Nobel in Africa takes stock of development economics

Two years ago, the first-ever Nobel symposium outside of Scandinavia was hosted at the Stellenbosch Institute for Advanced Study (STIAS), a feat that was repeated last year and again in the past week.

This time around, the star attractions were Nobel laureates Abhijit Banerjee and Esther Duflo, who – along with Michael Kremer – were recognised by the Royal Swedish Academy of Sciences in 2019 for their “experimental approach to alleviating global poverty”.

They were joined in the South African university town by leading academics from around Africa and the rest of the world to review progress in the approach which has “completely transformed” development economics over the past 20 years.

Scientific evidence

Microdevelopment research involves dividing the big issue of global poverty into smaller, more manageable questions – for example, the most effective interventions for improving educational outcomes or child health.

Answers to these more precise questions are then pursued via carefully designed field experiments – often in the form of randomised impact evaluations – among the people who are most affected.

Randomised impact evaluations are a powerful tool used to measure the true effect of policies. Similar to the methodology of randomised control trials, two groups are created – a treatment group, which receives the programme or intervention being evaluated, and a control group, which does not receive it and, therefore, acts as a baseline for comparison.

Many of the participants at this week’s Nobel in Africa symposium form part of a network of more than 900 researchers at universities around the world linked to a global research centre co-founded by Banerjee and Duflo in 2003 – the Abdul Latif Jameel Poverty Action Lab, or J-PAL.

Based at the Massachusetts Institute of Technology (MIT), it strives to ensure that “policy is informed by scientific evidence”.

‘Poor economics’

Banerjee and Duflo used their Chancellor’s Lecture, hosted by Stellenbosch University (SU) as part of the Nobel in Africa programme, to look back on their seminal 2011 book, Poor Economics: A radical rethinking of the way to fight global poverty.

They said both the discipline of economics and the world at large have changed drastically since the book was published in 2011, and conceded that, although they got some things right, they got other things wrong and completely missed certain important aspects.

Banerjee said there has been an exponential growth in experiments using the randomised impact evaluation method to test the effectiveness of socio-economic interventions globally, and 600 million lives have been touched by research linked emanating from J-PAL.

The number of people living in extreme poverty has declined steadily since 1990, but that progress has since been halted by COVID-19, a global debt crisis, wars in various parts of the world, and climate change.

Education

Looking at one of the topics they covered in their book, education, Banerjee said that not much has changed since they concluded in Poor Economics that “the difficulty is not to get children into school but to teach them something while they are there”.

The core problem seems to be that teachers teach a curriculum that is not adapted to most of the children present. Schools do not seem to recognise or teach practical skills.

Duflo looked at social protection measures pursued with cash transfers, which can be either conditional or unconditional. These have increased in the past 15 years.

She described universal basic income (UBI) grants as the “poster child” of these types of programmes, and said it has given rise to “the question of whether cash transfers would make people lazy”.

She said “the myth of the lazy beneficiary” is found in “standard economic theory, which tells us that people will stop working or work less when they get this kind of income because they can rest a little”.

However, randomised control trials have shown this not to be the case.

“We don’t see any difference in the labour supply of households that got or didn’t get conditional cash transfers. And, in some contexts, among the poorest of the poor, you actually get the opposite effect.”

In this regard, she highlighted two studies showing “we got it backwards – people actually want to work”. In Bangladesh and in Uganda, low-income subjects given a choice between a certain amount of cash and a lesser amount plus some paid work, chose the latter option.

Work was also shown to have health benefits, with the general and mental health of those who worked being better than those in the control group. An interesting finding from a study in Ghana was that “having money increases the ability to focus”.

There was also a large multiplier effect with cash transfers. In Kenya, a UBI experiment found that an increase of US$1 in household spending in targeted villages increases spending by US$2.5 in nearby villages.

Women and work

Gender was an aspect that Banerjee and Duflo felt they did not cover sufficiently in Poor Economics.

Duflo pointed out that, in India, an estimated 100 million women would like to work but cannot because there is a clash between traditional female roles and the organisation of the workplace.

In many societies, the general perception is that a woman’s place is in the household. Efforts to change the nature of work to better suit women were most likely to succeed if women were, themselves, in charge in the workplace and in trade unions.

Climate change

It was “a bit embarrassing” that they did not cover the environment at all in Poor Economics, Banerjee and Duflo said.

Climate change has increased in prominence the past decade. The 10% who emit the most greenhouse gases are responsible for 50% of those emissions, and they mostly live in rich countries.

Duflo said the argument that China and India are to blame because they are now responsible for most of the damaging emissions is not valid because they produce products for the rich West.

She also finds it worrying that the World Bank seems to be moving in the direction of giving attention to climate change but forgetting about poverty.

“There’s no trade-off between eradicating poverty and combating climate change,” she said.

By 2050, the world is predicted to have many more “very hot” days posing dangerous risks, especially to the poor.

“If you live in a rich country in the West, you likely have air-conditioning in your house, car and workplace. But that’s not the case for people in poor countries,” Duflo said.

The poor will bear the brutal brunt of climate change. “Adding up the emissions from consumption in United States and Europe, we get a total of about 14 billion tons per year, which amounts to an annual mortality cost of US$518 billion on poor countries,” Duflo pointed out.

Rich countries, therefore, have a financial responsibility towards poor countries, she argued, and will have to consider compensation.

For Africa

Nobel in Africa is a STIAS initiative in partnership with SU, under the auspices of the Nobel Foundation and the Royal Swedish Academy of Sciences, with funding from the Knut and Alice Wallenberg Foundation.

STIAS Director Professor Edward Kirumira said the symposia are an opportunity to promote research excellence and collaborative scholarship in Africa, in conversation with the rest of the world.

The first two symposia focused on physics and chemistry, respectively, while a fourth symposium in October this year will deal with physiology, looking specifically at cardiovascular medicine. This week’s symposium was convened by Jakob Svensson of Stockholm University and Rulof Burger of SU.