Review of Good Economics for Hard Times

 

David Brooks, in his scathing review of modern economics, writes, “Economics achieved coherence as a science by amputating most of human nature.” Throughout Good Economics for Hard Times, Esther Duflo and Abhijit Banjeree show awareness of this critique, and consistently bring up non-financial incentives that motivate human behavior. For example, the authors emphasize the dignity (rather than just cash) that comes from holding a job with meaning and conclude that the reason why fewer people emigrate towards higher paying jobs than one might expect is because moving is difficult for social and emotional reasons.  

In their discussions of poverty, global warming, and changing industries, the authors frequently recommend government interventions and programs as part of the solution. However, Duflo and Banjeree admit that government often faces an image problem where there is assumed corruption and waste which interferes with the government’s ability to help. (Interestingly, the perception of the government as corrupt varies greatly from country to country; the authors mention interesting research that Danes who were reminded of the fact that they were hoping for a government job proved to be more honest than the average Dane, but Indians who were reminded of the fact that they had the same goal were less honest than the average Indian). Duflo and Banjeree concede that corruption and waste plague governments, but also assert that many of the services that governments do and should perform are not easily replaceable in the private sector: “To demonstrate waste in government, one needs to show there is an alternative way to organizing the same activity that works better” (268).

One of the central ideas of Good Economics for Hard Times is that—contrary to Reagan’s portrayals—the poor throughout the world can generally be trusted to spend their money wisely. As such, it isn’t surprising that the authors discuss UBI (Universal Basic Income). They do not like the idea of UBI “as a way to buy off those who will be made unproductive by the new economy and won’t be able to find work” as they find the dignity associated with working to be essential to human satisfaction (298). As such, they ultimately do not endorse UBI in the United States. However, they do offer their support for UUBI (Universal Ultra Basic Income) in developing countries. However, their idea of funding UUBI is not very fleshed out: they simply propose that UUBI could replace all existing social programs in developing countries. This feels like a politically impossible idea.

This is one example of a place in the book where the discussion is not very thorough; in places, the authors sacrificed depth for breadth in ways that were unsatisfying. There also were some potentially unresolved tensions in the book which I would have liked to have been addressed: the authors bring up the fact that people tend to spend large amounts of free time in ways that make them miserable (301), but also denounce paternalistic policies such as giving the poor food stamps rather than cash (100). It seems to me that if people really do not know how to spend free time in ways that make them satisfied, then the same may be true for money, and that policy “nudges” sometimes would be justified.