The winners of the 2019 Nobel Prize for Economics are researchers whose work focuses of the problem of world poverty in a way that has much in common with Lean thinking. The results are also the same: finding useful solutions to problems on the ground.
The Nobel Prize for Economics: From Thought to Practice
Poverty has long been a global pathology, and hundreds of millions of people live on an annual income of $200. It is gratifying that the 2019 Nobel Prize for Economics was jointly awarded to three researchers who seek to contribute to the war on poverty through the design of reality-changing, effective policies: Esther Duflo and Abhijit Banerjee from MIT, authors of Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty and Michael Kramer from Harvard. According to the Prize selection committee, the research conducted by these three individuals has contributed to socio-economic aid that has had an effect on the lives of hundreds of millions of people.
The selection of these three researchers is a continuation of the change in the academic discipline of economics, as it transitions from a theoretical perspective (econometrics) to applied research evaluated according to its contribution to the community. This trend began with the work of psychologist Daniel Kahneman, who was awarded the Nobel prize in 2002 and continued with the awarding of the prize to Richard Thaler in 2017.
Over the past few years, the recipients of the Nobel Prize for Economics have shown an ability to extrapolate from academic and philosophical discourse to ideas for effective public policy. Instead of analyzing the distribution of resources as an ideological (capitalism/socialism) or political (the relationship between wealth and government) result, they have focused on the scientific and practical examination of ways to deal with the illnesses of human society.
The Purpose of the Research: A War on Poverty
These three recipients of the Nobel Prize have grounded their work in a range of academic disciplines. Their research has focused on communities that have suffered from poverty and backwardness for generations in India, Kenya, Indonesia, and dozens of other countries in Southeast Asia, Africa, and Central and South America.
In their research, the three scientists presented action-oriented models, rather than a general, overall solution to world-wide problems. They broke down the large question of “eradication of poverty”: to smaller and concrete questions: How can the quality of education in rural classrooms be improved within limitations of the resources that currently exist (in contrast to vague questions about national educational policy)? How can farmers be convinced to adopt more effect means of irrigation and crop growth in areas that have no electricity? What will convince parents to vaccinate their toddlers and infants in areas in which inoculations and hygiene are not widely accepted?
Duflo and Banerjee discovered that in the Rajasthan region in India, only 6% of children had been vaccinated by their parents. They further discovered that one of the reasons for this is that the clinics that offer vaccinations are unstaffed much of the time. A controlled experiment that they conducted proved that introducing mobile clinics to the villages raised the rate of vaccinations threefold, to 18%, and, when parents received a bag of lentils in exchange for the vaccination of their children (an idea based on Richard Thaler’s Nudge Theory), the rate jumped to 39% and the cost of the inoculation was cut in half.
Michael Kramer has focused on the educational dimension. In a series of field experiments that he conducted in Kenya, he found that distributing free books in schools did not lead to an improvement in the students’ achievements. His conclusion was that focused aid to the weakest students is likely to be of much more help.
Instead of a Ready-Made Solution: Discovery Through Experimentation
After formulating their research questions, Duflo, Banerjee and Kramer attempted to provide an answer in as scientific a manner as possible: through well-planned and controlled experiments conducted in the field.
These three individuals did not attempt to pull out a solution for poverty from the file drawer, but instead proposed a wide variety of ideas (research hypotheses) based on analysis of the root sources of the gaps in academic knowledge in the fields of health, nutrition, medicine, education, political economics, climate change, sociology and anthropology. Instead of a promising but artificial vision, they presented a series of concrete experiments, proving that small changes in the field can lead to tremendous changes in people’s lives.
At the press conference at MIT on the day that the prize was announced (October 14, 2019), in MIT President L. Rafael Reif words, “By providing an experimental basis for development economics, professors Banerjee and Duflo have reimagined their field and profoundly changed how governments and agencies around the world intervene to help people beat poverty.”
The Connection to Lean Thinking
The scientific methods employed by these three researchers, known as Randomized Control Trial, are well-accepted in medical research and are intended to disprove solutions based on stereotypes, beliefs and traditions that lack scientific validity. Thus, every experiment must include a control group. This research method is essentially very close to Set Base Concurrent Engineering, which is the foundation for Lean Product and Process Development (LPPD).
We in the Lean activist community have also had an opportunity to learn from the work done by Duflo, Banerjee and Kramer. The recognition they have received gives additional validity to the A3 Problem Solving Methodology. In contrast to a linear process (question-answer or problem-decision), Lean thinking involves a problem-solving model that enables small steps of experimentation in a chaotic environment. Instead of handing down solutions based on existing knowledge from above (deduction), Lean activists examine reality through inductive experimentation in the field (reaching decisions from the specific to the general) and creation of knowledge together with learning and renewal.
The Lean journey may not lead to a Nobel Prize, but that is not important. The community will continue to receive confirmation and encouragement for its working principles: thinking according to scientific methodology, breaking down complex (and abstract) problems into their underlying sources; the A3 methodology to examine solutions through small and rapid experiments, learning in the life space (Gemba) of the subject of value (the customer). And, finally, development of theoretical knowledge through concrete and systematic experiments in the field that lead to ground-breaking ideas.
Boaz Tamir, ILE.