A Nobel Prize in Economics for health interventions that alleviate extreme poverty

Pedro Rey

The recent 2019 Nobel Prize in Economics has been awarded to three academic economists: Abhijit Banerjee and Esther Duflo of MIT and Michael Kremer of Harvard "for their experimental approach to alleviating world poverty." His research has revolutionized the way of studying how the economic development of the more than 700 million people living in extreme poverty can be stimulated. It enunciates the prioritization of small interventions in pilot tests and based on the knowledge of why those affected do not make optimal decisions that could contribute to their prosperity. It also forwards a more macro and institutional approach that depends on large programs that "should" work in theory, but in which the cause-effect relationship of its effectiveness has not been empirically established in all cases.

Thanks to these experiments applied to public policies, the winners have been able to provide rigorous scientific evidence on the impact of various interventions aimed at fighting poverty. This approach of promoting policies based on evidence from randomized experiments (Randomized Control Trials or RCT) has a connection with the ways of acting in medicine. Not only because many of their experiments are applied to health issues such as increasing vaccination rates or improving eating habits, but because the experimental approach is directly inspired by clinical trials. As in these clinical trials, the economic experiment uses two populations with similar characteristics, ideally identical, to which a group subjected to treatment, exposed to a certain intervention, and a control group, with a placebo intervention, on which no significant action is taken. For example, the treatment group may obtain a grant that makes a certain drug free for them, or they may be promised a tangible incentive, such as a small amount of food, in exchange for, for example, vaccinating their children. (Featured 1). By subsequently observing the health status or the vaccination rate of the group to which the subsidy or incentive has been given, and comparing it with the group in which it has not been acted, the effectiveness is measured and, ideally, the causality between a given measure and the improvement of the situation of the poorest.

One of the main lessons of these interventions is that providing resources to the poor is not necessarily the most effective way to lift them out of poverty. (Featured 2) For example, the winners found that one of the main reasons for the lack of childhood vaccination in poor countries is not only the scarcity or cost of vaccines but the ease of obtaining them. In this sense, one of his investigations coincides with the classic teaching of behavioural economics on the value of "free": vaccination rates went, in one of his experiments, from 18 to 75% at the time that the Vaccines stopped costing just under a dollar and became free. This spectacular increase in coverage cannot be attributed to the difference in the cost of the vaccines, but rather seems to be exponentially enhanced by the fact that no payment is required.

Similarly, the winners found that the problem was not so much that the vaccines were not available in health centres, but that when patients came to get vaccinated, those in charge of administering them were not in their work stations. For this reason, they established a system of mobile units that carried out vaccination campaigns directly to the most populated areas, thus managing to dramatically increase vaccination rates. The winners also found that not only ease of access was important, but that when vaccination was accompanied by the delivery of a kilo of food, the proportion of those vaccinated also increased exponentially.

In other of their investigations, the objective variable was not necessarily related to health, but the intervention they proposed had a health component. For example, they found that one of the most effective ways to reduce the problem of truancy is to provide families with a drug to reduce digestive infections, rather than other educational interventions such as giving free books.

Many developing countries have signed agreements with bodies that promote the use of randomized experiments, such as the Jameel Poverty Action Lab, founded by Abhijit Banerjee and Esther Duflo, to commit to designing their public policies based on empirical evidence. Besides, institutions such as the World Bank and other multilateral organizations have begun to require impact evaluations in most of their development aid programs.

The contribution of these authors to problems related to health has not only been experimental but also conceptual. Thus, Michael Kremer has spent years designing incentive mechanisms that promote the dedication of resources to research on vaccines for malaria, AIDS or tuberculosis. The main problem is that there is a contradiction between stimulating private research into vaccines so that they are more likely to be developed and the strong temptation to set a low price for vaccines, once they have been obtained, to take advantage of the positive externality caused by the vaccines. infectious cycles and thereby eradicate the disease, which in the long term eliminates financial incentives for laboratories. For this reason, Kremer enacted the creation of large subsidies that would reward the discovery of new vaccines in exchange for the purchase of them by public agencies. Thus they could establish a low price that would allow most of the population to be vaccinated. In this way, incentives for research are created without falling into the past problem of having to set a low price. An additional advantage of the type of mechanisms proposed by Kremer is that, by establishing an award, the public body can, in turn, set the conditions that the awarded drug must meet, so that research is directed towards the development of drugs or vaccines that meet the needs of the target population. For example, regarding the number of doses a patient needs, or the times in which the drug must be administered (many individuals in developing countries do not have a clock) or the method of administration (injectables are more complicated in poor countries). (Featured 3)

Given the relevance of the problems addressed by the winners, this has been a celebrated Nobel Prize, although it has also received various criticisms. Outside of the academic debate, one of the main criticisms lies in the relative lack of ethics presented by the experimental approach used. To establish causality, the experiments need a control group in which the intervention that is expected to work is not carried out so that some of the participants do not benefit as the patients in the treated group. It’s also possible that the treatment group doesn’t benefit, but is harmed by the intervention under study, which has also not been previously tested (although it’s suspected that at most it will not work, but in no case will it harm). However, this criticism is similar to that of clinical trials of new drugs and, therefore, its defence is similar: participation in treatment groups is always voluntary and allocation to the control group is random, Therefore, in the absence of possible externalities of the experiment, the "untreated" will not be in a worse situation than they already were.

In any case, and putting aside the controversy, it’s clear that the winners' contribution to improving health in developing countries is important and that their influence on the design of interventions based on empirical observation is here to stay.

Featured:

1. "The treatment group can receive free a certain drug or a small amount of food in exchange for vaccinating their children".

2. "One of the main lessons of these interventions is that providing resources to the poor is not necessarily the most effective way to lift them out of poverty."

3. "Given the relevance of the problems that the winners try to solve, it has been a celebrated Nobel Prize, although it has also had different criticisms related to the ethics of research".