Easterly and Jeffrey Sachs, used to maintain opposite views – Sachs argued that free distribution of mosquito nets is an effective way to reduce malaria incidence while Easterly claimed that providing mosquito nets for free leads to the wrong incentives and that people end up using them for something else, such as fishing nets. To know which story is correct, we cannot simply compare people that received a bed net for free to people that paid it, because these groups are different to begin with: People who pay for it are typically more educated, and have a better understanding of why they need a bed net; while those who got it for free might be poorer, which is why they were in contact with an aid organization that gave them a bed net for free in the first place. Instead, we can set up an experiment. We can randomly select a number of individuals to receive a bed net for free, and another group of individuals that pay a given price for it. One year later, we can see whether those that got it for free, actually are less likely to use it. Evidence from RCTs by Jessica Cohen and Pascaline Dupas, shows that this is not the case. This finding led a number of international organizations to eliminate user fees in the take-up of key preventive health products. The RCT approach, in short, helps us measure the effect of interventions in a credible way, while preventing researcher bias and political opinions from affecting the results of research studies.

Some of the programs evaluated using RCTs, by the laureates and other researchers, such  as programs in education and healthcare, have later been scaled up to reach millions of poor people: School-based deworming programs are now recommended by the World health organization, based on evidence of its cost-effectiveness by Michael Kremer and Edward Miguel; GiveDirectly sends cash directly to over half a million households living in extreme poverty, without strings attached, based on a large body of evidence showing that unconditional cash transfers are one of the most effective ways to improve household's assets, consumption and psychological well-being. Other sub-fields of Economics have also begun to use similar methods.

This year's economics prize is a recognition of the growing field of development economics, and of a methodological approach that has affected the entire discipline of economics in the last 20 years. To quote economist Lawrence Katz: “This is probably the first 21-st century prize in Economics"

The book Poor Economics, a popular scientific book by Banerjee and Duflo, summarizes much of the research in this “modern development economics" within areas such as health, education and business activity for a general audience. The book is currently being translated to Hebrew and will be published in 2020 by Now Africa, a collaboration between the Tamar Golan Africa centre at Ben-Gurion University and Pardes books.

The economics prize is not one of the original Nobel Prizes, and its official name is The Sveriges Riksbank (the Central bank) Prize in Economic Sciences in Memory of Alfred Nobel. The Royal Swedish Academy of Sciences appoints the prize-winner(s) according to the same principles as for the Nobel Prizes.

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Dr. Miri Stryjan in an interview to the Dagensarena (Swedish):

https://www.dagensarena.se/innehall/de-har-flyttat-fokus/  (translation to English: Miri Dagens Arena English and Hebrew.pdf)


Related: articles in Hebrew in calcalist and the marker on this year's winners, mainly based on the Nobel committee's statement (with some mistakes in economics terms, such as misnaming the academic field Development Economics and calling it Developing Economies)

https://www.calcalist.co.il/world/articles/0,7340,L-3771831,00.html

https://www.themarker.com/wallstreet/1.7971499

Rel​ated: Twitter thread on the laureates' contributions to economic theory, and to combining theory and empirics: https://threadreaderapp.com/thread/1183813752245948417.html

Related: The press release of the Royal Swedish Academy of Sciences with scientific background: https://www.nobelprize.org/prizes/economic-sciences/2019/press-release/