The book was first published in November 12, 2019. The authors, Abhijit Banerjee and Esther Duflo, were jointly awarded the Nobel Prize in economics in 2019 (Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel).
In the book, Abhijit Banerjee and Esther Duflo address controversial topics such as immigration, trade, economic growth, technological disruption, universal basic and climate change. To do so, the authors rely on various experiments (randomized controlled trials) to test the effectiveness of specific policy interventions, in the same way clinical trials are performed in medicine (cf. figure below).
Thanks to its experimental focus, the book is written in an easy-to-understand style, which makes it accessible for readers who are not well versed in economics.
Some of the findings that caught my attention are as follows:
- Increased immigration does not negatively affect local people wages
- Ordinary people like to stay in their place. They don’t want to go to a different sector, to a different location and to a different life
- Free trade boosts overall growth, but it also produces concentrated pockets of job losses
- Tax cuts for the wealthy do not produce economic growth
- Damages from climate change will be much more serious in poor countries
- Because of distortions in the tax code (taxing humans more than capital) and industry concentration, most of automation today is more about deplacing workers than raising overall productivity
- There is no evidence that cash transfers make people work less
- Universal basic income is a good idea but it is very expensive. However, in the case of the US, it would require eliminating all existing welfare programs and raising the US tax level to the level of Denmark’s
Selected quotes from the book :
“Economics is too important to be left to the economists.”
“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”
“The focus on income alone is not just a convenient shortcut. It is a distorting lens that often has led the smartest economist down the wrong path, makers to the wrong decisions and too many of us to the wrong obsessions”
“We clearly don’t have all the solutions, and suspect that nobody else does either. We have much more to learn. But as long as we understand what the goal is, we can win”
“If the world warms by a degree centigrade or two, residents of North Dakota will mostly feel perfectly happy about it”
“The bulk of R&D resources these days are directed towards machine learning and big data methods designed to automate existing tasks rather than the invention of new products that would create (…) new jobs”