Can economics be of the people, for the people and by the people?

Sound theories are essential as they provide stable base for policymaking, but the process is too long-drawn and takes away objectivity

Abhijeet Banerjee, Esther Duflo and Michael Kremer’s Nobel Prize for ‘randomised control trials’ or RCTs brought back fond memories of our Masters in Gokhale Institute of Politics and Economics. Professor P Venkatramaiah, who was teaching development economics and had done seminal work on input output economics, started with: “I don’t know what to teach you. My theories on development economics stand challenged.” He went on to teach us ‘game theory’ for which Nash, Selten and Harsanyi had won the Nobel Prize in 1994. A sidelight: He would prompt us to negotiate when we disagreed with our marks given in our weekly exams. Mostly, we lost. 

But the interesting thing after the announcement of the Nobel Prize 2019, there was a lot of replugging of articles written by people who disagreed with the RCT and the results it produced. As the saying goes, if you put two economists in a room, you will get two opinions, unless one of them is Lord Keynes, in which case you would get three opinions.

Disagreeing is fine. But it is good that economics and economists are being viewed from a practical angle. Sure, some subjects need vast canvases, many don’t. For example, privatisation of hospitals could require a broader analysis in the context of the implementation of Ayushman Bharat, but providing vegetarian or non-vegetarian food to students is more likely to be area-specific – small and manageable problems, as they are called.

In that context, Banerjee’s role in ideating the Nyay programme – giving 72,000 a year to the poorest (Rs 6,000 a month) – was a prominent election plank for the Congress. All and sundry criticised that it will mean higher taxes for corporates and high networth individuals. Well, the latter has already happened, and the corporate sector got relief only after the economic growth rate started faltering.

While the government has taken some baby steps towards tackling consumption demand such as increasing the dearness allowance for 11 million central government officials by 5 per cent, would something like a Nyay have boosted consumption demand, especially in rural areas? We don’t know that.
 

What we know is that Telangana Chief Minister K Chandrashekhar Rao’s Rythu Bandhu scheme, which provides Rs 5,000 per acre per season has been a huge success. It has boosted consumption, and the state is one of the top ones in goods and services tax collections and needs minor or no compensation from the centre. So, money at the hands of the people is working. And KCR is a winner, politically.   

If Congress really wants to show to people that it was serious about Banerjee’s proposal on Nyay, it should implement it in the five states – Punjab, Rajasthan, Madhya Pradesh, Chhatisgarh and Puducherry - in which it is in power. Yes, resource is a question. But state government can raise money through bonds, and if consumption is revived, tax collections follow. It can also be targeted and done in phases.

This would strengthen the view that like democracy, economics can be of the people, for the people and by the people.

Twitter: @joyghosh2