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Nobel Prize laureates Esther Duflo and Abhijit V. Banarjee suggest that in order to address pressing ...
2023-01-18 09:00:00

Well-Asked Questions
A Novel Approach to Economics

Photo by Bryce Vickmark/AFP/East News
Well-Asked Questions
Well-Asked Questions

If you would like to help someone, first learn as much as you can about them. Toss away the golden rules, tailor a solution to each individual. And most importantly: do not believe in self-evident truths, keep checking and inquiring. This is the advice of Esther Duflo and Abhijit V. Banerjee, Nobel Prize winners and scholars of contemporary poverty.

Read in 16 minutes

Both of them were still asleep when the phone rang. Their watches in Cambridge, Massachusetts showed it was only 5:00 a.m. It was October 2019. When forty-seven-year-old Esther Duflo, a scientist studying poverty and how to ameliorate its effects, finally answered the call, she may have momentarily thought that she was still dreaming. The voice on the other end of the line told her that she would be the second woman in history to receive the Nobel Prize in Economics. She responded by asking: “Myself and who else?”

Two other economists were awarded along with her. Her husband Abhijit V. Banerjee, and Michael Kremer—all three had spent years conducting landmark studies at Poverty Action Lab, a global research center for combating world poverty.

Right after Duflo discovered she was not only the second woman to win the prize, but also the youngest winner of the Nobel Prize for Economics, she handed the phone to her husband. When she had recovered from the shock, she followed the advice of the man who had phoned from Stockholm: she had a cup of tea and got dressed, because forty-five minutes later all three professors were to hold their first press conference. As in all subsequent interviews, they stated that they were accepting the distinction for all of the academic community that was trying to change how economics describes the world.

Duflo, Banerjee, and Kremer received the Nobel Prize for their detailed measurements of poverty since the start of the 21st century, and for their publications on the subject, including the book Poor Economics (2011). Soon after having received this highest of honors, in November 2019, the couple released their second popular science publication: Good Economics for Hard Times. In this book, Duflo and Banerjee show how their research methods help them access solutions to today’s pressing issues: migration, the crisis of democracy, the growth of populism, the domination of superpowers. Their research in many countries and in diverse social groups takes care to respect human dignity and restore subjectivity to people traditional economics reports reduce to numbers on a chart (and often to mere fractions).

Although they received their Nobel Prize for studies on poverty, their work has far broader consequences. Duflo and Banerjee remind readers that economics is a social science, and thus their task is to describe and try to solve human problems. The economist has to see more than numbers and charts—above all, they should see the individual, with their own motivations, making life decisions as a result of many factors.

Banerjee and Duflo’s findings complicate the world enormously. This is because they give the lie to a way of thinking that has stood behind every decision made at the summits of power since the 1990s. They have shown the heads of the large banks, the presidents of today’s superpowers, and the leaders of the world funds and aid organizations—all of whom favor one-size-fits-all solutions—that they are taking the wrong approach. They prove that in the social sciences, one must always take the individual situation into account. There are no universal principles for combating global problems. Thus, before we roll up our sleeves and get down to eliminating poverty, strengthening democracy, or fixing the economy, we must first take an honest look at the case in question and understand the realities in a given place and time.

Nonetheless, the duo have somewhat mollified this inconvenient truth, which would have required an incomparably larger amount of work. They suggest that the findings of behavioral economics (studying human behavior, among other things) could be applied to global development models. They have marked out paths for decision makers, and above all state governments to work out diversified solutions to precisely formulated problems. In doing so, they have thrown open the door to a politics of the future: a kind based on economic studies that help form responses to new, previously unknown challenges. According to Duflo and Banerjee, the world had been asking the wrong questions.

Details, Not Generalizations

Born in 1972 in the suburbs of Paris, Esther Duflo is the daughter of a mathematics professor and a pediatrician. She claims her childhood was fairly typical; she did not stand out much, perhaps only with better-than-average organizational skills. Her mother was active in charities, helping children who were victims of war. Duflo had an early sense of her privilege, of her wealth and education, what she ate and where she lived.

She took her PhD at the Massachusetts Institute of Technology in 1999. One of her professors was an outstanding Indian economist, her husband-to-be, eleven years her senior. Abhijit V. Banerjee had come to MIT from Harvard University, where he received his PhD. He had previously completed studies in Kolkata and Delhi, following in the footsteps of his economist parents.

In her PhD studies, Duflo focused on schools in Indonesia. Her field experiments confirmed the thesis that in developing countries improving education quality leads to higher earnings for students in the future. When asked about her method while receiving her Nobel in an official interview at the Royal Swedish Academy of Sciences, she said: 

I think it is very important to ask questions that can be answered. And that can be answered in as rigorous and scientific a way as possible. The question can be broader or it can be narrow, but it should be specific. There are questions you can ask through experiments that have vast implications, for example “Is private school better than public school?” That doesn’t seem to be a narrow question, but it is a pretty well defined question. And you can set up an experiment that compares the expense of children in a system that is mostly private school and the same in mostly public school, by creating an experiment where some villages have a private school voucher offering and some villages don’t. So that is not a narrow question, that is a broad question, but one you can set up an experiment for.

This response displays the scientist’s groundbreaking approach. You cannot respond to a question like “How can we beat poverty?” with an effectively-conducted scientific experiment. This is why responses thus far, owing to their generality, have been too far removed from the real experiences of poor people to yield any real solutions. For instance, the old claim that “it’s better to give a poor man a fishing rod than a fish” is quite false. And the reverse, that a fish is better than a fishing rod, is also untrue in some situations. Both the fishing rod and the fish can differ and work differently: one family might be helped by access to funds for farm fertilizer, another by a program to delouse school children, and a third by phone-in banking or microcredit. There are as many solutions as there are poor people. Yet to implement specific assistance programs, one first has to know the answers to some precisely formulated questions.

To understand how the Nobel-winning scholars think and work, let’s stick with schools. In one chapter of Poor Economics, Banerjee and Duflo explore the ties between education and poverty, showing various approaches to the issue. Their book is full of specific stories from research in villages, families, and households in a wide variety of countries, from India to Morocco and Brazil. It reads like reportage combined with practical sociological analysis, the economics narrative turning into a story about people who are looking for ways to improve their lives in a thousand different ways.

Equality Is Crucial

The scholars established that in the countries they studied, schooling was provided, generally free of charge. There was no shortage of institutions, and yet 14–50% of students stopped attending school—not because they had no way of getting there, nor because their impoverished parents had to force the children to work or did not consider education to be important. These are all stereotypes that are often attributed to the poor. Meanwhile, the research shows a different picture: low-quality education and a shortage of teachers. It is for these reasons that, for instance, in Pakistan as many as 80% of third-grade students are unable to read a text from the grade-one program, and in India one-third of fifth graders are unable to do the same. Children therefore stop attending school as the result of a rational decision—neither they nor their parents see the point in an education that yields no results.

The private school market bloomed on the ruins of public education. In developing countries, many parents pay hard-earned money to send their children to expensive institutions. Banerjee and Duflo analyzed state financing programs in Latin America, for instance, to see if paid education was indeed better. It turned out that their graduates did know more. At the same time, they showed that the teaching programs at private schools were tailored to the needs of the affluent, eliminating students who were poorer or had difficulties learning. Like any company, a private school needs top results to be competitive on the market. The existence of this sort of institution thus serves to buffer an ailing school system, ultimately harming both the children and the society.

The duo also noticed that poorer parents send their children to paid schools for only a few years, thinking that this will suffice to give them a future. They are convinced that financing education in later years would be less viable and would not make much of a difference. Here they make a mistake: every additional year at school, regardless of the stage of education, proportionally improves the student’s earnings and material status. In other words, every year of education pays off equally over the years to come.

The research presented in the book demonstrates that every semester of school learning improves the child’s professional (and life) prospects, but not only as a result of the abilities and knowledge gained at school—students are also included in health and nutrition programs. Duflo studied children in Kenya, for example. Those among them who attended school for two years, and thus received parasite medicine for a longer period of time, later earned significantly more than their peers who had no such opportunities. Duflo drew an unusual conclusion: if you want to give poor children a brighter future, dear politicians, remember to delouse them. This kind of precise suggestion is characteristic of the work of the French-American scholar.

On a macro scale these economists propose, first and foremost, a change in priorities: every government’s ambition should be not to produce an elite, but to give the best possible elementary education to all children, without exception. This is a postulate that could be carried out almost everywhere. Training good primary school teachers is neither difficult nor expensive (one example of the success of this initiative is the educational programs carried out in the USA). Young people’s education can also be supported by technology. Although nothing replaces a committed teacher, if they are in short supply some of their work can be done by a computer, or even better, using the internet.

Second, the duo has called for developing teaching programs to ensure children more freedom and allow them to learn at their own pace. Many grapple with prejudices or discrimination that impedes development, if, say, they have dark skin or come from a poor home or a lower caste. Duflo and Banerjee call for a global reorganization of schooling so that it truly serves all students in the education system—at least to a rudimentary degree—and not only those whose parents can afford a better school.

Everyone’s Got It Different

The duo approaches other aspects of life in poverty in a similar way—posing detailed questions and finding the answers. Their work involves taking apart the stereotypes that cause all poor people to be painted with the same brush. Among the popular falsehoods are, for example, the view that they do not know how to manage or save their money. Similarly, they also debunk overly positive convictions—that a poor person will take any job, even if it means traveling a thousand miles from their village. Or a different illusion: that the poor have special entrepreneurial talents and are good at pulling up their socks on their own, once any formal or tax obstacles are removed. Duflo and Banerjee break down these statements to their core elements. They put each of these claims to the test. When asked once about his wife’s greatest talents, Banerjee said she is able to juggle hundreds of balls at once, knowing which of them will fall, and then pick them up and toss them back into the game, except this time, differently. This is a good metaphor for what both economists do. Their studies are multiaspectual; sometimes their methods change in the course of their work, because the subjects of their experiments are living people, not abstract quantities. They always have to consider their living conditions, chance events, traditions, illnesses, the presence or lack of running water, or even if they receive an excess of social assistance—all these components are important if one wants to establish whether there truly is a poverty trap, which can imprison a person, or an entire country, for good. If so, are there ladders to help people out of these traps, and where should they be placed? 

One conviction that is strongly tied to poverty is that the poor are malnourished and often too weak to work effectively; that if they had the money they would spend it on better-quality food. This is mistaken. Duflo and Banerjee investigated this—the poor people they studied spent the extra money on tastier, not healthier food. Some of the disposable income went to small pleasures and stimulants, such as shampoo or cigarettes. They treated themselves to a bit of luxury, clearly this was important to them. Another stereotype when it comes to nutrition: there is a widespread belief that ever since the change to the free market in India in the 1990s, the inhabitants of the country earn more, eat more, and have gained weight. This is not true. Research confirms that wealth is increasing, but people are consuming fewer and fewer calories, in every income bracket. Nutritious food remains accessible even to the most impoverished. Thus, if the poor inhabitants of India are stuck in a poverty trap, it is not for insufficient food.

Something else is holding them back. This could be a lack of awareness that microelements ingested in childhood are key to later wellbeing. Or an ignorance of the fact that water iodized by inexpensive capsules available in rural pharmacies or handed out at wells can save the lives of mothers and newborns. One needs knowledge to make good decisions. The lack of information is where the ladder should be set up. Yet one ladder is not enough. Another factor Duflo and Banerjee highlight is boredom. Every person needs a bit of entertainment; it is a natural need, like eating or drinking. This is why some poor families choose a television on an installment plan over better food or health insurance. If they are unable to pay it off they end up in a debt spiral, lose their land, and slip into even deeper poverty. This is not because of their inability to economize or their thoughtlessness, as some might suppose—it is the outcome of complex social mechanisms.

The researchers have also made some interesting observations about healthcare. They investigated how to support malaria prevention in Africa and Asia and stop lethal diarrhea in children. They checked whether it was better to hand out free mosquito netting, fund its purchase, or simply ensure it was widely available on the free market. They checked why people did not want to use freely distributed medicine; why they didn’t come for check-ups, even if the clinic was nearby; why they went to the doctor with minor complaints, but not with more serious illnesses. They discovered some complex reasons for this, showing, for instance, that it was hard to spend money on medicine whose benefits would only come some years later, or difficult to decide alone if a child should be vaccinated. These decisions sometimes take a kind of determination, knowledge, and persistence that residents in places like the USA or EU, with health systems that make these decisions for them, do not even consider. The COVID pandemic has shown how everyone can take varied and sometimes inconsistent standpoints toward protecting their health when the decision is up to them. The poor in no way differ from the wealthy—there is usually something to justify their decisions.

Populist Generalizations

In Good Economics for Hard Times, Duflo and Banerjee examine international processes, such as migration and the fear of newcomers sometimes stoked by politicians. Such populist arguments are based on two assumptions. The first is that there is an “unprecedented rush” of migrants to wealthy countries. The second is that their arrival hurts locals economically—the newcomers take their jobs and cause earnings to fall. Neither of these statements have anything to do with reality. Studies have shown that in 2017 migrants made up 3% of the global population, approximately the same proportion as in 1960–90. The EU receives around 1.2 to 1.5 million immigrants annually (a small portion of the continent’s population), most of whom find legal work. Increases in migration, such as in 2015, are less marked after a few years. The market and society “absorb” the newcomers. And no, society does not grow poorer as a result. On the contrary, its members rise to better positions, as migrants generally take less desirable and lower paid work. In this way, they drive all of society forward, rather than holding it back.

Nor is it true that the poor wish to leave their homes to get rich in a better world. Studies show that most people have no desire to migrate, and generally do not. In terms of the needs of the global economy, we presently have a deficit of migrants.

Duflo and Banerjee also studied what the poor really want. Their findings suggest that the answer is a sense of dignity and bonds with others. This is why better earnings alone seldom motivate people to leave their home. What, then, generally motivates migration? Crises, military conflicts, the collapse of states and institutions, and an unpredictable future, in the broadest sense. What people need to feel fulfilled is thus far more complex than just money. Migration— whether internal, e.g., from a village to the big city, or to a foreign country—means breaking ties and potentially a lack of social support. In the precarious and shifting life of the poor, neighbors and relatives are the only insurance policy; they provide a sense of identity. The wealthier have the social care system, insurance, savings in the bank. The poor depend on loans from relatives and their care in times of illness. Moreover, every trip means possible failure, a fear of which is common to all, regardless of their financial status. Migration is also a psychological challenge—it requires strength and determination. This makes it an option for only a few. The vast majority choose what they know—even if this means poverty.

Here, the duo come up with an astonishing suggestion: states should not limit migration, they should actively encourage it, whether internal or international. The movement of people is among the best things for leveling economic differences; it is an antidote to the unequal distribution of resources and goods. According to the economists, people need to be shown the advantages of moving, they need encouragement and support, such as rent or insurance subsidies, or programs to assist integration within the new living environment.

Duflo and Banerjee come to very similar conclusions in studying international trade. It turns out that it brings much smaller profits and has much less of an impact on GDP than was previously believed. While goods are easy to send, people are not as mobile as was once thought in plans for international trade. The narrative persuading us that workers will go anywhere for better pay has led, on the one hand, to some economic misconceptions on a world scale, and on the other, to stigmatizing those who are reluctant to move for their job, wounding their sense of dignity. Meanwhile, this pair of economists has proven that there can be important reasons for staying at home.

A Human Focus

Focusing on people in economic research, whether poor or wealthy, can help everyone take a new look at the world. It can also help governments better run their societies and respond to real human needs. It provides a chance to increase respect for economists themselves, who, through a legacy of proud forecasts that ignore human complexity or are simply misdirected, have a level of authority only just higher than politicians. We trust weather reports more than economic prognoses. Duflo and Banerjee are disarmingly modest. They compare their work to a plumber who solves a problem by combining intuition and knowledge, guesswork and experience, making many attempts and experiencing a great many failures. When an error occurs, they suggest the following procedure: return to analyzing the facts, find the mistake, and move on. When asked what qualities an economics scholar should have, Duflo lists skepticism, mindfulness, a critical approach to the evidence, and sincerity when it comes to one’s own knowledge and ignorance. And above all, a resistance to finding quick solutions. Before you fix a pipe, you need to have a close look at the leaks and gaskets. And then think once more—and once again after that.


Translated from the Polish by Soren Gauger

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Paulina Wilk

Paulina Wilk

is Editor of the Culture & Society section, as well as a writer and journalist focusing on global development. Among others, she has published the non-fiction books “Lalki w ogniu” (Dolls on Fire: Stories from Modern India) and “Pojutrze. O miastach przyszłości (After Tomorrow: On Future Cities). She has also written a series of fairy-tales about a teddy bear called Kazimierz. She is the co-creator of the “Kultura nie boli” foundation, the bookshop, café and literary space Big Book Café, and the Big Book Festival.