Nobel Laureate Abhijit Banerjee presents ‘Good economics for hard times’

“Good economics for hard times” against the backdrop of COVID-19 was the topic under discussion at the University of Cape Town’s (UCT) first Vice-Chancellor’s (VC) Open Lecture for 2021.

The lecture was presented by Nobel Laureate Abhijit Banerjee on Thursday, 29 April. The virtual event was hosted in partnership with the Abdul Latif Jameel Poverty Action Lab (J-PAL) Africa, based in UCT’s School of Economics. 

Banerjee is the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology (MIT) in the United States (US). He holds various prestigious titles, including being past president of the Bureau for Research in Economic Analysis of Development, and a research associate at the National Bureau of Economic Research in the US.

He shared the 2019 Nobel Memorial Prize in Economic Sciences with professors Esther Duflo and Michael Kremer, “for their experimental approach to alleviating global poverty”.

During his lecture he reviewed extracts of his most recent book, Good Economics for Hard Times, co-authored with Duflo, who works in the field of poverty alleviation and development economics at MIT.

“Hard times turned into harder times with the pandemic.”

“In 2019, just before the [onset] of the pandemic, we published ... Good Economics for Hard Times. I don’t usually think of myself as having any prophetic powers. But this was one instance where we seemed to have sadly hit it right on the nail,” he said.

“Hard times turned into harder times with the pandemic.”

But despite the current COVID-19 crisis, and more disasters possibly still to come, Banerjee said he remains hopeful that change is possible. His lecture focused on how economics can be useful when it comes to “holding onto hope”

Warm welcome

UCT VC Professor Mamokgethi Phakeng welcomed Banerjee and the audience to the lecture. She said these events provide an opportunity for the university community and members of the public to hear “first-hand” from individuals who have distinguished themselves in their respective fields.

“These are people who inspire us to greatness.”

Since the onset of the pandemic, she said, it had become imperative to connect and to engage in discussions that “allow us to consider different points of view” and to instil a sense of inclusivity, transformation and excellence within the university.

“The pandemic also reinforces the importance of disrupting the old patterns of thinking and behaving that have led to the current state of the world,” she said.

Economic challenges

Banerjee told the audience that several of the world’s most pressing challenges are directly linked to economics. These, he explained, include climate change, poverty and inequality, racism and discrimination, social policy and, more recently, the COVID-19 pandemic and the economic and social ills that come with it.

Yet economists have lost most of their credibility, which means that few people trust their opinion. In fact, he added, according to a recent study conducted in the US, only 25% of respondents indicated that they trust economists to do their work, compared with the 84% of respondents who trust nurses and the 82% who trust doctors.

“We really are at the bottom in terms of what people think is our competence to do our jobs.”

Along with politicians, it’s economists who are considered most untrustworthy. “We really are at the bottom in terms of what people think is our competence to do our jobs. People are very sceptical about it,” he said.

Why the mistrust? Banerjee said one reason is because economists often fail to predict what is going to happen to the economy, especially in the context of a financial crisis. In general, “we are constantly embarrassing ourselves by making predictions that don’t go very far (...) but I don’t think of that as being what economists do well”.

However, Banerjee believes economists still have an important role to play in society. He used the COVID-19 pandemic as an example. At the onset of the pandemic, economists joined scientists to conduct highly relevant research on the virus and its effects.

“Economist [were] ideally placed ... to ask a certain set of questions that nobody else was asking,” he said.

Opportunities for growth

Banerjee highlighted three opportunities to foster growth that the world should take from the COVID-19 pandemic and the myriad challenges it has imposed globally for more than a year:

• Introduce comprehensive social protection – break the political impasse.
• Fight climate change. Persuade people that it’s in their interest to fight climate change and find the resources to deal with the issue. This will require bigger and more aggressive [policies] from governments.
• Convince people that the idea of a shared destiny is a real one. COVID-19 vaccines are “mostly being grabbed by rich countries”. "Rich countries have shamelessly decided that their citizens are more important to humanity than the rest of the world.

“That narrative undermines our ability to build empathy and to move forward in a world where we are all contributing to a shared destiny. We need to walk back from there,” he said.