Leaders who dare: Esther Duflo

After studying at the ENS and the EHESS, Esther Duflo defended her thesis ‘Three Essays on Development Economics’ in 1999 at the MIT, where she is now Professor of Poverty Alleviation and Development Economics.  

Esther Duflo, who holds the ‘Poverty and Public Policy’ chair at the Collège de France and pioneered an empirical approach to the fight against extreme poverty, is co-recipient of the 2019 Nobel Prize in Economics.   

On 21 June, she was interviewed by the French Foreign Affairs Committee. She presented her analysis of the financing challenges facing developing countries, whose populations are suffering disproportionately from the effects of the global climate, health and geopolitical crises, threatening to wipe out the tangible progress made in recent decades in terms of quality of life.  

As the Paris summit for a new global financing pact ended on 23 June, how can we, as ordinary citizens, assess the scope and potential impact of the roadmap that emerged from the summit? We propose the reading grid drawn up by the economist, expert in the making of public policy, during his speech to the committee a few days earlier.   

Esther Duflo identifies three priority areas for action, where the Covid crisis recently demonstrated the ineffectiveness of international solidarity.

1. Insurance

• • Possible solution:

Offer insurance in the event of a major crisis (pandemic, climate) to countries that individually cannot claim any safety net because of insufficient solvency.   

• • Why should this be done?

Because not all countries can afford a ‘whatever it takes’ insurance policy at 27 GDP points.

2. Innovation in the design of public policies

• • Possible solution:

Adopt a bottom-up approach, breaking out of the current silos, and recognize innovation as a global public good , whether it’s fundamental research into medicines or the climate.   

• • Why should we do this?

Dictating local public policy from Paris or Washington leads to a dead end.

3. Compensation for the damage caused by climate change due to our actions as citizens of the world’s wealthier countries. 

• • Possible solution:

Esther Duflo proposes putting a figure on the loss of human life due to heatwaves, expressed in terms of the carbon price, at 37 USD/t CO2, or 500 billion per year.  

• • Why would we do this?

Her calculations are based on the work of the Global Impact Lab , which estimates an increase in mortality of 73 lives per 100,000 by 2100 (in poor countries) due solely to heat and without taking account of the other physical manifestations of climate change. Day exposure to temperatures above 35°C is detrimental to human life.  This excess mortality is equivalent to the mortality caused by all infectious diseases today.  

  

Esther Duflo is in favour of finding new money. She insists on the necessity of putting in place a robust financing mechanism to ensure that the commitments made are honoured.  

A tax on the wealthiest individuals is unlikely, even if it would enable the required financial levels to be reached. On the other hand, revising the minimum international tax rate on multinationals (FR) from 15% to 18% or even 20% would raise $300 billion and $400 billion, respectively.  

Introducing a tax on maritime transport, which is currently untaxed, could easily add another $100 billion a year. 

One solution would be to transform public policies to support the scaling up of innovations whose significant impact on the populations concerned has been measured using a rigorous scientific method.  

Esther Duflo hopes that innovative initiatives such as the Development Impact Fund in the United States, or the Fonds d’innovation de développement (FID) in France (€15m a year, 100 projects submitted, three-quarters of which come from Africa) will serve as examples. 

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