5min book review #13

Abhijit V. Banerjee & Esther Duflo: Good Economics For Hard Times

Value for money

7/10

Ebook or Bookshelf?

This deserves a place on your bookshelf.

Year, Price, Pages, Cover design

2019 by PublicAffairs; EUR 26,80; 404 pages (The content itself 326 pages; Acknowledgements 2 pages; Notes 56 pages; Index 15 pages); Hardcover

Jacket and cover design by Pete Garceau, Book design by Jane Raese.
Very nice jacket and book design. Good paper quality and reading experience

5 sentences about the book

The main focus of Nobel-Prize winning economists Abhijit V. Banerjee and Esther Duflo is the question of how to ​​improve citizens’ well-being and protect human dignity. Each chapter of the book tackles a big topic of global relevance as immigration, trade wars & protectionist tariffs, growth and climate change. Chapters are well-used occasions to demystify the myths of each topic and present real data. Their approach is based on empirical work on these topics primarily through randomized controlled trials (RCTs) and natural experiments. These are studies in which people are allocated randomly to either receive an intervention (usually a product or service) or to be part of a control group that receives no intervention at all (more about field trials in an interview with Esther Duflo).

The title is also a critique that aims at its own economic domain. Banerjee & Duflo’s brisk ethic reveals what is bad economics and what good economics should look like:

“Good economics prevailed over ignorance and ideology to ensure insecticide-treated bed nets were given away rather than sold in Africa, thereby cutting childhood malaria deaths by more than half.

Bad economics 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.

Blinkered economics told us trade is good for everyone, and faster growth is everywhere. It is just a matter of trying harder and, moreover, worth all the pain it might take.

Blind economics missed the explosion in inequality all over the world, the increasing social fragmentation that came with it, and the impending environmental disaster, delaying action, perhaps irrevocably.” 326 [my emphasis]

In one sentence: while reading this book I didn’t have a feeling I am reading the book of two economics, but I rather saw two observers who care about society — thought big topics uncover small stories and based on real empirical data help us understand what is good economics about.

What did I learn?

• Did you know that the fraction of international migrants in the world population in 2017 was roughly what it was in 1960 or in 1990: 3 percent? 10
• Field experiments showed that the idea of “economic migrants” is often naive and illusory: “it is hard to take seriously the idea that most people are just waiting for an occasion to give up everything and head to a richer country.” 18–19
• “Behind the anti-immigrant views are two misconceptions: an exaggeration of how many migrants are coming in, or about to come in, and a belief in the nonfact that low-skilled immigrants depress wages” 261
• Did you know that despite its openness to trade, the US import share (8 percent) is one of the lowest in the world? “Belgium, a small open economy, has an import share of above 30 percent, so there trade matters much more.” 88

Rethink economic growth. Economics measures the “health of the economy” in terms of growth. Banerjee & Duflo admit that growth is hard to measure and actually, we do not have any bloody idea what drives it: “Given that, we will argue, it may be time to abandon our profession’s obsession with growth. The most important question we can usefully answer in rich countries is not how to make them grow even richer, but how to improve the quality of life of their average citizen” 166 [my emphasis]

• Climate change: yes, it is our fault and fight: “The citizens of rich countries and, more generally, the rich worldwide bear an overwhelming responsibility for any future climate change.” 210
• How to approach climate crisis in rich countries: “If energy consumption is a bit like an addiction, in that using a lot of energy today makes us use a lot in the future, then the appropriate response is high taxes, like those on cigarettes” 220
• Should we provide money/cash to the poor? Again, data, data, data:

“What is very clear from all these experiments is that there is no support in the data for the view that the poor just blow the money on desires rather than needs.” 288

“There is also no evidence that cash transfers lead to greater spending on tobacco and alcohol. And cash transfers generally increase food expenditures as much as food rations.” 289

“There is no evidence that cash transfers make people work less.” 289

• Kind reminder: to have a job — is not just about money, but mainly about dignity and self-realization, 317

What was missing?

• N/A

Favorite quotes

“The United States seems to be at an impasse. Forty years of promising those good things are just around the corner and have created an environment where too many people trust no one, least of all the government. The growing economic and political influence of the rich, the result of the pursuit of the elusive elixir of growth, has combined with anti-government sentiments the rich carefully have cultivated to head off any attempts to rein in their growing wealth.” 273

“A recurring theme of this book is that it is unreasonable to expect markets to always deliver outcomes that are just, acceptable, or even efficient. […] More generally, in a world of skyrocketing inequalities and ‘winner take all’, the lives of the poor and the rich are divergent wildly and will become irremediably different if we allow markets to drive all social outcomes” 263