Friday, February 22, 2008

Economics for a better world

After that damning post yesterday on the plunge of economics into insignificance, I need to post something to make it up. I started searching for evidence that economics postively impacts on the worst problems we face. One of them is poverty.

Interestingly enough it seems as if many economists agree which economists were managing to do influential work on the crucial questions facing modern society. In a survey of economists, conducted by David Leonhardt and reported on in the NY Times... the small group of economists who work at the Jameel Poverty Action Lab at M.I.T., led by Esther Duflo and Abhijit Banerjee, were mentioned far more often than anyone else.

According to their website ...the Abdul Latif Jameel Poverty Action Lab (J-PAL) serves as a focal point for development and poverty research based on randomized trials (and here).

As pointed out by Urbanomics, randomized trials can be very useful in shaping policy, but they have to deal with a mind-numbing diversity between and within developing societies, and their possible responses to the specific strategy or approach could (and will) itself exhibit similar diversity. Dani Rodrick argues that this way of thinking about development policy is radically different from more traditional approaches as it admits much greater diversity and heterodoxy. In his words: It is humble about the extent of our knowledge but optimistic about our ability to learn.

Randomised trials have been applied in many fields, most notably in healthcare. Although there are many pitfalls in applying randomised trials, most notably its potential ethical impacts, it can provide insights on how the (developmental) system behaves. Given the lessons from clinical trials in healthcare (such as mentioned here), one needs to be cautious in only relying on such results without a contextual bigger picture understanding on how development paths look or ought to look like.

Go economists! The real world is waiting.

No comments: