The Nobel Prize of Economics awarded to Abhijit Banerjee, Esther Duflo and Michael Kremer celebrates a revolution in economics. It is a well-deserved distinction of a new approach to economic analysis that values rigorous evidence as a necessary basis for the formulation and implementation of impactful public policies.
These award-winning researchers innovated in the use of experimental methods to test economic policies. But their greatest contribution is to remind us all that the economic science needs to be close to people to make a difference in the world.
Since the creation of the Poverty Action Lab at MIT in the 1990s, the work of the three Nobel-winning economists focused mainly on the fight against poverty in Africa and in the Indian subcontinent. But the influence of this line of research is not limited to the critical impact it had on the way poverty is nowadays tackled in developing countries. It is true that international institutions such as the World Bank, cooperation agencies (USAID, DFID, Nordic cooperation) and the major international NGOs work today side by side with academics to test the impact of their anti-poverty policies before replicating them on a larger scale. However, this school of thought has today expanded to the impact evaluation of public policies addressing many other goals in all regions of the world – including the most developed countries – such as education and health policies, promotion of jobs and mobilization for political participation.
In Portugal, since 2011, the NOVAFRICA center, created at the Nova School of Business and Economics, is integrated in the school of thought founded by this year’s Nobel laureates, which advocates the collection of data through close contact with the beneficiary populations to experimentally test the impact of development policies – because public policies often have unexpected effects.
For example, in the context of a study we are doing on irregular migration from West Africa to Europe, we have learned that informing people that one in three people die on their trip to Europe does not reduce, but instead increases their will to emigrate! The reason is simple, but it would not be clear without this kind of fieldwork: the initial expectation of the potential migrants was that one in two migrants would die when trying to emigrate – and yet they think this risky emigration is worthwhile given the extreme poverty they face in their daily lives.
In another work, in northern Mozambique, where terrorist attacks have been intensifying at the same time that the exploitation of valuable natural resources has started, we have learned that an Islamist anti-radicalization training initiative promoted by local mosques is more effective at reducing violence than training aimed to improve employment and integration in the job market. It is not enough to improve people’s lives as a mean to combat extremist discourses, it is necessary to de-radicalize.
Also in Mozambique, with the goal of reducing hunger in the context of natural disasters (such as floods that happen every year in that country), we learned that the mobile phone, and pretty much every African has one nowadays, can play a very important role. In particular, the possibility of sending remittances remotely via mobile phone (mobile money services), allows emigration to richer regions, from where it is possible to support the family back home and thus ensure that they will be free from hunger, and also can afford better access to healthcare and education.
Demographic growth is explosive in Africa and the creation of jobs is a key priority. In a context where the private sector is dominated by microenterprises, we have learned that interventions that will inspire entrepreneurs to grow are especially effective at improving business performance. Surprisingly, the barriers to business expansion do not seem to be so much the access to financial resources, or to management skills trainings, but instead the lack of ambition and confidence in the chance of success – a lesson learned for designing effective business growing policies and to create jobs within this context.
In Guinea-Bissau, we observed that community health agents, that are vital for reducing child mortality, perform best when encouraged by social recognition in their communities. It should be noted that the strategy we used to convince people to use modern medical services is to work closely with traditional healers. In this way, the trust that people have in their traditional religious leaders is shifted to community health agents providing modern healthcare.
Finally, in Angola, we have learned that using technology, namely tablets with modern educational software, is a powerful tool for teachers. Teachers in this context are often poorly educated, but in this way they can significantly improve students’ motivation to attend school and participate in teaching activities, while also somewhat improving their academic performance.
In short, the 2019 Nobel Prize for Economics has helped to demonstrate that economic science is not just about (not) predicting the functioning of markets – it is a science that can and should be at the service of people and that can actually contribute to an efficient allocation of scarce resources to build a better world. That this translates into motivation for all of us economists to continue working towards this goal.