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Economics Nobel honors trio taking an experimental approach to fighting poverty

Economists may not build gigantic atom smashers or gene-sequencing facilities, but they can still perform rigorous experiments. This years Nobel Memorial Prize in Economic Sciences honors three researchers who pioneered the use of randomized controlled trials to determine how best to ameliorate global poverty. Michael Kremer of Harvard University and Abhijit Banerjee and Esther Duflo, both of the Massachusetts Institute of Technology in Cambridge, will split the roughly $900,000 prize. The three have often worked together and form an intellectual team, other economists say.

“We all knew that they would win, just not so early in their careers,” says Sandra Sequeira, a development economist at the London School of Economics and Political Science (LSE). Kremer is 54 years old, Banerjee is 58, and Duflo is 46. Whereas many Nobel Prizes honor discoveries made long ago, this year’s economics prize goes to work still gaining momentum at foundations and development agencies around the world, says Sylvie Lambert, a development economist at the Paris School of Economics. “It’s an ongoing project,” she says. “This is the frontier.”

Globally, more than 700 million people live in extreme poverty, according to the World Bank, which defines poverty as living on less than $1.90 per day. One in three children is malnourished, according to figures provided by the Nobel Foundation, and most children leave school without basic skills in reading, writing, and math. The new Nobel laureates have strived to explain empirically which interventions work to alleviate poverty and why. “The goal of our work is to make sure that the fight against poverty is based on scientific evidence,” Duflo said on the phone at the press conference announcing the prize. “It starts from the idea that often the poor are reduced to caricatures, and often even people who are trying to help them do not understand the deep roots of the problems.”

To bring some science to the fight against poverty, the three researchers borrowed a key tool from clinical medicine: the randomized controlled trial. To see whether a particular intervention works, researchers give some people immediate access to it while making others wait, and they compare the results from the two groups of people. (Unlike a medical trial, such an economic trial cannot be blinded.) If the intervention fails, they dig deeper to see whether they can explain why. The researchers have used trials to test interventions in education, health, agriculture, and access to credit. Kremer has worked mainly in Kenya and sub-Saharan Africa. Banerjee and Duflo, who are married, have done most of their work in India.

The goal of our work is to make sure that the fight against poverty is based on scientific evidence.

Esther Duflo, Massachusetts Institute of Technology

In a classic example, in the early 2000s the laureates studied the use of fertilizer among farmers in Kenya, Lambert says. They found that merely demonstrating the benefits of fertilizer would not induce farmers to use it. That’s because they waited until the start of the growing season to buy it, she says, at which point many did not have enough money. Using a randomized controlled trial, Kremer and Duflo found they could induce greater uptake if they offered farmers a discount to buy fertilizer immediately after a harvest and to deliver it later for free. That worked better than a bigger discount offered later, she says.

The introduction of empirical tools into development studies is welcome, but the trend has its own issues, says Sohini Kar, an anthropologist at LSE. In experimenting with people, researchers must stick to strict ethical standards, and withholding interventions from control groups is potentially problematic, she says. In addition, researchers must take care to determine whether the effects they see really hold over the long run, Kar says. For example, Banerjee and Duflo studied microcredit—the supplying of tiny loans to start an informal business, for example—in India and at first found broad benefits. But the effect didn’t hold up, she says. “In more recent work they found that the people who did better with microfinance were also somewhat entrepreneurial to begin with,” she says.

In fact, the field is now undergoing something of a maturation process to address such concerns. “Right now there’s a big push toward reproducibility,” Sequeira says. “The big concern is that if you found an effect in a small village it may not apply more generally.” The experimental approach is also expensive and labor intensive. To support it, Banerjee, Duflo, and a colleague in 2003 founded the Abdul Latif Jameel Poverty Action Lab (J-PAL), a network of nearly 200 researchers performing randomized controlled experiments in economics. So far, researchers associated with J-PAL have performed 978 studies in 83 countries.

Duflo is only the second woman to win the economics Nobel—technically the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel—and the only woman among the 14 Nobel laureates this year. Researchers are grappling with the realization that academic environments aren’t always welcoming to women, Duflo noted at the press conference. “Showing that it is possible for a woman to succeed and to be recognized for success I hope is going to inspire many, many other women to continue working,” she said, “and many, many men to give them the respect that they deserve.”

*Correction, 15 October, 10:30 a.m.: This story has been updated to correct the amount of the monetary award that goes with the prize.