Dr Conny Wollbrant, Associate Professor, Division of Economics and Director, Behavioural Science Centre, Stirling Management School

Dr Mirko Moro, Associate Professor, Division of Economics, and Behavioural Science Centre, Stirling Management School

This year’s Nobel Memorial Prize was awarded to Abhijit Banerjee, Esther Duflo and Michael Kremer, for their work on reducing poverty in developing countries using field experiments. Poverty and development remain important but daunting tasks. Rather than relying on preconceived notions to address these enormous problems, this years’ Laureates have applied the experimental method to tests specific interventions in real-life settings. The researchers randomly assign individuals or groups to “treatment” and control groups, exactly as in a clinical trial, where the efficiency of a drug (“treatment”) is tested.  

Development Economics has increasingly been applying such field experiments, also known as Randomised Control Trials, to unpack problems one by one in order to understand what works. Instead of attempting to answer “big questions” such as “does international aid work,” or “what makes us healthy”, these studies focus on “smaller”, more specific issues to identify targets, which can be measured more precisely. 

This approach is employed by many economists to study a variety of issues with profound economic consequences. The University of Stirling’s Behavioural Science Centre is currently implementing an experiment to increase blood donations in Sweden. Three different invitation messages are sent by email to randomly generated group of registered donors, each addressing one potential reason for why people often do not attend clinics. The outcome of this trial will inform Swedish Blood Transfusion services of the most promising content of their invitations and shed light on the downwards trend in blood donations observed across the world, potentially helping to reverse it. 

The value of experimentation

 In many cases, well-constructed experiments can also tell us why interventions work, because they reveal how people in an experiment respond in real life under “business as usual” conditions. Experiments have for example shown that merely increasing resources for education does not improve attainment unless complemented with an understanding of what specific difficulties school children face at their level of development.

This experimental approach is not without its limitations and critics. Some argue these studies focus on “small” issues that on their own cannot lead entire countries out of poverty and onto a sustainable growth path.

Experiments cannot engage with more systemic issues, as researchers are unable to manufacture different types of democracies or different degrees of income distribution. As social scientists, we should not shy away from big questions. However, these questions seem complementary to policy design that improves lives, albeit incrementally.

Profound reasons may be linked to cervical cancer being one of the most common in women worldwide. However, research undertaken by one Stirling MSc student has demonstrated that one intervention – the introduction of a new text messaging reminder service – could increase cervical cancer screening attendance in Iceland by 5%. In this sense, even small changes save lives.

Questioning received wisdoms

This years’ prize also demonstrates that some of the ideas and theories we hold dear may not work once implemented. Some policies may not work at all, some may turn out prohibitively expensive and some may not scale up. In some cases, iterative experimentation can lead to gradual implementation through learning-by-doing. In other cases, policies can be abandoned at an early stage, thus releasing scarce resources for promising alternatives.

Economics is fundamentally about human well-being and asks how we can get the most out of what we have. In the face of limited resources, what can be done to solve environmental crises such as global plastic pollution or reduce flood risk in developing countries? How can cash transfers, such as the Winter Fuel Payment, achieve the intended outcome and make people healthier?

To answer some of these questions, we construct surveys that help us understand individual choices that can lead to environments, and healthy food and healthier lives, and provide a barometer on the emerging challenges faced by ageing societies.

Research undertaken at the University of Stirling’s Behavioural Science Centre investigates the underlying behavioural mechanisms of choices in order to improve model predictions of human behaviour. For example, studies of life expectancy or the foundations of altruism can both explain behaviour and inform policies and interventions for improvement. Recent work demonstrates how estimates of life expectancy is sensitive to the framing of the question and how small incentives intended to increase pro-environmental behaviour can backfire and ultimately increase littering rather than reduce it.

The awarding of this year’s prize is a welcome endorsement of the important role that behavioural economics can play in shaping effective policy interventions. We sincerely hope that this award will lend momentum to wider applications of experimental methods in policy-making, to find out what works, what doesn’t, and what can make a genuine difference to people’s lives.