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Nobel Prize, RCTs, and Cookies in Class

Banerjee, Duflo, and Kremer are three economists that just won the Nobel Prize in Economics for their work in development economics. Specifically, they won the award for their practical application of theory to discover what actually works and what does not work to help improve the lives of those in developing countries.

To do that, they developed and conducted Randomized Control Trials (or RCTs) in Africa, India, and other places. They examined effects of interventions in schools on test performance, microfinance programs on wellbeing, prices for healthcare on usage, and more. While these three economist had many other co-authors on their various papers, they are attributed with leading a change in development economics to where it is today with the widespread use of RCTs.

So, what is a Randomized Control Trial, or as we call it an RCT?

First, think of a science lab experiment. If a scientist wants to see the effect of a drug, for example, she would inject that drug into one cell but not another. Then she would then study the differences in the two cells over time. The only difference in the two cells should be the effect of the drug.

The idea is similar for an RCT in social sciences. You take one group of people and do something to them and the other group you keep as your control. To be clear, by “do something” to them, I don’t mean medically. I mean you give them textbooks, access to loans, incentives for teachers to show up to school, or something like that. Properly doing an RCT is difficult. You need to ensure that your control versus treatment groups look very similar. If not, then it could be differences in populations that drive any result. You also have to make sure that there is not something else that varies simultaneously with the treatment that could be driving the result. That’s why the “randomization” is so important.

To give you a concrete example, a few researchers in the Germany (not the ones that won the Nobel Prize) did an RCT at a medical school to study the impact of giving some students cookies in class on student evaluations. (No, I’m not making this up -