The Real Policy Agenda of the New Nobel Prize Laureates in Economics
Back in November, when Abhijit Banerjee and his wife Esther Duflo were named recipients of the 2019 Nobel Prize in Economics, along with Michael Kremer, I called the three “government technocrats who think at the government level rather than at the foundational level where an appreciation for free markets would make their work useless.”
Banerjee and Duflo appeared Sunday on the CNN show, Fareed Zakaria GPS.
In their discussion with Zakaria, they revealed the key policy thinking of their agenda. It is to promote government transfer of wealth from the rich to the poor.
Zakaria, who comes off as reasonable but an establishment man, clearly had none of the necessary foundational economic understanding to challenge the wealth transfer-crazed couple.
Banerjee was the more open of the two. He said he was in favor of a universal basic income and also said that if the rich are taxed it does not mean they will work less–as if that is the key point.
The couple claims they reached their conclusions based on experiments but the Nobel Prize winner Friedrich Hayek would surely argue the experimental method to reach grand universal economic tenets is an improper methodology for the science of economics.
Nowhere have Banerjee or Duflo addressed Hayek’s critique.
But more significant, in their desire to central plan and transfer wealth from the rich to the poor, Banerjee and Duflo ignore the damage this does to capital accumulation. They simply don’t mention it, as if the transfers don’t cause a massive hole in the capital structure. The larger the capital structure, the greater the general increase in the standard of living. Shrinking the capital structure by transferring funds to the poor, from the pool of capital, is just about the worst thing you can do for the poor. Capital is the key to producing more goods and more goods are what the poor need more than cash handouts buying a shrinking pool of goods.
Banerjee and Duflo have also never rebutted the observation of Israel Kirzner that an entrepreneur can emerge without the need for his own personal capital. If Kirzner is correct in his observation, and I believe he is, then there is even less justification for transfers from the rich to the poor.
Banerjee and Duflo are just riding the current wave of wealth-hate by coming up with shallow justifications for taking funds from the rich without addressing the fundamental-type objections to such taxation in particular that it lowers the general standard of living.