Good Economics for Hard Times

In "Good Economics for Hard Times," MIT economists Abhijit V. Banerjee and Esther Duflo argue that economic policy has failed to address the defining issues of our era—immigration, trade, inequality, and climate change—because it relies on flawed assumptions about human behavior. Drawing on randomized controlled trials and empirical evidence, the authors challenge the notion that people are perfectly rational actors who respond predictably to incentives. They show through case studies, such as the "Great Migration" of workers from Puerto Rico to the US mainland, that moves rarely follow simple supply-and-demand logic, and that displaced workers often stay put rather than relocate, contradicting standard economic models. The book dismantles several shibboleths. Banerjee and Duflo demonstrate that trade with China hurt certain US regions but did not significantly reduce overall employment; instead, it accelerated automation. They argue that immigration does not lower native wages on average, and that the fear of robots taking jobs is overblown. On inequality, they contend that top tax rates can be raised without crippling growth, and that universal basic income experiments show mixed but generally modest effects on work effort. The authors also critique economists themselves, noting a bias toward elegant theory over messy reality. They advocate for a more humble, evidence-driven approach—"good economics"—that acknowledges complexity and human fallibility. The book concludes with practical proposals: a jobs guarantee, a carbon tax with redistribution, and a more humane immigration policy. Throughout, Banerjee and Duflo emphasize that economics should serve people, not abstract models, and that careful empirical work can illuminate a path forward in polarizing times.