By Diego Sánchez de la Cruz

Image credit: Libertad.org

Four years ago now, the Swedish Central Bank awarded Angus Deaton the Nobel Prize in Economics. Thomas Piketty’s success with the launch of Capital in the 21st century seemed to suggest that the award would go to the Gallic economist or some other expert in the study of inequality, such as the Serb Branko Milanovic.

However, the awarding of the prize to Angus Deaton was a boost to the long trajectory of a prestigious economist who has always defended that the way out of poverty necessarily implies the generation of certain inequalities. China is a perfect example of this: the Asian giant today has higher levels of wage inequality than thirty years ago, but its poverty rate has been reduced exponentially. The focus, therefore, must be on the elimination of poverty, not so much on the inequality that can be generated in a context of progress.

In the following two years, the Central Bank of Sweden recognized the trajectory of Oliver Hart and Berngt Holmström, experts in the economic analysis of contracts, and Richard Thaler, an influential scholar of the economics of behavior. In 2018, the recognition was shared by William Nordhaus and Paul Romer, experts in introducing meteorological innovations into long-term economic projections.

The three winners’ work

However, the issue of inequality is still very topical, so the bets on the 2019 Nobel Prize placed economists like Piketty or Milanovic among the favourites to win the prize. However, this year’s three winners, Abhijit Banerjee, Esther Duflo and Michael Kremer, share Angus Deaton’s concern for poverty as a topic of study.

Banerjee and Duflo were favourites to receive the award in 2012, following their success a year earlier with the launch of Poor Economics, a book in which they set out ways to fight poverty through small-scale experiments in areas such as education, entrepreneurship or health.

Both authors promote this type of solutions from the J-PAL research center, a U.S.-based project that has conducted hundreds of specialized projects to study, measure and improve all types of poverty reduction projects. In total, J-PAL has more than 150 academic partners who have conducted more than 1,000 evaluations and provided scientific opinions on how to improve the anti-poverty strategy in more than 80 countries. The projects analysed by J-PAL have already reached 400 million people.

One of the centre’s most important economists is Michael Kremer, who shares the Swedish Central Bank’s award with Banerjee and Duflo. Kremer is one of the economists who made possible the success of the Deworm the World initiative, whose objective is to improve the national deworming strategy applied by the governments of countries such as India, Ethiopia, Kenya or Vietnam. In addition, Kremer is an expert in the study of demography in a global and historical key.

The note that accompanies the announcement of the award of the 2019 Nobel Prize in Economics recalls the “improvement in living standards” that has occurred in recent decades. The jury then emphasizes that “more than 700 million people still subsist on extremely low incomes,” which calls for “reliable answers” to these complex challenges.

In this sense, Banerjee, Duflo and Kremer are specialists in practically measuring the results of one type of anti-poverty programme or another, which is especially necessary now that global poverty is below 10% and the consolidation of poverty reduction requires lasting solutions.

Their studies show that teacher absenteeism in schools in the poor world tends to decline when their contracts go from being fixed to being subject to an annual renewal subject to targets.

Another myth that has been shattered by the winners’ research of the Swedish Central Bank is that of the supposed validity of microcredit as an alternative to poverty. Far from validating this belief, popularized during the 1990s, their research suggests that these mechanisms have no notable objectives when it comes to reducing poverty, improving investment or increasing consumption.

Thus, the common denominator in the work of the three winners is their commitment to a bottom-up analysis, which runs away from the big anti-poverty plans of the left and focuses on specific challenges that must be solved on the ground, considering the economic incentives and continuously monitoring the results of the projects deployed.

 

This article was published by Libertad.org on October 22nd, 2019. Reproduced on Political Hispanic with authorization from said source. Translated by Political Hispanic.
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