MR and RCT: Can We Design a Monetary Reform Experiment on a Sub-National Scale?

Abhijit Banerjee, Esther Duflo and Michael Kremer just received the 2019 Nobel Price in Economics. Banerjee and Duflo are husband and wife working at MIT and Kremer is at Harvard, all specializing in finding practices to alleviate poverty in the world based on rigorous scientific experiments.
 
The Nobel price committee observed that “Their experimental research methods now entirely dominate development economics”[1]. Their method was lifted from pharmaceutical research methodologies and transplanted into social science settings and is named Randomized Controlled Trials (RCT), which Duflo very well explains in her TEDTalk [2].
 
One of the findings in their research programme was, for example, that microfinance had a much smaller impact on communities than expected. This is of relevance for MR because it is an experiment with an alternative method of issuing credit, i.e. banking [3].
 
So, while reading about their research and research methodology the idea formed to at least formulate the possibility to do research on monetary reform on a small scale.
 
So far the MR community has made the plausible assumption that the smallest scale for MR is a nation state with its own sovereign currency. The question Duflo’s research methodology opens is to have an MR experiment on a smaller scale by choosing two regions to do an approximate randomized trial, one region to do the experiment and the other as control.
 
Would there be an ingenious way to design such an experiment? To be honest, I get stuck within the grooves of thinking that you cannot change a region’s current banking practices to conduct the experiment. And this idea leads to the inevitable conclusion that the assumption that such an experiment can only be done at the scale of a nation-state is not only plausible, but even inescapable.
 
But is it? Who will think outside the box?
 
[1]. The Royal Swedish Academy of Sciences. “Press release: The Prize in Economic Sciences 2019“. 
 
[2]. Duflo, Esther. 2010. “Social experiments to fight poverty“. YouTube, 4 May 2010.
 
[3]. Banerjee, Abhijit, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan. 2009. “The Miracle of Microfinance? Evidence from a randomized evaluation”. Centre for Micro Finance, Working Paper Series No. 31. Also in: American Economic Journal: Applied Economics, 2015, 7(1): 22–53.
 

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