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Free exchange: Random harvest

Development, evidence, experiments, RCT

IT ALL began with a white envelope. Inside, a letter from the provost of the Massachusetts Institute of Technology offered three young economists at MIT $100,000 to spend as they wanted (those were the days). Two of them, Esther Duflo and Abhijit Banerjee, used the money to set up an organisation to run “randomised control trials” (RCTs), an experimental technique a bit like drugs trials, but for economics. To test if, say, boosting teachers’ pay improved educational outcomes, an RCT would take a collection of comparable schools, randomly assign higher wages to some teachers but not others, and see what happens. The organisation, called J-PAL (to give it its full title, the Abdul Latif Jameel Poverty Action Lab), has just celebrated its tenth anniversary. Its methods have transformed development economics.

When J-PAL started in 2003, RCTs were regarded as wacky. Critics said that doing a trial was like putting people in a cage and experimenting on them. They pointed out that you cannot conduct randomised trials for big macroeconomic questions (“What happens if we devalue the currency by 50%?”) because there can be no control group. They conceded RCTs might generate useful nuggets of evidence (raising teachers’ wages in India, for example, did surprisingly little to improve learning). But they argued that evidence from such trials would always remain small-scale, tied to a specific context and not be useful beyond it.

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