Banerjee’s responsibility to his country of origin includes moral components.
In the face of crumbling financial position of the states, caution regarding finances will have to be a necessary ingredient in his policy recommendations now on.
Last week, one of India’s premier colleges for Economics — Hindu College, Delhi University — announced a new certificate course in behavioral economics. The online poster reads: “A first-of-its-kind, this educational programme aims to familiarize students with the promising field of Behavioral Economics and to integrate this understanding into a broader policy-based analysis”.
Now, the field of behavioral economics, a combination of economic theory, social psychology and behavioral insights, has been around for decades. It had even got Richard Thaler the 2017 Nobel in economics.
Yet, the spotlight India is suddenly putting on behavioral economics is because this year’s Nobel is closer home: one of the prize-winners, Abhijit Banerjee originally belongs to India. He was born here, and studied here right up to his post-graduation, and his parents reside here.
The seminal work of Banerjee, Esther Duflo and Michael Kremer, is about developing an experimental approach to tackling poverty. This approach relies on RCTs (randomised control trials), which draw heavily from behavioral economics — specifically, people’s motivations that determine their choices. Their global research centre at MIT, J-PAL, has been “working to reduce poverty by ensuring that policy is informed by scientific evidence” since 2003.
Hindu College’s new course is one example of Banerjee’s ideas catching on. Earlier this month, Delhi government signed an MoU with J-PAL South Asia, to conduct real-time monitoring of its public services, specifically, beneficiary experience in public distribution system (PDS) ration shops and ‘mohalla clinics’. Another MoU has been signed by Odisha government for improving development outcomes.
Many such collaborations are expected to follow: poverty alleviation will always remain in focus for governments; and the Nobel has just lent credibility to the laureates’ work.
Association With India Not New…
For J-PAL, the South Asia office in India has been their largest office for over 12 years. There are nine offices all over India, over 175 people employed, and thousands of field workers collecting data. Work has been going on with 16 state governments and also central government ministries.
India has provided a large part of the research base for their work, where many of their experimental field studies were conducted.
Also, as far back as 2009, Banerjee had received the Infosys prize in Social Sciences — Economics, “for his pioneering work in the empirical evaluation of public policy”.
…Still, It’s A New Beginning Now
To a question, “Is the Nobel Prize a burden?” Nobel laureate in Physiology for 2008 Francoise Barre Sinoussi replied, “Well not a burden, but it is a higher responsibility.”
Sinoussi, the co-discoverer of the HIV virus, elaborated: “I had been doing a little bit, I must say, before the Nobel prize; but since the Nobel prize, it’s easier to directly contact politicians. I’m trying to use that as much possible for people living with HIV”.
The Nobel laureates, and Banerjee in particular, are similarly in demand in India among politicians, media and others, with opinions on all kinds of matters being sought. And, of course, the new projects for J-PAL.
The outstanding feature of the work of Banerjee et al is using RCTs, which is about watching the effect of specific actions on the subjects (RCTs are more common in the field of medicine).
People are divided into a control set and an experimental set; one is exposed to the policy measure, and then outcomes in both sets are compared. These show the impact — are certain policy measures working as well as hoped?
In Duflo’s words: “The big question of how to tackle poverty we broke down into smaller questions and found answers.” For example, which are the most effective interventions for improving health or educational outcomes?
Putting the affected people at the ‘centre’ and understanding them by watching their actions, is certainly laudable. For effectiveness, of course, self-examination among policy-makers, and their willingness to fine-tune efforts must necessarily follow.
The other very welcome point in their approach is getting hard data as ‘evidence’, in this evidence-based approach. Data availability has always been an issue in India, and any initiative that offers hard data-based research should be encouraged. Of course, this presupposes systematic recording and maintenance of the data.
But Wouldn’t ‘Smaller Questions’ Stop Only At ‘Infinitesimal’?
Let’s look at some programmes this approach has served.
In education, Banerjee and Duflo conclude from an RCT that neither providing meals, nor textbooks would increase education quality. Instead of that, working with laggard students, ie, remedial classes is the way to bettering learning outcomes.
One agrees, in fact, it is commonsense that remedial classes would help. But what about the crucial factor that is lacking in India — adequate numbers of quality teachers, who also have time?
Would the Nobel laureates suggest breaking this down into a further ‘smaller question’ — another RCT that addresses ‘way to make remedial classes work’?
In fact, Banerjee’s remedial-classes model was adopted by the Delhi government and implemented in its Chunauti scheme. But the idea of grouping children based on learning ability didn’t go down well with parents, who found it discriminatory, likened it to ‘apartheid’, and approached Delhi High Court.
This is an example of an earnest and well-intentioned “evidence-based policy prescription” gone debatable.
The fact is, it’s always a wheels-within-wheels situation, where people are involved: the multiple considerations — financial, physical, emotional, mental; and then multiple influences and ideologies.
Breaking it down into smaller questions can only stop at ‘Infinitesimal’. And what an awful amount of money and time that could be.
And then who is to say what is the ‘right’ solution? It can only be a comparative analysis of existing options thought of — never an exhaustive list of possibilities. The options being the product of human minds, which can range from heavily ideological, to mildly hallucinatory, to hugely eccentric.
Finally, if going by the Duflo-Banerjee claim about food and textbooks, policy-makers were to decide to do away with these incentives, would it be a wise decision? Meals have helped increase school attendance, and also address nutrition; textbooks are basic infrastructure, and also who knows what might catch the truant child’s fancy and trigger his interest? These cannot be written off.
In the Udaipur vaccination RCT, lentils were used as an incentive for immunisation. They found this increased the outcome to 38 per cent immunisation — as against only 6 per cent with another incentive. But, 38 per cent is still not satisfactory. Surely then, either a combination of innovative solutions is required — until that single ‘breakthrough’ incentive is hit upon.
For effective prevention of malaria, they found that people did use bed nets when they were distributed free. But exactly this scheme in India has proven futile: not only was there low usage of the bed nets, but in places, they were being used as fishing nets.
Unless there is very strict government machinery to implement and monitor schemes, merely keeping people at the ‘centre’ does not really help. This has been India’s experience.
Given all of the above complexities, their approach to policy prescriptions could perhaps be termed ‘simplistic’ or ‘starry eyed’.
Considering States’ Poor Finances
Let us also remember that costs are involved in each of these measures. Unless they yield the desired level of outcome, the money is almost wasted.
Banerjee’s responsibility to his country of origin includes moral components: in the face of crumbling financial position of the states, caution regarding finances — both short-term and long-term finances — will have to be a necessary ingredient in his policy recommendations now on.
Ground Zero And India’s Achilles Heel
After his meeting with PM Modi, which Banerjee called a “unique experience”, he explained the former’s views on governance as: “Why the mistrust of the people on the ground colors our governance, and how it, therefore, creates structure of elite control over the governance process.”
Modi reportedly explained how he was trying to reform the bureaucracy to make it more responsive, to understand ways in which people's views need to be taken into account.
This resonates with the views of an American expert on education that I happened to hear recently. He talked about India’s peculiar problem — policy-making is high-quality, but practices and implementation extremely poor.
This is the Achilles heel in India’s fight against poverty. Could Banerjee and Duflo tweak their work to fit this situation? India has been fertile ground for their work and payback can include, perhaps, solutions to tackle the governance part, the lower-level-bureaucracy part, the practices part.
Gradually, more learnings from India and honest on-the-ground evaluations would help refine and enrich course content in behavioral economics. Leaving no chance for dissatisfied students later, who experience and dismiss the subject as one ‘full of hot air!’
‘Fighting Poverty’ is a slow process, but luckily, it is quantifiable, and apparent over time. Banerjee is being watched. And hopes from him are high.