Monday, May 30, 2011

MIT Macro Panel: Duflo

Esther Duflo, a renowned MIT economics who works on development, also presented at the Macroeconomics Panel. Her main point was that asking big general questions such as "does aid work" is pointless because there is no way to empirically prove one way or another. Instead, she asks "what individual aid programs work?" She mentioned Avinash Dixit, who is another MIT economist who specializes more in econometrics, who seems to have influenced her a great deal. He had coined "MIT style theory" which seems to be modeling by example.

She had an interesting example of mosquito net use in Africa (I think Kenya). The question was whether to give away mosquito nets for free or to charge for them. Many were concerned that because of the "sunk cost fallacy" if people paid for them, they were more likely to use them as intended rather than as fishing nets or other uses. Also, if they got nets for free, they may be less likely to pay for nets in the future. However, the research showed that participation in using nets were much better when they were free, and furthermore that people were more likely to buy them in the future if they got the first one for free.

No comments: