Abhijit V. Banerjee

Esther Duflo

FROM THE WINNERS OF THE 2019 NOBEL PRIZE IN ECONOMICS 'Wonderfully refreshing . . . A must read' Thomas Piketty In this revolutionary book, prize-winning economists Abhijit V. Banerjee and Esther Duflo show how economics, when done right, can help us solve the thorniest social and political problems of our day. From immigration to inequality, slowing growth to accelerating climate change, we have the resources to address the challenges we face but we are so often blinded by ideology. Original, provocative and urgent, Good Economics for Hard Times offers the new thinking that we need. It builds on cutting-edge research in economics - and years of exploring the most effective solutions to alleviate extreme poverty - to make a persuasive case for an intelligent interventionism and a society built on compassion and respect. A much-needed antidote to polarized discourse, this book shines a light to help us appreciate and understand our precariously balanced world.

Better Answers to Our Biggest Problems

Good Economics for Hard Times

Government will do things the market won’t touch.

Florian

Since it is in the nature of the government‘s job to interpose itself in front of the market, the fight against corruption in government will be an uphill and continuous battle, even with the best intentions.

The current fashion of fighting corruption is transparency. […]Monitoring often relies on outsiders limited in their ability to understand the bigger picture or evaluate how well he overall social objectives are being served; the most they can do is to verify that due process is followed. In turn, this means bureaucrats tend to focus a lot on checkıng off the right boxes to avoid attracting attention. This creates a specific bias toward following the letter of the law, even when its spirit is somewhere entirely different. Ultimately, the portrayal of bureaucrats and politicians as either bumbling idiots or corrupt sleazeballs, for which economists are probably partly responsible, is deeply damaging.

In other words ethnic or bigotted voting is often just an expression of indifference. But that means it is surprisingly easy to make them change their minds by highlighting what is at stake in an election. In 2007, in Uttar Pradesh, an Indian state famous for its caste-based politics, Abhijit and his colleagues managed to make 10 percent of voters move their vote away from their own caste-party using only a combination of songs, a puppet show, and some street theater - all carrying the simple message "Vote on development issues, not on caste."

User choice vs. random proposition of news articles.

Third, however, at the end of the experiment, those who got to choose their articles had updated their preferences more than those who did not, and they had generally updated toward the center! This is the opposite of the echo chamber effect. On balance, the option to choose slanted material made users less partisan. The reason is they understood exactly how biased the source they chose was, and partly undid the bias, while being receptive to the information.

We don't like to think of ourselves as racists; hence, if we have negative thoughts about others, it is tempting to rationalize our behavior by blaming them. The more we can persuade ourselves migrants are to blame for bringing their children with them, the less we worry about the children in their litle cages. Instead, we look for evidence that we are right; we overweight every piece of news, however thin, that supports our original position, ignoring the rest. Over time, the instinctive defensive reaction we started from is replaced by a carefully constructed set of seemingly robust arguments. At that point, we start feeling that any disagreement with our views, given how "solid" the arguments are, has to be either an insinuation of moral failure on our part or a questioning of our intelligence. Thats when it can get violent.

A study of African American and white Princeton undergraduates shows how deep this runs. The students, who had no prior experience of golf, were asked to perform a series of golf exercises of increasing difficulty. In a first experiment, half of them were asked to indicate their race in a questionnaire before they played (the standard way to "prime" race; that is, to bring group identity to the top of the mind), and half were not. All students were then presented the golf exercises as a test of "general sports performance." When race was not primed, white and black students performed very similarly. But once race was made salient, the fact that golf is a "white sport (this was before Tiger Woods) made the African Americans worsen their performance and the white students improve theirs, creating a large gap between the two.

… the power of what he called a "stereotype threat." In his original experiment, he found that black students performed comparably with white students when told a test they were taking was "a laboratory problem-solving task." However, black students scored much lower than whites when test takers were told the test was meant to measure their intellectual ability. Minorities aren't the only ones vulnerable to stereotype threat. Female college students performed better on a hard mathematics test when it included at the beginning the statement "You may have heard that women typically do less well at math tests than men, but this not true for this particular test."

Social norms act as bonds in communities (mutually beneficial groups) - independent of perceived „correctness“.

It is also true that sometimes individuals feel the need to express intolerance and prejudice (including sentiments they do not actually share) in order to signal fealty to their group. For example, during the Indonesian cconomic crisis, membership in Koran reading groups increascd. The display of intense religiosity was a sign of loyalty to carn a place in a mutual assistance circle." In other contexts, sometimes people keep quiet about racism (and or sexism), or even echo what they hear because they do not want to lose their jobs or valuable i mmiga social connections.

Suppose people suspect that others know something (perhaps the train door will open at a particular spot). They would then join the crowd (perhaps at the cost of ignoring their own information that the train is likely to stop somewhere else). But that would make the crowd bigger, and so the next person coming along would see an even bigger crowd and be even more likely to think this conveyed useful information. They might also join the crowd, for the same reason. In other words, what looks like conformity could be the outcome of rational decision making by many individuals with no interest in conforming, but who believe oth- ers might have better information than they. He called it a "simple model of herd behavior."

The overarching takeaway is that we need to address the pain that goes with the need to change, to move, to lose one's understanding of what is a good life and a good job. Economists and policy makers were blindsided by the hostile reaction to free trade, even though they have long known that as a class workers were likely to suffer from trade in rich countries and benefit from it in poor countries. The reason is they have taken it for granted that workers would be able to move jobs or places, or both, and if they were not able to do this, it was somehow their failing. This belief has colored social policy, and set up the con- fict between the "losers" and the rest that we are experiencing today.

More generally, much of the hardship caused by trade is related to the immobility of both people and resources. The free movement of goods across borders is not matched by movement within countries.

TAA to compensate job loss due to free trade.

It took ten years for the salary levels of the retrained and untrained workers to converge. This was thus a worthwhile investment for them, although not one they could undertake without government support, since getting a bank loan for this purpose would have been very difficult.

Large economies like the US or China have the skills and the capital to produce most things at a very high level of efficiency somewhere in the country. Moreover, their internal markets are large enough to absorb production from many factories in many sectors operating at the appropriate scale. They would lose relatively little by not trading.

Why poor countries have it hard entering the global market. Having a name can help here.

The structure of global inequality is such that the kind of customers in the west who would buy a labor-intensive product (for which to produce poor countries have a comparative advantage) are often so much richer than the makers that any savings from a new entrant offering cheaper prices will be insufficient to compensate the customer for their lost time or ruin of a favorite blouse (risk).

Dhrumil Patel

If too many people with a different culture come together, will they assimilate or will they change the culture? Or, for that matter, will they assimilate so well that their culture will vanish, leaving us all with a uniform globalized tasteless blend? A utopia of perfect and instant movement in response to any difference in economnic opportunities might become its own dystopia.

Most people do not like risk, and those close to subsistence level especially so, since any loss could push them into starvation. Is that why so many people prefer not to try?

In many developing countries, there are often several missing rungs in the quality ladder of housing. The next thing to a slum might be the nice little flat entirely out of reach.

There is a reason for this. Most third-world cities lack the infrastructure they need to serve their population. According to a recent report, India alone needs 4.5 trillion US dollars in infrastructure investment between 2016 and 2040, while Kenya needs 223 billion and Mexico 1.1 trillion.

While the initial chapters are a great insight into the challenges of modern democratic economies, the latter part is too focused on the US and poor developing countries, claiming benefits of systems that are already in place in Europe yet have not shown to solve the problems claimed in the book. Critically assessing similar programs already implemented in Europe would thus have been beneficial.

matej yangwao

** spoiler alert **
           Maybe not my kind of policies, political science of labour etc, otherwise some interesting ramblings on labour, migration and economic opportunities 

>When migration issues come up in conversations, people often favor sentiments over facts.

 
>Facts reveal that migration improves both migrants and locals’ quality of life.

>These examples reveal that people do not migrate simply because of economic advancement. Some needed a natural disaster or war to displace them from their ancestral homes.

>Low-skilled migration pushes up the demand for labor and discourages the tendency to look for alternative technological solutions. 

>Migrants are willing to perform tasks natives are reluctant to carry out; they mow lawns, flip burgers, and attend to babies or sick people's needs.

Faith Ho 

"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." 

This book has taken forever (and by that I mean multiple months) but absolutely worth it. I was taking notes constantly because there were so many interesting ideas substantiated by case studies and economic experiments, while remaining accessible and largely enjoyable. The premise of the book is to break down a lot of traditional "common sense" economic concepts and ideas, and really examine them. 

Undoubtedly the scope is humongous, covering everything from trade to climate to growth to work (just to name a few) and each chapter could likely have been a whole book in and of itself. But it provided a good introduction into the key points of each of these topics, as well as generally convincing argments - and challenged me to critically think about economic (or otherwise) ideas we take for granted. I also enjoyed how they provided not just the challenge but talked about and evaluated potential solutions. I also liked that they not only integrated economics of developed nations but that of developing nations too (though developing nations is their key area of study after all).

Notes/summary (for myself so not intending to be coherent here, though I'm not particularly coherent anywhere):
1. No one trusts economists haha 
2: Labour is sticky, why migration isn't as widespread as we think (or fear)
3: Challenging the gains from global trade and the problems of redistribution
4: Preferences shaped by multiple factors and may not be rational and stable. Examines how prejudices can be changed and impact on society. 
5: Growth is more nebulous and difficult to measure or direct than we think; moving away from chasing economic growth as an ends. Some more theoretical/technical part on the economic ideas of Sollow (convergence theory due to diff growth rates of capital and labour, growth is exogenous ie beyond control) and Romer (even if individual firms have diminishing returns, put together will have increasing returns); reduce misallocation. "Many of the important successes of the last few decards were the direct result of a policy focus on those particular outcomes, even in some countries that were and have remained very poor"
6: Climate change: defending the carbon tax, need for trade offs (but also to mitigate immediate current impacts), changing consumption habits [imo not very comprehensive but decent as an introduction to this area]
7: Automation may be less of a danger than we think, evaluating taxation
8: Lack of trust in government, role of government in redistribution
9: Evaluating policies such as Universal Basic Income, the importance of providing dignity and autonomy to people through work"We should each have a universal right to a productive life within society." [see: Tyranny of Merit]

The experience of the last decade has not been kind to the image of economists- asleep at the wheel (perhaps with the foot on the gas pedal) in the run-up to the great recession, squabbling about how to get out of it, tone-deaf in discussions of the plight of Greece or the Euro area; they seem to have lost the ability to provide reliable guidance on the great problems of the day. In this ambitious, provocative book Abhijit V. Banerjee and Esther Duflo show how traditional western-centric thinking has failed to explain what is happening to people in a newly globalized world- in short Good Economics has been done badly. This precise but accessible book covers many of the most essential issues of our day, including why migration doesn't follow the law of supply and demand, why trade liberalization can drive unemployment up and wages down and why nobody can really explain why and when growth happens. In doing so, they seek to reclaim this essential terrain, and to offer readers an economist's view of the most pressing issues of the day, one that is candid about the complexities, the zones of ignorance, and the areas of genuine disagreement.

Simao Freitas

I really loved this book. It’s a great overview of the impact of economic policy throughout the world.

Ivan Zarea

In my bubble of center-left, we missed a moderate voice backed by loads of research. This is it! It has it all: it's grounded (looking at Doughnut Economics here), it's cosmopolitan (at least with a focus on India), and it's not very speculative (hello Sapiens). 

The probably book won't age too well due to its numerous references to Trump, but it still challenges some of the dogmas. Are we the immigrants stealing jobs? Is more trade actually better? Why is Silicon Valley? And most importantly: why, if you struggle to find food and you're given money, you'd rather buy a TV instead of food?

A pretty good read that made me question some of my beliefs and look for parallels in other places.

Safiya 

First I am so biased ! So this review might not reflect the real image of the book, anyhow ...

I got to know Banerjee through network sciences and was super excited to drive the same experiment of microfinance networks in Morocco (only that I didn't succeed in getting the right data... someday)...

Banerjee & Duflo are nobel prize laureates and work on the economy of poverty and development. A field that is only too close to urban informality in a sense that it comes with all the fully fledged components : phyisical/economic/social/environmental ... etc..

Throughout the book I was led to look deeper into economic dynamics to understand the whys and whatnots ... Deeply inspiring as the examples were not only American but included a wide range of developing countries making it all worthwhile.

The intellectual humility in the chapters is just inspiring !
Needless to say this is going to be over quoted and cited !

Recommending it to anyone interested in knowing the truth about immigration : is it really a threat ?

C'était pas évident à lire durant le contexte des élections américaine, au lieu d'aller droit à mon objectif j'étais distraite en essayant de comprendre les enjeux politico-économique ... mais bref ! Super bon livre que je recommande vivement aux jeunes adultes, ça ouvre les yeux ce genre de truc Wallah !

Good Economics for Hard Times Better Answers to Our Biggest Problems

Reviews

Highlights