Monday, March 28, 2011

What medicine can teach economists and marketeers !

There's a lot doctors can learn from other professionals - and there's a lot doctors can teach others as well !

An interesting "recent" innovation in economics is the introduction of "controlled trials" to determine the true impact of interventions to help alleviate poverty. Common sense would suggest that giving the poor loans will them help to turn around their lives - but in reality, this is not what usually happens. The road to hell is paved with good intentions, and "aid" can often end up killing initiative ; fueling waste and corruption; and breeding dependence ! Handouts don't always work well - and it's easy to waste a lot of money very quickly ! The only way to find out what works and what does not work is to perform experiments in the field - something which doctors are very good at ! Innovations are a part and parcel of medicine - but which ones are really useful ? And which ones aren't ? Doctors are very good at figuring this out because they've been doing this for so many years - and the staple technique we use to do so is called a controlled clinical trial. Economists are now adding these to their armamentarium to judge how valuable field interventions are , so they have data to analyse impacts, rather than just having to depend upon their intuition !

Interestingly, marketeers do this all the time as well. They need to figure out which ads work; which don't; and which provide the most bang for their buck. In marketing, a randomised trial is called split A/B testing !

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