Poor Economics: Fighting Global Poverty
Abhijit V. Banerjee in conversation with Sreenivasan Jain
Economics has often been called the ‘dismal science’. There are a lot of people who are sceptical about whether Economics can solve the big problems that confront humanity today; chief among them being poverty. The work of Abhijit V. Banerjee and his partners has shown that these sceptics may not be correct. The core of their work has centred around small, data-driven interventions which have the potential to solve complex problems around the world. In conversation with Sreenivasan Jain, Banerjee shared some important achievements of his organisation J-PAL’s journey.
Assumptions are an essential part of economic modelling. However, Banerjee said that these assumptions are often “ideologically loaded constructions which bury the premises of the world in the model”. Thus, facts crucial to the models’ performance can simply be assumed not to exist. Scholars say that a model based on unsound assumptions cannot be used for policy design. Banerjee and his associates have proposed an alternative: Randomised Control Trials (RCTs), which can test the impact of different policy proposals without needing to know the model, and thus the assumptions behind them.
“The biggest problems often have simple solutions,” he said, and that is exactly what RCTs conducted by J-PAL attempted to highlight. Banerjee exemplified this by sharing an anecdote about Malaria prevention. He said that Malaria was the largest killer of children in Africa. “For many years, it was known that if you have children sleep under insecticide treated bed nets, they don’t die of Malaria,” Banerjee said. RCTs conducted in Africa showed that subsidising bed nets or giving them for free could help increase the use of bed nets. This went against the conventional wisdom of subsidies being inherently bad. However, this idea was put into practice, and as a result, “5 million children are now not dying of Malaria worldwide,” Banerjee said.
Moderator Jain pointed out to the belief that “the quality of education is related to the amount that the government spends on it”. Banerjee said that this was not necessarily true, giving the example of interventions designed to improve students’ educational outcomes. One of these was to “teach children what they need to learn, not the syllabus”. This meant giving time and attention to areas that pupils were weak in, instead of blindly following the course. This intervention was almost free of cost, Banerjee said, but it led to “a drastic improvement in reading and math scores”.
Data not only validates ideas; it can also serve to disprove them. Banerjee said that some dangerous ideas about policy have managed to exist for a long time because there was “no empirical research on them”. One of these, Banerjee said, was that “freebies given to poor people make them lazy.” Because of this “dogma,” governments were reluctant to distribute free benefits to target groups. Research done by J-PAL has shown that giving out an asset for free to the poor “can actually encourage entrepreneurship”, thus disproving this idea.
People often believe that policy design has to battle the lack of political will to see implementation. On this, Banerjee said, “the idea that all politicians are equally bad” had to be refuted. Giving the example of J-PAL’s work with state institutes like the police, he said that governmental agencies were also open to change. “We are too inclined to put labels on governments,” he said, ending his session with a refreshing sense of optimism about the politics in policy.
