Good Economics for Hard Times, Abhijit V. Banerjee · Esther Duflo
"As in medicine, we are never sure we have reached the truth, just that we have enough faith in an answer to act on it, knowing we may have to change our minds later. Also like in medicine, our work does not stop once the basic science is done and the core idea is established; the process of rolling out the idea in the real world then begins."
"Those trying to get out of such places probably don't face the grinding extreme poverty the average Liberian or Mozambique resident faces. It is more that they find life intolerable because of the collapse of everyday normality: the unpredictability and violence brought upon them by the drug wars in Northern Mexico, the horrible military Junta in Guatemala, and the civil wars in the Middle East. A study from Nepal found that even bad years in agriculture didn't drive many Nepalis out of the country. In fact, fewer people left in bad years because they could not afford the trip out. It is only when the violence from Nepal's long-standing Maoist insurgency flared up that people started leaving. They were running from the mouth of the shark. And when that happens, it is almost impossible to stop them, because in their minds there is no home to return to."
"This study came to the same conclusion as the historical ones. Comparing the evolution of wages and employment of less-educated natives in cities subject to this chance influx of migrants to those in other cities, it found no evidence of negative impacts."
"Therefore, despite widespread support for it, including from people like President Trump, the immigration of skilled workers is more of a mixed bag from the point of view of its impact on the domestic population. It helps low-skilled natives, who benefit from cheaper services (most doctors who serve the poorest corners of the United States are migrants from the developing world) at the cost of worsening the labor market prospects of the domestic population with similar skills (nurses, doctors, engineers, and college teachers).
"Ultimately, we also need to remember that many people, regardless of any incentives on offer, will choose not to move. This immobility, which runs against every economist's instinct of how people should behave, has profound implications for the entire economy."
"Taken together, the exchange of goods, people, ideas, and cultures made the world much richer. Those lucky enough to be in the right place at the right time, with the right skills or the right ideas, grew wealthy, sometimes fabulously so, benefitting from the opportunity to leverage their special gifts on a global scale. For the rest, the experience has been mixed. Jobs were lost and not replaced. Rising incomes have paid for more new jobs--as chefs and chauffeurs, gardeners, and nannies--but trade has also created a more volatile world where jobs suddenly vanish only to turn up a thousand miles away. The gains and the pains ended up being very unequally distributed and they are, very clearly, starting to bit back at us; along with migration they define our political discourse."
"The overarching takeaway is that we need to address the pain that goes with the need to change, to move, to lose one's understanding of what is a good life and a good job. Economists and policy makes were blindsided by the hostile reaction to free trade, even though they have long known that as a class workers were likely to suffer from trade in rich countries and benefit from it in poor countries. The reason is they have taken it for granted that workers would be able to move jobs or places, of both, and if they were not able to do this, it was somehow their failing. This belief has colored social policy, and set up the conflict between the "losers" and the rest that we are experiencing today."
"Both parts of the Robbers Cave experiment are important: the fact that it is easy to divide as well as the fact that it is possible to reunite. That it is easy to divide is a strong reason to be extremely frightened by the xenophobes and the cynical manipulators of xenophobia who rule so many countries today. The damage they do is not permanent, but unless it is carefully undone it can leave a terrible scar on a nation."
"So at the end of the day, although we will try to stitch together the best evidence for these theories, the result will be tentative. We have already seen that growth is hard to measure. It is even harder to know what drives it, and therefore to make policy to make it happen."
"The bottom line is that despite the best efforts of generations of economists, the deep mechanisms of persistent economic growth remain elusive. No one know if growth will pick up again in rich countries, or what to do to make it more likely. The good news is that we do have things to do in the meantime; there is a lot that both poor and rich countries could do to get rid of the most egregious sources of waste in their economies. While these things may not propel countries to permanently faster growth, they could dramatically improve the welfare of their citizens."
"If there had been any trickle-down effect of lower taxes, as its advocates claimed, one would expect wage growth to have accelerated in the Reagan-Bush years. But the opposite happened. The labor share (the share of revenues used to pay wages) has continuously declined since the 1980s. In manufacturing, almost 50 percent of sales were used to pay workers in 1982; it had fallen to about 10 percent in 2012."
"All in all, therefore, it seems to us that high marginal income tax rates, applied only to very high incomes, are a perfectly sensible way to limit the explosion of top income inequality. They would not be extortionary, since very few people will end up paying them; top managers will simply not get these kinds of income anymore. And from all we see, they won't discourage anybody to work as hard as they can. To the extent they affect people's choice of career, it will likely be in a positive direction."
"While the Swiss example is particularly stark, the result is more general. Taxes do not seem to discourage people from working. However, voters may still oppose taxation if they think others would stop working if taxes went up. In our survey we asked some of the respondents whether they would stop working, or work less, if taxes were higher. Seventy-two percent said they would absolutely not stop working, and 60 percent said they would work just as much as before. This is very consistent with the data. We also asked the other respondents how they thought the average person in the middle class would respond. In that case, only 35 percent of respondents believed the average middle-class person would work as much as before, and 50 percent believed they would stop working. Thus, when judging themselves, Americans are about right, but when they anticipate the behavior of their friends and neighbors, they are much too pessimistic."
"But bad relative to what? The problem is that there is no substitute for a lot of things the government does (although of course many governments do more things than they should, like running an airline in India or a cement plant in China). When a tornado strikes, when an indigent needs healthcare, or when an industry shuts down, there is usually no "market solution." The government exists in part to solve problems no other institution can realistically tackle. To demonstrate waste in government, one needs to show there is an alternative way of organizing the same activity that works better."
"Ideas are powerful. Ideas drive change. Good economics alone cannot save us. But without it, we are doomed to repeat the mistakes of yesterday. Ignorance, intuitions, ideology, and inertia combine to give us answers that look plausible, promist much, and predictably betray us. As history, alas, demonstrates over and over, the ideas that carry the day in the end can be good or bad. We know the idea that remaining open to migration will inevitably destroy our societies looks like it is winning these days, despite all evidence to the contrary. The only recourse we have against bad ideas is to be vigilant, resist the seduction of the "obvious," be skeptical of promised miracles, question the evidence, be patient with complexity and honest about what we know and what we can know. Without that vigilance, conversations about multifaceted problems turn into slogans and caricatures and policy analysis gets replaced by quack remedies."