Abstract
This book is written by Abhijit V. Banerjee who is Ford Foundation International Professor of Economics at Massachusetts Institute of Technology and Esther Duflo who is Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics in the Department of Economics at Massachusetts Institute of Technology. For their exceptional work on poverty alleviation they were awarded the 2019 Nobel Prize in Economics.
The book deals with the most underlying questions of modern times. Questions such as the following: Is international trade good for everybody? Does immigration effect low-income native workers? What will be the impact of Artificial Intelligence (AI) on mankind? How should climate change and growth be managed? and finally, should we care? The book is divided into nine chapters and each chapter tackles a different set of challenge and its possible solution.
The book starts by setting the tone for discussions related to common global issues such as immigration, taxes, trade, the role of government and how economists have contributed in their own way in dealing with these issues. This first chapter is a careful and yet critical analysis of the role of economics and economists in creating a better world by restoring human dignity to its central place.
The second chapter is a detailed outlook on migration and how it impacts nations and its citizens. Various studies are mentioned relating to migration and the conclusions are similar to historic ones: low-skilled immigrants do not have a significant impact on wages and employment of the natives. The advantage of migration is then discussed and the chapter concludes by asserting that encouraging migration, both within and beyond borders should be a policy priority, but need not be accomplished by forcing people or distorting economic incentives, but by removing some of the key obstacles.
The third chapter explores trade under the backdrop of Stolper–Samuelson theorem which states opening up to trade should increase growth in all countries and in poor countries inequality should go down. Under this assumption, the chapter permeates through factors like reverse causality, trade liberalisation and comparative advantage. It concludes with recommendations for better trade policy (offering subsidies to firms adversely affected by trade) and employing a collective tax revenue.
The fourth chapter deals with the issue of prejudice emerging from caste, creed, colour or religion and suggests alternatives for its dilution. The chapter draws numerous examples from India and America of how caste-specific political parties have risen and used it to their advantage. Statistical discrimination combined with self-reinforcing discrimination and how it has affected a country’s social fabric is discussed and, finally, implications of these prejudices are mentioned.
The fifth chapter starts by asking a fundamental question: is growth over? The chapter then explores the challenges countries face using Solow’s model of growth. The chapter concludes that growth remains an elusive concept. It also suggests that poor countries should focus on improving education, providing better infrastructure and making the quality of life better for its citizens. For policy makers, the chapter suggests that rather than taking an economy from 2%–2.3%, they should focus on transforming millions of lives in poor countries.
The sixth chapter focuses on climate change and its implications on people. It suggests that a carbon tax be levied in such a way that tax revenues be handed back as a compensation to those at the lower end of the income scale which in turn would provide the incentive to conserve energy.
The seventh chapter has AI at its focal point. It argues whether robots and AI would lead to fewer jobs in future and goes on to discuss rising inequality in many countries citing policy decisions as its main reason. The chapter discusses the implications of social inequality and how it makes people upset with the government. It also warns its readers to be wary of any policy being sold in the name of growth as it is likely to be bogus.
The eighth chapter continues the previous discussion of inequality but keeps the government at the centre. The chapter asks, is government the problem? The question is dealt with under the backdrop of people perception, corruption and the tax system. The chapter concludes by calling for better social programmes designed with governments for political viability and effectiveness.
The ninth chapter takes forward the need for social programmes and its implications on the poor. Programmes like Universal Basic Income (UBI), Negative Income Tax (NIT) and Universal Ultra Basic Income (UUBI) are discussed. The chapter concludes by proposing possible solutions to rising inequality. It asserts, ‘defining people by their problems is turning circumstances into essence’ and proposes to overcome this Victorian overlay, by helping people absorb the shocks they have faced without allowing those shocks to affect their dignity and their sense of themselves.
The book concludes by stating the importance of good and bad economics for policy making. It warns that good economics alone cannot save mankind. To be vigilant against bad ideas, questioning the evidence, being sceptical of promised miracles and being patient with complexity can significantly influence policy analysis and not get replaced by quack remedies.
This book is a must read for budding economists, entrepreneurs, policymakers and pretty much everyone in the social science domain. This book should be taken as a reference, while framing policies and deciding on business expansion. It is also an essential read for those who think of this world from a neutral lens and are not prejudiced by caste, colour or creed and want it to be a better place not just for the privileged ones but for everybody.