We also admire the stand taken by both Esther and her husband in showing demonetisation to have catastrophic consequences for the Indian economy.
This newspaper congratulates Esther Duflo, her husband Abhijit Banerjee, and Michael Kremer for the 2019 Nobel Prize in Economics. Their breakthrough in development economics — to break macro-economic policy questions into smaller and easier test studies, as they did through Randomised Control Trials (RCTs) — has proven effective in the real-world problems of poverty alleviation. This link between the abstract and the empirical is important in a country like India where state capacity remains limited. Their work has made a tangible difference in two critical areas of governance: education and healthcare. We look forward to their forthcoming book, Good Economics for Hard Times (whose first chapter is “MEGA: Make Economics Great Again”). While we are proud Abhijit was born in India and that he was educated at Calcutta University, Jawaharlal Nehru University and Harvard, we are happier still that the prize was awarded to pioneers in an important area of micro-economic research rather than to analysts of macro-economic and trade patterns, much of whose work has been undermined by global politics since the 2008 Great Recession. It is pointed out that during his student protest days, Abhijit had to spend a few days at Tihar Jail; fortunately he did so in a climate unlike today’s, in which student agitators are dubbed “anti-nationals” and “tukde-tukde gang” members. His Nobel Prize validates dissent and the questioning of authority as markers of intellectual curiosity.
We also admire the stand taken by both Esther and her husband in showing demonetisation to have catastrophic consequences for the Indian economy. They are like the boy who pointed out that the emperor wore no clothes. Back in 2016, a month after the government’s great folly, Esther told an interviewer that she feared we would never know the full damage of demonetisation because India lacked an effective mechanism to measure GDP creation in the economy. Abhijit has continued to emphasise that our current slowdown has been exacerbated by demonetisation, as well as the sloppily-implemented Goods and Services Tax. According to him, India is now in crisis: investment has totally collapsed, exports are not growing, and public borrowing is at nearly 10 per cent of GDP. He advocated increasing demand. Let's see if the government listens.
Notably, Abhijit played the part of a public intellectual when he helped the Congress Party formulate its Nyuntam Aay Yojana (Nyay), which would have given cash supplements to the poorest 20 per cent of the population. (Esther and Abhijit’s work has shown that the poorest, rather than plough their money into entrepreneurial activity as this government believes, use it for healthcare expenditure.) He is a far cry from that other JNU student of his time, Nirmala Sitharaman, who is hurtling towards the history books for her incompetence as finance minister. It shows that an ideological agenda is no panacea for the problems facing a vast nation like India; and it is always better to break a problem into smaller pieces, rather than look for dramatic, one-size-fits-all solutions.