The academy’s decision to honor work dedicated to fighting poverty, which it said is among today’s most “urgent issues,” comes as inequality grows into one of the most widely debated topics in the field of economics amid a rapid rise in income disparity over the past decades. Last year, the academy rewarded research that incorporated climate issues and technological advancement into economics.
Duflo is the second woman and the youngest person ever to win the economics prize, which has existed for half a century. In 2010, she won the John Bates Clark medal, after being identified as the economist under the age of 40 who contributed most to the profession.
Science vs Caricatures
“Our goal is to make sure the fight against poverty is based on scientific evidence,” Duflo said in a webcast phone call with journalists. “It starts from the idea that often the poor are reduced to caricatures, and often even people who try to help them don’t actually understand the deep roots of the problems they are addressing.”
The academy said the three laureates helped shape a new approach to fighting poverty by splitting the issue into smaller and more manageable questions, bringing field experiments into the mix and studying productivity levels within developing countries.
Incorporating contract theory and behavioral economics, their research has included how to improve school results in Kenya and India, studies on micro financing, price sensitivity to health-care costs and lifting vaccination rates, helping hundreds of millions of people.
Kremer has a PhD from Harvard and is the Gates Professor of Developing Societies at the university. He has helped develop the advance market commitment for vaccines, a program to stimulate private investment and distribution in the developing world. In 2010, he was the founding Scientific Director of Development Innovation Ventures at USAID.
Banerjee, who also got his PhD from Harvard, is now the Ford Foundation International Professor of Economics at MIT. In 2003, he founded the Abdul Latif Jameel Poverty Action Lab, along with Duflo and Sendhil Mullainathan. He’s the author of four books, including Poor Economics, which he wrote with Duflo.
Duflo said receiving the prize was “humbling,” in part because of her age. The award is a reflection of “incredible collective work” and the three winners represent “hundreds of researchers who are part of a network that work on global poverty,” she said.
The theories that winners develop often take on a different status after a Nobel is handed out, which can result in greater influence on areas such as government policy and investment strategies. Last year’s prize went to William D. Nordhaus of Yale University and Paul M. Romer of the Stern School of Business in New York for bringing long-term thinking on climate issues and technological innovation into the field of economics.
Previous laureates have included Milton Friedman, Paul Krugman, Eugene F. Fama and Friedrich August von Hayek. In 2009, three years before her death, Elinor Ostrom made history when she became the first woman to receive a Nobel in economics, which she shared with Oliver Williamson for their research into the limits of markets and how organizations work.
Annual prizes for achievements in physics, chemistry, medicine, peace and literature were established in the will of Alfred Nobel, the Swedish inventor of dynamite who died in 1896. The prize in economic sciences was added by Sweden’s central bank in 1968.
Each award carries with it a cash prize of 9 million kronor ($917,000). Due to the depreciation in the Swedish krona, the dollar value of the prize has fallen by about 30% over the past decade. The economics prize completes this year’s cycle of Nobels.