The Pragmatic Rebels

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Duflo applied to economics graduate programs and enrolled at MIT the following fall. She knew she had made the right decision 10 minutes into her first class with Abhijit Banerjee, who had spent most of the previous decade formulating new theories for examining poverty to better account for behavior, psychology, negative feedback loops, and the quirks of the financial markets. "I was really in the right place at the right time," she says. "From the theory angle, a vast field was open for empirical work."

Banerjee had arrived in Cambridge as a 22-year-old Harvard PhD student in 1983, the same year as Sachs and Lawrence H. Summers, now director of the White House's National Economic Council, two of the youngest economists to receive tenure at the university. (Both were 28.) The laissez-faire Chicago School ideas popularized by Milton Friedman still dominated the field, but the clique of ambitious Harvard economists was determined to best them—and one another. Banerjee avoided the fray, though the Chicago School efficient markets dogma struck him, too, as preposterous. Markets, he believed, routinely failed for a variety of reasons, and he studied how extreme wealth and income disparities could lead to poverty traps that stifled the creation of a middle class. Corporations, he maintains, routinely undermine free-market competition. One paper Banerjee co-wrote with Summers investigated how even seemingly innocuous practices like frequent-flier programs exemplify systemic anticompetitive behavior.

Banerjee's work endeared him to Summers' protege Shleifer, a fellow skeptic of the efficient markets hypothesis. It was Shleifer who in 1991, freshly tenured and busy remaking the long-neglected development economics department, asked Banerjee if he'd try his hand at overhauling the curriculum. Shleifer would later be implicated in a scandal emanating from the consulting he did in Russia, precisely the kind of grandiose economics work that J-PAL would define itself in opposition to. "I suppose you could say we all share a sensibility formed in reaction to spending years in a field that is known to embody a certain, well...." Banerjee trails off. "I don't know if 'smug' is too cruel a word...."

The Next Generation

These days, J-PAL is nurturing a markedly different breed of economist, like Angela Kilby, 25, a research analyst who was planning to major in biology before she took Duflo's class in her sophomore year.

Kilby has been involved with one of J-PAL's most headline-grabbing innovations, X out TB, which distributes urinalysis strips among tuberculosis patients. When doused with urine containing tuberculosis-fighting drugs, the strips reveal hidden codes. Patients can then text the codes to their cell-phone providers and receive free minutes as reward for taking the medication.

Encouraging drug adherence is a sticky last mile challenge almost anywhere you go; some American clinics have taken to handing out computerized pillboxes that enter patients into a lottery in which they can win money when they remember to shake the box (and presumably, take a pill) once a day. TB is uniquely formidable because it requires a powerful cocktail of antibiotics that take at least six months to kill the disease—long after symptoms recede. As with any bacterial infection, a partial course of drugs is worse than no drugs at all, because it promotes antibiotic resistance, a big part of the reason TB now kills between 1.3 million and 2 million people every year.

J-PAL now attracts some of the brightest young minds in economics and is making its influence felt among the dominant institutions of the aid world, including the World Bank, which in 2006 asked Banerjee to serve on a panel that reviewed all the research it published from 1998-2005. Working with a team that included six other J-PAL economists, Banerjee encouraged researchers to be more transparent, noting wryly that "trade-offs tend to be eschewed in favor of ubiquitous 'win-win' scenarios, so that, for example, growth and environmental improvement are never seen as in conflict."

Sachs, too, has reached out to J-PAL. He has spent much of the past decade consumed with administering shock charity in Africa via the Millennium Villages project, in which 78 villages have received massive aid packages that effectively double the local economies overnight. Unfortunately for economists, Sachs didn't think about how the efficacy of the project could be measured until after all the villages had been blanketed with aid money. When he asked J-PAL last year for help evaluating the project, Duflo told Sachs that because the design of the project had not accommodated randomized testing, there was nothing she could do.

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