Ideas to Action:

Independent research for global prosperity

Views from the Center

CGD experts offer ideas and analysis to improve international development policy. Also check out our Global Health blog and US Development Policy blog.

 

If Randomized Evaluations Are So Great, Why Don’t Businesses Use Them?

This is a joint post with Michael Clemens.

Michael Clemens recently wrote me, saying that he gets asked this question a lot. I do, too. So I was interested when he brought my attention to a 2007 article in Forbes that discusses a number of companies that do use randomized studies. I wasn’t surprised to see Google in the list, but I never imagined that all the junk mail that I receive from Capital One might be guided by sophisticated research (though it hasn’t convinced me to sign up yet!). Progressive Insurance apparently discovered profitable lines of business (middle-aged motorcycle drivers) by randomly accepting a portion of applicants who would normally be rejected and studying their claims behavior. According to Hunt Alcott, other companies that have used randomized studies include H&R Block, PNC Bank, Amazon, Subway and Harrah’s Casino.