In this series of articles, INOMICS will highlight the accomplishments of particular economists who have contributed greatly to the field. Students often learn about the great figures in economics only briefly and in passing, but the content taught in economics courses comes from brilliant economists such as these.

For the first article in the series, in recognition of International Women's Day, we have decided to feature one of the most prominent contemporary female economists, Dr. Esther Duflo. She has become famous among economists for her studies on global poverty alleviation, and she has pioneered the practice of using randomized control trials in development economics. Her studies and experiments have studied health, education, microfinance, and more in the context of global poverty.

Dr. Duflo won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2019 alongside colleagues Abhijit Banerjee and Michael Kremer “for their experimental approach to alleviating global poverty”¹, becoming not only the second woman in history, but also the youngest person ever to win the Nobel Prize in economics.

The key word in that explanation is “experimental”. Her approach with using experiments to help us understand global poverty has paved the way for more effective policy design. With these experiments, economists have been able to learn more of what truly works to help alleviate poverty, rather than relying on theory. Indeed, the Nobel Prize’s original press release had this to say about Dr. Duflo and her colleagues: “In just two decades, their new experiment-based approach has transformed development economics, which is now a flourishing field of research”².

The difficulty with experiments in economics

Economists are similar to scientists in that we attempt to use empirical rigor while learning about the world around us. But, unfortunately, it is often extremely difficult or immoral to conduct experiments about economics. People must have the freedom to live their lives without having their economic situation in life dictated by a curious economist.

As an example illustrating why this is difficult, imagine if an economist was interested in the effects of early childhood education (such as preschool) on development, and designed an experiment where certain children were placed in preschool, while others were left at home and did not receive the same educational opportunities. When controlling for other factors, this would help the economist learn about the effectiveness of early childhood education, and could help us design better policies to aid families with accessing the right type of services for their children.

But what parent would willingly force a potentially huge disadvantage upon their child (being behind in early learning)? Making an experiment that studied real people and dictated this course of action would be immoral. Thus, experiments in economics are often very difficult to design or conduct, and can be overlooked as it’s often easier to rely on theory.

Dr. Esther Duflo’s contributions

Despite those typical challenges, Dr. Duflo won her Nobel Prize because she was able to design and implement experiments that teach us more about how poverty works, how people respond to it, and how it can be overcome. She helped pave the way for economists to be bolder with designing field experiments that both aid people and help advance our knowledge, while avoiding moral quandaries; many of these experiments involve providing an economic benefit to a group of people that otherwise wouldn’t have had it. To preserve experimental purity, often the choice of recipient for the intervention is randomly chosen.

To aid in systematically conducting such experiments, Dr. Duflo co-founded the Abdul Latif Jameel Poverty Action Lab (or J-PAL for short)  with Dr. Abhijit Banerjee and Dr. Sendhil Mullainathan. The Lab’s purpose is to break down the problem of global poverty into smaller, more manageable pieces that can be studied and used to build policy. It does so by conducting randomized control experiments with the global poor in various developing countries and studying the results, much like a natural scientist might do.

An example of a study conducted by J-PAL involved building rainwater cisterns to study how having additional resources reduced individuals’ motivations to conduct political clientelism. The experiment randomly chose communities to receive the cisterns, and studied the effect on the democratic process. You can read more about this particular study at J-PAL’s website. Experiments such as these allow economists to learn how to design more effective policies, in this case, how to avoid future clientelism in a developing economy’s democracy³.

Read More from Dr. Esther Duflo

Besides contributing to developmental economics with these experiments, Dr. Duflo has also published a number of books and contributed to a number of economics texts. One well-known book, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (published in 2011) is an excellent read for students of economics. It also exemplifies the reason why Dr. Duflo won her Nobel Prize.

The book raises questions about the behavior of the global poor, such as: Why do these people make decisions that seem wrong to many of us in developed countries (such as having so many children)? Why don’t they save more?

Then, the book explains how these behaviors are often rational from the perspective of someone who is living in poverty and dealing with challenges many of us are unaware of. For instance, children can be viewed as a vehicle for financial security, especially in areas where child mortality is higher and children are expected to care for their parents as they age. In some parts of the world, children – not a 401(k) – are the default retirement plan. This stands in stark contrast to many developed nations, where children are often viewed as a financial burden due to the cost of childcare.

The book additionally examines other questions and concepts (such as if nutritional poverty traps exist) that students of microeconomics may be familiar with. It’s an excellent read that we can heartily recommend.

Other books Dr. Duflo has written and contributed to include Good Economics for Hard Times, Elsevier’s Handbook of Field Experiments, Vol. 1 and Vol. 2, and several books in French including two volumes of Lutter contre la pauvrete, Le Développment Humain and La polique de l'autonomie. She has contributed to chapters in books such as the World Bank’s The Influence of Randomized Controlled Trials on Development Economics Research and on Development Policy, Aging and Death Under a Dollar a Day, Field Experiments in Development Economics, and more.

Dr. Duflo is currently the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at the Massachusetts Institute of Technology. She received her PhD in economics from MIT in 1999. She has also received a number of other awards, including a "MacArthur Foundation fellowship (2009), the John Bates Clark Medal from the American Economic Association (2010), and…the BBVA Foundation Frontiers of Knowledge Award for Development Cooperation”⁴ in 2009. To read more about Dr. Duflo, you can visit the National Women’s History Museum article about her, or read the 2019 Nobel Prize in economics press release.

References

1: Esther Duflo – Facts – 2019. NobelPrize.org. Nobel Prize Outreach AB 2023. Tue. 7 Mar 2023. <https://www.nobelprize.org/prizes/economic-sciences/2019/duflo/facts/>

2: Press release. NobelPrize.org. Nobel Prize Outreach AB 2023. Tue. 7 Mar 2023. <https://www.nobelprize.org/prizes/economic-sciences/2019/press-release/>

3: Harvesting rainfall: Experimental evidence from Cistern deployment in Northeast Brazil: The abdul latif jameel poverty action lab. The Abdul Latif Jameel Poverty Action Lab (J-PAL). (n.d.). Retrieved March 7, 2023, from https://www.povertyactionlab.org/evaluation/harvesting-rainfall-experimental-evidence-cistern-deployment-northeast-brazil

4: Dizikes, P. (2019, October 14). MIT economists Esther Duflo and Abhijit Banerjee win Nobel prize. MIT News | Massachusetts Institute of Technology. Retrieved March 7, 2023, from https://news.mit.edu/2019/esther-duflo-abhijit-banerjee-win-2019-nobel-prize-economics-1014

 

Header image attribution: Kris Krüg, CC BY-SA 2.0 <https://creativecommons.org/licenses/by-sa/2.0>, via Wikimedia Commons