Review of Good Economics for Hard Times: How Does Economics Helps Navigate a Our World Today
Written by: Ferio Brahmana
A review of the book of Good Economics of Hard Times from Chapter 1-4
"Good Economics for Hard Times" by Nobel laureates Abhijit Banerjee and Esther Duflo is amazing. While reading it, I experienced a surprising range of emotions – shock, relief, and even optimism – all at once. This initial emotional response is coming from the book's presentation of a lot interesting and comprehensive facts. Banerjee and Duflo masterfully craft these facts into a coherent perspective using data-driven (that was based on a lot their economist colleagues' work) and great reasoning. Their work offers a glimmer of hope for our complex and challenging world.
The book start the first chapter with a comical chapter title, "MEGA: Make Economics Great Again," a playful echo of the one of the most memorable political jargon at the time the book was published. However, this title does really represent the authors' call to revitalize the role of economics and the perspective of economist in society. They acknowledge the public's skepticism towards economists, often seen contradicted each others and lean more into certain interest of elites. Despite the inherent limitations of economics in providing definitive answers to complex problems, Banerjee and Duflo argue that it offers a valuable framework for understanding these issues – which is what they are promising to deliver in the whole book.
Through thorough research and analysis of existing economic researches, the authors aim to address contemporary challenges like polarization, migration, and international trade. Aside from their honest aspiration to share their thoughts regarding current challenges of the world, their goal is not to force-feed anyone with their solution or ideas, but rather to equip readers with a deeper understanding of economic methodologies and arguments, fostering informed decision-making.
The following chapters are talking about two pressing topics in American society in that time: migration and international trade – which was brought as two of the major issues that was talked a lot on the presidential campaign. Banerjee and Duflo offer a comprehensive perspective and knowledge, challenging "typical" simple answer that was being disseminated at the time while revealing the complexities of these phenomena. They provide evidence which argue that migration can have a positive impact on society, debunking simplistic theories often used in political debates such like "supply-demand" concept for labor market – which is not exactly a right theory for the complex labor dynamics. However, they also emphasize the importance of effective integration of the migrated workforce and achieving clear economic goals regarding the needs of additional workforces to avoid potential drawbacks. This discussion of migrations was also coined as a mobility problem that was also relevant to the issue of international trade on the next section.
For the international trade discourse, the authors acknowledge the criticisms towards it, particularly concerning the unequal distribution of benefits and the actual gain for the whole economy of a nation especially for some certain cases. Based on recent researches, they admit that large economies like the USA may not see substantial gains of the global trade, but they emphasize the significance of global trade for developing nations. Then, they also argue that these nations still need support from established entities, which most certainly exist in greater economy country, to fully integrate into the global network. This assistance, they suggest, can take various forms, not necessarily requiring formal government-to-government partnerships, but is certainly needed for a global net surplus. With that said, even if global trade is not really benefiting a large economy country, the authors still against both abrupt disengagement and uncritical embrace of international trade, advocating for adaptive strategies to mitigate potential disruptions - because disruptions from international trade is a fact and unavoidable. However, a mitigation plan to ensure economics safety is not impossible to achieve. This includes fostering workforce mobility, allowing workers to adapt to changing economic landscapes by acquiring new skills or transitioning to different industries.
Then, the chapter 4 of the book explores how economic principles can also help to shed light on complex social issues such as beliefs, preferences, discrimination, and racism. Using historical data and cleverly designed research experiments, the authors offer new insights into these challenging dynamics. They conclude with four key takeaways: the danger of reinforcing racist sentiments through contempt, the nuanced nature of prejudice, the multifaceted motivations behind racist beliefs, and the importance of fostering diversity to combat discrimination.
The final chapters tackle growth, inequality, and climate change – central themes in the authors' vision for the future. These topics inherently involve a higher degree of abstraction compared to migration and international trade. Banerjee and Duflo acknowledge this complexity and the limitations of data in these areas. They emphasize the role of both personal and societal preferences (including wants and needs) in shaping their arguments on these future challenges.
"Good Economics for Hard Times" delivers on its promise, offering a compelling blend of empirical research, theoretical insights, and thought-provoking arguments on today's pressing issues. The first four chapters provide a strong foundation, and it's intriguing to see how the authors leverage an economic perspective to shape their vision for the future.
Twitter: @feriobrahmana