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‘Good Economics for Hard Times: Better Answers to Our Biggest Problems’ review: Have plumbers, need architect

John Maynard Keynes, the founder of Keynesian economics, once said that “if economists could manage to get themselves thought of as a humble, competent people, on a level with dentists, that would be splendid”. Judging from recent opinion polls, economists still have a long way to go. According to one poll, cited in this book, 84% of people in the U.K. would trust the professional advice of a nurse, but only 25% would trust an economist.

The aim of this book is partly to demonstrate the value of “good economics”, and partly to bring economic reasoning to bear on the critical issues of our times — poverty, inequality, trade, migration, climate change, among others. Rather than dentists, Banerjee and Duflo think of able economists as plumbers who patiently “solve problems with a combination of intuition grounded in science, some guesswork aided by experience, and a bunch of pure trial and error”. Sure enough, their preferred tool of trial and error is the randomised controlled trial, but they also make healthy use of other types of evidence.

Joining the dots

The result is convincing in many ways. In fact, the book is a model of how economic reasoning and evidence can shed light on real-world issues. The authors excel at joining the dots from numerous theoretical and empirical studies. The arguments flow like clear water. Written in an engaging style, the book makes economics accessible to a wide audience. Who would have thought that the Stopler-Samuelson theorem had so much to offer?

The book is divided into nine thematic chapters on some of the leading issues of today’s “hard times”. On migration, the authors dispute the alarmist narratives and argue that, far from being a major threat, migration should be welcome if not encouraged. A fine chapter on international trade reminds us that there are “pains from trade” (for some people at least), not just gains as many economists tend to think. The chapter on economic growth aptly sums up our ignorance and concludes that it is better to improve the quality of life with the resources we have than to pretend that we know how to accelerate growth. Some chapters (notably on climate change) are a little inconclusive, but others end with a clear message, such as higher taxes on the super-rich to reduce income inequality.

The book ends with a long but not entirely convincing chapter on social policy. For developing countries, the authors support some sort of “universal ultra-basic income” (UUBI). The basis of this recommendation, however, is not clear — one is at a loss to understand the statement “we are in favour of a UUBI based on what we know so far” (p. 296). For one thing, much would depend on how UUBI is to be financed. The authors note, apparently in approval (p. 295), that in India 1.38% of GDP could be mobilised for UUBI by removing “the ten largest central welfare schemes”, without mentioning what these are. As it happens, they include valuable programmes like school meals, the Integrated Child Development Services and the National Rural Employment Guarantee Scheme. There is a gap in the argument to say the least.

Clues to the future

At the end of the book, the reader certainly feels wiser, but not necessarily clearer about what should be done to address the big issues of our times. For all its “revolutionary” character, advertised on the cover, the book is a little short of clues on the way forward. Instead, it ends with a somewhat rhetorical “call to action”.

Here we seem to encounter the limits of “plumbing”. To fix a water tap, informed poking around may be good enough. But to build a house, you need to think hard about what sort of house you want. That is not just a matter of technical knowledge, but also of normative judgement as to what we are trying to achieve and for whom. Banerjee and Duflo remain a little enigmatic in that respect. They certainly want the world to be a better place, but it is not clear what that place would look like, other than having less poverty and nastiness. I am sure that they have an answer, and I am hoping that we will hear it one day — perhaps in their next book.

Meanwhile, Good Economics for Hard Times has much to offer. It is always difficult to recommend good books on economics to a layperson who wants to educate herself without getting bored — this one is a safe bet.

Good Economics for Hard Times: Better Answers to Our Biggest Problems; Abhijit Banerjee, Esther Duflo, Juggernaut, ₹699.

The author is Visiting Professor at the Department of Economics, Ranchi University.

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Printable version | Jan 26, 2021 8:46:05 AM |

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