In writing a book that ventures much beyond our “core competence,” we had to rely heavily on the wisdom of many of our economist friends. Being surrounded by so many brilliant people, it is impossible to remember where every idea came from. Listing some risks excluding many others, but we feel compelled to name (without implicating, of course) Daron Acemoglu, David Atkin, Arnaud Costinot, Dave Donaldson, Rachel Glennerster, Penny Goldberg, Michael Greenstone, Bengt Holmstrom, Michael Kremer, Ben Olken, Thomas Piketty, Emma Rothschild, Emmanuel Saez, Frank Schilbach, Stefanie Stantcheva, and Ivan Werning. Thank you so much for educating us. Thank you also to our PhD advisors, Josh Angrist, Jerry Green, Andreu Mas Colell, Eric Maskin, and Larry Summers; and our many teachers, collaborators, friends, and students, all of whose imprints are everywhere in the book. Again at the risk of being grossly unfair, the book would not be the way it is without the influence of, among others, Philippe Aghion, Marianne Bertrand, Arun Chandrasekhar, Daniel Cohen, Bruno Crepon, Ernst Fehr, Amy Finkelstein, Maitreesh Ghatak, Rema Hanna, Matt Jackson, Dean Karlan, Eliana La Ferrara, Matt Low, Ben Moll, Sendhil Mullainathan, Kaivan Munshi, Andrew Newman, Paul Niehaus, Rohini Pande, Nancy Qian, Amartya Sen, Bob Solow, Cass Sunstein, Tavneet Suri, and Robert Townsend.
Our year of leave at the Paris School of Economics was a godsend. It was a pleasant and fun place to work, both collegial and lively. We are especially grateful to Luc Behagel, Denis Cogneau, Olivier Compte, Hélène Giacobino, Mark Gurgand, Sylvie Lambert, and Karen Macours; and to Gilles Postel-Vinay and Katia Zhuravskaya for their always-welcoming smiles, much fun conversation, and many sweaty games of tennis. Our MIT colleagues Glenn and Sara Ellison, who coordinated their sabbaticals with us, made the year all the more wonderful. We gratefully acknowledge financial support from the Région Île-de-France (Chaire Blaise Pascal), the Axa Research Fund, the ENS Foundation, Paris School of Economics, and MIT. We thank them for their support.
For over 15 years, the J-PAL crew has not only fed our research fire, but also kept us optimistic about both economics and humankind. We are infinitely fortunate to work with kind, generous and dedicated people every day, year after year. Thank to Iqbal Dhaliwal who steers the ship and to John Floretta, Shobhini Mukherjee, Laura Poswell and Anna Schrimpf, who are our daily companions, seen and unseen. And, of course, to Heather McCurdy and Jovanna Mason for valiantly attempting to put some semblance of order into our lives.
Esther’s parents, Michel and Violaine Duflo, and her brother Colas and his family were a huge part of why we had such a lovely time in Paris. Thank you for everything you do for us, year after year.
Abhijit’s parents, Dipak and Nirmala Banerjee, are for him always the ideal readers for what he writes. He thanks them for teaching him so much of the economics he knows and, perhaps more importantly, the reasons why he should care.
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ABOUT THE AUTHORS
Abhijit V. Banerjee is the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology, and a co-founder and co-director of the Abdul Latif Jameel Poverty Action Lab (J-PAL). In 2011, he was named one of Foreign Policy magazine’s top one hundred global thinkers. Banerjee served on the UN Secretary-General’s High-level Panel of Eminent Persons on the Post-2015 Development Agenda. He has received numerous honors and awards including the inaugural Infosys Prize. Poor Economics, his previous book with Esther Duflo, won the Financial Times and Goldman Sachs Business Book of the Year award and was translated into seventeen languages. He lives in Cambridge, Massachusetts.
L. Barry Hetherington
Esther Duflo is the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics in the Department of Economics at the Massachusetts Institute of Technology and a co-founder and co-director of the Abdul Latif Jameel Poverty Action Lab (J-PAL). Duflo has received numerous academic honors and prizes, including the John Bates Clark Medal for best American economist under forty and a MacArthur “Genius” Fellowship. In 2011 she was part of Time magazine’s 100 most influential people. She lives in Cambridge, Massachusetts.
PRAISE FOR GOOD ECONOMICS FOR HARD TIMES
“In Good Economics for Hard Times, Banerjee and Duflo, two of the world’s great economists, parse through what economists have to say about today’s most difficult challenges—immigration, job losses from automation and trade, inequality, tribalism and prejudice, and climate change. The writing is witty and irreverent, always informative but never dull. Banerjee and Duflo are the teachers you always wished for but never had, and this book is an essential guide for the great policy debates of our times.”
—Raghuram Rajan, Katherine Dusak Miller Distinguished Service Professor of Finance, University of Chicago Booth School of Business
“Banerjee and Duflo move beyond the simplistic forecasts that abound in the Twittersphere and in the process reframe the role of economics. Their dogged optimism about the potential of economics research to deliver makes for an informative and uplifting read.”
—Pinelopi Goldberg, Elihu Professor of Economics, Yale University, and chief economist of the World Bank Group
“Not all economists wear ties and think like bankers. In their wonderfully refreshing book, Banerjee and Duflo delve into impressive areas of new research questioning conventional views about issues ranging from trade to top income taxation and mobility, and offer their own powerful vision of how we can grapple with them. A must-read.”
—Thomas Piketty, professor, Paris School of Economics, and author of Capital in the Twenty-First Century
“A magnificent achievement, and the perfect book for our time. Banerjee and Duflo brilliantly illuminate the largest issues of the day, including immigration, trade, climate change, and inequality. If you read one policy book this year—heck, this decade—read this one.”
—Cass R. Sunstein, Robert Walmsley University Professor, Harvard University, and author of How Change Happens
“Banerjee and Duflo have shown brilliantly how the best recent research in economics can be used to tackle the most pressing social issues: unequal economic growth, climate change, lack of trust in public action. Their book is an essential wake-up call for intelligent and immediate action!”
—Emmanuel Saez, professor of economics at UC Berkeley
“One of the things that makes economics interesting and difficult is the need to balance the neat generalities of theory against the enormous variety of deviations from standard assumptions: lags, rigidities, simple inattention, [and] society’s irrepressible tendency to alter what are sometimes thought of as bedrock characteristics of economic behavior. Banerjee and Duflo are masters of this terrain. They have digested hundreds of lab experiments, field experiments, statistical studies, and common observations to find regularities and irregularities that shape important patterns of economic behavior and need to be taken into account when we think about central issues of policy analysis. They do this with simple logic and plain English. Their book is as stimulating as it gets.”
—Robert Solow, Nobel Prize–winner and emeritus professor of economics, Massachusetts Institute of Technology
“In these tumultuous times when many bad policies and ideas are bandied around in the name of economics, common sense—and good economics—is even more sorely needed than usual. This wide-ranging and engaging book by two leading economists puts the record straight and shows that we have much to learn from sensible economic ideas, and not just about immigration, trade, automation, and growth, but also about the environment and political discourse. A must-read.”
—Daron Acemoglu, Elizabeth and James Killian Professor of Economics, MIT, and coauthor of Why Nations Fail
NOTES
CHAPTER 1. MEGA: MAKE ECONOMICS GREAT AGAIN
1 Amber Phillips, “Is Split-Ticket Voting Officially Dead?,” Washington Post, 2017, https://www.washington
post.com/news/the-fix/wp/2016/11/17/is-split-ticket-voting-officially-dead/?utm_term=.6b57fc114762.
2 “8. Partisan Animosity, Personal Politics, Views of Trump,” Pew Research Center, 2017, https://www.people-press.org/2017/10/05/8-partisan-animosity-personal-politics-views-of-trump/.
3 “Poll: Majority of Democrats Think Republicans Are ‘Racist,’ ‘Bigoted’ or ‘Sexist,’” Axios, 2017, https://www.countable.us/articles/14975-poll-majority-democrats-think-republicans-racist-bigoted-sexist.
4 Stephen Hawkins, Daniel Yudkin, Míriam Juan-Torres, and Tim Dixon, “Hidden Tribes: A Study of America’s Polarized Landscape,” More in Common, 2018, https://www.moreincommon.com/hidden-tribes.
5 Charles Dickens, Hard Times, Household Words weekly journal, London, 1854.
6 Matthew Smith, “Leave Voters Are Less Likely to Trust Any Experts—Even Weather Forecasters,” YouGov, 2017, https://yougov.co.uk/topics/politics/articles-reports/2017/02/17/leave-voters-are-less-likely-trust-any-experts-eve.
7 This survey was done in collaboration with Stefanie Stantcheva and is described in Abhijit Banerjee, Esther Duflo, and Stefanie Stantcheva, “Me and Everyone Else: Do People Think Like Economists?,” MIMEO, Massachusetts Institute of Technology, 2019.
8 “Steel and Aluminum Tariffs,” Chicago Booth, IGM Forum, 2018, http://www.igmchicago.org/surveys/steel-and-aluminum-tariffs.
9 “Refugees in Germany,” Chicago Booth, IGM Forum, 2017, http://www.igmchicago.org/surveys/refugees-in-germany (the answers are normalized by the number of people who give an opinion).
10 “Robots and Artificial Intelligence,” Chicago Booth, IGM Forum, 2017, http://www.igmchicago.org/surveys/robots-and-artificial-intelligence.
11 Paola Sapienza and Luigi Zingales, “Economic Experts versus Average Americans,” American Economic Review 103, no. 10 (2013): 636–42, https://doi.org/10.1257/aer.103.3.636.
12 “A Mean Feat,” Economist, January 9, 2016, https://www.economist.com/finance-and-economics/2016/01/09/a-mean-feat.
13 Siddhartha Mukherjee, The Emperor of All Maladies: A Biography of Cancer ( New York: Scribner, 2010).
CHAPTER 2. FROM THE MOUTH OF THE SHARK
1 United Nations International migration report highlight, accessed June 1, 2017, https://www.un.org/en/development/desa/population/migration/publications/migrationreport/docs/MigrationReport2017_Highlights.pdf; Mathias Czaika and Hein de Haas, “The Globalization of Migration: Has the World Become More Migratory?,” International Migration Review 48, no. 2 (2014): 283–323.
2 “EU Migrant Crisis: Facts and Figures,” News: European Parliament, June 30, 2017, accessed April 21, 2019, http://www.europarl.europa.eu/news/en/headlines/society/20170629STO78630/eu-migrant-crisis-facts-and-figures.
3 Alberto Alesina, Armando Miano, and Stefanie Stantcheva, “Immigration and Redistribution,” NBER Working Paper 24733, 2018.
4 Oscar Barrera Rodriguez, Sergei M. Guriev, Emeric Henry, and Ekaterina Zhuravskaya, “Facts, Alternative Facts, and Fact-Checking in Times of Post-Truth Politics,” SSRN Electronic Journal (2017), https://dx.doi.org/10.2139/ssrn.3004631.
5 Alesina, Miano, and Stantcheva, “Immigration and Redistribution.”
6 Rodriguez, Guriev, Henry, and Zhuravskaya, “Facts, Alternative Facts, and Fact-Checking in Times of Post-Truth Politics.”
7 Warsan Shire, “Home,” accessed June 5, 2019, https://www.seekers guidance.org/articles/social-issues/home-warsan-shire/.
8 Maheshwor Shrestha, “Push and Pull: A Study of International Migration from Nepal,” Policy Research Working Paper WPS 7965 (Washington, DC: World Bank Group, 2017), http://documents.worldbank.org/curated/en/318581486560991532/Push-and-pull-a-study-of-international-migration-from-Nepal.
9 Aparajito, directed by Satyajit Ray, 1956, Merchant Ivory Productions.
10 Using data from sixty-five countries, Alwyn Young finds that urban dwellers consume 52 percent more than rural dwellers. Alwyn Young, “Inequality, the Urban-Rural Gap, and Migration,” Quarterly Journal of Economics 128, no. 4 (2013): 1727–85.
11 Abhijit Banerjee, Nils Enevoldsen, Rohini Pande, and Michael Walton, “Information as an Incentive: Experimental Evidence from Delhi,” MIMEO, Harvard, accessed April 21, 2019, https://scholar.harvard.edu/files/rpande/files/delhivoter_shared-14.pdf.
12 Lois Labrianidis and Manolis Pratsinakis, “Greece’s New Emigration at Times of Crisis,” LSE Hellenic Observatory GreeSE Paper 99, 2016.
13 John Gibson, David McKenzie, Halahingano Rohorua, and Steven Stillman, “The Long-Term Impacts of International Migration: Evidence from a Lottery,” World Bank Economic Review 32, no. 1 (February 2018): 127–47.
14 Michael Clemens, Claudio Montenegro, and Lant Pritchett, “The Place Premium: Wage Differences for Identical Workers Across the U.S. Border,” Center for Global Development Working Paper 148, 2009.
15 Emi Nakamura, Jósef Sigurdsson, and Jón Steinsson, “The Gift of Moving: Intergenerational Consequences of a Mobility Shock,” NBER Working Paper 22392, 2017, revised January 2019, DOI: 10.3386/w22392.
16 Ibid.
17 Matti Sarvimäki, Roope Uusitalo, and Markus Jäntti, “Habit Formation and the Misallocation of Labor: Evidence from Forced Migrations,” 2019, https://ssrn.com/abstract=3361356 or http://dx.doi.org/10.2139/ssrn.3361356.
18 Gharad Bryan, Shyamal Chowdhury, and Ahmed Mushfiq Mobarak, “Underinvestment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh,” Econometrica 82, no. 5 (2014): 1671–1748.
19 David Card, “The Impact of the Mariel Boatlift on the Miami Labor Market,” Industrial and Labor Relations Review 43, no. 2 (1990): 245–57.
20 George J. Borjas, “The Wage Impact of the Marielitos: A Reappraisal,” Industrial and Labor Relations Review 70, no. 5 (February 13, 2017): 1077–1110.
21 Giovanni Peri and Vasil Yasenov, “The Labor Market Effects of a Refugee Wave: Synthetic Control Method Meets the Mariel Boatlift,” Journal of Human Resources 54, no. 2 (January 2018): 267–309.
22 Ibid.
23 George J. Borjas, “Still More on Mariel: The Role of Race,” NBER Working Paper 23504, 2017.
24 Jennifer Hunt, “The Impact of the 1962 Repatriates from Algeria on the French Labor Market,” Industrial and Labor Relations Review 45, no. 3 (April 1992): 556–72.
25 Rachel M. Friedberg, “The Impact of Mass Migration on the Israeli Labor Market,” Quarterly Journal of Economics 116, no. 4 (November 2001): 1373–1408.
26 Marco Tabellini, “Gifts of the Immigrants, Woes of the Natives: Lessons from the Age of Mass Migration,” HBS Working Paper 19-005, 2018.
27 Mette Foged and Giovanni Peri, “Immigrants’ Effect on Native Workers: New Analysis on Longitudinal Data,” American Economic Journal: Applied Economics 8, no. 2 (2016): 1–34.
28 The Economic and Fiscal Consequences of Immigration, National Academies of Sciences, Engineering, and Medicine (Washington, DC: National Academies Press, 2017), https://doi.org/10.17226/23550.
29 Christian Dustmann, Uta Schönberg, and Jan Stuhler, “Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment, “Quarterly Journal of Economics 132, no. 1 (February 2017): 435–83.
30 Michael A. Clemens, Ethan G. Lewis, and Hannah M. Postel, “Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion,” American Economic Review 108, no. 6 (June 2018): 1468–87.
31 Foged and Peri, “Immigrants’ Effect on Native Workers.”
32 Patricia Cortés, “The Effect of Low-Skilled Immigration on US Prices: Evidence from CPI Data,” Journal of Political Economy 116, no. 3 (2008): 381–422.
33 Patricia Cortés and José Tessada, “Low-Skilled Immigration and the Labor Supply of Highly Skilled Women,” American Economic Journal: Applied Economics 3, no. 3 (July 2011): 88–123.
34 Emma Lazarus, “The New Colossus,” in Emma Lazarus: Selected Poems, ed. John Hollander (New York: Library of America, 2005), 58.
35 Ran Abramitzky, Leah Platt Boustan, and Kath
erine Eriksson, “Europe’s Tired, Poor, Huddled Masses: Self-Selection and Economic Outcomes in the Age of Mass Migration,” American Economic Review 102, no. 5 (2012): 1832–56.
36 “Immigrant Founders of the 2017 Fortune 500,” Center for American Entrepreneurship, 2017, http://startupsusa.org/fortune500/.
37 Nakamura, Sigurdsson, and Steinsson, “The Gift of Moving.”
38 Jie Bai, “Melons as Lemons: Asymmetric Information, Consumer Learning, and Quality Provision,” working paper, 2018, accessed June 19, 2019, https://drive.google.com/file/d/0B52sohAPtnAWYVhBYm11cDBrSm M/view.
39 “For the conversion of his money into capital, therefore, the owner of money must meet in the market with the free labourer, free in the double sense, that as a free man he can dispose of his labour-power as his own commodity, and that on the other hand he has no other commodity for sale, is short of everything necessary for the realisation of his labour-power.” From Karl Marx, Das Kapital (Hamburg: Verlag von Otto Meissner, 1867).
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