Deconstructing Hot Issues for the World
(Book review on Good Economics for Hard Times)
People don’t trust economists. Yes, funnily that’s how I (also an econ student, Hi) want to start my review on an economics book written by two eminent economists who talk about changing common perspective on several burning topics. So, since it’s going to be easy convincing you guys, let’s go all in.
People don’t trust economists. And I don’t say that as a complaint but as a fact. A study shows economists are second least to be trusted succeeded only by politicians. And most of the fault lies with economists themselves. First of all, there is a lot of bad economics going around. The self-proclaimed economists on TV or the ones tweeting frivolously on twitter aren’t generally academics. They use a lot of jargon and make a helluva lot of predictions, most of which don’t turn out to be correct. This, in turn, leads to wrong perceptions on several important issues which get politicized and turned around to suit particular partisan views. Secondly, the academic economist who should speak out usually doesn’t basically because today’s media culture does not like explaining the complex process that academics go through while looking at a problem. They edit it and place the final facts, which most of the time do not provide the complete picture.
This is what the husband-and-wife duo of Abhijit Banerjee and Esther Duflo, winners of the 2019 Sveriges Riksbank Prize in Economic Sciences ( the common man may read it as Nobel prize in Economics ) try to undo in their book. Unlike most economics books this book can be read by anyone, even if you don’t have an economics degree. They present findings on the most glaring issues of recent times ( the book was written before the onset of Covid-19 so obviously it doesn’t include it ) and try to portray the actual picture behind several of these issues ranging from immigration ( the favourite subject of a very well-known politician who will remain anonymous), artificial intelligence to inequality to taxes and even global warming.
Banerjee and Duflo do a great job of collating and explaining the contentious issues. And even being an economics student reading the book made me re-evaluate several of my own strongly held perceptions. Without spoiling the entire book, let me give you an example.
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You have probably heard the argument that when immigrants who are willing to work for low pay show up in a community, they trigger the reduction of wages for some percentage of the local population. But Good Economics for Hard Times shows how that concern is misplaced. “There’s no credible evidence that even relatively large inflows of low-skilled migrants hurt the local population,” Banerjee and Duflo write. But why wouldn’t it lead to job losses?
Banerjee and Duflo show that the new migrants are not only workers (as perceived by natives) but also consumers who go for shopping, eat at restaurants, get haircuts. That is, they spend money in the country they arrived in and demand for more quantity of goods and services than before. This leads to shopping malls asking for more goods which is generally met by hiring more labourers in factories to produce the same, restaurants would employ more chefs to feed more mouths and barbers would employ assistants to cut more heads. Thus, all of this would lead to more jobs rather than less. Another reason is that an influx of new labourers reduces companies’ incentive to automate their operations. “The promise of a reliable supply of low-wage workers makes it less attractive to adopt labour-saving technologies.”
The book is filled with several such examples placed in front of you with the generosity of extensive research that will make you question your own preferences. But the book doesn’t uphold good economics as the solution to everything. The authors acknowledge at the very beginning, “We, the economists, are often too wrapped up in our models and our methods and sometimes forget where science ends and ideology begins.”
Why should you then read about a book on issues of a pre-Covid-19 period? My answer is why shouldn’t you. The issues are as important now as they were earlier. Trade is still important if we want to recover from the economic slump Covid-19 brought in, inequality and global warming will always be a debated topic, taxes still hurt people. So why shouldn’t you try to know about the issues that plague the global spectrum? At least this time when you tweet back at the anonymous famous politician mentioned above you would be informed enough to trump his comments.
This book is not only about economics and public policy. It’s about decisions the society makes at large. It’s about you and me. And as Abhijit Banerjee so aptly puts “The call to action is not just for academic economists — it is for all of us who want a better, saner, more humane world. Economics is too important to be left to economists.”
- Prahlad Borthakur
