Good economics for hard times

Back in 2011, I took my longest ever career sabbatical (15+ months) which would eventually lead me to “start up” for the second time.

Poor Economics: A Radical Rethinking of the Way to Fight Poverty was the debut bestseller by the dynamic duo Abhijit Banerjee and Esther Duflo (from MIT) and my learning bible in that period. Here is me gushing on about the book before I had even read it. The hype and anticipation would turn out to be fully justified - I dedicated 12 posts summarising my fave insights from their book. By the time the duo had won the Nobel Prize, they had already revolutionised the field of development economics - RCTs had become de riguer. On a side note, when the Nobel was announced on 14th October, 2019, it was the first time I knew exactly why they had won! At the start of my (now third) sabbatical, is it any surprise that I went looking for the latest on J-PAL, Duflo and Banerjee?

Good Economics for Hard Times: Better Answers to our Biggest Problems

I should have my hands on this book by tomorrow. This Guardian review (by a University of Athens professor & former finance minister of Greece) makes a cogent case for why the book is eminently worth a read:

Good Economics for Hard Times is the latest attempt by economists to defend their profession. It is, happily, an excellent antidote to the most dangerous forms of economics bashing: the efforts of opportunistic politicians to weaponise discontent with mainstream politics and to press it into the service of a xenophobic ideology that denies facts and serves the interests of a nativist, global oligarchy. They examine the most crucial issues humanity faces (migration, trade wars, the scourge of inequality, climate catastrophe) with a combination of humility over what economics cannot tell us and pride over its contributions to our limited understanding. On every page, they seek to shed much-needed light upon the distortions that bad economics bring to public debates while methodically deconstructing their false assumptions. In their words, the book’s noble, urgent task is “to emphasise that there are no iron laws of economics keeping us from building a more humane world”.

The book’s greatest contribution is its methodical deconstruction of fake facts: migration, we learn, is not on the rise – indeed, at 3% of global population, it is at the level it was in 1960. Natural experiments (involving Finns expelled from the USSR in 1945, Cubans flocking to Miami in 1980 and Jews settling in Israel in the 90s) prove that migrants do not steal natives’ jobs; they just help expose the holes in public services and social housing left by austerity. As for trade liberalisation, which economists treat as super-important, Banerjee and Duflo suggest it brings relatively small benefits while doing a lot of damage to the poor in countries such as the US and India. The resulting discontent turbo-charges racism: the moment white blue-collar men lose hope and apply for disability welfare benefits, it is no longer enough for them to denigrate black people and Latinos as “welfare queens”. They must now be depicted as gang members or rapists.

Regarding the authors’ themselves, the reviewer had this to say:

Their own conception of what economists should be doing is disarmingly down to earth. They see themselves as society’s “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”. A comparison with John Maynard Keynes’s conception of economics is telling. He thought that it required us to be, at once, “mathematician, historian, statesman, philosopher”. That we must “contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought”. That we must remain “as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician”.

And ends with the assessment that the book fails to address capitalism’s fatal flaws:

It is a remarkable sign of the times that, as my friend the philosopher Slavoj Žižek once said, even the brightest minds would rather fathom the end of the world than plan for the demise of capitalism. Perhaps the greatest contribution of Good Economics… is precisely this: it demonstrates both the brilliant insights that mainstream economics can make available to us and its limits, which a progressive internationalism has a duty to transcend.

J-PAL in numbers

J-PAL recently completed 20 years and they put out this impressive evaluations page which, in just sheer numbers, reads a bit like this:

• 1800+ randomized evaluations conducted by affiliates in 96 countries across 14 sectors
• Sectors ranging from Agriculture & Education to Crime, Violence & Conflict
• The sheer range of Interventions is so inspiring that I’m going to list most of them - dispute resolution, apprenticeships, audits, behavioral economics, child care, certification, coaching, behavioral therapy, community policing, consumer protection, cookstoves, conditional & unconditional cash transfers, cookstoves, crime prevention, defaults, diversity quotas, financial literacy, health care delivery, incentives, insurance, nudges & reminders, pedagogical innovation, performance based pay, savings, social networks, subsidies, vocational training
• Just in India, there were 161 interventions (out of a grand total of 868 evaluation summaries)
• 1648 evaluations in 2023 (this was 103 in 2003)
• 44 policy insights

Intervention showcase

Let me end with an intervention showcase from Haryana - Impact of school-based gender attitude change program

Intervention setup

In partnership with Breakthrough and the Government of Haryana, researchers evaluated a school-based program to test if adolescents’ gender attitudes, aspirations, and behaviors can change through discussion and persuasion. From a sample of 314 government schools, researchers randomly selected 150 in which to implement the program, while the remaining 164 served as a comparison group. The program began in the 2014-2015 academic year and targeted secondary school students between 11–15 years old, as adolescence is believed to be a critical time for development when students are still forming their own attitudes and are mature enough to reflect on complex issues. Over two and a half years, Breakthrough facilitators conducted 27 45-minute long sessions during the school day.

Researchers surveyed students four to nine months before the program began and one to six months after the program ended. They aggregated survey responses into indices that captured student’s gender attitudes, aspirations, and behaviors. To measure the program’s medium-term impacts, researchers surveyed the students again two years after the program ended, when the students were, on average, 17 years old. In addition, they distributed application forms for a college scholarship program to female participants to determine whether the program increased girls’ aspirations and thus made them more likely to apply for a scholarship. Finally, researchers also informed participants about a petition to end the dowry system, with the names of signatories to be published in the local newspaper, to evaluate whether participants would be willing to publicly support a gender-progressive position.

Scaling up

A measure of the success of this Haryana pilot program can be evinced by the fact that its neighbor Punjab proceeded to adopt the very same program for grades sixth, seventh, and eighth in its government schools. More recently, Odisha also followed suit. Media coverage - TOI, Feminism India and Economist.