Saturday 1 February 2020

Economics for the Future



Abhijit V. Banerjee & Esther Duflo (2019). Good Economics for Hard Times, Juggernaut, New Delhi, pp.402.

Banerjee and Duflo are back with arguments for conceptualizing economics that is useful to build the future. This is the second book of the Nobel Prize winning duo (https://www.nobelprize.org/prizes/economic-sciences/2019/banerjee/lecture/) and real-life economist couple after their debut ‘Poor Economics’ which was reviewed in this blog (http://thehouseofbooks.blogspot.com/search?q=Poor+Economics). The authors take on the biggest problems facing humanity today- climate change, automation, immigration, welfare and poverty- and explore how a better use of economists’ frame can help solve them. Armed with data, case studies, relentless humour and tender feeling, this work is rigorous as it is humane.

Critique of Economics

The book begins with a frank critique of economics as it is practiced today. Economists come in for a fair share of brickbats for their obsession with economic growth as the ultimate yardstick of good policy making, the method of trade liberalization as a means to achieve them, the unwillingness to move from assumptions of rational economic choices and the inability to connect with the larger public on issues that impact the average person. Crouched under the complexities of fallacious assumptions, mathematical modelling, and inept communication, economists have created a wide gulf between themselves and the rest of the world. Banerjee and Duflo argue that continuing along these traditions is unhelpful as it is unethical. They call for an approach that uses realistic assumptions and make bare the caveat emptor rather than continuing with misleading simplistic versions of the world.

Analysis of Issues

One of the biggest takeaways from this book is the way the authors examine some of the pressing issues today by presenting deliberate questions that challenge commonly held assumptions. For example, all over the world there is a surge of fear against immigrants as arguments abound that they reduce chances of employment and welfare of others. The authors examine immigration both from historical data and theoretical assumptions to bring out what happens to the local economy when groups of a particular skill-set immigrate? Who wins and who loses and what is the long-term impact? The nuances in their reasoning give clear pointers as to how the problems could be solved. The authors caution that careful intervention, not outright prohibition is the way forward.  Similarly, other issues such as automation, welfare and climate change are dissected with reasoned arguments and empirical evidence.

Banerjee and Duflo are known for writing eminently readable books which provoke our thinking and arouse our feeling towards action. They do not disappoint this time. Their canvas is bigger with better challenges to tackle head-on! A great book to begin your year and decade!