Nobel laureates Abhijit Banerjee and Esther Duflo speak to NDTV's Dr Prannoy Roy on a range of subjects from Randomised Control Trials, to expectations from the upcoming Budget and protests against the Citizenship Amendment Act.
Here is the full transcript of the show:
Dr Roy: A round of applause for these two people who make us so proud. It's not only a very special occasion and a show for me, because these are two people I really admire and I am so proud to be here. They also unfortunately depress me a little. Because in my PhD I wish I had done work under them and done some kind of the work they are doing. It's just so outstanding. And if you read this book, if you read one book this year, read this. Honestly. And I am not just saying it because of this event. It's so easy to read. And so insightful. I'll just read the first line. And you'll understand. We'll go through the other aspects of the book. The first sentence is "We live in an age of growing polarisation." And they're talking about everywhere including India. Thank you both for joining us and many, many congratulations on winning the Nobel Prize. The youngest Nobel Prize in economics ever. And you're the top of list and he is in the top quartile by your scientific classification. Yes, maybe the second or the third youngest.
Abhijit Banerjee: I think I have enough grey hair.
Dr Roy: I think the first thing we all would like to know, in very simple terms, what is the difference between your economics and traditional economics?
Abhijit Banerjee: I guess any statement I make I'll sound bumptious. But I think what we do in economics, or what we try to avoid doing in economics, is build this large castle out of many, many pieces that we think are self-evident. People behave in this way. Therefore, this must happen. Therefore, that other thing must happen. Therefore, that other thing must happen. It is a long syllogism which is built on very little. We go the other way and try to be sceptical at every step. We want to say, maybe people actually don't behave that way. Maybe actually one of these shibboleths of economics is false. So, we start asking that question from the beginning. We also build our own castle. But hopefully it's built on things we have tested and have some idea that it's plausible.
Dr Roy : That's what I love about it. That you look at serious problems that we face in India and around the world. And you measure it from the bottom, field work. You do what are called Randomised Controlled Trials. Explain what they are.
Esther Duflo: I guess it starts from the idea if you don't want to answer the question by just a series of assumptions and if you really want to base it on facts then you have to unpack it at a level at which you can give a very precise, concrete answer. So, for example, if you want to talk about education in general, education is good for growth, or maybe it's bad for growth. It's maybe good for democracy or maybe it's got nothing to do with democracy, then you're not going to get anywhere that way. The way you can say something useful about education, for example, is by being more specific about what is education. If kids who are in school aren't learning, then why is that? Is it because they are unable to learn or is it because their classes are too large?
Dr Roy: You actually measure that? Effect of class size on learning?
Esther Duflo: For example, if that's the question you want to ask, which is the first RCT Abhijit was involved with. And once you've asked the question this way then it's the same type of question you would try to ask in a medical trial. So, we'll take a sample of schools. If you take an example of Abhijit's first randomised control trial, a sample of single teacher schools in Udaipur in Rajasthan. And to half of those schools, randomly selected, add a second teacher. And then measure the outcomes of the kids over a year. And see what happens. So, is it that the kids who got the second teacher do better? Or really does it make no difference? So, if you find a difference at the end, you know it's because of the second teacher. If you don't find a difference at the end, you'll know that your intuition, which might be a huge thing, was wrong.
Abhijit Banerjee: And it was wrong.
Dr Roy: It was wrong?
Abhijit Banerjee: Most of my intuitions were wrong.
Dr Roy: That's why you test them. You see, intuitions are wrong because you're Bengali. The highest point in your life was you going to Presidency. After that everything is been.... I must say when I was teaching in Delhi School, I hate to say this, the best students were the Presidency students. And then you found that people who don't have food first buy a TV set. That's irrational. What did you make of that?
Abhijit Banerjee: I guess one thing that I feel traditional economics did well to emphasize was the idea that before you question someone's rationality, think about how they think. What's their problem? Not how would you think. And I think one good insight from that, this is not actually something I have encountered in the classics of economics, I think asking the question how could this be rational, is useful. And it tells you to think about these guys, the guy who told us they would rather buy a television before getting enough food, he lived in a small village at the edge of the Sahara. There is nothing to do there. After you've sat in the tea shop for few hours and killed a few flies, what else was there to do? For him his life was only bearable only because he could watch soccer on the television. And to say you better invest in food. Because if you invest in food, in 20 years you'll be stronger, and then you're going to be productive. That is thinking like an economist.
Dr Roy: That's the rational thing to do and bore yourself to death.
Abhijit Banerjee: Exactly, as Amartya Sen says, that's the rationality of the rational fools.
Dr Roy: So, then you started measuring, took various random samples, added something in one, didn't have it in the other. Today how many people have you measuring at this moment around the world? And in how many countries?
Esther Duflo: About 17 years ago we created a partnership which is really a network called J-PAL or the Jameel Poverty Action Lab, which now has an office in almost every continent. Well, not one in Antarctica yet. Many people from J-PAL are here. So maybe they can stand up to be visible.
Dr Roy: Anyone from J-PAL here? Wonderful job you're doing.
Esther Duflo: This is one of our oldest regional office. It is the biggest.
Dr Roy: So, you're about in 40 countries, or you've done studies in about 40 countries?
Abhijit Banerjee: 80 countries
Esther Duflo: We have done studies in about 80 countries, but India is where we have done most of the studies. And where our office is the biggest. So, we have about 200 permanent staff members. At any moment there are 1000 people in the field directly collecting data. At this point I hope they're eating their meal and getting their sleep.
Dr Roy: No, they're checking whether people watch NDTV on TV or not.
Esther Duflo: This is about the scale of the operation here in India. And we are working with the state governments in many states. In many states we have relationships from the top of the country to the bottom of the country. From east to west, across the political spectrum. Walking with civic society, with non-governmental organisations.
Dr Roy: It's a huge organisational exercise.
Esther Duflo: It is a big organisation.
Dr Roy: On top of being scientifically, statically very strong, you have to be rigorous, choose your samples very correctly. And your questionnaires. It's a very tough exercise. But that's what I love about it. And you're famous for saying, all I do is plumbing. This is a Nobel Prize for plumbing. But it makes such a difference to the world, that you know how to give immunization properly, how to motivate people in different ways by your studies. So plumbing matters.
Abhijit Banerjee: I think that in a sense, going back to your first question, I think plumbing is a lot what economics should be about. Which is, here's a problem. The toilet is choked. It's smelling, what do you do about it? And there are a few things we can do, before we call the plumber. You can try them out. And that particular mindset of assuming that the problem is well defined, the toilet is choked, and its solvable by a set of steps rather than by some philosophical gesture. I think that's an important part of what makes. ...
Dr Roy: Are you sure you are a Bengali? Because Bengalis would look philosophically at something.
Abhijit Banerjee: I am not actually a Bengali. I am half Maharashtrian.
Dr Roy: That explains everything.
Abhijit Banerjee: Ghati blood
Dr Roy: Ghati blood and Parisian genes. That becomes practical. But when you started in this world of economics and MIT and Harvard and the rest of the world, and you're saying I am a plumber and into data. It must've been a difficult start. Did people say things that...
Esther Duflo: I think within the world of economics, the word I would use to describe it is benign neglect.
Dr Roy: You faced benign neglect.
Esther Duflo: You can do whatever you want. I mean economists in that sense, because they tend to believe in people's preferences and are quite libertarian, will say if you want to waste your time doing that stuff why not. Nobody is going to stop you. There was more, in a sense, opposition to these ways of doing things.
Dr Roy: That is a tough thing to tell somebody.
Esther Duflo: And particularly when we came with results that were contrary to the intuition that people held, then that's where we got some people upset. For example, I worked on women as policy makers very early in my career, one of my first projects. I did this project with Raghabendra Chattopadhyay, where we looked at the impact of having women as the head of the panchayat. And we had a nationwide randomised controlled experiment in front of us because which village was reserved to elect a woman was randomly assigned. So, the first thing we had to do was fight with our field officers. Because they are saying "why are you wasting your time. These women are just puppets of their husbands. They're not talking. They're not doing anything. It can't make a difference. You should do some other project about something else that you would actually find something." And getting over that was our first fight with our own staff. Then we once had the first results, the purpose of this project was to show that these women actually do make a difference. They make different decisions. However shy and coy they might look like, but they are invested
Dr Roy: The actual policies were maybe a little bit, more pro women
Esther Duflo: Not little bit, lot bit. They were doing a lot, more different things. Because at some level they were still in charge. So, we saw, for example, a doubling in investment in water infrastructure. Which is of direct interest to the woman of the place.
Dr Roy: Benign neglect. I do remember when I first started my first election show on television. So, I was on a panel with some economists, and they said to me and Ashok Lahiri, you know there are these two people who are doing a little bit of data work. Can we ask them what they feel? Okay now shut up. That kind of thing. That sort of benign neglect. So, you got through that. But then, apart from plumbing, you also talk about, you do nudges. You create situations by nudging the circumstances. Like positive nudges and negative nudges. Explain what those are.
Abhijit Banerjee: Nudges are the idea that maybe a very small reward, or a small reminder or something that you think is going to be inconsequential, can have large consequences. Like the example we give in our previous book Poor Economics is on immunization. We were in Udaipur district. Udaipur district, the full immunization rate, which is getting children to have 5 shots, was at that point 2%.
Dr Roy: It's so important. Immunization can change lives.
Abhijit Banerjee: It's the cheapest way to save lives. And the full immunization rate was 2%. And we talked to everybody. And everybody knew the answer to why. There were the two views. The government does not deliver immunization. If you delivered it, everybody would take it. That was the view of the NGO sector. Of course, the government's view was these people are just backward. And they don't want immunization because they believe in jhaad-phoonk. So therefore, they're not going to do it. So, there were these two views. And of course, nobody bothered to look at the data. The data was already pretty clear. Because if you look at the full immunization rate, it was 2%. But the first shot, 85% got. So, if they really didn't believe immunization, why were they doing it? If the government was so incompetent why would 85%...how could they do it? So, neither of the stories could be true. But nonetheless, everybody was confident in their view that they knew the answer. What we did in a randomised control trial is we offered first, Seva Mandir is this wonderful NGO we have worked with in Udaipur, anyone who wanted to get immunized could get immunized. They did organize camps in the villages. And that increased the immunization rate, by that time in the controlled villages, the ones where we changed nothing, it had got up to 6%. From 6 to 17%. That was actually when you made sure that whenever you wanted it you could have it. We added to that the fact that if you get your child immunized, you get a kilo of dal every time you do it. If you do that it goes up to 36%. So that goes to 6%, to 36% which is an incredibly large increase. Mostly by the power of a kilo of dal. And of course, if you really passionately hate immunization, a kilo of dal should do nothing for you. If it is impossible to get immunized and that's why you don't do it and I have assured you that you can get it, that should do everything. So, a kilo of dal in that world can't matter. So, this is a classic nudge, something that is so small that everybody will say that this cannot matter. But, in fact it does.
Dr Roy: But it's such a huge impact and the important point is that by giving a kilo of dal, what does cost? But if your immunization goes up to 36%. The cost per immunized child is not higher. Is it?
Abhijit Banerjee: It's lower, including the price of dal. The cost per immunized child was lower when you give them the dal. Basically, the main cost is this guy who goes to the village to immunize. His time. So, once you've paid him, the extra children you attract, you're getting them very cheap basically.
Dr Roy: So you're reducing cost by making it a positive experience, you're going there, you're feeling a little happy about it. And you also found that mosquito nets, how you get people to use mosquito nets? It changes dramatically the amount of malaria that children get.
Esther Duflo: The idea that mosquito nets reduce malaria is a research done by doctors, by medical doctors, not by us. But towards the mid-2000s, 2008, the medical consensus was very clear that the best way we have now, of stopping the spread of malaria, is to distribute malaria nets as much as possible. but there was a big disagreement in the world into whether you should give them to people? Or whether you should ask them to pay for them
Dr Roy: Whether you give them in free or ask them to pay a little bit or how do you make people use mosquito nets?
Esther Duflo: In both cases the objective was the same. How do you get most nets out and effectively used? And, in both cases, you had a very strong intuition. On one hand you had the intuition that if people have to pay, they are less likely to get one, so you're going to get less nets out. That seems like intuition economics 101. On the other side there was a countervailing intuition, the problem is when you give someone a net for free, they really won't use it. They won't value it.
Dr Roy: They'll use it for fishing nets or something.
Esther Duflo: So, people were kind of fighting, intuition against intuition. The side which was in favour of selling them was winning and therefore most people had to pay for the nets. And this is where we, and this is where the research of Pascaline Dupas, who is a former student, asked me and said, well let's test this out. We can offer the net at various prices from zero to partial subsidies and see. Do we lose a lot of people by selling it, number one; and number two, if people have to get it for free, are they actually using it less effectively than if they pay for it? And what she found is that there's a huge drop in the number of people who get the net if they have to pay for it. On the other hand, the price doesn't influence use. So, on balance you might as well give them for free. And what is very interesting is that the fact won. And even people who were initially very sceptical about giving nets for free, kind of switched.
And what you saw, with detail in this book, is from 2010 a huge spread in the number of bed nets in malaria infested zones, particularly in Africa. As a result of which you see a huge decline exactly in those regions in the number of malaria cases.
Dr Roy: So, here are two examples whereby their kind of work, the different kind of economics they do, you're saving millions and millions of children's lives by immunization and by making people use mosquito nets. These are like two positives. Abhijit, if I may ask where you disproved something. In the micro-credit area, the whole revolution and there was a conventional wisdom that micro-credit has changed the whole countryside and is fantastic and you did actually test it and what did you find?
Abhijit Banerjee: That it was kind of okay. I mean it didn't ...People took micro-credit. They bought refrigerators. They probably ate better or watched television. They didn't get richer. So, the median person, the 90% who got micro-credit you can say precisely that nothing happened to their earnings.
Dr Roy: Now micro-credit, just to explain, is giving people small loans
Abhijit Banerjee: Correct
Dr Roy: Okay
Abhijit Banerjee: So, you give people you know $200-$300 loans. They take these loans and as the micro-credit industry insisted, they do repay, which is great for the micro-credit industry at least. It doesn't do anything for their standard of living.
Dr Roy: It's amazing
Abhijit Banerjee: No doubt, are happier to have their television, you know, now they are busy watching whatever, maybe soaps. I'm sure they all are watching NDTV right now. but whatever it is, it doesn't make them wealthier. Now there is a caveat to that. One other aspect of looking at the data is sometimes you figure out that what you said in 2011 isn't quite right. So, we said in 2011, very categorically and correctly, that it doesn't do anything for 90-95% of the population. But it turns out that the 5% who were the exceptions, do benefit from micro-credit. They are the ones, and we kind of know who they are, they are people who started a business before micro-credit showed up in their area. So, there were people who...
Dr Roy: Entrepreneurial
Abhijit Banerjee: Yes, and they didn't start their business because they had taken this easy loan which was available to them, they started a business because they wanted to start a business. Look at those people 10 years later, we keep following them, we see that they compared to the similar people who didn't get the loan. So, people who had a business before micro-credit but didn't get the loan, you see that between them there's a big difference. So, it does make a difference to people but it makes a difference to 5% and to the rest it...
Dr Roy: So, among entrepreneurial types, giving them a loan, micro-credit, does make a difference. But giving it to non-entrepreneurial types, it doesn't ruin their lives, it doesn't improve their lives.
Abhijit Banerjee: It might improve their lives. I think you know, we have a large loan, which we took to buy our house. It made us happier.
Dr Roy: That's irrational
Abhijit Banerjee: I don't grudge anybody their happiness.
Dr Roy: But economists generally grudge people's happiness.
Abhijit Banerjee: That's true
Dr Roy: No, but what's interesting in your finding out ...so how do you find which is the 5% that's entrepreneurial, you would like to give them the money, you use gossip?
Abhijit Banerjee: Kind of
NDTV: I mean that's shocking
Abhijit Banerjee: So our students, they did a study, basically what they did, was these guys were all businessmen and they were all in these micro-finance groups. And they go to these groups, these micro finance groups are basically, micro finance is often organised around groups where everybody meets once a week to make their weekly instalments on the loan or something. So, they knew each other, not very well but, and so they asked all of them to name who among them were the best entrepreneurs. And just to discourage the possibility that they might all say me, they said ....
Dr Roy: Except for you.
Abhijit Banerjee: ... name the person who everybody else thinks is the best entrepreneur. That's a good trick and then there was a prize for guessing the right person. It turns out many people guessed the same person. And so, what they did then was they took the people who nobody thought was good, the people that some thought were good, that's the middle, and the people that most people thought were good. And they put them into 3 groups. And, in each group, they gave some people, chosen at random, $100 as a gift. Why did they do that? To find out what do they do with this money? Does it make them richer? And it turns out, the people who everybody said were duds, were duds. Zero per cent return on the money. The people who everybody said were great got 20% per month, which is astronomical, on the same money
Dr Roy: Wow
Abhijit Banerjee: What's striking about that fact is that the market is failing so miserably. Here are people who everybody knows their background. Somehow, they are not getting the capital from the market. There is something happening here, I don't know what our bankers do here, but they don't seem to manage something very elementary which is, go ask who is the best guy here and give him a loan.
Dr Roy: So gossip works. There's internal information flow and people have filters and say, this guy is good at that and this guy is good at that or he is not good at that, but then ...
Esther Duflo: Can I add something to it?
Dr Roy: Yes, yes
Esther Duflo: So, I think this relates to something that we also take on in this book more generally, which is the good, the bad or the ugly of social networks. So, this is one powerful, positive use of the social network, which is that there is a lot of information that people have on each other that can be harnessed to make everyone's life better. Another example of the positive use of the social network is one that we use for immunization, to try to do an intervention that can be done at scale and with very little money. We harness the gossips in the community, which is we tried and went to see people in the network, in the village and said, hey if I have to spread some piece of information about an event or a fair in your village, whom should I go talk to? And the first fact of interest is that they all agree. For example, if you introspect in your dorm, in your social network, in your organisation, who is the gossip, you probably know and you agree. Who you go to talk to when you want something known or who you would avoid when you would rather something not known, so this we call 'the gossips'. Then we went to see the gossips and said, hey would you like to do a little something for your community? We are going to send you an SMS once a month. And then all you have to do, it's to remind you of the benefits of humanisation, all you have to do is to talk about it to other people. And most of our gossips were delighted to participate. It doesn't involve any payment or anything.
Dr Roy: They were looking for new topics
Esther Duflo: It turns out I like to talk, that's a new thing to talk about, I'll be happy to do that. So, when you do that, we did that again as part of an experiment, which we compared with the effect of giving people small incentives. In this context we did it in Haryana with cell phone minutes. And what is interesting you get the same effect.
Dr Roy: Cell phone minutes ....
Esther Duflo: Cell phone minutes, when people got immunized, they got cell phone minutes.
Dr Roy: When you go to immunization, you get cell phone minutes. It's like the lentils.
Esther Duflo: Because it turns out that, as the plumber, we realise that if you try to do dal at the scale of Haryana, it's not happening. Because the procuring of dal turns out to be a huge headache. Cell phone minutes are much neater to ....
Dr Roy: Dal across a whole country is tough.
Esther Duflo: It doesn't happen. In fact, one of our chief plumber friends, Santhosh Mathew who sits there, told that to me about 10 years ago, it is nice, your dal idea, but it is not really feasible on a very large scale. So, cell phone minutes turn out to be feasible. So, when you compare cell phone minutes to gossips, the gossips are just as effective if not a little more. And of course, they are free. So that's a good ....
Dr Roy: So, it's as effective as cell phone minutes almost, the gossips?
Abhijit Banerjee: Better
Dr Roy: Better?
Abhijit Banerjee: Marginally
Dr Roy: See what I love is that you can actually test and say this is better, that is better. That's worth the money. This is not worth the money. That's wonderful.
Esther Duflo: And you know, I really love immunization incentives. But I want to go back to the bad side of social network, because that's something we are also spending time on in the book. In the same way it can be harnessed for good, it can be harnessed for bad. In both, because there can be collective action that is actually designed to ostracise, that is designed to exclude, that is designed to enforce a norm that is against women. For example, it can also be a place where not only good information, but bad information, circulates and gets amplified such that everyone ends up having the wrong belief. So, one thing we spend a lot of time here is to discuss what has happened to the social network, real and virtual, in the world. And what we can do about it to turn them from being bad to being good.
Dr Roy: A last example before we start looking at the big picture from the data. Two things, one is very interesting for me as an election analyst. What we call hand-outs at political times. Which are actually asset transfers or you give people money to buy the girl child a bicycle. Or you just give money, the universal basic income. One, does that make people lazy?
Abhijit Banerjee: Absolutely no evidence that it does.
Dr Roy: And you've tested this?
Abhijit Banerjee: We've tested this across many countries, many different interventions, where people got different amount of money. Quite large amounts of money, quite small amounts of money. Sometimes the money comes with some encouragement too, so there are different variants of this. In all cases, the average effect on what we call labour supply, the number of hours worked, the number of days in the week you work or something, is basically zero.
Dr Roy: It doesn't go down, you give them money, they don't say we won't work tomorrow?
Abhijit Banerjee: In fact, in many cases we find that giving people money makes them more enthusiastic and more productive.
Dr Roy: Really?
Abhijit Banerjee: We did a study in Ghana where we actually set up a bag factory to measure productivity. We produced over 100,000 bags in the process. But that means we knew exactly what's happening to productivity. So, we could see that people who got a little bit of an extra gift were more enthusiastic and much more productive.
Dr Roy: That's amazing. So why should we call them hand-outs then? That's a very economist kind of word.
Abhijit Banerjee: I hate the word hand-outs. But also, it's a bigger point we make in the book. Which is I think, part of this ideology of treating people who are somehow not economically successful as moral failures, this is a Victorian ideology. Which I think we have continued to imbibe and economics is the flag bearer for that. I feel that's extremely costly. Because at some level the world is such an uncertain world. There's so much that happens to us that we have no control over. The Chinese export this, jobs go away. The exchange rate appreciates and jobs go away. Or new technologies have developed in America and jobs go away. All of that, how does one, why do we blame individuals for not
succeeding in a world where most of what's happening to them are like slings and arrows of outrageous fortune? So, I think be more sympathetic to people who have been hit by shocks. And not thinking of them as being people you're being generous to, despite what you should do or rather being grateful to them for not being more angry about what ....
Dr Roy: Your data shows that if you give, I think you call it TUP, Targeting the Ultra Poor, if you give them money or an asset like a couple of cows, they don't stop working. It improves their lives and they actually work harder.
Esther Duflo: This TUP programme actually goes beyond a money transfer. It is a productive asset combined with some help to use that asset. It was a programme that was designed by ....
Dr Roy: Assets like cows or something like that ...
Esther Duflo: Two cows or some goats or something to start a business. It is a project that was developed by the wonderful organisation BRAC, in Bangladesh. And this programme targets the poorest of the poor. And that's why it goes beyond giving them money and even beyond giving them just the asset. But it also gives them enough to get started with an asset. Give them the confidence to get started with their assets. This programme has been evaluated, first in Bangladesh, and then in seven or eight countries around the world. And in all the countries we found a very large effect in the medium term ....
Dr Roy: You really improve the lives of the poor.
Esther Duflo: You really improve the life of poor. Now in India we have been following this household for over 10 years. And ten years later, their incomes are still 25% larger than the incomes of those who didn't get the assets at the very beginning.
Dr Roy: So, one push lasts for 10 years.
Esther Duflo: At this point, I would assume presumably for even longer. Which is an enormous ....
Dr Roy: So, it's better than fiscal stimulus ....
Esther Duflo: Oh, it's an enormous return on your investment.
Dr Roy: So, coming to what's happening in India today. We are in a fairly deep economic crisis as everybody now accepts. What do you think, say a budget is coming up, what should the Finance Minister be doing to, say boost demand, which is really dying and re boost the economy?
Abhijit Banerjee: I would say first, no more cuts in corporate taxes. I think that was ....
Dr Roy: No more cuts in corporate taxes?
Abhijit Banerjee: I think the corporate sector is actually sitting on cash right now, it's not investing. The clear fact is that the corporate sector is not short on cash, it is not investing. Why is it not investing? Because every sign of the demand problem is there, you know you can see that. Basically, you talk to people in the corporate sector, say right now just, there's no market for what I want to sell. I think you have to get the demand side going and for that you need to get the money into the hands of the people who will spend it now, who need the money. Get the money in the hands of poor people I think, or poorer people.
Dr Roy: So, your studies, which are like very different to other economic studies, say actually give people money, cash. Directly give them money and then they'll spend it and you'll boost demand. Is that what you are saying?
Abhijit Banerjee: Yes, I'm not saying that this comes from our studies. To be honest I would say that our studies do show that when you give people cash, they spend it, but ....
Dr Roy: But it shows they don't get lazy.
Abhijit Banerjee: We don't actually give cash to billionaires and check if they spend it or not. So, I can't make the claim that I gave a lot of money to Mr Ambani and he didn't spend it, so there's a little bit of a stretch here. I'm going a step further ...
Dr Roy: But you found is give cash to the poorer and the lower sections, and they spend it and they don't get lazy, their productivity remains the same. The economy will grow as much if not more?
Abhijit Banerjee: Exactly. I'm sure there will be no people retiring because you gave them a small amount of money. Government is spending a little bit more ....
Dr Roy: So, I think that is a major signal which the Finance Minister should listen to, rather than tinker with tax rates etc. Give money.
Esther Duflo: In fact, thanks to the efforts of plumbing being done over the last few years, there have been plumbing efforts that make a policy like that feasible, because people do have bank accounts, there is actually a financial infrastructure that makes it possible to reach people. So, it is something that has been built ...
Abhijit Banerjee: This government has built it
Esther Duflo: ... that would be ready to kind of put into action.
Dr Roy: But there is one issue, that you have all these bank accounts and everybody has got them, and I have been around the villages during election time to find many old ladies saying, look I'm thrilled to get a thousand rupees a month cash, but when I go to the bank to get the money the teller says, "you give me five hundred, only then will I give you five hundred". They take five hundred kickback from an old lady. So, that last election, we actually, in the bank, called the bank manager and had the lady there and said, "look at what's happening, she gets a thousand but your people take five hundred" and he said "accha accha" and "line band ho gaya" disconnected.
Esther Duflo: That's a great and powerful example of again the plumbing issue, which is that, there is always one detail that you need to pay attention to, but again the advantage once you have bank accounts is that you can create alternative channels of delivery. You don't have to necessarily depend on the bank teller. You could have a lady sitting with portability and in their villages and in some in some states like Andhra Pradesh it has been done.
Dr Roy: So that is another, it's just a step to be addressed. Finally, before ....
Abhijit Banerjee: But it can be addressed
Dr Roy: But it can be addressed. Exactly. There's a lot happening in India. Lot of massive protests on the CAA, the act which decides whether you are a citizen or not, what do you make of this? Is that again out of fear, worry, you write about these factors in your book.
Abhijit Banerjee: I think, there's all kinds of issues there, I don't think it's my, I'm not a specialist there. Let me say one thing which worries me from my experience doing field work, is that when you have somebody with an enormous amount of power, the guy who decides whether or not you will be on this list or that list, he has a lot of power and so if he's going to say look I'm not sure that you're a proper citizen and forget about religion, he says it to ...
Dr Roy: He has the right to write on your form 'doubtful'. he has that power. Once he writes 'doubtful', you have to prove, go on endlessly and the backdrop is a detention camp. So, you have to go through a lot of torture to prove you're not 'doubtful'. You're saying that power is what worries you?
Abhijit Banerjee: Many things you could be worried about. I'm just saying that- that's one thing that just prima facie, if I were somebody living in a border district, I'd be petrified by that thought. And even if I were, you know, just the fact that somebody will come and say look I'm in charge of making this list, I could put 'doubtful' next to your name, I mean after all it is a border district, or I could not, and maybe you could pay me ten thousand rupees ....
Dr Roy: Then it'll be fine ...
Abhijit Banerjee: I mean the governance challenge there is very significant.
Dr Roy: So, what you're saying is that the power, there's too much governance, and the power to decide these things is in the hands of an individual. And if he doesn't like you, your religion, you need not be Hindu, you need not be Muslim, you could be Christian and they'll say we'll put you "doubtful", you may not pay money ...
Abhijit Banerjee: I'm at least as worried about everything else, just abuses of power in general. It seems to me, we should worry about creating structures of the state where people, you have so much to lose if you're not a citizen of India and no other country wants you, who are you? I think at that point creating power structures that make you so vulnerable means you could be extorted in many different ways. I do think as a governance problem it's a very frightening one.
Dr Roy: Last thing on this, so it is not just religion you said. That means if you are say a Hindu, and if you are really opposing the government in your area, or opposing the local authorities, they may take it out on you in this way, not only Muslims or Christians should worry. Everybody should worry, just by this governance.
Abhijit Banerjee: Yes, it gives power to some people to take decisions that can have massive consequences for your life. I think those decisions are, we need to be extremely careful in designing institutions to make those decisions. They should not be made by kind of quick acts of Parliament. That's the worry.
Dr Roy: Shall we take questions? Ah, so many questions. That's a good sign. Your name and your question.
Priyanka: A very good evening to both of you, I am Priyanka. I am very curious to know how do you put a time frame on your RCTs because I understand social complex problems take some time to reflect the real outcomes. And how do you justify that whatever time frame you have put to your RCTs are real, you know, they are justifying your studies?
Abhijit Banerjee: One thing we don't do is claim that we know the absolute perfect truth. You have to take a decision at some point. The reason why you have to put a timeframe is not because you know you have some absolute notion that this is the right time frame. It's because you know that there's a compulsion to take decisions and so, you know, if you don't provide any evidence then the decision will be taken without any evidence. Some evidence is better than no evidence, so I think we are fully aware of the fact that maybe after seventeen years the tide will turn and go the other way. And indeed, sure in some cases it happens, but I don't see a way to wait for that long. I mean I think there is a compulsion of having some answer and I think the evidence we generate is still useful.
Dr Roy: Back there, go ahead.
Audience member 1: Good evening Ma'am and Sir. My question is, what are your views on farm loan waivers and what impact do they have on Indian economy?
Dr Roy: Farm loan waivers, what is your view and what's the impact?
Abhijit Banerjee: I mean farm loan waivers are, I'll tell you what I, let me not answer exactly that question, but answer slightly relatable, I think, a more fundamental question. I think one reason why farm loan waivers are used is that we actually have a very, still I think a very, underdeveloped machinery for providing support to people who are in distress. You don't have, this is what we are saying right at the end, developing a welfare system where if you can predict that in this particular area the rainfall has failed for three years in a row, a lot of people will be in distress, let's give them some help, after all this is not in their control. That's something we can't do easily. So, what we do instead is to use these klutzy instruments like farm loan waivers, which are really inefficient ways and unfair ways to compensate people. Somebody who didn't take a loan doesn't get compensation, but it's a way to get money to some people, some of those people. So, I think one thing we need to focus on is developing more efficient machinery, so that all the people and not just those who have taken loans can be compensated.
Dr Roy: There
Riya: Hello Sir, hello Ma'am, my name is Riya and, you guys are such a huge inspiration to me personally and a lot of my peers, because we got into economics hoping that we can make a difference in the world. And you both sitting here are the biggest examples of how that is possible.
Abhijit Banerjee: You are very kind to say that. I am not sure that's true.
Dr Roy: She meant relatively
Abhijit Banerjee: Relative to all those economists who do monetary policy
Riya: Professor Duflo is one of my biggest inspirations.
Esther Duflo: See it was me not you that's why.
Dr Roy: That's right
Abhijit Banerjee: I was agreeing. Had she only mentioned you, I would have agreed.
Riya: So, my question is related to two Latin American countries which are Brazil and Mexico. So, both of them have programmes, Mexico has 'Prospera' or what at some point was probably known as 'Prospera' and the 'Bolsa Familia' in Brazil. Now these are programmes that are extremely complex, in the sense that they have some conditional cash transfers, there are aspects related to how households have certain outcomes that they need to show in order to get those or maintain those kinds of assistance. What I have understood so far is that we can alter in RCTs, we can alter one or two things. So, in a situation where you have more than three or four things to evaluate, how do you design this kind of RCT? What kind of control groups do you have? And how do you basically evaluate those kinds for programmes that are that complicated?
Esther Duflo: That's a great question so 'Prospera' was kind of a really important programme, both because it was kind of a very solid attempt of putting actually a lot of money in the hands of the poor. There was a lot of opposition of doing that at the time and it was kind of a brilliant political move at the time by Santiago Levy, the architect of the programme to say, "Oh! But I am not just going to give them the money, I'm going to make them work for it through these conditional cash transfers". And I think a part of him believed in it, the conditionality, and part of him also kind of said it quite explicitly that it was a way to build consensus for the programme. The other reason why 'Prospera' was very important is that he got an evaluation of it. And this in fact started in 1997, at the first big government run RCT in a developing country, and in that sense a game changer, because it showed to others that it could be done. It is not just some nutty academic like Michael Kremer or Abhijit Banerjee who do it. It can actually be done by government. For example, I was working on a programme in Morocco where we did a version of the programme that had all bells and whistles and the conditionality etc and one version that just gave the money and said "by the way this is to help your kids go to school". And there was no conditionality attached to it but it was just presented as, 'it might help your kids go to school'. And we found slightly better effect than the conditional version. In part because it avoided discouraging some people to even try, and then people kind of replicated these types of things, so we now know that maybe the conditionality is not that important, but maybe labelling it is sufficient to get enough of a nudge without having this very complicated, expensive administrative system. So little by little, project by project, you kind of build the evidence base. It's not done in one big swoop. Although sometimes people can go on and do one big experiment where there's lots and lots of different treatments that can then be compared. But typically, it comes after you have some idea of how your package is working and then you unpack them. Or some idea of how one component is working and then you put it inside a package.
Dr Roy: The one with the, whoever looks most enthusiastic. Here somebody is waving
Esther Duflo: Yes, someone is waving behind
Audience member 2: Firstly, congratulations for the Nobel win. My question is that, I spent three years learning economics, Keynes, Marx, all these guys. And now here come a bunch of economists who say that you know, data is the new thing. So, my question is that, what is the relevance of economic theory in an age of data science? Because you disprove Stolper Samuelson Theorem in your third chapter maybe, but that was the staple diet for us as BA students, but now that's gone. So, what should we do?
Dr Roy: You're ruining people's lives. You realize that?
Audience member 2: So, my question, being very specific, is that what is the relevance of economic theory in an age of data science?
Abhijit Banerjee: You can't disprove something if it's not claimed. So, I think the only way we learn is by building narratives and then some of them get proved and some get disproved. If you didn't know the Stolper Samuelson Theorem we could not disprove it, so I think that's the nature of progress.
Audience member 2: So, it's still relevant?
Abhijit Banerjee: Yes
Dr Roy: Feeling better?
Audience member 3: Hi, I remember reading both of your works in 2013 in my graduate studies and my professor clearly mentioned saying, you will win the Nobel prize and she kind of got it right. I personally work in climate change, so I have a larger question and a much more specific question to your work. The larger question is the dichotomy between growth and sustainability that people in the 'saving the world business' struggle with, so your opinion on it?
Esther Duflo: So, some of our colleagues talk about what you are talking about, the argument between sustainability and growth as the Green Peace answer in not very positive terms. And we took back in our chapter on climate change, we have a chapter on climate change in the book, and we took back that Green Peace answer and said, maybe we are just lucky enough and technology will improve sufficiently that we can continue to consume more in the rich countries, as well as have the necessary improvement in the living standard in the poor countries and everything will be fine ever after, because we all will be powered by clean stuff etc. But then maybe not. And maybe the Green Peace answer is correct and maybe there is going to be a need for consuming differently, or maybe consuming less in the rich countries, particularly as in the poor countries the consumption levels need to go up because it's about real bottom line quality of life. But then what you are saying is that, look even though we discussed today about taking peoples' preferences seriously, one thing we also talk about in the book is maybe we shouldn't take them too seriously.
One problem Economists have about anything like the Green Peace answer is that oh, it would make people in the US so sad to consume less air conditioning and to have smaller cars and to drive the train to work instead of driving their car. But then you know maybe not, because maybe they are consuming this way because that's the way they are used to. Maybe they are consuming this way because this is the way their friends are doing. Maybe they are consuming this way because that's what the TV tells them is the right thing to do and maybe these preferences can be changed. And in fact, there is plenty of evidence from experiments and from non-experiments that we are creatures of habit and we can change the way we consume. And we are social creatures and what other people do and what we see on television etc, influences what we do. And therefore, it is possible to get the Green Peace answer without making people in Texas actually miserable as a result of it.
Dr Roy: One of the things you just mentioned, which actually worries me a lot, if I may ask you a question. You say, you tend to suggest that television does have an impact. That really worries me. You had some experiments with sitcoms and that really changed people's lives. If television does change people's lives, it is deeply worrying isn't it? You are meant to say no, no, no.
Abhijit Banerjee: I'm going to, unfortunately have no RCT so far on the impact of our discussion on high economic issues so ...
Dr Roy: Thank God.
Abhijit Banerjee: ... no doubt that would make people much better off. But what I do know is that we have now several examples of either soaps or sitcoms and looking at their effects on people's lifestyle changes, and in particular lifestyle changes which have a lot to do with you know, for example HIV and safe sex. So, we have a study in Nigeria where we basically worked with MTV and MTV made this really quite well produced soap called Shuga. What Shuga does, it doesn't talk about HIV, kind of doesn't lecture people about it, it kind of gets the viewers involved in the lives of the people and suddenly confronts them with the fears that HIV brings to them. So, there is this scene where you know, this guy is waiting. He is finally frightened and he's gone to get tested and he's waiting for his test results and that's a scene which is extremely powerful and lots of the viewers end up reacting to that and saying, look you know maybe we should take this seriously. So, I think one thing television does ....
Dr Roy: So, it had an impact on people's behaviour?
Abhijit Banerjee: Very powerfully is it takes away that layer of, "okay, ya we've heard that, don't lecture us." This is not lecturing. It's getting you into a situation where you haven't thought about it, but because you identify with the characters it brings you to that situation. And when it brings it to you, you sort of react by saying "oh my God! I should have actually, should actually take it seriously." We find this has been found in a number of different countries.
Dr Roy: So, maybe Bollywood films, which are fairly progressive generally compared to television, would have an impact?
Abhijit Banerjee: I think my guess is that they've had an impact. I just haven't quite got a Bollywood producer to agree to randomize.
Dr Roy: I'm sure you could. Sorry, yes Ma'am.
Audience member 4: Good evening and thank you to all three of you on the stage for the wonderful evening. My question is more on the actionable part of the research conducted. So, in cases where the policy makers have a lack of focus on the issues concerned, how do you transcend from the results being accumulated from the data collected into it actually benefitting the concerned people?
Dr Roy: Good question
Esther Duflo: So, first of all that's a great question and it, in fact, is the heart of what we do, because the tagline of JPAL is translating research into action. So, we both, from our different paths, as well as many people who work in JPAL, came into this particular way of doing work because we wanted to affect the lives of very many people. Not just understand their lives, although we would like to do that as well. But we see that those two things are going together. So, I think, we learn a little bit over all the years how this happened and that it's not like a drug, where you do your trial and then put it to market and you are hoping the best, policy making is not like that. One way in which it really happens is often the research itself is done with policy maker directly. For example, Santhosh Mathew we see sitting here, we have been working with him ...
Dr Roy: Santhosh Mathew please stand up. He has made a huge transformation in plumbing. Master plumber, Delhi School of Economics
Esther Duflo: Santhosh Mathew, master plumber, who was, for many, years in the government. We worked with him on the problems that he was facing in the implementation of the major programme that he was running at the time, the LAGA programme. And that's one example, actually one of many, and in that case the kind of policy making and the research go together, which doesn't mean there is no ebbs and flows. God knows there are setbacks. But then it, kind of leads its life inside the process. We have had similar experience with police departments in Rajasthan, working with Nina Singh. We've got similar experience with the Haryana government. We discussed the immunisation work directly with them to address their requests. So, then the two things don't get mixed up. When we have done work that was initially outside, for example, like our work with Pratham on remedial education started completely outside and then kind of found where to get embedded within the government. And that is all a process that has many twists and turns. That's not very linear. Not so much because of lack of focus on policy makers, but because we get a lot of things wrong. Policy makers get a lot of things wrong because of what is their actual power on the people they work with, of what people would react to. So, there are many things to learn that is about the actual implementation of an idea at scale, which is itself kind of one more layer of work. But this work, once you are willing to be patient, then it sort of happens. Not in any kind of flash of conversion.
Dr Roy: They are not always resistant. Because they also want to gain from improving things, is that right?
Esther Duflo: No, absolutely. And in fact, this is something that has definitely changed dramatically over the last ....
Dr Roy: It is for their self-interest also
Esther Duflo: ... over the last 2 decades, both in India and elsewhere in the world. That there is just much more interest at various levels of policy, from the very top to the very smaller level. Because people see that, this is kind of quite useful. We are also not so much into lecturing and more into working together and figure out what the issues are and incorporating what we might know from elsewhere.
Dr Roy: So, you don't find resistance all the time?
Abhijit Banerjee: No, not really, often what we find, which is also frustrating, is they say, "yes, we don't have any time. We agree with you. We don't have time to do it, can you come and do it for us?" That's a little bit awkward because we are not really designed to move to Patna and live the rest of our life there. So, it turns out you know, difficult thing to pull off.
Dr Roy: But at least they say do it for us, so then you can have a team.
Abhijit Banerjee: But then what we've tried to do in JPAL, is to create a facility where somebody, a policy maker who wants to actually implement a policy change, we can help them recruit and even pay for somebody to work with them to do that task.
Dr Roy: You can design the whole thing?
Abhijit Banerjee: Not just design, also be the man Friday who is going to; any policy changes, answering seventy questions in Parliament and, you know, writing 87 memos and power points and all that. So, we often provide people. Santhosh had somebody like that in MHRD.
Dr Roy: Right
Ravi: I am a law student, final year law student. My name is Ravi. My question is regarding, we were siding with Rawls when we said we should provide primary goods and then I think the critique by Amartya Sen, already pointed out by Professor Banerjee, that we see the capability, like if we give the micro-loan to two lead people, but one might be able to use it in a better way and one might not be able to. So, then your data says that providing primary goods is effective, so how do we reconcile the critique with what your data says, and what John Rawls said, by providing primary goods with education? And how do we procure data to determine capability, for which we use gossip or social networking, and in a big country like India how do you establish a system to understand capability and how do you reconcile that?
Abhijit Banerjee: I think you are making a very good point. But I think, one shouldn't also aim too high. I think the idea that we are going to design a policy for everybody, which will be tailored to their needs, is a little maybe Panglossian. So, I would say one thing that for a country like India, precisely because we don't know what everybody needs and, but we know that being desperately poor to the point where you can't feed your children, is not a reasonable outcome for a society. Nobody should have to face that. So, I think having a basic kind of a social minimum net is important and then I think we can design programmes where there is some amount of self-selection. One of the things that microfinance did, which was maybe less helpful, is that they decided they would actually gather no information. Anybody who wants it can get a loan. Now you could do other things, you could say, look we are going to come, and one idea we had proposed many, many years ago was to hire a local cost accountant and send them to the businesses and tell us, do you think you have been working here, dealing with these businesses for such a long time, tell us if this looks like a good business or not. We don't do things like that. The bankers' world I am afraid lives entirely outside the world, the real world of small businesses. And therefore, these ideas, where you have to bridge that gap, really never get tested, so we never got a chance to test that because no one really wants to touch it. So, I do think that we can tailor things, not perfectly, not even remotely perfectly. But I do think that there is a lot more than we actually do that can be done.
Dr Roy: So, we're running out of time, but I thought I would give both of them a chance which they have never had before. You always wanted to ask Esther that one question, now is your chance. And you can ask a question, after you have answered his question. One question which you have always wanted to, but never had a chance, now is your chance, What's the question you want to ask Esther?
Abhijit Banerjee: I cook dinner every day, what is the dish you like the least of all the dishes that I cook?
Dr Roy: The whole series or only one?
Abhijit Banerjee: What she likes the least, so it's well defined.
Esther Duflo: I think that's a fake question because he knows that when I don't like something, I say it. And so, he actually perfectly knows what I like.
Dr Roy: Which is the worst?
Abhijit Banerjee: What is the worst?
Dr Roy: Which is the worst?
Esther Duflo: Again, that's a fake question. You know I don't really like chicken.
Dr Roy: Chicken
Esther Duflo: Because I am saying it, but he still manages to kind of come in and say yes, you can like chicken.
Dr Roy: But he's been wanting to ask you for a long time. What's your question that you've always wanted to ask him?
Esther Duflo: You know, this is kind of related to my answer to this question, I don't really have one.
Dr Roy: What?
Esther Duflo: I think one way in which our relationship works is that we are both reasonably transparent and blunt with each other and with other people.
Dr Roy: Any question. Any question then.
Esther Duflo: What do I ask him? I think if I have a question, I just ask him.
Dr Roy: Go for it
Abhijit Banerjee: It's already been asked
Esther Duflo: I can tell you one of the first questions I asked him. Much before I knew him personally, when he was a Professor and I was a student, which was, "can you be a development economist if you're not Indian?"
Abhijit Banerjee: No, she's lying. She asked if you can be a development economist if you're not South Asian?
Dr Roy: South Asian?
Abhijit Banerjee: She was allowing Pakistanis
Dr Roy: What was your answer to that?
Abhijit Banerjee: I think there's some evidence that ....
Dr Roy: It was obviously the right question
Esther Duflo: He said, "of course you can." And then maybe I was always wondering whether it was a polite thing to say.
Dr Roy: Right. Thank you very much indeed. We completely ran out of time. We could have gone on for another five hours it was just fascinating. Thank you, thank you very much.