Economics is too important to be left to economists alone – that’s how two of the three economists, Abhijit Banerjee and Esther Duflo, who won the Nobel Prize this year, end their latest book, Good Economics for Hard Times. Abhijit Banerjee has raised a lot of controversies by winning the prize; but one thing is clear – he has taken it off its pedestal, simplified the social science, and brought it down to the grassroots.
He has thought about the poor but he has not pleased the conventional leftists because he has relied on the market forces. Once he landed in India to release his latest book after winning the Nobel, he gave at least 100 interviews in a day and in the process lost voice. Everywhere he was heard disagreeing with his ‘friend’ and former contemporary of JNU – the present Finance Minister Nirmala Sitaraman – on reducing the corporate taxes.
He spoke in favour of privatising the public sector banks, which angered the left parties and the Congress.
The Prime Minister invited him to his house and praised his genuine concern for the poor and also said he had made India proud. But the BJP criticised him viciously for helping Congress with their 2019 campaign promise of NYAY (for which Banerjee had only offered data and had been critical of its design). The Nobel laureate reiterated that he is a professional and that his economic convictions do not follow any political line. He offered to help out any party if they came to him for guidance on issues related to the economy.
Abhijit Banerjee has very strong views – and for that he is not very well accepted even among his community of traditional economists. Banerjee and Duflo state in their book, “Bad economics underpinned the grand giveaways to the rich and the squeezing of welfare programmes, 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.” He claimed that ‘smart philanthropy’ of so-called ‘goodʼ economics by giving away things was not the full answer to remove world’s miseries.
What is impressive is Banerjee’s exhorting economists to be more flexible with their views. When the self-proclaimed economists pronounce and predict, they sound authoritative. A survey reveals that the forecasts of the IMF on growth have in many cases turned out to be wrong. Economists are not futurologists. They often go wrong. “Economists are more like plumbers; we solve problems with a combination of intuition grounded in science, some guesswork aided by experience, and a bunch of pure trial and error,” he and Duflo claim. The ‘trust deficit’ about economists, he says, needs to be restored.
Best economics is the least strident. As he and Duflo write, “The most valuable thing economists have to share is often not their conclusions but the path they took to reach it – the fact they knew, the way they interpreted those facts, the deductive steps they took, the remaining sources of their uncertainty.”