The new gold standard in development economics? (Randomised Control Trials - RCTs)

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 The new gold standard in development economics? (Randomised Control Trials - RCTs)

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• 20 yrs of development economics : The use of RCTs (randomised control trials) has changed the flavour of development economics. The "Randomistas" support the idea of using RCTs to assess long-run economic productivity and living standards in poor nations. (Randomistas = the 3 Nobel winners for 2019 in Economic sciences)
• What makes up an RCT : Two elements make up an RCT – Control and Randomisation.

1. Control – either a treatment is given to a group, or nothing given at all
2. Randomisation – subjects are allocated randomly, with no one knowing who goes in which group

• 1996 clinical trial on AZT : The antiretroviral therapy AZT had to be clinically tested, for risk reduction in mother-to-infant HIV transmission.

1. Random groups of pregnant mothers, heterogeneous in nature, were made.
2. 238 got AZT, and 238 got a placebo.
3. 20 newborns were HIV-positive in first group (that got AZT) and 60 were HIV-positive in the second. So AZT was effective.

• Applying statistics : British statistician Sir Ronald Fisher devised RCT a 100 years ago, largely for agriculture etc. Social science came in much later. In 1960s, RCTs were applied to clinical trials.
• Social sciences : As experts found RCTs doable and effective in social settings, the science changed from non-experimental to experimental. Across 83 countries (India, Kenya etc.), more than 1000 RCTs were conducted by the "randomistas".
• Subjects under study : Microfinance, health care, immigration programmes, gender inequality etc. were studied.
• Finnish experiment : Finland did a Basic Income experiment in 2017 on 2000 unemployed Finns aged 25-58 yrs, randomly selected. They were paid 560 euros/month, and not unemployment benefits. Results showed it had no impact.
• Criticism : Many say that a broader problem is chopped into smaller ones, to apply RCT, rendering the outcome questionable.
• Useful in clinical trials : Since doctor and patients never know what treatment they're getting, all bias is eliminated while experimenting. ('blinding' helps avoid any influence on possible outcomes) But such blinding is not possible in economic experiments as participants know for sure what they're getting! So randomisation has a lesser impact in social sciences as compared to clinical trials, and critics must remember this.
• Apply RCT : There is little doubt that applying RCT to economics helps, despite the baggage and shortcomings.
• Summary : Randomised control trials, though far from perfect, are helping social sciences adopt experimentation, and leverage the power of statistics for meaningful policymaking.

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