XML FeedsEconomic Scene: Making Economics Relevant Again
By CostBenefit on Mar 4, 2008 | In Non-Environmental, Academic Study/Journal Article, Newspaper/Mag/TV/Media Story, Regulatory Analysis, Costs and Benefits | Send feedback »
It was only a decade ago that economics seemed to be an old and tired discipline. The field no longer had intellectual giants like John Maynard Keynes or Milton Friedman who were shaping public policy by the sheer force of their ideas. Instead, it was devolving into a technical discipline that was even less comprehensible than it was relevant.
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Over the last decade, however, economics has begun to get its groove back. Armed with newly powerful tools for analyzing data, economists have dug into real-world matters and tried to understand human behavior....
They have explained why Americans don’t save enough money — and come up with clever ideas to increase savings. They have discovered that modest increases in the minimum wage don’t actually destroy many jobs....
But there are more than a few economists who believe that the renaissance has come with a big downside. They argue that the new research often consists of cute findings — which inevitably get covered in the press — about trivial subjects, like game shows, violent movies or sports gambling.
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This year, David Leonhardt asked which economists were managing to do influential work on the crucial questions facing modern society. Who, in other words, was using economics to make the world a better place?
There was a runaway winner. 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.
They want to overhaul development aid so that more of it is spent on programs that actually make a difference.
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The basic idea behind the lab is to rely on randomized trials — similar to the ones used in medical research — to study antipoverty programs. This helps avoid the classic problem with the evaluation of aid programs: it’s often impossible to separate cause and effect. If aid workers start supplying textbooks to schools in one town and the students there start doing better, it could be because of the textbooks. Or it could be that the town also happened to hire a new school administrator.
In a randomized trial, researchers would choose a set of schools and then separate into them two groups. The groups would be similar in every respect except for the fact that one would receive new textbooks and one wouldn’t.
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Mr. Kremer and two other economists, in fact, did the textbook experiment — and found that textbooks didn’t improve test scores or graduation rates in rural western Kenya.... On the other hand, another randomized trial in the same part of Kenya found that treating children for intestinal worms did lift school performance....
Mr. Banerjee estimates, very conservatively, that $11 billion a year — out of roughly $100 billion in annual development aid worldwide — could be spent on programs that have been proved to work. Unfortunately, nowhere near $11 billion is being spent on such programs.
FOR FULL STORY GO TO:
http://www.nytimes.com/2008/02/20/business/20leonhardt.html?em&ex=1203829200&en=9a7ce484874334d5&ei=5087%0A
The New York Times www.nytimes.com
Published: February 20, 2008
