This year’s Nobel Prize for Economics

The Nobel Prize is not without contention, but it is prestigious and indicates what the international community thinks is worth praising and emulating. It is in this context of signifying recognition to a specific way of thinking about the world that this year’s decision to award the Nobel Prize for Economics also needs to be reconsidered.

An Indian economist (Abhijit Banerjee), his wife (Esther Duflo), and their colleague (Michael Kremer) were awarded a Nobel Prize in Economics this year for their use of experimental approach to alleviate global poverty. Their experimental approach has been praised for revolutionising ways to contend with poverty using Randomised Control Trials (RCTs), an approach inspired by studies in medicine.

RCT experiments aim to assess the impact of specific interventions using “experimental” and “control” groups. RCTs are used to measure the impact of providing a specific intervention (more teachers or pre-natal services) to a randomly selected experimental group (students or young mothers) in terms of producing desired outcomes (better grades or lower post-natal mortality rates). As experimental groups (those selected for a specific intervention), and the control group (which was not targeted by the intervention) are assumed to be otherwise similar, the difference in outcomes produced is thus attributed to that specific intervention.

Instead of presuming that specific interventions will automatically produce the desired results, this year’s Nobel laureates for Economics have worked to empirically identify which development interventions offer the best results to help alleviate poverty. This experimental approach has been used to argue about the efficacy of placing two schoolteachers in the classroom rather than one, monitoring teachers’ attendance, providing incentive pay for school performance to help improve educational outcomes, and an array of other interventions.

The RCT approach has now become very influential amongst international donors, governments, and NGOs, which increasingly rely on RCT results to tweak their poverty alleviation and development programmes.

While this evidence-based approach to addressing development challenges may seem like an effective and objective way to address poverty, a closer look at the use of this method, and what it entails, has caused understandable concern.

The RCT approach identifies a control group and an experimental group, which are meant to be similar in all ways, except for the intervention being introduced to them. However, it is next to impossible to achieve truly random sampling in human communities, or to control all other factors which may or may not impact outcomes in real life. Moreover, the implicit premise of RCTs is that the differences their studies find between experimental and control groups can be used to identify singular interventions, which can then be applied to any other location to achieve similar results.

Even more problematic is the RCT’s apparent shift from thinking of development as a structural problem, involving issues of power and control over assets, towards more convenient forms of dealing with problems of deprivation.

RCTs largely aim to tinker with an existing menu of technical interventions while side-stepping questions related to the role of global economic institutions, terms of trade, and elite-led economic growth models, which both poor and rich countries alike remain reluctant to let go of. Rather than challenging the cuts to public schools due to fiscal austerity policies, the focus of RCTs, for instance, is on technical factors such as teacher absenteeism, student-teacher ratios, the impact of providing school meals, or even how deworming helps improve learning outcomes.

Perhaps, it is this non-confrontational stance towards the prevailing political and financial order which explains why the RCT approach is so appealing to international donors and the local elite within the so-called “developing” world. Yet, despite the accolades being heaped onto small technical fixes, their ability to alter the status quo of glaring inequalities resulting from systemic global crises remain questionable.

Published in The Express Tribune, December 13^th, 2019.

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