Of Diet Coke And Nobel Prizes : Planet Money We talk to newly-minted Nobel Prize winner Michael Kremer about using economics to solve real-world problems and what it's like to receive his field's highest honor.
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Of Diet Coke And Nobel Prizes

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Of Diet Coke And Nobel Prizes

Of Diet Coke And Nobel Prizes

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UNIDENTIFIED PERSON: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

Before we get started, do you mind if I just get your name the way you'd like it and your title the way you'd like it?

MICHAEL KREMER: Michael Kremer - so like non-dairy creamer - and my titles - I'm actually Gates professor of developing societies in the department of economics at Harvard.

VANEK SMITH: And Nobel laureate.

KREMER: I guess so.

VANEK SMITH: I think you definitely have to put that on there now (laughter).

CARDIFF GARCIA, HOST:

Yeah, I should think so.

VANEK SMITH: Right?

GARCIA: It's a Nobel Prize.

VANEK SMITH: Right. I mean, you know, that should come first.

GARCIA: That's pretty much the peak because when someone wins a Nobel Prize, the whole world is going to acknowledge them as having contributed significantly to their field and, in this case, to humanity in a meaningful way.

It's hard to think of how you would even celebrate that, actually.

KREMER: I found out about it this morning and was wolfing down some lunch - the Diet Coke. And when somebody asked me that question, I told them that I could upgrade from the Diet Coke to the regular Coke.

VANEK SMITH: And that, ladies and gentlemen, is how you celebrate winning a Nobel Prize. You upgrade from a Diet Coke to a regular Coke.

GARCIA: Oh, my (laughter).

VANEK SMITH: I love him so much.

GARCIA: I know. Michael Kremer just won the Nobel Prize for his work in what's known as development economics, along with his colleagues Esther Duflo and Abhijit Banerjee. The Royal Swedish Academy of Sciences said that the work of the three economists had, quote, "dramatically improved our ability to fight poverty in practice."

This is THE INDICATOR FROM PLANET MONEY. I'm Cardiff Garcia.

VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, we talk with Nobel laureate and regular Coke drinker Michael Kremer about development economics.

GARCIA: Yeah - what it is, how it has helped change the way we think about economics and how it's even changed the world.

So economics - as a field, it can have the reputation of being kind of abstract, cerebral.

VANEK SMITH: Yes, that's true - kind of mathy (ph), lots of sigmas, you know, complicated financial instruments, ivory tower stuff. Michael Kremer, our newly minted Nobel laureate, says he hears this from people all the time.

KREMER: I think people have a view of economics as only about, you know, the stock market. They kind of mess with you on an airplane and you're next to somebody - that's the question that you get.

VANEK SMITH: Oh, really? When you sit next to people on airplanes, they're like, is the stock market going to go up?

KREMER: Yeah, that's the classic question you get because - I'm not able to offer much advice on that one.

VANEK SMITH: Now he has a Nobel Prize, so you really want to know if he thinks the stock market's going to go up, right?

(LAUGHTER)

VANEK SMITH: I got this stock tip from a Nobel Prize winner.

GARCIA: And the response he might give to somebody who asks him for stock tips...

VANEK SMITH: Yes.

GARCIA: ...Is to say that look; development economics is something different. It's a branch of economics that focuses on improving conditions in developing countries. So Michael's research has looked at different ways to improve health care and education, agriculture, social conditions, all these different things in those developing countries.

VANEK SMITH: Michael got started in this kind of economics when he was visiting a friend who was teaching in Kenya. His friend was working for a nonprofit and had been put in charge of a bunch of local schools. And they were trying to figure out how to best run these schools and where to invest their very limited resources.

KREMER: They weren't sure, actually, what the best approach was. They had several different ideas that they were interested in trying. And as we were talking, I suggested that perhaps they could try some approaches in some schools and other approaches in other schools. And if they did that systematically, they could learn about what was working best and evaluate the impact of what they were doing, much as in a medical trial.

VANEK SMITH: Much as in a medical trial. Real-world trials are used in many of the sciences, but applying them in economics was groundbreaking.

GARCIA: In some of the most noted work of Michael Kremer and his colleagues, they looked at where to best allocate resources in impoverished schools in Kenya. So for example, would students benefit more from free textbooks or from free meals? It turned out neither of those things actually made a huge impact for the students.

VANEK SMITH: What did make a huge impact for the students? Another study uncovered a pretty unexpected answer to that question - free access to deworming medication.

KREMER: This is hookworm, whipworm, roundworm. These are worms that actually used to be a big problem in the Southern United States.

GARCIA: The medication to treat worms was quite cheap, but it did still cost some money. And there were a lot of parents who were still not getting it for their kids. What made a huge difference was when kids were given free access to deworming medication. Michael says the impact it had on their education was extraordinary.

KREMER: We found that children were much more likely to be in school, that absence from school went down by one-quarter.

VANEK SMITH: When they had access to the medicine.

KREMER: Yes.

VANEK SMITH: Michael and his colleagues followed the students for years, all the way through school and into the workforce. And they found that free access to deworming medication just kept paying off.

KREMER: This was a while ago, and now they're young adults. We see that they're actually earning more and consuming more. And the girls are more likely to have gone on to secondary school - so a huge impact relative to the really tiny costs. These medicines cost pennies per dose.

GARCIA: Investing in deworming medication, as it turned out, had a much bigger impact on the educations and professional lives of kids than textbooks or school meals. And economics figured that out. The solution was not obvious. It emerged after a series of rigorous experiments that were systematically trying different approaches until they found the most effective, efficient solution.

VANEK SMITH: Michael and his colleagues presented that information to the Kenyan government. You want to help kids and keep them in school? Put your money here. Invest in deworming medication, and it will effect major change. It will move the needle.

KREMER: They were excited about it, and they decided they wanted to launch a national program. And then Indians' state governments heard it - heard about it. And then the national government of India introduced a similar program. So now the Indian program is reaching, you know, more than a hundred million children every year.

VANEK SMITH: And I think I remember reading that the program actually ended up paying for itself through increased tax revenue because people did become more productive when they were healthier. Is that right?

KREMER: That's exactly right. In our more recent follow-up work, we've looked at the economic impact of this. Now, the students at the time of the original deworming are now in the labor force, and we see that people are earning more. And if we just do the calculations, turns out that the extra tax revenue alone would have been more than enough to pay back the costs of the program.

GARCIA: It's estimated that the work of Michael Kremer and his fellow laureates this year has changed the lives of hundreds of millions of people around the world. And Michael says he's very glad to see that a more hands-on kind of economics is being acknowledged and validated in such an important way.

KREMER: We're trying to do work that is very rigorous, that is using the tools of economics but that is also engaged with practical problems. It's easy to see the problems of global poverty and to think that they're intractable and that we can't make a difference. But actually, there's been huge progress.

VANEK SMITH: And Michael thinks there will be more progress as economics is applied to different problems in the developing world. He thinks it can help find simple, practical solutions that can actually make a big difference.

GARCIA: Michael says he is incredibly excited to see economics being used this way. And of course, he's excited about winning the Nobel.

VANEK SMITH: Yeah.

GARCIA: Maybe he'll even figure out how to celebrate it properly (laughter).

VANEK SMITH: Congratulations.

KREMER: Thank you so much.

VANEK SMITH: And I think you should upgrade to regular Coke for at least a week.

KREMER: OK. Champagne will be involved as well.

VANEK SMITH: (Laughter) There you go. There you go.

GARCIA: Now we're talking.

VANEK SMITH: Now we're talking.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

GARCIA: This episode of THE INDICATOR was produced by Leena Sanzgiri, edited by Paddy Hirsch. Our intern is Nadia Lewis. THE INDICATOR is a production of NPR.

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