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Esther Duflo's Nobel Prize: Beyond the Award, a Methodological Breakthrough?

Cross-Interview with Éric Chaney and Julien Damon

INTERVIEW - 15 November 2019

Esther Duflo is not only the youngest woman in history to win the Nobel Prize in Economics, she also brings forward, above all, a subject, poverty, and an innovative method for economics, field work. How should this distinction be interpreted? Eric Chaney, Institut Montaigne’s economic advisor and Julien Damon, sociologist and associate professor at Sciences Po, comment on the award of this prize to the French economist.

How do you view the award of the Nobel Prize in Economics to Esther Duflo?

JULIEN DAMON

This is excellent news for French economists and for economics in general. This has already been pointed out in abundance, but Esther Duflo is the youngest winner of a prize, founded half a century ago, which had only rewarded one woman and only three Frenchmen before her. After Gérard Debreu in 1983, Maurice Allais in 1988 and Jean Tirole in 2014, it places French economists at the forefront of the profession. It should be noted that in each case, they are experts and teachers who have a keen interest in mathematics and have worked in the United States or even settled in the United States. Esther Duflo, as was the case for Gérard Debreu, has the dual nationality. Beyond the French "cocorico" ("cock-a-doodle-do", for the French rooster), which could be put into perspective, I think that the recognition of Esther Duflo's work is above all a formidable sign in favour of a more embodied economic science, more skilled in the analysis of data and concrete policies than in modelling and theorization. The latter practices, however fundamental they may be, must be applied, and this is what Esther Duflo, her colleagues and her teams do pragmatically. In fact, this Nobel Prize, following the footsteps of Amartya Sen and Muhammad Yunus (an economist who holds the Nobel Peace Prize), puts forward a subject, that of poverty, rather than a personality. Moreover, in France, we forget a little bit about the other two winners who were awarded at the same time as Esther Duflo - including her husband and colleague Abhijit Banerjee.

The French economist embodies a methodological paradigm shift from mathematical modelling to field experiments, notably through "random sampling evaluation". In what way does this methodology constitute a breakthrough? What are its limits?

ÉRIC CHANEY

I would not say that Esther Duflo and Abhijit Banerjee – since most of their research papers are jointly signed, their respective contributions are difficult to distinguish - have set aside theoretical modelling, but rather that they have sought to answer the difficult question: how to validate, or invalidate, the practical conclusions of theoretical models based on hypotheses on human behaviour, when it comes to assessing the effect of economic policy actions. Michael Kremer, who shares the prize with the Duflo-Banerjee couple, was one of the first to adopt methods commonly used in other scientific fields, such as medical research, using a sample of randomly selected individuals who share an economic characteristic, or benefit from the same economic policy measure, and a control sample. He did so in Kenya on educational policy issues. Esther Duflo and Abhijit Banerjee then developed and expanded this methodology, convincingly answering the question: are your conclusions from samples valid on a larger scale? To do this, they have developed econometric techniques adapted to panel data, which themselves have a theoretical side, in a statistical rather than an economic sense. But there is more. In their article Giving credit where it is due (Journal of Economic Perspectives, summer 2010), they point out that, in the case of credit (hence the pun) in developing countries, they themselves developed a theoretical model of access to credit and of the rates applied, and then submitted it for empirical validation using the above methods, drawing on "natural experience" (a regulatory change in Sri Lanka). Closing the loop, they show how validation or non-validation leads to new theoretical models. Esther Duflo and her husband have become major actors in what has often been called in economics the "credibility revolution", without ignoring theory.

Esther Duflo was chosen by Barack Obama in 2013 to serve on the World Development Committee to advise him on these issues. What has been her contribution in this context?

JULIEN DAMON

I do not know about her precise contribution in this particular context. France celebrated this nomination and talked a lot about it again on the occasion of the award of the Nobel Prize. We even hear, in the French media, that Esther Duflo was "Barack Obama's advisor". This was not the case. It is not at all questioning the merits of the Franco-American economist to say that she was appointed to a kind of Theodulus committee. However high the level of this committee, it is not the famous Council of Economic Advisers of the American President. Three meetings of the Committee for World Development are reported on the White House’s website, whose impact is almost invisible. In short, Esther Duflo's interesting contributions are in her books, articles and experiments, rather than in her passing through the cenacles of the American administration. In France, let us just appreciate a well-deserved acknowledgment without speculating too far – alas, perhaps - on its impact. Finally, we observed that Emmanuel Macron praised this award, while Barack Obama and, unsurprisingly, Donald Trump did not.

ÉRIC CHANEY

I fully agree with Julien: Esther Duflo's contribution to economic development and to the economic policy issue - how to eradicate poverty? - comes first and foremost from her work and her credibility. The fact that President Obama chose her in this context is an acknowledgement of this achievement. But it is much more "on the ground", as she likes to say, that her work has had and will continue to have a real impact. When a country's authorities consider building a dam for irrigation or power generation, they consult engineers, economic technicians and environmentalists, but rarely the people, let alone poverty specialists. This is more difficult today because of the random sample selection surveys in the field by Esther Duflo and her teams. Let us underline this last word: hundreds of young economists and statisticians around the world are working with her to help distinguish what works and what doesn't.

Copyright : JOSEPH PREZIOSO / AFP

 

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