The Nobel economists do practical work to improve lives – and might just revive their tarnished profession

Economists are the butt of so many jokes – and can get things so wrong – that is it a relief to be able to write about something they are doing that is unquestionably useful to society. It is the work of the three winners of the Nobel prize in economic sciences, Abhijit Banerjee, Esther Duflo and Michael Kremer.

Banerjee and Duflo (who worked together for many years and married in 2015) are at MIT, while Kremer is at Harvard – but what they do is completely different from the pursuits of most academic economists at top-flight institutions.

They are development economists, studying how the lives of poor people in the emerging world might be made better. But instead of creating theories or examining published data, they carry out randomised trials to see what works.

The idea comes from medical research. You have a new drug but you don’t know whether it will be effective. So you set up a trial, giving half the group the drug and the other half a placebo, and see whether there is any difference in the outcomes.

Applying that approach to economic policies is not straightforward and that is where their craft comes in: creating such experiments and examining the results in an apolitical, non-judgemental way.

In their ground-breaking book Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, published in 2011, they note how their work is very different from the two conflicting theories about international aid. One, popularised by Jeffrey Sachs in The End of Poverty, published in 2005, is that aid is the answer. Other academics, notably William Easterly and more recently Dambisa Moyo, argue the opposite, claiming that aid does more bad than good.

“Whom should we believe?” Banerjee and Duflo ask in their introduction: “Those who tell us that aid can solve the problem? Or those who say that it makes things worse? The debate cannot be solved in the abstract: we need evidence.”

That evidence, however, has to come from detailed studies of what actually happens, not big countrywide data, which people interpret to suit their positions.

I have been looking at one of their studies, which gives an idea of what they do. The aim is to increase school enrolment. We know that keeping children in school brings huge benefits both to them and to their societies, but resources are limited, so what do you do? Do you put money into computer-assisted learning? Or remedial tutoring? Or free school uniforms? Or, to take another three policies, do you give subsidies to new private schools to open in a village where there is no school at present? Or do you create more scholarships? Or give a cash bonus for students on graduation?

The answer is that the first three seem to have zero impact on student participation, while the second three have a very big impact indeed.

And the authors look at the cost: how many dollars does it cost to keep a student in school for one more year? Treating children with intestinal worms in western Kenya not only cut absenteeism by more than a quarter but because it reduced worm prevalence in the environment, improved attendance among children who had not been treated.

So economists are doing something useful, it is recognised by the Nobel committee, and that is great. But I feel there is something going on here that is more than just recognising, celebrating and rewarding great work. It is the wider lesson for the study of economics.

We know the subject has headed into some blind alleys. The over-reliance on mathematical models led to an unawareness of the dangers to the financial system in the run-up to the banking crash and recession of 2008-09. Old-style development economics has been rather sidelined by the explosive growth of China since 1978, for China ignored all the theory developed in the elite universities of the west.

So how does economics restore some of the lost prestige and become more useful to society? Well, the idea that you should look at the evidence in a dispassionate, apolitical way and then develop policies from that base – as these Nobel prize-winners have done – is not a bad place to start.