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- The 2019 Nobel Memorial Prize in Economic Sciences was jointly awarded to Abhijit Banerjee, Esther Duflo, and Michael Kremer for their pioneering work in economics for the developing world.
- The economists took an evidence-based randomized-control-trial approach, usually reserved for clinical research, to study poverty.
- They have proven the effectiveness of tackling large-scale poverty through smaller-scale issues, such as tackling access to education and child healthcare.
- This article is part of Business Insider’s ongoing series on Better Capitalism.
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The winners of this year’s Nobel Memorial Prize in Economic Sciences have transformed the way the world thinks about and fights extreme poverty. About 700 million people live in extreme poverty worldwide, and the prize committee said the winners’ research could be an important tool in tackling it.
The Royal Swedish Academy of Sciences gave the shared award on Monday to Abhijit Banerjee and Esther Duflo of MIT and Michael Kremer of Harvard, noting that their collective research has led to remedial teaching programs for 5 million Indian children and subsidized preventive-healthcare programs in developing countries.
Banerjee and Duflo, who are married, have produced many research papers and two books together, including the highly praised 2011 book “Poor Economics,” and their work is complementary to Kremer’s. The three, who have also collaborated, brought a radical new approach to developmental economics. They have proven the effectiveness of taking an experimental approach typically seen in clinical trials, utilizing randomized control trials.
For the past three decades, they have shown the effectiveness of reducing large-scale poverty in countries like India and Kenya by seeing the problem as a holistic one with many parts tied to access to education and healthcare from childhood.
The best introduction to this approach is “Poor Economics,” but we’ve compiled some further reading, as well as a short talk from each winner that you can watch.
Abhijit Banerjee of MIT is an expert in the history of poverty in India.
Banerjee came to the US from India to work toward his Ph.D. at Harvard. Aside from his work in developmental economics, he’s explored theory, like his exploration of herd behavior and his extensive looks at the history of Indian economics.
He is a fellow at the American Academy of Arts and Sciences, among other organizations.
A 2011 video from The Economist shows him explaining some of the main problems he and Duflo had with the study of poverty and what they did instead.
Esther Duflo of MIT has worked with Banerjee to show the need for data-based experiments in the field.
Duflo, 46, is the youngest recipient of the Nobel Memorial Prize in Economic Sciences and only the second woman to receive the award. She runs the Center for Economic Policy Research’s developmental economics branch and is a researcher at the National Bureau of Economic Research.
In 2003, she, Banerjee, and the University of Chicago’s Sendhil Mullainathan founded the Abdul Latif Jameel Poverty Action Lab (J-PAL) in Cambridge, Massachusetts.
Duflo gave a popular TED Talk in 2010 in which she explained the need for more data-based approaches to fighting poverty, as opposed to making large investments and hoping for the best.
Michael Kremer of Harvard is a pioneer in bringing randomization to the field.
Kremer is a MacArthur “genius grant” recipient and the cofounder of Precision Agriculture for Development.
He is responsible for research that inspired the Bill and Melinda Gates Foundation to invest heavily in vaccinations for children in the developing world. He’s done important research on schooling in Colombia and Kenya, as well as wage inequality in the developing world.
He also developed the O-ring theory of economic development, which is useful for understanding some of the foundational differences between rich and poor countries. If you want a deep dive into that, the George Mason University economist Tyler Cowen has a video explainer.
In 2014, Kremer gave a brief talk at Banerjee and Duflo’s J-PAL organization that explains why randomized evaluations, which may sound simple in theory, have been so revolutionary in the study of developmental economics.