A critical success factor in shaping policies and programs is to ensure they are relevant, practical, and culturally sensitive for the individuals and communities in question.
The three new Nobel Laureates in Economics challenge policymakers and communities to adopt creative and non-conventional measures to address poverty and income inequality. A critical success factor in shaping policies and programs is to ensure they are relevant, practical, and culturally sensitive for the individuals and communities in question.
Banerjee and Duflo’s most notable publication to date has been Poor Economics, a 2011 book that attempts to reveal the reality of poor people’s lives through social experiments. The authors contend that experimentally informed small changes, covering a wide range of topics, will serve to improve the lives of the poor steadily.
The Randomised Controlled Trial (RCTs) methodology adopted by the three Nobel Laureates now dominates development economics. It was borrowed from the medical world and is now applied in assessing social policy interventions. Although there has often been a reluctance to use RCTs in social policy evaluation, it is now widely accepted that this approach can deliver more insightful information as it has the capacity to:
- Align with cohort-specific outcomes
- Recognise and respect the cultural sensitivities of individuals and communities
- Reveal the hierarchy of participants’ preferences
- Understand the practical issues associated with policy interventions
- Identify a relevant counterfactual/ base case scenario.
The work of Banerjee, Duflo, and Kremer also seeks to leverage behavioural economics in the formulation of social policy interventions to combat poverty and income inequality. For example, Banerjee has argued that the adoption of a basic income policy for India would reduce poverty, cut through the corruption, and minimise bureaucracy. The necessary element for successful implementation being simplification in the design of the social policy intervention to focus on the scope.
Australia, like other advanced economies, faces anxieties that reflect underlying concerns including equality, economic and environmental sustainability, and social isolation. Our approach to social policy interventions should be evidence-based, relevant, and practical in design and implementation. We should also ensure that we consult with those individuals and communities for whom the policy or program is intended to impact.
Above all, Banerjee, Duflo, and Kremer highlight the need for effective and purposeful strategies to combat poverty and income inequality. These strategies will require vision, creativity, and importantly, the engagement and empowerment of those whose lives we seek to improve. Fair and fulfilling economic participation, that is both sustainable and culturally aligned, will support the delivery of truly great places.
Richard’s article was originally published on LinkedIn.
Header image by Harry Cunningham from Unsplash