Friday, December 27, 2019

Esther Duflo & Abhijit Banerjee

Esther Duflo and Abhijit Banerjee won the 2019 Nobel Prize in Economics, along with economist Michael Kremer. Banerjee & Duflo's new book is Good Economics for Hard Times.

From the transcript of their interview with Fareed Zakaria:

ZAKARIA: And one of the methods that you really pioneered is this idea of going in and observing what people do? Tinkering with some of the things you gives one - you do one thing for one group and one thing for another group? What does it reveal with in terms of this idea that we are all bound by economic incentives?

DUFLO: Yes. So one, for example, one series of experiments, not just one, but maybe a dozen experiments that revealed very much that the poor don't get discouraged from working when they receive free money is a series of cash - that they've happened now all over the world or in Latin America, even in the U.S. for a while.

So the people get some money as long as their kids go to school and they get the basic immunization and other preventive care services for their children. So one can then look at what happened to the people who get the money and the people who don't. And they are strictly equivalent because they were chosen randomly.

And across all of these experiments you never see a difference in the probabilities that people are working or in how many hours they work? If anything, whenever you see a small difference, it's actually the people who receive money work a little more.

ZAKARIA: You also work in some of the poorest parts of the world. You work in a part of India that is pretty poor. What is the - is there a simple answer to the question of what does one do about that kind of extreme poverty? For a government that doesn't have the resources of the United States?

BANERJEE: Well, I think in our book we make the case that it's probably - that is exactly where you may want to go for something like universal basic income maybe kind of an ultra basic income. Not really very much, but the government's attempt to help the poor has always been a little bit colored by this idea that if you give them free money, they'll be a bunch of lazy people who will - it's just take it.

So you basically have a scheme where what happens if you have to go to work to get the money. It's not clear that that's how you help the poorest people. We worked with some women who were - who had been abandoned by their husbands, and had small children. How do they go to work? Where do the children go?

They were not using these schemes. And as a result, they were instead begging, basically. And the loss of dignity from that seems extraordinarily costly. Nobody will have to be at that - nobody needs to be begging. I think that's not - that - that I think most countries can achieve. And we should try...[read on]
--Marshal Zeringue