Good Economics for Hard Times, by Abhijit Banerjee and Esther Duflo

A frustrating book. One minute, it’ll be knee-deep in the blinders and false-assumptions of economics, the next it’ll flip and call out economists for being too focused on GDP and not enough on human dignity.

That kind of whiplash makes me not trust anything the authors say. They’re too inconsistent for me to be able to piece together a coherent approach or worldview for them.

Or argue with their takes. I mean, how do you approach someone who believes the B.S. that Silicon Valley has been spouting for decades about being “disruptive” (instead of the truth: they’re VC funds chasing the bubble-high returns of monopoly) but also admits that increasing automation can displace people who should be helped?

Or a team that argues that GDP should not be used to measure growth anymore — and even that growth is not that important — but also uses GDP growth in their arguments for other policies (for example, that immigration does not hurt the societies that accept immigrants)?

It’s all over the place.

If anything, this book further convinces me of the limits of current economic thinking. So many times, the authors posit a problem (“why don’t people move around more?”) that has obvious answers as soon as your take your head out of the economic sand.

I mean, so many of the things that make it hard for them to “explain” why humans act the way they do are fundamental ideas in economics that have been debunked.

Amazon isn’t profitable because of its size. Amazon was a business failure for decades, that Bezos kept afloat through his access to capital. Only in the last few years, when it’s become an illegal monopoly and so can flood the moat around its market, has Amazon turned a profit.

The authors swallow the Amazon line because they’re still beholden to the economic idea that bigger means more efficient. But anyone that’s ever worked in a large org knows that bigger organizations are less efficient than smaller ones. They just wield more economic power, and so can remain large.

And they find it hard to explain why people don’t move around more (from poorer places to wealthier ones) only because they rely on the economic model of human behavior, which posits that people always act to increase their wealth, and do so efficiently.

Which is obvious bunk to anyone who has, you know, spent time around actual people.

The authors whiff on basically every issue they address. They find it hard to calculate the costs or benefits of social media, when Facebook’s balance sheet is publicly available (proving social media is big business). They advocate for helping immigrants find their way in a new society, without pointing out that the policies they recommend — job matching, housing, child care — would benefit everyone if implemented universally, not just the displaced (and so be more politically viable).

In the end, I think they themselves sum up the book’s “insights” best:

Economics is too important to be left to economists.

Well said.