Explain the approach Randomised Control Trial which was the tool used by the Nobel laureates in their study of poor Economics.

The Randomised Control Trial (RCT) which was inspired by the use of RCTs in medical science was used by the Nobel laureates to test the effect of small interventions on individual behaviour.

How does this approach work?

The approach examines the response of a poor to a particular intervention using these randomised trials. The approach studies the impact of micro-interventions by treating one set of individuals/households and comparing the outcome with another set of individuals/households, which are similar in all other respects but have not been treated with the intervention.

India has been among the biggest laboratories of these experiments with several experiments on diverse themes such as literacy, nutrition, health, micro-finance and so on.

A Study Model

For example, to study whether providing a mobile vaccination van and/or a sack of grains would incentivise villagers to vaccinate their kids under an RCT, village households would be divided into four groups.

• Group A would be provided with a mobile vaccination van facility.
• Group B would be given a sack of foodgrains.
• Group C would get both, and
• Group D would get neither.
• Group D is called the “control” group while others are called “treatment” groups.

Households would be chosen on a random basis to ensure there was no bias, and that any difference in vaccination levels was essentially because of the “intervention”.

Such an experiment would not only demonstrate whether a policy initiative works but would also provide a measure of the difference it brings about. The approach would also show what happens when more than one initiatives are combined. This would help policymakers to have the evidence before they choose a policy.

Topics: GS-III: Indian Economy Issues Relating to Planning