Wednesday, July 1, 2020

Field experiments as/and market design in the July AER

(2) Field Experiments and the Practice of Economics
Abhijit Vinayak Banerjee
Full-Text Access | Supplementary Materials

"When, some twenty-five years ago, I first started doing RCTs, the most common reaction was one of puzzled tolerance. Colleagues and friends seemed to admire the effort involved and could see that RCTs had the advantage of avoiding the then common wrangling about what is causal and what is not. But in the end they were skeptical that it was worth it. In part they were concerned for me: I had a successful career doing economics (in particular economic theory) the way it was done then. Why go down this particular rabbit-hole? But more importantly, as the more candid among them put it, “are RCTs economics?”
At the risk of some caricature, there are really four closely related questions:
(i) Economics aspires to generate generalizable knowledge. RCTs focus on estimating the impacts of specific interventions. Aren’t these fundamentally different ways of approaching the world?
(ii) Economics tackles big questions. RCTs by their very nature provide narrow and specific answers. How do we square that gap?
(iii) Economics is about cumulatively building a theory, by building on the existing theories and making use of any new pieces of evidence to enrich the theory. Aren’t RCTs piecemeal: one insight here, one insight there?
(iv) Why are economists needed to run RCTs? Wouldn’t it be better to have  competent applied statisticians or the World Bank run them?
(3) Field Experiments and the Practice of Policy
Esther Duflo
Full-Text Access | Supplementary Materials

"I was not destined to be an economist. As the daughter of a mathematician, I was quite sure I would become an academic. My heroes were Gauss, the mathematical genius, and Emmanuel Le Roy Ladurie, the quantitative historian who found  peasants interesting, rather than kings. But as the daughter of a physician who spent time trying to be helpful in countries where children were victims of war, I also aspired to be a change maker. I felt that the only repayment for the incredible luck I had in my life was to do whatever I could to try to improve the lives of the many people who were not that lucky. My heroes were Mother Teresa and Albert Schweitzer. Of course, I had no idea how to combine those two aspirations, but I hoped that one day I would find a way.

"Until quite late in my college career, economics did not occur to me as a plausible path for accomplishing these goals."
(4) Experimentation, Innovation, and Economics
Michael Kremer
"The experimental method not only helps identify causal relationships, but also provides economists with a rich sense of context, focuses research on specific practical questions, stimulates collaboration with practitioners and specialists from other fields, and allows for rapid iteration. In this lecture, I present a series of examples illustrating how together these features make the experimental approach a powerful tool for advancing scientific understanding, informing policy, and promoting innovation. I then discuss how institutions can be designed to accelerate innovation and direct it toward the world's most pressing needs."
(11) Incentivized Kidney Exchange
Tayfun Sönmez, M. Utku Ünver and M. Bumin Yenmez
Over the last 15 years, kidney exchange has become a mainstream paradigm to increase transplants. However, compatible pairs do not participate, and full benefits from exchange can be realized only if they do. We propose incentivizing compatible pairs to participate in exchange by insuring their patients against future renal failure via increased priority in deceased-donor queue. We analyze equity and welfare benefits of this scheme through a new dynamic continuum model. We calibrate the model with US data and quantify substantial gains from adopting incentivized exchange, both in terms of access to living-donor transplants and reduced competition for deceased-donor transplants.

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