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Why Abhijeet Banerjee Got Nobel: Understanding His Experimental Approach To Alleviating Global Poverty

Banerjee, Duflo and Kremer have eminently succeeded in drawing the attention of the people around the world concerned about poverty and deprivation and forcing them to rethink, which has been vindicated by this year’s Nobel in economics.

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Abhijit V Banerjee, Esther Duflo and Michael Kremer have been awarded the Nobel in economics for their ‘experimental approach to alleviating global poverty’. Rethinking poverty and the ways to end it - this sub-title of the 2011 book Poor Economics, written by Banerjee and Duflo, aptly sums up the research agenda that the two outstanding scholars in economics, along with others, have been pursuing over the past two decades now. The two are clearly much farther off the image of typical ivory tower economics professors who live happily ever after in the abstract world of economic models. 

What is this ‘experimental approach’ and how does it differ from the earlier approaches to poverty alleviation? If we go back in time, development economics in its earlier phase was almost synonymous with the economics of growth as it was believed that a growing economy would eventually solve the problem of widespread poverty. Therefore the emphasis of the planners and policy makers was on raising the rates of saving and investment that were substantially lower in the 1950s and 60s than what we see today. By the time we reached the 1970s it was clear that it would take years to wipe out poverty from India unless we shift our policy focus to a direct attack on poverty. The concern got reflected in the growing literature on the measurement of poverty. The height of sophistication in thinking about poverty measurement in the 1970s, however, was not matched by a similar development in our understanding of why the poor remain poor. Inquiries into the causal aspect of perpetuation of poverty remained tentative as it was difficult to establish the propositions on firm empirical ground for the lack of hard data. As evidence-based policy making still remained out of reach, approaches to poverty alleviation continued to be ad-hoc, largely based on casual observation and intuition. As a result, official anti-poverty programmes showed mixed results, if not ended in spectacular failures. One may recall that one of the most ambitious poverty alleviation programmes in India was Integrated Rural Development Programme (IRDP) introduced during the Sixth Five-year Plan (1980–85), which aimed at creating productive assets for the poor. But the potential of the poor to make use of the assets productively was grossly overestimated and the programme failed to bring about the desired results. To say that, it was due to the ‘problems at the implementation stage’ would be wrong. It was rather due to the design itself which ignored the micro-motives of people who were targeted.

The experimental approach starts questioning this kind of top down poverty alleviation schemes which are usually insensitive to what people really want. The approach promoted by Banerjee and Duflo, which relies heavily on randomized control trials (RCT), helps us understand the cause-effect relation in a way that can directly inform policy-making to achieve better outcomes. As in medical trials, the impact of an intervention is isolated by randomly assigning subjects to treatments and control groups. By comparing the outcomes of the experiment on the two otherwise comparable groups, the difference in the outcome can be attributed to the intervention. 

They are clearly allergic to grand generalizations that the earlier generation of development economists indulged themselves in. Instead they get to the ground and through systematic observations and experiments to make us understand how poor people live and cope with adversities, how they respond to various interventions. The huge number of scholars associated with Banerjee and Duflo and their Abdul Latif Jameel Poverty Action Lab at MIT have built up a massive repository of knowledge which the policy makers around the world can draw on. We are now in a better position to understand what is likely to work on ground. Questions ranging from what kind of intervention would solve the problem of school dropouts to whether the unqualified medical practitioners (i.e. quacks) should be trained with the aim of reducing possible harm they unknowingly inflict on users of their service. Banerjee and Duflo take away our attention from the superficial critique and commonplace diagnosis of the failure of anti-poverty programmes, usually ran in terms of ‘bad implementation’, ‘corrupt officials’ and so on. Their findings do not merely stop at pointing out the reasons for failure, with rigorous methodological approach and appropriate tools and techniques they show what might work. This positive message in concrete terms has made their approach substantially different from the earlier ones and more attractive to the international development community. 

Criticisms can be, and have in fact been, made against their approach’s overwhelming reliance on RCT results for evaluating programmes and policies.  The approach is rather ‘too micro’ and therefore cannot deal with the macroeconomic policy failures that might push back any anti-poverty programmes, the critics would say. Political economy scholars would further question the assumption – which is implicit in the experimental approach – that anti-poverty programmes are well-intentioned but fail because of the lack of necessary understanding of the behavioural responses of the agents involved. The debate would surely continue as it is an integral part of the process of knowledge production in any branch of knowledge. Admittedly, Banerjee, Duflo and Kremer have eminently succeeded in drawing the attention of the people around the world concerned about poverty and deprivation and forcing them to rethink, which has been vindicated by this year’s Nobel in economics.

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Achin Chakraborty

Achin Chakraborty is a Professor of Economics and the Director of the Institute of Development Studies Kolkata (IDSK) in India, specialising in welfare economics and development economics. Chakraborty received his Ph.D. in Economics from the University of California at Riverside, USA.

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