Abhijit Banerjee and Esther Duflo are development economists at MIT. The two (along with Michael Kremer) won a Nobel Memorial Prize in Economics in 2019 for their work on global poverty alleviation. The book, Good Economics for Hard Times, is a collection of their thoughts on the pressing issues facing the world today: immigration/migration, international trade, racial problems, tax, climate change, artificial intelligence, and the role of government in the economy. While “scientific” evidence is a major component of the book, there are also accounts of personal experiences and opinions.
As the title of the book suggests, the authors’ motivation is to provide “good economics” for “hard times.” By “hard times,” they mean times like the one we currently live in, when income inequality is soaring between haves and have-nots, and highly controversial (and arguably harmful) political figures and events keep emerging. The world today seems to be highly polarized. “There seems to be a ‘tribalization’ of views, not just about politics, but also about what the main social problems are and what to do about them.” The authors aim to offer some solutions to those problems in this book. Readers will quickly discover that they have a clear value predisposition: they believe that inequality should be addressed, and society should take care of and empower disadvantaged social members. This profound value predisposition guides their definition of pressing issues and their solutions to them. It also differentiates “good economics” from “bad economics,” which “underpinned the grand giveaways to the rich and the squeezing of welfare programs, sold the idea that the state is impotent and corrupt and the poor are lazy, and paved the way to the current stalemate of exploding inequality and angry inertia.” So yes, the book is very political. But what differentiates it from an opinion book is the magnitude it puts on respecting facts and the effort to understand opposite opinions. In making the arguments, the authors draw widely from other economists’ work as well as the work of their own.
The main ideas conveyed in this book include: 1) immigration/migration is generally beneficial to the economy as a whole, although it may create some inequality; 2) trade generally makes trading countries better off – the caveat is that not everyone benefits from trade; 3) government should address inequality, which is a byproduct of the free market process, and to do that, it needs money – a lot of money; 4) tax rate in America is too low to make the government rich enough to address inequality problems; 5) global warming will not affect countries equally, and green technology is not the only or best solution; 6) artificial intelligence will increase income inequality; 7) nobody really knows the myth of persistent growth; 8) financial aids and empowering programs will empower rather than demoralize the poor.
To me, the pith of the book is Chapter 4, which centers around people’s likes, wants, and needs. In the field of economics, preferences of individuals are often pre-assumed or taken as given (often for granted). Changing people’s minds seems to be the work of psychologists, not economists. But clearly, changing people’s preferences is key to solving many of the problems discussed in this book. Banerjee and Duflo argue that preferences have no intrinsic origin; instead, they are often socially constructed. People prefer a policy because others they associate with prefer it; people like something because they are pre-assigned it, maybe at birth. The intrinsic value of something to a person is therefore indeterminable. That was the biggest “wow” moment I had reading the book. When we view preferences as variable and shapeable, the world looks slightly different: people who supported Trump could totally have done the opposite; the opponents at two ends of a policy could potentially reach a consensus at some point; standoffs are not necessarily unavoidable. That thought is brilliant. To solve the many impasses in America and around the world, we need to first understand where contradicting likes, wants, and needs come from.
There are some minor viewpoints which I disagree with the authors. I think the vision that artificial intelligence will create a winner-take-it-all economy is too pessimistic, and that global warming will disproportionately impact poor countries is an overly assertive prediction. Besides, some of their policy recommendations need further justification (but I understand that no one really knows what works and what does not; all we can do is to learn from trial and error). Overall, I think the book is a thoughtful read. I recommend it to those who have thought about the topics and want to gain additional perspectives.
Jing Deng 