MIT Prof. Esther Duflo spoke at the 15th Barcelona Economics Lecture on January 14, 2009, giving a talk titled "Fighting Poverty Effectively: Creating Experimentation in Development Economics”.
Prof. Duflo (PhD MIT, 1999) is Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at MIT, where she is co-director of the Abdul Latif Jameel Poverty Action Lab. She is recipient of a number of recent awards and honors, including the Elaine Bennet Prize for Research of the American Economic Association (2003). In 2005 Le Monde named her Best Young French Economist, in May 2008 she was cited as one of the top 100 public intellectuals in the world by Foreign Policy magazine, and in December 2008 she was listed by The Economist as one of the eight most promising young economists in the world.
Her talk marked the 15th Barcelona Economics Lecture, a series organized by the Barcelona GSE Research Network and sponsored by Banc Sabadell, a Board Member institution of the School. Enriqueta Aragonès (IAE and GSE), Director of the GSE Research Network, and Teresa Garcia-Milà (UPF and GSE), Board Member of Banc Sabadell, gave short introductions at the beginning of the event.
The Role of Innovation in Eradicating Poverty
Prof. Duflo’s talk focused on the importance of advancing field experiments as a methodology to discover causal relationships in economics. She makes a case for using scientific experiments to contribute to what she calls “a polarized discourse” in the effectiveness of foreign aid.
According to Prof. Duflo, social policy needs, and often lacks, imagination. “Researchers and policymakers are prisoners of the ambition to do too much, solve the entire problem at once”, she said during the lecture. As a possible solution, Prof. Duflo proposes that economists guide policy in a process of creative experimentation by trying new approaches that put theory to the test.
Prof. Duflo is a proponent of what she calls “modesty normative economics” in solving problems of poverty. The normative approach – contrary to the positive approach – uses value judgments and a consideration of what the economy “ought to” be like rather than its actual state. As examples of economic policy that uses a normative approach, Prof. Duflo cited Mohammed Yunus’ launching of microfinance initiatives.
The Importance of Evaluation
During the Barcelona Economics Lecture, Prof. Duflo stressed the absolute necessity for evaluation in field experiments, which is often skipped over or done unscientifically. “Ignorance pays,” she said – program supporters are able to feign success, and the overall effectiveness of the program is continuously overestimated. The end result, she says, is that nobody is fooled about the success of the program, but nobody learns.
However, evaluating field experiments poses the challenge of finding adequate comparison groups. To do this, Prof. Duflo often takes advantage of what she calls “natural experimentation", which exploits situations where, by chance, groups happen to be strictly comparable. Within this context, she uses randomization to test the effect of the treatment or program.
Testing the effectiveness of a project or policy in a field experiment allows scientists to test a theoretical prediction. “Field experiments have a subversive power that neither observational studies nor lab experiments possess,” said Prof. Duflo. “This is probably their main strength, and the main way in which they can contribute to the fight against poverty and to knowledge building.”
Fighting Poverty with Creative Experimentation
According to Prof. Duflo, “by focusing on creative experimentation, we are not abandoning the goal to reduce poverty significantly one day. On the contrary, experimenting with specific programs to fight the ills associated with poverty is a necessary first step.”
In fact, she suggests that microeconomic estimation may be the key to understanding better macroeconomics. “We have seen that growth regressions cannot go very far in uncovering the secret of growth. It may be more promising to start from micro-funded and micro-estimated models, and to use these as building blocks for a macro model, which can then be calibrated to a real economy. The better we understand the micro-relationship, the more useful the macro model will be.”
Concluding her talk at the 15th Barcelona Economics Lecture, Prof. Duflo said, “I would like to practice economics as a true human science: a science which is rigorous and impartial. A science of the human being, in all its imperfections and complexities. that is humble and condemned to error. Humane, finally; generous and committed.”