This week it was announced that Abhijit Banerjee, Esther Duflo and Michael Kremer won the Economics Nobel Prize (or more accurately: the ‘Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel’). The trio of economists were awarded the prize for "their experimental approach to alleviating global poverty”.
On social media and in mainstream newspapers, there was an exceptional level of praise for the laureates, reflecting their existing rockstar status within development economics. The Financial Times even claimed that the Nobel “will help restore [the] profession’s relevance”. However, the widespread calls for celebration need to be considered with a cautionary counterweight.
The experimental approach to poverty alleviation relies on so-called Randomized Control Trials (RCTs). Inspired by studies in medicine, the approach targets specific interventions to a randomly selected group (schools, classes, mothers, etc), and then compares how specific outcomes change in the recipient group versus those who did not receive the treatment. As the groups are assumed to be otherwise similar, the difference in outcomes can be causally attributed to the intervention.
