Publisher’s write-up:
‘In this revolutionary book,
renowned MIT economists Abhijit V. Banerjee and Esther Duflo take on this
challenge, building on cutting-edge research in economics, explained with
lucidity and grace. Original, provocative, and urgent, Good Economics for Hard
Times makes a persuasive case for intelligent interventions toward a society
built on compassion and respect. It is an extraordinary book, one that will
help us appreciate and understand our precariously balanced world.’
Good Economics for Hard Times is a
book on topics of public policy the MIT economists and Nobel Laureates –
Abhijit Banerjee and Esther Duflo. The book is split into nine chapters,
dealing with the most contentious topics of the day such as immigration,
economic growth, healthcare, tax cuts, environmental policy, education, and the
impact of behavioural aspects in all of these.
Much as the title of the book
suggests that it is a book relating to personal economics/ microeconomics, it
is entirely directed towards public policy. The authors analyse various
popularly held myths – such as immigration lowering wages, tax cuts leading to
higher economic growth, misuse of funds by welfare recipients, etc. Following
the election of madman Donald Trump in the 2016 US Presidential Election – the
sole talking point for the next four years was the need to address the concerns
of the blue-collar workers in the former industrial towns in Wisconsin,
Michigan, and Pennsylvania. This was analysed well in this book – about how
there is very little that could be done about reviving a declining industry
(like coal) but there was an interesting proposition about the government’s
need to subsidise the wages of the employees who would be unable to immediately
find another means of employment.
The book was very unlike a
traditional economics book – wherein the ones proposing the theory is very sure
of the list of chain reactions that is going to befall if a policy is
implemented; for example, if rent controls are implemented, the rents will
naturally rise to the market price and thus, the difference between the
prescribed amount and market rate would lead to under table payments and
undeclared income – leading to loss of federal revenue. The reality is, we are
not sure if that would be the case and that is what is repeated several times
in this book – that we do not know for sure what the effects of certain
public policy would be, they might succeed sometimes and fail during other
times. The authors start by saying that as of today, economists are one of the
least trusted professionals after politicians and goes on to explain that
economists are not like physicists but more like plumbers which involves a bit
of intuition as well as experience. And as members of the public, we often try
to draw our conclusions based on anecdotes rather than real data and the
reasoning goes along the lines of, ‘I know my neighbour who spends all their
welfare money on alcohol and cigarettes – therefore this policy is a failure’
whereas in reality, such persons are a small percentage of the total.
It could be frustrating for many
to read ‘we do not know’ so many times for almost every issue but I
found that refreshing because as someone who studied economics, I have never
met a professor who was not certain of the consequences of a given policy. The
goals of the writers seem clear here – it is only to inform the readers what
their politicians and ‘experts’ is not based on fact but merely pursuing
self-interests (eg – tax cuts).
The political positions of the
authors are well known, and the bias is going to be present in the way they
present the facts which I do not mind. But there were times I felt they were
trying to justify a result which did not match with their hypothesis, which
defeats the very purpose of the analysis. For instance – there was an analysis
on whether privatisation of schools help and while the conclusion was that
there was no evidence of efficient management / higher academic attainment in
private schools, there was an exception noted in Libera – where the authors
ended up explaining a result which they did not wish to observe.
I would also say that the title
of the book is misleading – as the authors do not propose many solutions and
thus, there is not much ‘good economics’ involved, merely identification of
what is ‘bad economics’. I do not have an alternative to suggest and it is not
my place to suggest one either.
This book was far less technical
than the previous book of theirs that I read, which was Poor Economics, and
I would have liked it better if this book had gone further into the details of
each of these schemes and how it affected real people instead of presenting
broad statistics. This does challenge a lot of perceptions that we popularly
hold and in that sense, I would suggest that this could be read by everyone.
On that note, I would conclude by
awarding this book a seven on ten.
Rating – 7/10
Have a nice day,
Andy
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