Nobel Prize in Economics 2019

The news of this year’s Nobel laureate(s) in Economic Sciences was just an hour ago announced to be the economists Abhijit Banerjee, Esther Duflo and Michael Kremer for their work to alleviate global poverty, the official announcement said.

Hopefully, this will bring development economics back on the radar of mainstream economics and make the field earn greater recognition. Beside the many actual and continuing development challenges faced by many countries around the world today, the empirical revolution observed within economics in recent decades has partly also contributed to the steady re-emergence and relevance of development economics.

Prior to the announcement, last week I just happened to be reading a paper of which Abhijit Banerjee is a co-author: “Targeting the Poor: Evidence from a Field Experiment in Indonesia” by Alatas, V., Banerjee, A., Hanna, R., Olken A., Benjamin and Tobias, J. (2012). I read this paper in support of my current daily work, which is designing and analyzing surveys used for carrying out field data collection on local economic development in rural Indonesia and East Timor. From my own policy practice and experience so far, efficiently targeting the appropriate people or communities for policy interventions is one of a daunting task. How do you identify and choose them? And by what methods and other means? The trio Abhijit Banerjee, Esther Duflo and Michael Kremer are all in particular well-known for their application of randomized controlled trials (RCTs), among other experimental methods, for investigating what interventions work or not in development.

There are two major take-off from the paper for my own work: 1) survey quality and 2) theory of change matters a lot. A considerably amount of funding must be spent on survey quality in order to obtain the most robust outcomes of interventions. Moreover, if you start with a wrong theory of change that is not reflected in the actual conditions of your targets, your outcomes will lack reliability and validity. For instance, in the process of randomizing within a sample of 640 Indonesian villages, the authors found out that elite capture of social programs did not pose a huge problem as their theory of change had initially foreseen. In other words, the social context in which experiments take place matter for your theory of change, and this was adjusted accordingly by the authors. Overall, despite that not all dimensions of the paper is directly applicable to my work, it nevertheless offers important insights into viable experimental ways for identifying the “right people” for social programs.

Working on development issues in Indonesia (and East Timor) on a daily basis has required me to keep myself updated with relevant literature, especially in economics and political science. Both Abhijit Banerjee and Benjamin Olken have been prominent in economics research that have used Indonesia as a case study. I first came across Benjamin Olken’s work when I was a student, particularly the paper: “Direct Democracy and Local Public Goods: Evidence from a Field Experiment in Indonesia” (2010). Their work has continued to inspire me ever since, being two of the rare economists out there who willingly and respectfully combine economics and political science together through rigorous empiricism. I humbly aspire to be able to do the same in the future.

Today’s news gives an inspirational boost to all development policy practitioners around the world who are working on the ground, including myself. From being involved in field data collection activities and learning how to work more closely with local field staff, I especially find the following observations made by Michael Kremer (In “Money talks: A Nobel Endeavor” podcast episode by The Economist recorded on 15 October 2019) quite relatable:

“(Until the 1990s) Most economic analysis of developing countries had been based on the approach of using and analyzing data sets often collected by other people. One of the reasons that has made field experiments now so powerful (in development economics) is that it involves researchers more directly on the ground with teachers, farmers, non-profit organizations and developing country governments as they all are trying to take on the challenges that they are facing.”

Furthermore, I can’t wait to dig into “Good Economics for Hard Times” (2019) by Abhijit Banerjee and Esther Duflo, a book which I had pre-ordered long before the authors were announced as this year’s Nobel laureates in Economic Sciences. Esther Duflo is the second female economist to earn the prize, only after Elinor Ostrom from 2009. I’m truly excited over these trends, in spite of the many shortfalls that persist within the economics discipline till this day. Overall, what cannot make me more excited about economics these days? “Positive thinking” might not solve my problems in the end, but such spirit certainly helps me to feel more alive day by day in various life aspects. To borrow a motto of Esther Duflo from an essay published by The New Yorker in 2010:

“One of my great assets of being in this business, or maybe I’ve developed it over time, is I don’t have many opinions to start with,” she told me. “I have one opinion—one should evaluate things—which is strongly held. I’m never unhappy with the results. I haven’t yet seen a result I didn’t like.”

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