Bridg­ing sci­en­tific ap­proach with eco­nom­ics

The Korea Times - - OPINION - Gouranga Gopal Das

When a No­bel prize was awarded to Muham­mad Yunus of Bangladesh in 2006 for his con­certed ef­fort to “cre­ate eco­nomic and so­cial de­vel­op­ment from be­low,” the No­bel Com­mit­tee said: “Last­ing peace can­not be achieved un­less large pop­u­la­tion groups find ways in which to break out of poverty.”

Ac­cord­ing to Yunus, “poverty is an ar­ti­fi­cial cre­ation” and it can be “sent to the Mu­seum” with good in­sti­tu­tional sup­port poli­cies.

This year’s No­bel prize in eco­nom­ics — awarded to pro­fes­sors Ab­hi­jit V. Ban­er­jee, Es­ther Du­flo and Michael Kre­mer — was awarded for the re­it­er­a­tion of the same em­pha­sis and re­as­sur­ance that fight­ing back poverty is es­sen­tial for shared pros­per­ity, as an agenda item for the United Na­tions’ Sus­tain­able De­vel­op­ment Goals. What then is the dif­fer­ence? What is its rel­e­vance at the cur­rent junc­ture? The dif­fer­ence lies in the ap­pli­ca­tion of the sci­en­tific ap­proach via field ex­per­i­ments — ran­dom­ized con­trolled tri­als (RCTs) com­bin­ing mi­cro­scopic anal­y­sis for each minis­cule prob­lem with a macro “lens” view — for ev­i­dence-based pol­icy-mak­ing from their ex­per­i­men­tal ap­proach to al­le­vi­at­ing global poverty.

The eco­nom­ics pro­fes­sion has of­ten been crit­i­cized for its eso­teric na­ture of the­o­riz­ing co­cooned in an ivory tower. Un­like the­o­ret­i­cal anal­y­sis with rigor, which of­fers a ground for prac­ti­cal pol­icy in­ter­ven­tion to cure the eco­nomic malaise just like a med­i­cal prac­ti­tioner ap­proaches a pa­tient bur­dened with dis­ease. The work done by Ban­er­jee, Du­flo and Kre­mer throws light on con­duct­ing such sci­en­tific ex­per­i­ments. We can learn that coun­try-level so­lu­tions to com­bat ex­treme poverty and other as­so­ci­ated prob­lems could cat­alyze in­clu­sive eco­nomic growth. This can en­able elite pol­i­cy­mak­ers to de­sign poli­cies.

What is novel in this year’s No­bel is their con­tri­bu­tion in mar­ry­ing the sci­en­tific ap­proach of ex­per­i­men­ta­tion — just like in a sci­en­tific lab­o­ra­tory — with the the­o­ret­i­cal rationale of so­cial sci­ence. This unique­ness in deal­ing with the prob­lem could ame­lio­rate the health fall­out, ed­u­ca­tional de­fi­ciency, men­tal health, in­fant mor­tal­ity, ma­ter­nal health, tech­nol­ogy choices and en­tre­pre­neur­ial ca­pa­bil­ity, etc.

The wel­fare of a so­ci­ety de­pends on the erad­i­ca­tion of poverty, and the con­tri­bu­tion of this “trio” opens new vis­tas of re­search in this re­gard. Three facets of de­vel­op­ment — poverty, pros­per­ity, and hence, peace­ful co­ex­is­tence — the trin­ity of hu­man well-be­ing, are im­por­tant. Their joint con­tri­bu­tion opens horizons for an­a­lyz­ing the ef­fec­tive­ness of spe­cific poli­cies and pro­grams for im­prov­ing de­vel­op­ment out­comes in health, gov­er­nance, ed­u­ca­tional at­tain­ment, im­pov­er­ish­ment and in­equal­ity.

They es­tab­lished the Jameel Poverty Ac­tion Lab (or JPAL) with more than 190 re­searchers and have al­most com­pleted on­go­ing RCTs in ar­eas rang­ing from gov­er­nance prob­lems in In­done­sia, ma­ter­nal health or mosquito net prob­lems in Africa, and school ab­sen­teeism in In­dia un­der the “Ed­u­ca­tion for All” pro­gram. J-PAL has re­search ac­tive across the World. “Poor Eco­nom­ics: A Rad­i­cal Re­think­ing of the Way to Fight Global Poverty” doc­u­ments this ap­proach.

By ap­ply­ing the el­e­gance of the­ory with vo­lu­mi­nous data, the fun­da­men­tal ques­tions they ad­dressed and an­swered are deep-rooted. De­spite lim­i­ta­tions this is the “gold stan­dard” for ev­i­dence-based so­lu­tions in tack­ling poverty, health and ed­u­ca­tional out­comes. Thus, it is help­ful re­search for im­prov­ing the lives of the have-nots.

Although the world has made sig­nif­i­cant progress by re­duc­ing ex­treme poverty (1.1 bil­lion fewer than in 1990), the up­com­ing chal­lenges born out of con­flict, na­tion­al­ism and pop­ulism could threaten this progress, and cause a re­ver­sal of for­tune. A re­cent World Bank re­port said that by 2030, the sit­u­a­tions of fragility, con­flict, and vi­o­lence will push half of the world’s ex­treme poor fur­ther down the path of huge in­equal­ity.

There­fore, the needs of the hour are ef­fec­tive de­vel­op­ment ap­proaches to ad­dress root causes, con­struct­ing mea­sures for re­silience, and help­ing pro­vide a “Great Es­cape” from poverty. With the ad­vent of the Fourth In­dus­trial Rev­o­lu­tion aided by in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy (ICT) — en­com­pass­ing tech­niques of Ma­chine Learn­ing and big data — con­duct­ing such large-scale field ex­per­i­ments via RCT is use­ful.

The sig­nif­i­cance in the con­text of In­dia, China and the two Koreas is enor­mous. The broader les­son for coun­tries like In­dia, Korea and those in Africa is that for solv­ing com­plex de­vel­op­ment chal­lenges we re­quire cost-ef­fec­tive poli­cies based on care­ful anal­y­sis of data and ev­i­dence. Es­pe­cially, when the economies such as those in South Korea and In­dia among oth­ers are slow­ing down, this prize is quite timely for re­ori­ent­ing a fo­cus to field ex­per­i­ments in a bot­toms-up ap­proach. For South Korea, the furor about the min­i­mum wage hike and in­come-led growth as well as cli­mate change is wide­spread. Go­ing be­yond ide­ol­ogy and pre­con­ceived no­tions, a sci­en­tific ap­proach to eval­u­ate de­vel­op­ment poli­cies is im­por­tant to judge their ef­fec­tive­ness.

South Korea, be­ing an ad­vanced na­tion, has the po­ten­tial to cre­ate syn­ergy be­tween fi­nan­cial in­clu­sion, mi­cro credit and ICT; in­cen­tiviz­ing en­trepreneur­ship; cre­at­ing em­ploy­ment via job growth; ef­fec­tive train­ing; de­cen­tral­ized de­ci­sion-mak­ing ver­sus leadership of lo­cal gov­ern­ments; so­cial en­ter­prise pol­icy-mak­ing, to name a few. That, in turn, will fa­cil­i­tate com­ing out with a cor­nu­copia of “ef­fec­tive” pol­icy in­ter­ven­tions, as nec­es­sary.

Re­cent prob­lems re­lated to flex­i­bil­ity in the la­bor mar­ket and the re­duc­tion to a 52-hour work­week cou­pled with hikes in the min­i­mum wage, dereg­u­la­tion, an ag­ing pop­u­la­tion and a fall­ing birthrate are dam­ag­ing Korea’s pur­suit for shared pros­per­ity. Con­duct­ing an ev­i­dence-based pol­icy anal­y­sis in these ar­eas and syn­the­siz­ing them are im­per­a­tive for con­struc­tive de­bate with­out ide­o­log­i­cally driven po­lar­ized view­points.

How­ever, the paucity of such con­certed re­search ef­forts in this di­rec­tion is ham­per­ing “good pol­icy” based on in­formed de­bate. The im­por­tance of the eval­u­a­tion of ma­jor gov­ern­ment pro­grams is cru­cial for the ju­di­cious use of the pub­lic bud­get.

As the prize has brought into the lime­light the role of RCT, gov­ern­ments could use such analy­ses to har­ness the power of such pol­icy tools to make best use of sci­en­tific rea­son­ing for im­prov­ing so­cial out­comes. Lib­er­a­tion from fi­nan­cial bondage is a sine-qua-non for de­vel­op­ment, and the “trio” of lau­re­ates have helped in pol­icy-de­sign­ing.

And, we must not for­get what Adam Smith pro­pounded: “Lit­tle else is req­ui­site to carry a state to the high­est de­gree of op­u­lence from the low­est bar­barism, but peace, easy taxes and a tol­er­a­ble ad­min­is­tra­tion of jus­tice; all the rest be­ing brought about by the nat­u­ral course of things.”

Newspapers in English

Newspapers from Korea, Republic

© PressReader. All rights reserved.