Economics gives a guided tour through all that could go wrong

The first evening of 2020's 'Literature Live' on Sunday at the Taj Mahal Palace, saw Mumbai play host to Abhijit Banerjee and Esther Duflo, who won the Nobel Prize in economics this year for their paper that deals with tackling poverty, in conversation with economist Ajit Ranade. The 'Nobel couple,' also launched their latest book, 'Good economics for bad times,' at the event.

The evening was marked by some coded statements that aimed at addressing the unrest prevailing in the country with regard to the controversial Citizenship Amendment Act (CAA) 2019 and the National Registrar of Citizens (NRC). Addressing the audience before yielding the floor to Banerjee, Duflo and Ranade, Anil Dharkar said, "Their current book deals with immigration, globalisation, climate change etc...all of which is very timely in India, although I don't think they meant it to be so when they wrote the book, because at the time, the deadly alphabet soup of CAA, NRC and NPR was not in anyone's minds, maybe except for a couple of minds in Delhi."

Dharkar further set the mood for the evening when he said, "I recently met a political leader of a particular party who claimed that most of the Nobel prize winners from India are Brahmins, and Esther, not being of Indian origin, is not a Brahmin yet...but what politicians don't realise is that this speaks of an exclusion, that if only Indian Brahmins were winning these awards...it talks of exclusion in India on a larger sense." 

History before economics

When the conversation between Duflo, Banerjee and Ranade was thrown back to Duflo's early days when she was studying history and was placed in Russia, she made the audience laugh when she said, "I liked history better but then thought how would I use it to make the world a better place?" She also said she was "young" at the time, to which Ranade quipped, "If there is any hope, it is because of the young—look at what's happening in the streets." Addressing Banerjee, he said, "I'm not going to ask you what you think of demonetisation." to which Banerjee quickly said, "No one was asked." 

"The only people who are trusted lower than economists are politicians," said Ranade, pointing out that economists had got 9 out of the last 11 recessions incorrect, to which, Duflo responded by saying, "It is because academic economists have ceded the ground to other kind of people... one of them is the economic forecaster.

Economic discourse has been dominated by forecasters...with various ideological axes to grind." Banerjee added that "There is a lot of trying, but the important part is to measure success after trying—which is something that doesn't happen."

'A guided tour'

Speaking on the role of economics, Banerjee said, "I think that economics gives you a guided tour through everything that could go wrong. That is where economics is very handy...but by now thinking through the various possibilities, we often stumble into them and it is too late to undo." He also spoke of how the difference of few decimal points, while calculating GDP, must not be taken at face value. "We don't have the capacity to measure these decimal points... they are fake precision. I don't mind guesses but let's acknowledge the marginal error." Then in the room full of economists, Ranade joked "There's a whole industry that thrives on those things," while referring to the economic forecasters.

When Ranade asked them as to whether India needed to ramp up its GDP in order to alleviate poverty, Duflo said, "No. It is neither sufficient, nor necessary, and in either case we do not know how to make that happen (make GDP go through the roof). The poor don't make much money which means that it doesn't take much to improve their standard of living."

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