Abhijit Vinayak Banerjee has shared this year’s Nobel Prize in economics with his wife Esther Duflo and Michael Kremer. Abhijit is the son of my colleagues and at one time close friends, Mrs Nirmala Banerjee and the late Professor Dipak Banerjee. He had graduated from Presidency College where I had been both a student and a teacher. He is the second Indian and the third man from the Third World to win the Economics Nobel.
For these interrelated reasons I was overjoyed when I learnt that Abhijit has won this year’s Nobel Prize. After Presidency College Abhijit obtained his M. A. in Economics from Jawaharlal Nehru University. There he spent a few days in Tihar jail for taking part in a student protest. That he has kept up his public-spiritedness was demonstrated by the fact that he joined a group of 108 academics who protested against the current central government’s policy of rendering India’s statistical data base opaque and unreliable.
Abhijit then secured his PhD in Harvard University and then joined the Massachusetts Institute of Technology where he has remained ever since. Abhijit has been a prolific writer often writing jointly with his wife Esther and/or other collaborators including many of his students. So it is difficult to summarize his work in the short compass of this article. Roughly speaking, his work has been spread over the theory of origin and spread of rumours, the role of institutions in economic and social development, the role of incentives in various contexts of human activity, survey-based portrayal of the situation of education and health care and the application of randomized experiments for policy prescriptions, especially for programmes of poverty alleviation in developing countries.
His work on rumours has been used by economists to supplement Maynard Keynes’s work on the herd behaviour, irrationality and instability of stock markets. It has also seen political scientists to analyse the rise of populist politicians on the basis of rumours, often manufactured by their associates. Abhijit has studied the working of institutions of judiciary, bureaucracy and the police in various contexts and delved into the reasons for, and the outcomes of their malfunctioning.
As an illustration I can cite his paper jointly with Lakshmi Iyer, where it was demonstrated that district by district in Indian states, those districts performed better in terms of human development , which were parts of raiyatwari areas in colonial India than those which were under Permanent Settlement tenure. Abhijit and his team have studied the state of primary and secondary education and have found widespread prevalence of absenteeism in both public and private schools.
The same stricture applies to hospitals and health centres, though to a lesser extent. On a study of the health situation in Rajasthan, Abhijit found that especially in villages the first resort of a sick man/woman is to an ojha, then to a quack (many of whom become ‘doctors’ because they can find no other source of employment) and only lastly to a public hospital or health centre). Superstition, ignorance and illiteracy certainly play a part in such behaviour, but the relative inaccessibility of doctors in hospitals and health centres and their frequent absenteeism also play a large part.
These studies have led Abhijit to study the proper incentives and the kind of accountability that would induce the economic agents from judges to bankers, policemen and nurses to change their behaviour in the right direction. I turn now to the message of Poor Economics, jointly authored with his wife for which they have been awarded the Nobel Prize. In this case as in many other cases, they have used randomized experiments to find out what kinds of policies work in particular contexts.
They choose an area where a particular policy is applied as against other control areas. Where such policies are not implemented, if they find that the former areas yield better outcomes,they recommend those policies. If not, they reject those policies. In their book they have summarized the results of randomized experiments as applied to the alleviation of the poor. This is entirely in line with the World Bank strategy of micro-interventions for the alleviation (not necessarily eradication) of poverty in developing countries. Abhijit has also recommended the giving of a basic income to every inhabitant of a developing country.
Finally, I should mention that Raghabendra Chattopadhyay, and exstudent of mine and later a professor in the Indian Institute of Management, Calcutta, is probably the only person in this city to have written a paper with Esther. The topic of their research was ‘Women in Indian politics. ‘
(The writer, an economist of international repute, is Emeritus Professor, Institute of Development Studies Kolkata)