From UPSC perspective, the following things are important :
Prelims level : Nobel Prize
Mains level : Poverty eradication strategies and its success
- The 2019 Nobel Prize in Economics has been awarded jointly to Indian origin Abhijit Banerjee, Esther Duflo and Michael Kremer for their experimental approach to alleviating global poverty.
- As a direct result of one of their studies, more than five million Indian children have benefitted from effective programmes of remedial tutoring in schools.
- It was also successfully implemented in introducing heavy subsidies for preventive healthcare in many countries.
About the theory
- Both Banerjee and Duflo have written a noted book titled “Poor Economics”, are associated with the MIT while Kremer is with the Harvard University.
- The laureates applied themselves to problems of development economics, especially poverty alleviation.
- The approach, which transformed the development economics field, involves dividing the issue into smaller, more manageable, questions.
- They chose to break down some of the most intractable issues into smaller parts and tried to understand what policy worked and what did not.
Ex. School-going children aren’t learning enough
- What Banerjee did was to break this issue down to understanding whether providing more inputs, such as textbooks, helps matters.
- They found, merely giving more books doesn’t help unless the schools were also provided with complimentary reforms.
- The approach thus was to conduct field experiments and understand whether a small policy initiative works or doesn’t and if it doesn’t and why doesn’t it.
- Tackling the problem this way helped researchers across the world better understand why some policies have worked and what policies need to be discarded.