Which development initiatives work and which do not? It is a simple question, but there has been surprisingly little attempt to answer it rigorously. Over the past decade, some economists have been trying to change this. They are applying a tool long used in the pharmaceutical world—randomized control trials (RCTs)—to evaluate the real impact of programs intended to help people.
I hosted Dean Karlan, a professor of economics at Yale and a practitioner of randomized control trials, for a meeting last week at CFR. Karlan is also the co-author of a new book, More Than Good Intentions: How a New Economics Is Helping To Solve Global Poverty. In the book, he and his co-author, Jacob Appel, review dozens of RCTs—some they conducted, some done by others—that test the effectiveness of various ways to improve the lives of the poor around the world. Some of the results are offbeat: one study in South Africa showed that simply putting a picture of an attractive woman on a consumer loan brochure caused more men to apply for loans. As Karlan and Appel write in the book, “Surely no customer would say that his decision to borrow boiled down to the picture in the corner of his pamphlet, but there it was in the data, clear as day.” Other studies deal with weightier subjects: an RCT in Mexico, for example, established that the Progresa program, a conditional cash transfer scheme in which poor families receive payments in exchange for getting regular medical care, had a strong positive impact on recipients’ health.
At the end of the book, Karlan and Appel lay out “Seven Ideas That Work.” During our meeting, Karlan offered up his top three picks. First is deworming. In places where kids are sickened by worms living in their gut, giving them an inexpensive pill not only makes them healthy by eliminating the worms, but also significantly boosts school attendance. Kids who received deworming pills in a study in Kenya had 20-30 percent higher incomes as adults, just from being able to attend school more. The second big idea is microsavings, small savings accounts that are accessible to the poor. Karlan and Appel argue that microsavings—not microcredit—might be the most potent financial service to improve the lives of poor people, especially women. And they advocate various innovations to promote savings, such as text message reminders to make monthly deposits and commitment accounts, which can (among other options) lock up savings until the depositor’s goal amount is reached. Finally, the third idea is chlorine dispensers at water collection points. Karlan and Appel review a study from Kenya showing that these dispensers are a cost-effective way to encourage people to disinfect their water, thereby combating diarrhea.
The book is careful to note that even the “Ideas That Work” are not all “conclusively proven and above reproach.” More study is needed to determine the best approach to development challenges. And context remains important: what works in one setting may fall short in another. Either way, More Than Good Intentions offers a rich trove of data with important implications for microfinance, agriculture, education, and health. I recommend it along with another new book by Abhijit Banerjee and Esther Duflo, two other development economists who are also RCT proponents. Their volume, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, makes an interesting read alongside Karlan and Appel’s.