Abhijit Banerjee on Theory, Practice, and India

Hi everyone, this is Tyler of Conversations with Tyler. I hope you've enjoyed listening to and learning from this year's conversations as much as I have. For me, it's the single most rewarding and instructive thing I do. This year, some of my absolute favorites have been, for instance, Neal Stephenson talking about science fiction, the future, and innovation. Masha Gessen on Russia and Putin and the history of communism. Russ Roberts on market economics. Carl Knausgaard on Norway, Henrik Ibsen, Norwegian art. Emily Wilson on the ancient Greeks, the classics, and Homer's Odyssey. If you've benefited from this podcast and enjoyed it, please consider making a financial contribution before the end of the year at conversationswithtyler.com/donate. Www.patreon.com/donate. All donations will go to the production of the show, including: First, new conversations every other week. And note that unlike most other podcasts, we often have to pay to travel to our guests, and we have never done a remote interview. Second, live shows in Arlington, Virginia, New York, San Francisco, Washington, D.C., and more locales to come. Third, full readable transcripts of every episode enhanced with helpful links. For me, doing Conversations with Tyler is about learning from other people and teaching other people how to learn. And that's what I try to do in each episode, is to show how listening and asking good questions produces knowledge and how that can help make the world a wiser place. So if you believe in the power of learning through listening and reading, as I do, Please support the podcast at conversationswithtyler.com/donate. Thanks. Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at mercatus.org. And for more conversations, including videos, transcripts, and upcoming dates, visit conversationswithtyler.com. I'm very pleased to be here today with Abhijit Banerjee, one of the recent Nobel laureates in economics. He is professor of economics at MIT, author— co-author, rather, of the recent bestseller with Esther Duflo, Good Economics for Hard Times. Abhijit and I also went to graduate school together at Harvard, and he is one of the most brilliant economic minds I have ever met, heard, or read. So, Abhijit, welcome.

Thank you. With that introduction, I'm going to be shy.

Let me start with a question about economic development. Dani Rodrik has argued that premature deindustrialization is a significant problem for emerging economies, that in essence they are moving into manufacturing at a time when automation already has happened and this will not, for these countries, build a middle class. What do you think of this argument?

Well, it's sort of beyond my competence, to be honest. It seems like reading lots of tea leaves, but my instincts are that he's right. And I think there's additional problems. One of them is just that the fact that there's so much inequality in the world means that the products that are being designed now, or a lot of them, new money is being spent on are products that are where the component of quality to it is extremely high. They tend to be products that are like, think of kids' toys. Most of kids' toys are a matter of checking and making sure that they have nothing dangerous about it. The checking is often done in actually in other places, in Germany, for example, or some of the things, the checking is done in Germany, even though the manufacturing is done in China. As a result, cost part of manufacturing is extremely small part of the price of the good. So what we pay in the US for the toy, a tenth of that might be the cost, the labor cost and the capital cost of it. But that means that essentially the things that kind of generate large earnings for people are not happening anymore. Lots of this is just very, very well-designed products of which brand naming, marketing, making sure that they're okay. All of these things are a huge part of the price. And therefore, essentially, if you think of the rest of it, which is, it's a small amount. So that means that if you're a worker, you're getting $0.40 for a $10 toy or something. And that's just not going to make a lot of rich people or even middle-class people.

One of the early papers in your career, you seem to be arguing there was too much petty entrepreneurship. In emerging economies. Do you think that's still the case? And if so, how do those economies make the shift away from that?

I don't see a way for them to make a shift out, to be honest. I mean, this is why I think this whole literature on universal basic income and microcredit and all these ways of creating more entrepreneurs, in some ways, I think this literature is sort of stuck in this place where they're trying to get most of these petty entrepreneurs to become a little bigger. Right now, we don't see a way to do what I think what needs to be done, which is to pick the best among these people and make them much, much bigger. Because I think the way petty entrepreneurs have been absorbed into the economy historically have been by making some people being very successful, employing lots of people. And creating large enterprises. There's very little, I mean, people give the example of Italy, but if you study it carefully, even in Italy, a lot of the reason why the petty entrepreneurs can get somewhere is because there's huge coordination by some brand name, like Benetton being the classic example. So it's not obvious to me that there is a, we are right now, thinking, even thinking properly about a mechanism for getting the smallest entrepreneurs out of what they're doing and into the labor market.

What do you think is the nature of the positive externality from manufacturing jobs in emerging economies? Where does it come from?

Oh, I don't know that it has to be manufacturing. That's the part that I— that's, I think, Dani Rodrik's view and something that, as I said, I'm quite willing to believe it., but I don't know why it has to be manufacturing. It seems to me what was important was that it was a set of middle-skilled people who could— the skill range in which you could move was still accessible to people who had a poor education. The key move was not so much whether it's manufacturing or not, but rather it was— there's some skills involved and those skills can be learned and the skills were available to to people who didn't start with having an excellent education. I don't know. It could be that manufacturing on top of that has additional benefits. That's the part I really don't know how to show or whether I actually believe or not. That's a piece where I— it's not that I disbelieve it. It's not that I have studied it. It's just not clear to me that there's a reason to think that. If the same options were available in services, they would not serve for the same purposes. I just don't know whether either of that is about to happen.

Could you imagine comparable growth to, say, that of South Korea exporting manufactured goods, but through the export of services? Or is there something different about services that makes that harder?

Excellent question. I'm slightly out of my depth in all of this because it's not— This is sort of macro trade, and macro trade is not exactly my specialization. Nonetheless, I would say that prima facie, no, I don't know that there is something that, you know, a small country exporting lots of services, could it be a location in even a big country like India? I mean, the software and after that, the BPO boom brought in a lot of people who were actually relatively low-skilled, who learned English and basically spent a lot of effort. There's lots of these classes all over India in small towns. Learn English, work for a BPO. And that's exactly this idea that somebody with a high school education who's smart, who's enterprising, who's willing to work hard, can get trained in English, speak like an American, say, "Hello, this is John." whatever that you're supposed to say and carry on a conversation. And that training I don't see is any different from the upgrading of a steelworker to a line supervisor. I don't know enough about either of these things, but it's not obvious to me that a location or a small country could not get a lot of benefits out of services. The problem is more that services are also where automation is hitting.

You discuss charter cities at some length in your new book. Why are you skeptical of them as a way of inducing more economic growth?

I think that if you could have charter cities, they may very well be great. The problem is more, can you believe that the country would honor the particular commitments that it requires? A charter city is the idea that we are going to hand over the maintenance of our law and order to a different country. And somebody else will act as an enforcer. I think the democratic process doesn't really— it's very easy to exploit that. You know, it's very easy to come and say, look, you know, your government has been taken over by these enemy people or these foreign people, and they're running— how could they be the people deciding what's legal and what's not, etc.? Just think politically. Extremely unstable, easy to attack, very visible target. It's not clear to me that it's anything more than that. I think, yes, if you could imagine a situation where the politics is exactly aligned right, where I would say that creating kind of the legal and physical infrastructure for enterprises would be excellent. But it's just the idea that this is a country which can't enforce its own laws, and therefore outsiders can do it for them. There's something in that idea that seems to me to be odd because it's precisely the fact that this country is not— this country can't enforce its own laws because there's something in this country which is making it hard to enforce those laws. And maybe it's competence, but it's not just competence. There's a— politically, the opportunities such these things offer are too tempting, it seems to me.

It seems that British rule of Hong Kong worked very well, Portuguese rule over Goa much less so. How well do you think we understand why some charter cities have gone well and others not?

I don't think we understand it at all well. And the reason partly we don't understand is because, is it that Goa was just too near Bombay and that Hong Kong being at that absolutely wonderful spot between, you Japan, Korea, the north of China, India, a lot of opium trade and all of these things went through there. So it's like there's tons of, it's in a great place to be an entrepreneur. And I don't know that the world can handle a certain number of successful entrepreneurs. Goa may have been too near to Bombay to be a successful entrepreneur. It's not clear that that was a great location. So I, Again, do I know that that was the reason why Hong Kong was successful? Absolutely not. I mean, like, there are only 10 examples of very successful entrepreneurs, or maybe 15 or 20. I don't know the history well enough to say that. But it's not that this is a— Venice for a long time was one, and then it stopped. But it was, is it that essentially your location is your ticket to success, or is it something more than that? Can you build economies out of anthropos?

How well do you think economists understand economic growth more generally?

I think they don't understand it. This is the point we make in the book that we really think— I think we understand some, I think, very basic insights, one being, I think, the one that my colleague Bob Solow made very clear, which is that growth has a tendency to run out. Once you used up your best talent and your best capital and your best locations, there's going to be less and less so. And I think that's probably the only thing I think which has been pretty consistently borne out, that fast growth slows down. China is slowing now, and it's not— there's nothing tragic about it. It's a normal way of things. The thing that we don't understand is what makes that happen sooner or later, more or less, et cetera. Brazil grew for 20 years extremely fast between 1960 and 1980 and then essentially stopped for 20 years. Why do those kinds of things happen? That we don't understand. I think we are lousy at predicting growth.

But if we have countries, take Singapore as an example, say they invest heavily in human capital, they actually have the political will to grow., and they very broadly have some kind of neoliberal policies but tailored to their specifics. I mean, don't we know if they do that, they'll grow? Singapore, it worked. Dubai, it worked. Republic of Ireland, it worked. Don't we know a lot about growth?

Alas, no. I think that, I mean, you have these tiny, tiny, tiny countries basically with, I would say, very specific political configurations. I think Lee Kuan Yew knew very well that if he didn't deliver a very specific set of environmental conditions and was— if we were falling behind Malaysia around— Singapore was a very, very, very fragile project in 1960 and one that, you know, I think they were lucky to have him as the dictator. I think he was, I think, in the end committed to some things which were But they could have easily had someone who had crazy views, and there were plenty of people with crazy views. I think small cities at the edge of other less liberal societies also are very strange examples to use. I would say Dubai, I mean, Dubai is, you see so many people from Saudi Arabia, Iran, et cetera, who need to escape their own societies temporarily for pleasure or for just freedom. I think lots of rich people around. They're, you know, Iraq less so. I think Iran and Saudi Arabia probably are two big countries with lots of rich people who need a playground. I don't know that that's replicable at any scale.

Why does Kolkata have the best sweet shops in India?

It's a bit circular because, of course, I tend to believe Kolkata has.

So do I, however. And I have no loyalty per se.

I think largely because Kolkata actually also, which is less known, has, I think, absolutely amazing food. In general, the food is amazing. Having had a very, I mean, relative to the rest of India, Kolkata had a very large middle class who, with fair amount of surplus and, you know, this, that, and who were willing to spend money on— they didn't— so restaurants were not— I think there were caste and other reasons why restaurants didn't flourish. That's sort of like, you know, that's not— is it not an accident that a lot of Indian restaurants were born out of truck stops? These are called dhabas, and that those are— caste has a lot to do with, but sweets are just too difficult to make at home. So even though lots of people used to make some of them, and I think there was some line that was just permitted that you can have sweets made out of, in these specific places made by these castes. There was all kinds of conversations about this in the early to mid-19th century on what you can eat out, what is eating out, what can you buy in a shop, etc. And I think the 19th century, you see that basically sweet shops are— sweet shops actually provide not just sweets, but for travelers, you can actually eat a lunch there for 50 cents, even now, and excellent lunch. Some savories, some— and a sweet, maybe for 40 rupees, you get all of that. And it was actually the core mechanism for reconciling Brahminical cultures of different kinds with a certain amount of, you know, social mobility. People came from outside, they were working in Calcutta. Calcutta was a big city in India. So all the immigrants came, what would they eat? So I think a lot of these sweet shops were a place where you actually don't just get sweets, you get savories as well. And the savories are excellent. I mean, in Kolkata, if you go out for the day, the safest place to eat is in a sweet shop. There's always freshly made savories available. You eat the freshly made savories and you get some sweets at the end.

Are higher wage rates bad for the highest quality sweets? Because rich countries don't seem to have them.

Oh no, rich countries have fabulous sweets. I mean, France—

Not like in Kolkata.

France has fabulous sweets. I think the US is exceptional. In quality of the, let me say, the fact that you don't get actually excellent sweets in most places.

Sure, hardly anywhere.

Hardly anywhere. You pay through your nose, France. We spend lots of time in a small village in Provence. It's a really small village, not one of these villages where whatever, you know, Albert Camus used to live. It's like a no-name village. At the edge of the Louverdun, and the sweet shop there produces better sweets of different kinds than any place in Boston that I would go to. I think just the average quality of what they produce is so wonderful. It's a no-name. There are two bakeries. One is cheaper and less good. The high-end bakery, you pay 10 cents more for a baguette, You know, instead of 95 pence, whatever cents, you pay €1.05 for a baguette or something. And the baguettes are always excellent and the cakes are excellent. It's, I actually think that it's an interesting question why US is so exceptional in this. And Italy is the same. I mean, I don't love the bread, but the pastry is excellent. In Spain, it's the same.

But are Indian sweets in particular so labor-intensive in their construction that you can't sustain them?

No, no, actually they're not more labor-intensive. I cook a lot. I actually can make a fair amount of them. They're not— in a sense, they're somewhat more forgiving than French sweets, which require, you know, if you're making a mille-feuille or something, those are extremely labor-intensive and they require extremely mindful labor. Indian sweets are actually relatively slow-cooked. They don't involve baking, which is the thing that goes wrong because once you stick it in the oven, it's like God is your only guide. And so, whereas I think Indian sweets are relatively forgiving, I prefer, much prefer to make Indian sweets than French sweets. So I love cooking and I will make anything in a if I have the time and mostly because I'm greedy.

What country other than India has the best Indian food? Not counting Pakistan or Bangladesh.

The UK. UK. Absolutely. No question. I mean, these days the best Indian restaurants in the world happen to be in Bangkok. And I've not tried Bangkok Indian food because when I go to Bangkok, I want to eat Thai food, which is excellent too. I mean, the UK has excellent, excellent, and trashy and horrible and kind of gloppy, the whole range, but including the high end, which is really quite excellent.

There's a longstanding tradition of left-leaning Bengalis being especially important in Indian intellectual history. Why do you think that is?

I guess why Bengalis? I think, again, I think it goes back to the fact that Bengalis were the first group of people, maybe a little bit with the Parsis, as being the comprador class, as we Marxists one day, once upon a time used to call them, of the British, the people who worked for the British, with the British, and made a good living. And I think that class very quickly started absorbing English writers and Scottish writers. They read, you know, by 1800, already, this is just 25 years after, you're starting to see people who are writing in Bangla about, you know, Hume and about Rousseau. They're reading European writers, mostly in English, but they've mastered English, they're reading all these things. So I think the reason, I think contact with the British created this. I mean, this is very controversial, and I'll get killed by many Many people who have strong views on this, but I think that it's very hard to imagine exactly what happened then. Maybe something else could have happened that was wonderful. I don't know the counterfactual. But the— what happened then was very much people absorbing English 18th century liberal and conservative discourses, using them. This very nice historical— there's a bunch of historians who studied this period, the 1800 to 1840. In Bengal. And it's a really fascinating period, like, you know, they're up in arms, they're fighting the Brahminical traditions, Brahminical tradition is fighting back. The first one fact that is, I like to emphasize is the first, I think, purely secular institution of higher education in the world is in Kolkata. In 1817, what now is called Presidency University was set up as Hindu College, but the Hindu College was never for Hindus because the first famous professor there was Derozio, who was a Christian. He was the first and perhaps the most visible sign. And it was funded by the Hindu community. And the idea was each community will fund one, but in fact, that didn't happen. So Hindus, Muslims, Christians, everybody went there. This is 1817. Jefferson was very proud of having set up Virginia as a liberal arts university where the library is the central point. That's in 1825. So this is 8 years before that. They already set this up. I think this is a, a moment in history which seems to me comes at encounter with the British, the sense that, you know, there is this extremely successful culture out there, whether it's good or bad, we don't know. But, and people are saying that, and they're writing that, you know, we need to know what these bastards are up to or whatever. You know, they have their own, they're often quite negative, but they're saying, how could we not? They are successful. They're like ruling the world. I mean, we really need to know what what they're doing. So they start reading up on all this stuff and they're writing about it. And there's actually by 1820s, actually even before the 1820s, Ramon Roy was the first, I think, great Bengali intellectual who's not, I would say, not left-leaning. I think he's very—

He was kind of a Benthamite, wasn't he?

Benthamite, exactly. Benthamite, but not so much. Bentham is— he's a contemporary of Bentham's, He dies in 1825 or something. So he's a contemporary of Bentham's. But he's absorbed all this and he writes in Persian a lot because that's the old— he's from the old aristocracy which was trained in Persian. But he writes about all these very important liberal ideas. He's a liberal in a very important sense in which he's much more than a leftist. He's a liberal, and I think that liberal tradition becomes extremely contentious immediately, you know, with the conservatives pushing back against them. And the liberal tradition then has actually a hard time not moving to the left. So it does move to the left, but partly because in reaction to a set of reactionary and completely meaningless reactions to the liberal tradition. So there were like a bunch of people who You know, I think you can speak about them in hallowed voices. I could talk about them, but their views seem to be mostly, "Come on, this is foreign stuff. We don't like it." And so I think the liberal tradition grew partly in reaction to conservative pushback. Conservative means conservative, not— I don't mean right or left. I mean conservative pushback.

Wasn't the first IIT in Bengal, in Kolkata?

Not in Calcutta, in Kharagpur. Kharagpur, yeah. That's about 100 miles from Calcutta. But I think those were Nehru, Nehru already, by this time there is a national plan for these things. And even though the first one gets built, there's one in Bombay, one in Madras, one in Delhi, one in Kanpur. So every part of the country gets one, the first 5 IITs. I think that was already conceived of as a single plan. But going back to the question of left, I think the left comes actually later. The liberals become left later, partly in reaction to just the horrors of the last years of British rule. I think the partition of Bengal starts the first piece of that in 1905, but most importantly, the Bengal famine. Just completely moves everybody to the left. Because the Bengal famine in Bengal is seen as being egregious, completely, you know, a callous government with maybe some sympathy for the people who control the rice supply created 3 million people die. Churchill sends ships that the Americans had sent with grains, to India, sends them, doesn't let them come to India, sends them to help British troops elsewhere. And so it creates, I think, extremely strong basis for the left. The left really becomes very powerful starting in the '40s. And I think the '40s is, the Bengal famine is a defining event of that period. So I think that that's, this is one of the biggest famines ever. It's such an egregious tragedy that I think a lot of people just feel that, you know, there's something deeply wrong with the world. And I think that's when the— from Tagore, who was basically a liberal, we moved to the left very quickly in the '40s. Tagore dies in '41, and after that, the Bengalis move quite sharply to the left. It started before. It's not that it didn't. There were elements of Marxist influence before, but I think the general move of Bengali intellectuals to the left starts in the 1940s.

How would you place your own father in the Bengali intellectual tradition?

My father was a liberal. I think he was not a leftist. I would say, you know, relative to the Bengal spectrum at the time, I would say he was on the right.

And he was an economist.

He was an economist, but I think more importantly for him, he in his self-presentation, he was a liberal., and he really believed in all the liberal values, freedom of speech, you know, he was, he had self-taught himself kind of British 20th century philosophy quite well. And I think it was Russell and G.E. Moore that he looked up to most. And Russell is left, G.E. Moore is more center. It's more those, that's his, that was his intellectual tradition. Rather than the Marxist tradition. I don't think he was— he was very much of a— much more of a liberal than a leftist.

Your colleague, Daron Acemoglu, in his new book, The Narrow Corridor, argues that the Indian caste system has held back Indian economic growth quite a bit. But Pakistan and Bangladesh are poorer than India and don't have a similar caste system. Do you have a perspective on this whole debate?

I think that Maybe he's— I mean, we don't know the counterfactual. Maybe other things went wrong. I think certainly the fact that there was a liberalism that was built into the Nehruvian state encouraged a certain type of person to stay Hindu, Muslim, Christian, and the self-selection was important. I don't know what all the ways in which that was— these countries are different. It's a very interesting thought. I don't know whether I actually believe that. I mean, I certainly believe the caste system is awful. I don't know whether I would think its first-order effects are on growth directly or because they just happen to be a way of ethnic organization. So, you know, whether without the caste system we would have had, like in Pakistan. Pakistan is a war zone between the Punjabis, the Pashtuns, and the Sindhis. The MQM, the kind of the movement of Karachi is exactly the— all of these people are fighting the Mohajirs, or the people who come from India. So it's a bunch of ethnic violence. Whether India would have had other axes of violence, in a sense, right now the Indian political economy is moving, I would say, a bit in the direction of trying to unify the Hindus against everybody. Whether that works or not, I don't know. I'm not sure whether that's a desirable thing or not. I tend to think that diversity is helpful, actually. So in some ways, I feel that it's not obvious to me that if India was not as— the Hindus were not as divided, India may have gone in a much less liberal direction easily. Because there are other minorities, and it could have been anti— much more organized in anti-minority lines. Part of the division The fact that the scheduled caste don't trust the upper caste, it might actually be a way of creating enough countervailing power, if you like.

So a kind of stabilizing property in the short run at least.

Yeah. So it's not obvious to me that where the— what the counterfactual is. That's the point I'm making.

If I look at the earlier history of Indian classical music in Bengal, to outsiders, Ravi Shankar is best known, but there are many top performers. And more recently, Bengal in Indian classical music seems to be less important. Do you agree? And if so, why is that?

Well, I think Bengal was never the place for vocal. So as a real addict of vocal Indian classical music, I would say if you look at the list of the top performers in vocal Indian classical music, no one really is a Bengali. Instrumental, Bengal was always very strong. Right now, one of the best vocalists in India is a man who lives in Kolkata. His name is Rashid Khan. He's absolutely fabulous in my view, maybe the best, on a good day, he's the best that there is. He's not a Bengali. He's from Bihar. I think, and he comes and settles in Kolkata. He's, I think, a Hindi speaker by birth rather than a Bengali. So I don't think Bengal ever had top vocalists. It had top instrumentalists, and Ravi Shankar, Ali Akbar Khan, Nikhil Banerjee, these were all Bengali instrumentalists. And if even now I would say the best instrumentalists, a lot of them are either Bengali, or a few of them are Second, you know, Vilayat Khan and Ish and Imrat Khan were the two great non-Bengali instrumentalists of that period, I would say. And they both settled in Calcutta, so their children grew up in Calcutta. And they are the other great instrumentalists are these Calcutta-born They went to the same high school as I did. They were this— they— Calcutta-born, not of Bengali families, but from very much the same culture. So I think Calcutta still is the place which produces the best instrumentalists.

Why is the better vocal music so often from the South?

Oh, that's a separate question. Separate— the South is actually— has its own vocal tradition, which is completely different. I actually don't know enough about it to say. I think the best Vocalists typically right now come from Maharashtra and northern Karnataka. That's sort of this middle southwest. But the deep south has a completely different tradition. They sing in entirely different ways. The tradition that I listen a lot to is the tradition of Maharashtra and Northern Karnataka, and that's where, to me, in my mind, the great home of classical vocal music right now is that part of India, the area kind of starting at Bombay going down to Bangalore. That chunk of India is where the great classical musicians are.

Like Pandit Kumar.

Yes, or certainly Venkatesh Kumar, but also— I'm going to blank on the name of this young woman artist who I just heard, who I thought was just fabulous.

Aman Kari? She's not young anymore, right?

No, no, no. She died. Kishori Aman Kari. She died a few years ago. Oh, I didn't know. She was the best, I think. I would say, I mean, I heard her a few times live, and when she sang well, I don't think anybody— she had a way of completely— I mean, I think what is difficult in Indian classical music is to keep the variation going and keep the musicality running. And some people do lots of variation, but they lose the sense of the overall music. She was amazing at her best. And in fact, I heard her first time live at Harvard when we were students together in 1985. And she sang an unbelievable concert in the old Fogg Museum courtyard. It was probably the best concert I ever heard. She was, but no, much younger people, women who are in their 30s. There are really some very talented ones, but I can't remember their names right now. They are, I'm blanking on their names. I can, I will remember them as soon as I walk out of the room, but there's actually lots of talented people in their 30s, 40s. That's Indian classical music being the kind of thing it is. You never become a top artist till you are in your late '30s or something.

Do the economics of Indian classical music have a future?

I think so. I think that—

But through concertizing or overseas work or how?

I think through concertizing. I do think that if you look at the top echelon of these people, their fees have gone up a lot and they're in demand. I think that it's not clear to me that this is any worse than it ever was. I mean, it was always a little bit of a, you have to do it if you love it. You don't do it because you're going to make money. And the movie industry has always been quite generous. I mean, Ravi Shankar also was a music director for many films and he composed music for many films, etc. So he, Bollywood is actually a pretty good client for good classical musicians. And that's— and Bollywood is one of, I think, India's great successes.

With the tradition of training Indian classical musicians through the family being passed down father to son, will that persist or is that an anachronism?

I think that's an anachronism. I think the training schools like the— like SRA in Kolkata are very good. They train you, make you listen to many different people and I think that that's actually a good thing for musicians to learn how to distinguish their tradition from other people's tradition. I think that the old norms were a little bit too parochial.

Now, in the middle of these conversations, we usually have a segment, Underrated versus Overrated. I'll toss out some names, some ideas, and you say if you think they're underrated or overrated. But of course, feel free to pass. First one, Balzac.

I think rated about right. I think Balzac is great. I don't think in France anybody doubts that he's great. So he's sort of the canon. So I think he's not overrated or underrated.

Experimental economics.

Underrated.

Why?

I think people haven't quite understood how much, how well it connects to the rest of economics. I think it's, that seems to me that people think that this is some boutique exercise that's happening elsewhere. It's changing economics. It's changing the way we do theory and changing the way we do policy analysis and the way we think about the world.

Tolstoy.

I think rated about right again. I don't think Tolstoy— I mean, I think Tolstoy is wonderful, but I think people think he's wonderful. They don't read him, but that's a separate question. Is he rated high? Yes, sure he's rated high. He's the canon.

The Beatles, underrated or overrated?

Neither. They are the canon.

They're the canon. Economic growth prospects for Pakistan. It seems to me 30 years behind India. Will it catch up, converge or not?

I don't know enough to— I mean, it's growing fine. It's actually doing fine. And, you know, Indian growth is a bit faltering. So maybe it'll catch up. But it just— I don't know. I wish I knew more about what makes Pakistan grow. I mean, after all, it still grows at 6%, which is not nothing. So I feel like, you know, who are we to sniff at 6%? For many, many years, it's been growing at 6%. It's not— that's nothing to laugh at.

Who is an underrated Indian writer of importance to you?

Any number of the vernacular writers who are not read, I would say, among novelists. I only really read Bangla, but that's not because, that's not to say that there aren't other similar people in other languages, but Bibhutibhoshan Bhujum Bondhabad Dai, Tarashankar Bondhabad Dai, Manik Bondhabad Dai, Shotinath Bhaduri, they're just amazingly good novel form literature from the 20s to the 70s, and also amazingly good poetry, both of which I think are just not read by anybody.

Is it translatable into English or what?

Yes, it is translated even. Some of it is translated.

But it can be translated but not translatable, so to speak.

I think it's translatable. I do think that it needs somebody with lots of talent to do it, and somehow that incentive hasn't I think now there's a little more interest in doing it. In fact, Penguin has a series where they try to publish high-profile translations. I mean, I think given incentives, I think there is just so much great literature.

Other than Bengali food, what do you think is the best Indian regional cuisine? For me, it's food of Chennai, but—

I mean, there are only, in my mind, only two competition. The competition is either Chennai or Hyderabad. I think Hyderabad has an even broader range of food in the sense that it goes from very meat-based and different styles of meat-based, the kind of the Hyderabadi Nawabi cuisine. Andhra Pradesh is full of people who are sort of not vegetarian, the Hindu, not vegetarian, they eat lots of meat. The South actually is where meat eating is more common than in the north. So bizarrely enough, though we associate the south with vegetarian food, and Andhra Pradesh has fabulous food across the range. I mean, if you go to small towns in Andhra Pradesh, the meat, the vegetables, everything is stunningly good. Fish is stunningly good. So I would pick Andhra Pradesh, but Tamil Nadu being the other possible. Tamil Nadu is where Chennai is. Those are the two Chidambaram also has enormous variety, again going from meat, Chettinad food, all the way to, you know, very, very proper vegetarian food and all that. It's really great. I mean, that part of the South, the Eastern South, has great, great food.

Why is the quality of vegetables so much higher in India than anywhere else?

Vegetable cooking.

Cooking, but the vegetables themselves. If you eat a fairly plain dish, it's still wonderful.

I think partly—

Short supply chain or?

Yeah, short supply chain. I mean, even now, people really pull out the vegetables in the morning and bring them to the market. If you go to like the Garihat Market in Kolkata, there's this part of Garihat Market where you buy basically old ladies whose sons have sent them from their village to vend the okra that they've picked this morning. I mean, just freshness is such an enormous part of taste. And also not designing food for durability. I mean, in the US, tomatoes are designed for durability, and that takes away from other things.

Johann Sebastian Bach, the cantatas, overrated or underrated?

My wife will kill me, but I'll say overrated. Overrated. Boring.

You have a 2015 Science paper with Esther, Dean Karlan, some other co-authors about how cash transfers to the poor combined with training and coaching have very high rates of return, over 100%, up to 433%. What exactly do you think the coaching is adding in those RCTs?

So these people, we've actually done it without the coaching in Ghana, and it doesn't work. So we are reasonably confident that the coaching is doing something interesting. I wouldn't say it does it necessarily for everybody, but the people targeted in this are the poorest of the poor. They're among the poor, the people who are really— and for them, I think confidence is an enormous issue because they've never actually done anything in their life successfully. They've been living hand to mouth, usually begging from people, getting some help. And what that does to your self-confidence, your sense of who you are, I think those things we haven't even documented how. How brutal it is to be really, you know, people who treat you with a little bit of contempt. They might help you, but they treat you with a little bit of contempt as well. This is the kind of people, I mean, at least the one that I was big part of studying was the one in India and also the one in Ghana, especially the one in Bengal. And these women, they lived in, I mean, they were living in places where nobody should live. They had, you know, one said, oh, we get snakes all the time. Another one said, you know, I had to— I'm now vending knickknacks in the village, or basically cheap stone jewelry or plastic jewelry. Before I— the people from this NGO showed me where the market was to buy wholesale, I had never taken a bus. So I had no idea how to go there. So they had to literally put me on a bus, show me where to get off. And it took a couple of times because I had never taken a bus. I didn't know whether I couldn't read. So if it's a number X bus, I don't know what X is. So how would I know I'm getting on the right bus? So all of these things are— if you start from a place where you really never had a chance, I think it's useful to have some confidence building. You can do it too. There's nothing difficult about it.

So do you think the coaching almost serves as a kind of placebo? You don't have to teach them so much, but just show that someone else has confidence in them?

I think that's an interesting question. I think it's a bit more than that. It's also saying, you can do it, and here are the steps. I think turning things into a set of processes is important. Otherwise, it looks like an unlikely proposition that I can do it. I've never done it. I've never bought and sold things. In fact, I've never sold anything. And how do I do it? I think it's a matter of— it's It's a bit more than that. I think setting, turning things into process is important also. You know, that here is how you get on a bus. You go there, you pay this much money, they give you something, you bring it back. I think one of the things they're doing is also turning it into a set of procedural steps, which is very different from saying, "Go do that." How scalable do you think the coaching is? Scalable. I don't think it's difficult. I think it will need a change in— I think one thing this organization does well is it teaches people to be quite sympathetic to the one we worked with in Bengal, the one I know well. And they were just— I think the people we worked with were basically able to be sympathetic. It doesn't take much. It takes sympathy. But I think it's a matter of motivating people to do it. Making sure that they feel— I mean, there are lots of people who work for NGOs after all. And they're often people who want to do things for the world who are positive people. So I don't imagine it being that difficult. I mean, it will require investment in training a particular kind of person, but I don't know that it's any different from training somebody for, you know, collecting money in a microfinance organization. It's the same level of skill, the same kind of person, same set of places where these people will come out of.

So this seemed to work in 6 countries: Ethiopia, Ghana, Honduras, India, Pakistan, Peru, as you well know. Why isn't the whole world doing this?

I think lots of people are. We— I think somebody told me 43 different countries, they are experimenting with it. I think this is the next stage where I think we are a bit proselytizers for this and we get called in, but actually this story is kind of doing the rounds. The governments, many state governments in India now want to just do it. That's my exposure. In fact, today, we were in a part of a long email exchange on exactly how it should be done in the state of Odisha in the east of India that wants to do it. So I think it's having some traction.

Your randomized control trials, they're huge. They employ large numbers of people. Do you have a personal philosophy on management or leadership? What have you learned? So you started as an academic, and now you run big things.

I'm a lousy manager.

It can't be, right?

No. I can be because I am, I have lots of faith in people and I'm good, I believe, in giving responsibility to the right people.

That makes you an excellent manager.

I'm only good at that, but I do go long on both investing in those people, making friends with those people, enjoying their company, and letting them, you know, tell me when things are going wrong and advise me when I'm thinking wrong. So I feel I get a great deal out of working with wonderful, brilliant people. J-PAL is full of such people.

How many consumer loyalty programs do you belong to?

Two, I think.

And you still think they're collusive?

Yeah, yeah, yeah. The fact that I belong to it in equilibrium, I should belong to them, absolutely. I think that the airlines are completely turning the screws on you.

Do you think there's a regulatory solution?

Maybe not. It's not clear to me that the welfare losses are that large. In a sense, the airline industry is— the problem with the airline industry is also this, you know, what in economics we were taught as Bertrand-Edgeworth competition. You pay your fixed cost and then you compete the others out. So it's known to be unstable. We knew, we were taught that, you and I, we were taught that, Andreo, that they were unstable. And I see the airlines industry as being, the first order of problem in the airlines is that, which is that it is designed to be unstable. The marginal costs become very low. You make a big investment, then you drive everybody else out. Then of course, the prices go up. You see absolutely the Bertrand-Edgeworth pattern, and you're seeing it right now in India where a bunch of airlines are going out of business because prices were just too low at some level and the competition was too hard. Jet Airways is gone and Kingfisher's gone. India's basically now down to 3.5 airlines.

You have a 1999 QJE paper with Aghion and Thomas Piketty. It seems to be an early precursor of secular stagnation theories. Do you still think about this issue?

Yeah, I like that paper. I think it was a little too— maybe cutesy for the macro people to like it. They like properly, you know, all the bells and whistles that make macro models. They like it. We went for a very different idea. We were basically theorists, so we're trained to write models that just deliver what you want it to deliver and not much else. So in that sense, I'm very proud of that paper. I think it's a good exercise. It never flew. Because I think people really wanted the bells and whistles that we didn't really provide. I think Paul Krugman for a while did some advertising of not that paper, but the sequel of that paper, which was on open economies. But I think most people, the most macro people, real macro people didn't see it as being— they thought it was too toy.

Do you miss being a theorist? Or maybe you still do theory in secret.

No, not even in secret. I have a recent— I mean, it's more that I do theory on— and things that in a sense I was doing 30 years ago in social learning. So doing theory, but maybe a little more inspired by behavioral economics, a little bit inspired by the fact that maybe people don't make rational choices, but have a 2019 paper on how people choose good rules for social learning. What are good rules for social learning? Will people choose them?

What's the story of how you came around to doing randomized control trials, having started off writing with Eric Maskin, right? He was your supervisor.

He was my supervisor. I think randomized control trials are— in a sense, they appeal very much to a theorist, I would say. Because what's nice about them, and that's what I always tell people, is that it's really not about, you know, getting unbiased estimates. That's a sort of a red herring. You can, maybe you can get unbiased estimates in many different ways. What you can't do is design your treatment to follow your, what's inside your head. And I think what's very nice about randomized controlled trials And what made me— is to say that, look, if I want to keep digging into something, why is it not working? I can keep varying the treatment exactly based on my current hypothesis. So in some ways, I think this process of working on it has even more convinced me that this idea that we're going to do theory which is place and time independent is not helpful. I think what's the best thing about economics is that it gives you a toolkit. You interrogate things that you say, "Oh, well, it couldn't be that. It couldn't be that. Could it be this?" And that training that we get, which is an excellent training of thinking through multiple hypotheses, that's what theory is about, is in a sense building, you know, ways to accommodate multiple hypotheses into the sparest narrative possible. So you want to see if these two forces are going to— which of them win out under certain conditions. And that kind of thing is great because it trains you to think about all the forces at play in a particular context. So I think of economics as theory as being excellent training for the mind, that it gives you a way to ask, I think it's this, but could it be that? And that training, I think, is still what makes me excited to— when I think about a new RCT, I think about, you know, maybe we can try this, maybe we can try that. Now I'm more I sort of, I teach PhD behavioral economics, so I've been educating myself in those things. So the hypothesis set are maybe a bit wider, but the same idea, which is that, you know, theory trains you to ask questions about, you know, what you could get wrong or where you could get confused or how to interpret a particular fact. Maybe I think naively that this means that, but it's not actually because we think about it. And that was the great insight, I think, of the Chicago tradition. I think they used it often maybe to defend the status quo, but I don't think the insight was not wrong. I think the way they used theory was very, very appropriate, which is to be interrogative.

How should we reform graduate training in economics?

We're trying very hard at MIT, actually. We've sort of— I was on a committee which recommended that we get rid of the general exam, and we just have instead have much more encouragement to start doing research early. I do feel that we are— we sort of stun people with, you know, this much theory and this much macro is essential and often don't— and there's so much, we teach them so much that they don't learn anything or they don't learn enough because I think some level what maybe we got by having been at an early point is that we got a lot of portable insights. And portable is the key word, which is that I want to take the insight and apply it to something immediately rather than sort of know that, you know, yes, there is this enormous edifice and the edifice can be built. That to me is less useful than knowing how the insight of why complete markets deliver efficiency, understanding that. Is very useful, not because it describes the world, but because it gives you a very clear understanding of what is going wrong. And we don't teach it as such. We teach it as, here is a theorem about the world. We don't teach the, you know, people to wonder about, here are 17 examples. What's going wrong in this one? Spot the place where the assumptions are failing. What's incomplete? In this market, and why is it that, you know, why does that potentially have big effects? I don't think we do a good job of making these things kind of get them under people's skin so that they feel that, okay, you know, I understand not just the theorem which I can write down and prove, but also that this is, if I had to take it in my hand and use it to analyze a particular question, I'll feel confident in doing that.

What did you learn from Eric Maskin, your doctoral supervisor?

I had two actually. I had Eric Maskin and an even maybe more pure theorist, Andreo Mascarello.

Sure.

Two absolutely fabulous supervisors. I can't imagine having better. What I learned was from, I think, both of them, and especially, I think, from Eric, it's more Eric is interested in the world. Andrea also actually eventually went into politics, but at that time he didn't. But what he did was he taught us that, you know, in the end, there's lots of verbiage, and there's a few ideas that are key. Just focus on that. And he would almost, when he would teach his advanced course, I don't know if you took one, he would just draw a picture and say that, look, this picture contains all the things that can go wrong. And this whole theorem is to show you conditions under which this doesn't happen. But think about the picture and you are in a sense done. I always think of that as being the key, key thing that I learned from both of them, which is have the discipline to pinpoint. Don't get lost in the complexity. The complexity is often man-made and sometimes unnecessary. Find the key place where the argument is failing. Or what gives leverage to the argument in both directions. And that's what I learned, and I think it's a fabulous way to be trained. With Eric, it's unnerving in a sense because he's so sharp that if you say something that's, you know, there's 3 extra pieces to the argument which are not needed, he'll spot them immediately. So you get trained to say that, look, this is the key point. Rest of it is— we can build the infrastructure over it, but it's not going to change the core inside.

What did you learn from your mother?

To be angry about things that are wrong in society. My mother is very passionate, and she will just, you know, go on a tirade. Even now, she goes on a tirade about all kinds of things that she thinks are wrong. And in a sense, her passion is not unrelated to the economics. She thinks of the economics and says, but this economics is kind of backwards, that, you know, this can't possibly be that this is what the market needs to do to function. So where is it going wrong? And she doesn't necessarily always articulate the whole thought, but her passion combined with a certain commitment to kind of thinking it through, I think is— she's just fabulous example for growing up. I mean, she was never— she would never be kind of passive about the bad things that are happening in the world.

And last question, what did you learn from your father?

To listen carefully to other people's arguments and try to see what they are saying. And before you Dismiss them, be mindful that they have thought about it, be respectful of what the argument is, and kind of unwind it carefully. He was ruthless about unwinding bad arguments, but he would do it in a way that's funny and non-confrontational. And I try, but I'm not as good as he is.

Abhijit, thank you very much.

Thank you. That was wonderful.

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