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2019-10-15

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Indian Economy
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Banerjee and team applied the rigour of scientific experimentation to social sciences

Abhijit Banerjee’s Nobel Prize for Economics, along with Esther Duflo of Massachusetts Institute of Technology (MIT) and Michael Kremer of Harvard University, has been a long time coming. As a matter of fact, his work was among the few shortlisted for this recognition some years ago.

The trio’s journey towards the Nobel began in the 1990s, with Kremer’s (he was then at MIT) field experiment in rural Kenya, which concluded that supplying textbooks to schools did not improve students’ learning outcomes. While this conclusion itself was an interesting one, it is the process by which Kremer arrived at the result—with the use of randomized control trials (RCTs)—that marked the beginning of the evolution of what some describe as a new approach to development economics.

RCTs are standard experimental tools in the field of science—say in medicine—but their effective application to the field of development economics was revolutionary. RCTs are controlled experiments—where two large and arguably similar groups are considered, and only one is subject to a specific intervention. The outcomes of each group are then compared with each other, and this reveals whether the intervention was effective or not.

In applying RCTs in the field of social science, a fine balance has to be maintained. If one is too fastidious about following an exacting scientific method, only a handful of social situations will lend themselves to suitable study.

On the other hand, with the intent to accommodate the shades of grey that are an inevitable aspect of social science, one may tend to relax scientific rigour too much. This will call into question the veracity and credibility of the study’s conclusions. The beauty of the work done by Banerjee and team over the last many years lies in dealing with uncertainty to perfect this balance, and effectively applying the rigour of scientific experimentation to the social sciences to develop deep insights into this century’s “wicked problem" of poverty.

Getting this balance right has enabled RCTs to be applied on a global scale to study the efficacy of attempted interventions. Till date, nearly 1,000 RCT evaluations have been completed in 83 countries, studying various dimensions of poverty, including microfinance, access to credit, behaviour, healthcare, immunization programmes, and gender inequality.

However, this pioneering work has not been devoid of criticism in the academic world. Scholars like Angus Deaton at Princeton University argue that any dilution of the scientific method for the field of social science rendered the conclusions questionable. Others question whether this approach to efficacy testing of interventions is actually economics.

Much of the work of MIT’s Jameel Poverty Alleviation Lab (J-PAL), co-founded by Banerjee and Duflo, has been conducted in India. J-PAL’s South Asia operations have been active in India since 2007 and its 150 researchers and 1,000 field surveyors share some of the credit for Banerjee and team’s contributions to alleviating poverty in the world.

This overdue recognition for a food-loving, soft-spoken son of economist parents is no “random" event. It will no doubt breathe some cheer into his life and to MIT, both of which have faced some headwinds in recent times.

Kapil Viswanathan is vice chairman of Krea and president of Institute for Financial Management and Research.

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