NEWS

  /  

October 22, 2021

  /  

9:28 a.m.

Nobel Laureate Michael Kremer Advocates for Experimental Methods in Development Economics


Harper Memorial Library

Jeremy Lindenfeld / The Chicago Maroon

On Wednesday, Nobel laureate and economics professor Michael Kremer commenced the return of virtual Harper Lectures with his presentation on using experimental approaches to alleviate global poverty. Kremer talked about how we could utilize randomized controlled trials to estimate the causal impacts of an intervention, as that could be a useful tool for not only scientific understanding and policy evaluation but practical innovation as well.

“The experimental method is widely used in many other fields,” Kremer said. “For example, in medicine, randomized trials are used to test new drugs and vaccines. Tech firms use A/B tests [two-sample hypothesis testing] to develop and refine new products. A similar approach can be adapted to be used in development economics.” 

As an example, Kremer spoke about a nonprofit organization that introduced a deworming treatment to children in Kenya. Due to various economic principles, including the concept that charging for a product might increase its perceived value, the organization initially thought about charging a positive price for treatment doses as a method of encouraging purchases. However, after experimentally testing this assumption by measuring the impacts of various interventions, it was revealed that about 70 percent of people received the medication when it was provided free of cost, while only 17 percent did when charged. Kremer and his team discovered that people consumed more with no price than a positive price, contrary to what the organization previously believed. 

“Thanks to these tests, there has been a real change in policy,” Kremer explained. “The very small non-governmental organization [stopped] charging. Then later, and much more importantly, the government of Kenya, then eventually of India, began providing free deworming. And the approach is now reaching hundreds of millions of children annually.” 

Kremer went on to describe other instances in which the experimental method proved pivotal to the success of innovation, from the provision of textbooks to treatment of contaminated water. He concluded his lecture by explaining that he came to the University because of its long history and flourishing research in the field of development economics.

Kremer’s new initiative—the Development Innovation Lab (DIL)—was announced in fall 2020 and further explores the idea of using economic tools to generate solutions in developing countries by working with governments and nonprofit organizations. 

“Experiments can allow for rapid iteration,” Kremer said. “You don’t have to wait for the next hypothesis or opportunity to come along to test that. There can be an experiment on that if the partners are interested in developing their innovation, and that can lead to continuous improvement.”