eBusiness Weekly
Alfred M. Mthimkhulu
Recently, South Africa’s former president Jacob Zuma delivered a public lecture on the legacy of former late president Mugabe. As is now usual in our times, a short video on the lecture did its rounds on social media.
“Economists talk more than any other professionals I have ever come across,” remarked former president Zuma pausing a bit to cheers from the crowd. “But, (the)economy is not coming right.” He paused and this time the applause was deafening. Poor economists.
He then switched to his native language mentioning how some were mocking his being less educated as reason for the poor performance of the economy. The audience cheers grew louder. The politician was at work and the economist wondering what was coming next.
He continued emphatically: “I wanted to quicken the process of changing the position of a poor black person in South Africa.” Unfortunately, he said, his term ended prematurely.
There is a book titled “Poor Economics”. It was written by Abhijit Banerjee and Esther Duflo, economists at Massachusetts Institute of Technology.
These are the economists along with Michael Kremer at Harvard University who were awarded the Nobel Prize of Economics last week, the very month former president Zuma was having a go at economists. The three Nobel Laureates are, ironically, the kind of economists former president Zuma and his colleagues at that levels of leadership in the global south must pay attention to, not because they won a Nobel Prize but because of the thrust of their work.
Like all great works of science, the thrust of their work is simple. How do we tell if an intervention for alleviating poverty is delivering good results?
Let us bear in mind that at any given point in time in any country, there will be numerous policy interventions tackling poverty. Some of these interventions will be anchored in the economic policy, others in health policy, others in education and so on. Some interventions are by Government while others are by private actors.
So, the task of assigning impact to a policy intervention is complicated though the question seems, on the face of it, easy to answer. For impact to be fairly attributed, a thought-through approach is necessary. That well thought-through approach is what the work of Professors Abhijit Banerjee, Esther Duflo and Michael Kremer earned them the Nobel Prize.
Imagine two very similar villages. An intervention is made by say the government in one of the villages. That one village is, to borrow from medical sciences, receiving treatment while the other is not.
If we observe, and better still, measure changes in the well being of people in the treated village against the untreated village then we can conclude that the policy has had some impact. If we like the impact, we could treat another and another. This is called scaling.
Some call this method randomised control trial or randomised control experiments, perhaps a standard approach in medical sciences before the animals’ rights movements cautioned us — e.g. some rats are given some trial medicine while others are not so as to infer the impact the medicine could have on humans. That’s what got them the Nobel Prize: “for their experimental approach to alleviating poverty”, one village at a time.
The book “Poor Economics” is a laid back read, packed with real-life stories and experiments. Some of the experiments continue to be done under Abdul Latif Jameel Poverty Action Lab (J-PAL), an organisation they founded in 2003. Through their academic publications, their easy-to-read book(s) and J-PAL, the trio have shared their method and experiments with the world. Of course, their method is not perfect. Such imperfections invite criticisms from peers and usually lead to even more robust methods — so turning the wheels of research and human progress.
A rather similar work received such recognition in the recent past. In 2006, Harvard Professor Muhammad Yunus received the Nobel Prize for his pioneering work in micro-finance in Bangladesh. He has since shifted his emphasis from micro-finance to social businesses which are defined as enterprises that are set on tackling social problems than merely making a profit.
Some prefer calling such organisations social enterprises, others prefer calling them development finance institutions. I’ve heard the term do-gooders being used to describe this kind of work but let us not go into all that lest we fall into the trap of talking too much and being too bookish. Real economists must talk because before the talking a lot of work would have been done, a lot of listening, reading, and reflecting as one runs and re-runs experiments through for instance Random Control Trials just as the trio of economists did. May the economists keep at it.
Alfred M. Mthimkhulu; Senior Lecturer, Graduate School of Business, NUST; Email: [email protected]; Twitter: @mthimz
