Nobel Prize for Economics in 2019 - Banerjee, Duflo & Kremer

Abhijit Banerjee – Indian-Origin Economist wins Nobel Prize in Economics for his work in Global Poverty. Esther Duflo, wife of Abhijit is the second woman to win the prize and the youngest winner of the prize. In 2015, Banerjee married his co-researcher, MIT professor Esther Duflo; they have two children. Banerjee was a joint supervisor of Duflo's PhD in economics at MIT in 1999.Duflo is also a Professor of Poverty Alleviation and Development Economics at MIT. Michael Robert Kremer is an American development economist who is the Gates Professor of Developing Societies at Harvard University.

The Nobel committee commented:

"Banerjee, Duflo and their co-authors concluded that students appeared to learn nothing from additional days at school. Neither did spending on textbooks seem to boost learning, even though the schools in Kenya lacked many essential inputs. Moreover, in the Indian context Banerjee and Duflo intended to study, many children appeared to learn little: in results from field tests in the city of Vadodara fewer than one in five third-grade students could correctly answer first-grade curriculum math test questions.

"In response to such findings, Banerjee, Duflo and co-authors argued that efforts to get more children into school must be complemented by reforms to improve school quality.”

Modi:

Excellent meeting with Nobel Laureate Abhijit Banerjee. His passion towards human empowerment is clearly visible. We had a healthy and extensive interaction on various subjects. India is proud of his accomplishments. Wishing him the very best for his future endeavours.

Abhijit Banerjee:

I was privileged to meet the PM. The PM gave me quite a lot of time and told me about his way of thinking about India, which was quite unique. We have the policies and what he was thinking about it. He talked about governance and the mistrust people share on the ground, which creates an elite structure of control.

In that aspect, he also explained how he is trying to reform the bureaucracy to make it more responsive. To make people understand the reality on the ground. I think it is important for India to have a bureaucracy that lives on the ground and gets its stimulus from it. Without that we get an unresponsive government.

Nobel Prize in Economics 2019 awarded to Abhijit Banerjee, Esther Duflo and Michael Kremer for pioneering the use of Randomised Control Trials (RCTs) in development economics.

RCTs method is a new concept moving from theoretical research to Empirical Research – Based on Experiment and Observation rather than theory. RCTs in short means Empirical based on Experience or Experiment.  Relying on or derived from observation or experiment rather than theory is all RCTs means – Empirical results prove the theory.

RCTs  are well known in medical trials – RCTs concept goes back to the statistician Ronald Fisher back in the 1930s.

RCTs use the following in sight:

You select two groups that are similar and then randomly select one to receive the treatment (a drug or a policy) being tested and then compare the outcome of this group (called the treatment group).

If the difference is statistically significant, then that is attributed to the treatment.

Using this method in economics has altered our view about what policies work and what do not.

As much as medicine should not be prescribed without diagnosis, policies should not be implemented without evidence and to the extent RCTs have brought the spotlight on this, more power to them on this count.

This method of RCTs now has become one of the main tools used in empirical work in development economics and in related fields. It has also led to a paradigm shift in development policy evaluation — the World Bank, and many governments and large NGOs now insist on randomised control methods wherever feasible.

RCTs, however, can mostly be applied to study problems at the micro-level where the implementation of an individual programme can be done in a randomised way that allows for a statistically satisfactory evaluation of the programme’s impact. 

RCTs are not feasible in respect of large-scale macro-level questions.

This immediately points to both the strength and weaknesses of RCTs: when feasible, they are a great tool to use, but for many questions of great interest in development economics such as broad macro-level issues or the more long-run aspects of development and institutional change, they are not feasible.

Tail- Piece:

J-PAL was founded in 2003 as the "Poverty Action Lab" by professors Abhijit Banerjee, Esther Duflo and Sendhil Mullainathan. J-PAL was established to support randomized evaluations measuring interventions against poverty on topics ranging from agriculture and health to governance and education. The Lab was renamed in honor of Sheikh Abdul Latif Jameel when his son, MIT alumnus Mohammed Abdul Latif Jameel, supported it with three major endowments in 2005. He further endowed its activities in 2009.

Nobel Laureate Abhijit Banerjee Indian born American said:He disowned highly politicised Rahul Much hyped Nyuntam Aay Yojana (abbr. Nyay) during Lokh Sabha 2019 election by complaining that the scheme was ill designed by Rahul Congress. Perhaps his Random Control Trials (RCTs) could not be tested due to lack of time or his hurry to earn instant popularity in India. Anyhow his getting Nobel prize is on a different research work.

It is great and unique that he shared the award with his wife Esther Duflo and another economics professor Michael Kremer.

As Indians we are proud and hail all three Nobel laureates.

Banerjee said there was a need to bring down the govt’s stake in PSBs to less than 50%. The Nobel laureate further said Ayushman Bharat scheme serves a useful purpose in ensuring access to healthcare for the poor. Nobel Laureate Abhijit Banerjee clarified that he had  suggested only ₹ 2500 for every poor family under Rahul'S NYAY Scheme, but the enhanced amount of ₹ 6000  pm for the poor was Congress’ decision.

The NAYAY was the total failure for Congress, as it had lost Lok Sabha election 2019.