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Commentary: This year’s Nobel Prize in Economics honors research that matters

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Poverty affects hundreds of millions of people around the globe despite centuries of efforts to alleviate it by myriad individuals, organizations, and programs. A primary issue is the complexity of the problem.

A trio of Americans helped to implement and demonstrate a novel approach and have received this year’s Nobel Prize in Economics (or, more formally, The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) for “their experimental approach to alleviating global poverty.”

The recipients are Abhijit Banerjee and Esther Duflo, both professors at the Massachusetts Institute of Technology, and Michael Kremer of Harvard University.

Every year, the Royal Swedish Academy of Sciences awards the prize in recognition of ideas and research that increase our understanding of important issues in economics and related areas.

This year, the Academy describes the trio’s works as involving dividing the issue of poverty into smaller, more manageable questions such as the most effective interventions for improving educational outcomes or child health.

These more precise questions may be answered through carefully designed experiments among the people who are most affected. By answering these questions, poverty can potentially be reduced over time.

Michael Kremer began using field experiments to test ways to improve school outcomes in Kenya in the mid-1990s. Drs. Banerjee and Duflo, often working with Dr. Kremer, soon performed similar studies of poverty-related problems in other countries.

By defining actions with the potential to improve outcomes and then testing them, a new approach to development economics was born. Instead of merely making assumptions about ways to enhance lives and reduce poverty and setting policy accordingly, the idea is to get in the field and test them.

Drs. Banerjee and Duflo founded the Abdul Latif Jameel Poverty Action Lab (J-PAL), a global research center “working to reduce poverty by ensuring that policy is informed by scientific evidence.”

Now, 181 professors at universities around the world are affiliated with J-PAL (including Dr. Kremer), with 978 ongoing and completed randomized evaluations in 83 countries aimed at answering critical questions about poverty.

In just two decades, the findings from Drs. Kremer, Banerjee, and Duflo and others have led to notable advances.

One of the most effective ways to reduce poverty is to improve basic health and living conditions, education, and other drivers of low income.

To break down the complex problem of poverty into smaller, answerable questions is beautiful in its simplicity. There is considerable research suggesting that we must ultimately tackle the issues surrounding poverty in a unified manner because of the dynamic ways they simultaneously interact.

Nonetheless, the answers must be based at their core on programs that actually work.

These three scholars have led the way.

M. Ray Perryman, Ph.D., is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

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