‘Good Economics for Hard Times’
Abhijit Banerjee and Esther Duflo, PublicAffairs, 432 pages, $30. When the authors of this excellent book were awarded the Nobel Prize for economics last month, French media crowed that a Frenchwoman had won it; Indian media that an Indian-born economist and his wife had done so. Most reports eventually mentioned the other laureate, but the parochialism of the headlines bears out one of the book’s central observations. The world is messier than conventional economic models assume. People respond not only to material incentives but also to the pull of tribe and custom. All economists know that their models oversimplify, but few have grappled as energetically with the complexity of real life. The couple are best known, along with their fellow Nobel laureate Michael Kremer, for pioneering the use of randomized controlled trials to answer economic questions. “Good Economics for Hard Times” reviews the evidence for what works and what doesn’t in tackling some of the world’s biggest problems. The authors admit that their knowledge is imperfect and their proposals will need refining. The result is a treasure trove of insight. They describe how caste politics fosters corruption, how potential migrants can overcome their fear of the unknown, and how, when government posts are excessively well-paid, fresh graduates remain jobless for years rather than settle for a private-sector position. All readers will find something to disagree with in this book. But they will be captivated by the authors’ curiosity, ferocious intellects and attractive modesty.