Setho ka Gaon

An engrossing book, Good Economics for Hard Times, augments our understanding of the events happening around us. It aims to answer some of the most pressing topics surrounding us, from subjects like migration, trade liberalisation, and economic growth to relatively recent concerns like environmental conservation and Artificial Intelligence causing job displacement. Every issue is viewed from a multifaceted lens, and every argument is supported with ample evidence.

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Throughout the read, one may find several instances where actual results of certain policies are more than a slight deviation from how we would expect them to unfold. This is a recurring theme-“it is unreasonable to expect markets to deliver outcomes that are just, acceptable or even efficient”. The first attempt which helps us to go beyond mainstream and conventional literature is the authors’ view on low skilled migration, and how more often than not, migration has worked in favour of natives by creating more jobs and increasing wages, contrary to the view that the resultant increase in labour supply would drive down the wage rate.

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Another episode that certainly stirs curiosity is the impact of trade liberalisation. A study in the book suggests how regions more affected by trade liberalisation showed a slower poverty reduction and widened income inequalities as compared to regions relatively less affected. It is worth one’s time to read and understand what forces conspired to outsmart the well-established “comparative and absolute advantage theory”. A detailed overview of the China Shock and why recovery was harder than anticipated, the differential impact of globalisation on Capital and Labour intensive economies, and why choosing a path of autarky might not be that bad for the US gives a deeper understanding of the real economy. It would, however, be wrong to infer that the aim is to debunk all economic theories as being far from reality. It just tries to put in the reader’s mind that there are many other forces at play; hence the collective consequences may be somewhat unexpected.

 

When it comes to talking of growth, it has a lot to offer. There are two contrasting possibilities presented to the reader, yet, each seems equally convincing. The one presented by Robert Gordon essentially suggests that “growth is unlikely to come back given that none of today’s inventions are (would be?) as radical as electricity or as transformational as the air conditioner”. On the contrary, the possibility posed by Mokyr is more optimistic and sees much more scope in today’s tech and innovation. Similar propositions along with contradictory claims run throughout this section, leaving the reader in an ambiguous state(should I go with Solow, but Romer seemed correct too?). Even the authors very graciously admit that when it comes to growth, results are tentative. What policies make it happen, what exactly drives it, is still not known. But, we can give it a rest-change our focus from making the rich even richer to improving the quality of life of the average citizen. 

 

One of the most intriguing parts is the section that addresses our fears about the wave of automation and AI and what it holds for an employee. To one’s disappointment, the answers to this are somewhat negative. There is indeed a negative effect on employment. There are many suggestions to delay the results, like, reforming tax laws, i.e. taxing capital higher than labour, and keeping a check on monopolies being some of the most effective. At the same time, it comes with a subtle warning against "so-so" inventions which are productive enough to be adopted but not productive enough to raise overall productivity.

Taxation occupies a major section and comes out with a somewhat startling conclusion “Tax cuts for the wealthy do not produce economic growth”. Rather, a correlation between top tax rate cuts and widening inequalities is clearly suggestive of an alternate policy.

 

One of the most remarkable features of this book is that the authors identify the desire for ‘dignity’ as being inherent in everyone, even if they are the ones in most need of help. Seemingly unimportant on the face, it is a major factor determining how people respond to social schemes. It emphasises the fact that income is not the only thing displaced workers lose. A policy aimed at upliftment must also work at rebuilding their morale and self-confidence. Social protection schemes thus require profound rethinking and injection of lots of imagination.

 

With multiple research results and a multitude of evidence and reasoning, the book motivates one to think beyond what is possibly the “obvious”.