Nobel Prize winner Michael Kremer thinks economics can better the world | DW Interview

Summary

In this conversation, Nobel laureate Michael Kramer discusses his groundbreaking work in experimental economics, particularly in alleviating global poverty. He explores how breaking down large issues into smaller, testable questions through field experiments can provide actionable solutions. Kramer addresses the challenges of incentivizing companies to act for the greater good, shares insights from his research on health, climate change, and agriculture, and proposes innovative approaches like advanced market commitments. He also highlights the role of experimental economics in shaping future policies and improving global development outcomes.

Takeaways

• 😀 Michael Kramer and his colleagues were awarded the Nobel Prize in 2019 for their experimental approach to alleviating global poverty.
• 😀 Their research shows that breaking down large issues like poverty into smaller questions and conducting field experiments can lead to effective solutions.
• 😀 Companies are often motivated by commercial incentives, and shifting their focus to broader societal benefits, such as donating drugs, can be encouraged through the right incentives.
• 😀 The commercial incentives needed to develop products for diseases affecting low-income countries are often insufficient, but initiatives like advanced market commitments can help bridge this gap.
• 😀 The advanced market commitment approach helped develop and distribute vaccines for diseases like pneumococcal disease, saving hundreds of thousands of lives in low-income countries.
• 😀 The COVID-19 vaccine rollout highlighted the stark inequities between developed and developing countries, emphasizing the need for better distribution models in future pandemics.
• 😀 Climate change is an area where economic growth and environmental protection can go hand-in-hand through innovative solutions like weather forecasting to help farmers adapt to changing conditions.
• 😀 By providing weather forecasts to farmers, especially in countries like India, we can dramatically increase agricultural productivity, which benefits both the economy and the environment.
• 😀 Fertilizer use in sub-Saharan Africa presents a complicated challenge, where subsidies can sometimes benefit wealthier farmers, but alternative approaches, like environmental services payments, show promise.
• 😀 Michael Kramer highlights the potential of AI and technology to improve education and health outcomes in low-income countries, particularly through personalized resources and AI-driven learning tools.

Q & A

What is Michael Kramer's approach to addressing global poverty?

Michael Kramer's approach to addressing global poverty involves breaking down the large problem into smaller, manageable questions and conducting field experiments to answer them. This experimental approach helps identify effective solutions for alleviating poverty.

How does Michael Kramer view the relationship between corporate incentives and the greater good?

Michael Kramer recognizes that companies are motivated by commercial incentives, but he emphasizes the importance of finding ways to shift those incentives to align with broader social goals. He suggests that companies can be persuaded to act for the greater good by introducing incentives that also meet their financial interests.

What challenge does the pharmaceutical industry face in addressing diseases in lower-income countries?

In lower-income countries, diseases like malaria face the challenge of inadequate commercial incentives. The market is smaller, which means companies are less motivated to invest in developing products for these diseases, despite their high social impact.

What solution did Michael Kramer propose to address the lack of commercial incentives for diseases affecting lower-income countries?

Michael Kramer, alongside Rachel Glenister, proposed the concept of an 'Advanced Market Commitment' (AMC). This involves creating financial commitments from governments and organizations to help bridge the gap between low prices and large-scale production, motivating companies to invest in vaccines and other essential products for lower-income countries.

How did the AMC model work with the vaccine for the disease 'pneumococcus'?

The AMC model worked by pledging $1.5 billion from a coalition of countries and organizations to help subsidize the cost of the vaccine for low-income countries. In exchange, companies committed to producing affordable vaccines for diseases prevalent in those regions, leading to the development and distribution of three vaccines that saved an estimated 700,000 lives.

What role did the COVID-19 vaccine rollout play in understanding global health inequities?

The COVID-19 vaccine rollout highlighted significant inequities between developed and less-developed countries in terms of access to vaccines. Michael Kramer believes the lessons learned from this process could help address similar global health challenges in the future.

How can climate change and economic growth be addressed together, according to Michael Kramer?

Michael Kramer argues that economic growth and climate change can be addressed simultaneously through innovative approaches. One example he provides is weather forecasting technology, which helps farmers in poor countries adapt to changing conditions, benefiting both their productivity and climate change mitigation efforts.

What impact can better weather forecasting have on farmers in low-income countries?

Improved weather forecasting can provide farmers with crucial information to adjust planting times and farming strategies, potentially leading to significant economic benefits. For example, the Indian government plans to send weather information to millions of farmers, helping them adapt to changing monsoon patterns.

What does Michael Kramer believe is a key component of innovation in addressing global challenges?

Michael Kramer defines innovation not just as technology, but as finding cost-effective ways to solve problems. For instance, using small amounts of money for maximum impact, such as offering subsidies or providing essential information to farmers, can be considered innovative.

What is the role of subsidies in encouraging the use of fertilizers in Sub-Saharan Africa?

Subsidies can encourage the use of fertilizers in Sub-Saharan Africa, but the situation is complex. While some subsidies may help poor farmers access fertilizers, they can also be expensive for governments and disproportionately benefit wealthier farmers. Kramer suggests exploring more sustainable models for supporting farmers, including environmental services or alternative subsidies.

What is the potential of microbial fertilizers, and how can they help in addressing climate change?

Microbial fertilizers, which utilize natural bacteria to convert nitrogen from the air into a form plants can use, hold great promise for reducing greenhouse gas emissions. They are being tested in countries like Brazil and Kenya, offering the potential for more sustainable agricultural practices with a significant environmental impact.

What future developments in experimental economics does Michael Kramer find most promising?

Michael Kramer highlights mental health as a growing area of interest within experimental economics. He also emphasizes the potential of technology, such as large language models, to address issues in education, agriculture, and healthcare in low- and middle-income countries. Kramer believes that continuous innovation, testing, and scaling of new ideas is essential for addressing global challenges.