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University Bridging the Gap between academic ideas and real world problems learn more at [Music] arcades.in conversations withth tyler.com I'm very pleased to be here today with AIT bonnery one of the recent Nobel laat in economics he is Professor of Economics at MIT author co-author rather of the recent bestseller with Esther Duo good economics for hard times abaj 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 abait welcome thank you with that introduction I'm going to be shy let me start with a question about Economic Development Danny rodri has argued that premature de-industrialization is 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 the
new money is being spent on are products that are where the the component of quality to the is extremely high they 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 and the checking is often done in actually in other places in Germany for example for some of the things things the checking is done in Germany even
though the manufacturing is done in China as a result the 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 you know brand naming marketing making sure that they're okay all of these things are huge part of the price and therefore essentially if you think of the rest of it which is it's a small amount so you know that means that if you're a worker you're getting 40 cents 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 that there was too much Petty entrepreneurship in emerging economies uh 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 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 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 P 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 you 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 huge uh coordination by some brand named like beneton 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 what they're doing and into the labor market what do you think is the nature of the positive externality from manufacturing jobs and emerging economies where does it come from oh I don't know that it's has to be manufactured that's the part that I that's I think Danny rodri's View and something that as I said I'm quite willing to be believe it but I I don't
know why it has to be manufactured it seems to me what's what was important was that it was a set of middle skilled people who could the 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 these are 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 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 how to show or whether I actually believe or not that's that's a piece where I it's not that I disbelieve it it's not that I have studied it it just not clear to me that there's a reason to think that you
know if the same options Avail were available in Services they would not serve for the same purposes I just don't know whether there that's 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 primery no I don't I don't know that there is something that you you know a small country exporting lots of services could could it be or a location in even a big country like India I mean the the software and after that the BP boo brought in a lot of people who were
actually relatively low skilled uh 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 BP and that's a that's exactly this idea that you know somebody with a high school education who's smart who's who's enterprising who's willing to work hard can get get trained in English speak like an American say hello this is John or
whatever you're supposed to say and carry on a conversation and that that training I don't see is any different from the upgrading of a steel worker to a you know a line supervisor I I have just I don't know enough about either of these things but I would not it is not obvious to me that a location or a small country could not get a lot lot of benefits out of services the problem is more that services are also where automation is hitting you
discussed Charter cities at some length in your new book why are you skeptical of them as a way of inducing more economic growth I 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 so a charter city is the idea that you know we are going to hand over the main tenance of our Law and Order to
a different country 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 you your government has been taken over by these these uh enemy people or these foreign people and they are they're running how could they be the people deciding what's legal and what's not Etc just seem politically extremely unstable
easy to easy to attack very visible Target it's it's not clear to me that is anything more than that I think yes if you could you could create imagine a situation where you know the politics is exactly aligned right where I would say that creating kind of the legal and physical infrastructure for uh Enterprises would be excellent but I it's just the idea that this is a country which can't enforce its own laws
and they 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 is not this country can't enforce his 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 there's politically the opportunity is such these things offer
are to too tempting it seems to me it seems that British rule 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
know Japan Korea and the north of China India I a lot of opium Trader all of these things went through there so it's like there's tons of it's in a great place to be an anthropo and I don't know that the world can handle a certain number of successful entos Goa may have been too near to Bombay to be an successful entor 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 go absolutely not I mean like they 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 you know Venice for a long time was one and then it stopped and but it was is it that essentially your location is your you know ticket to success or is it something more than that is can you can
you build economies out of onose how well do you think economists understand economic growth more generally I think they don't understand it I this is the point we make in the book that we really think we we I think we understand some I think very basic insights one being I think the one that you my colleague Bob solo made very clear which is that growth has a tendency to run out you you 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 born out that it that fast growth slows down China is slowing now and it's not there's nothing tragic about it it's 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 Etc 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 I think we're 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 at worked Dubai at worked uh Republic of Ireland it worked don't we know a lot about growth alas no I I I think that I mean you have these tiny tiny tiny uh countries basically with I would say uh very specific political configurations I think Li and knew very well that if he didn't deliver a very specific set of environmental conditions and was if if you were
falling behind Malaysia around Singapore was a very very very fragile project uh in 1960 and one that you know I think he they were lucky to have him as the dictator I think he was he was I think in the end committed to some some things which were but they could have easily had someone who had crazy views and there were plenty of people with crazy 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 Etc who need to escape their own societies temporarily for pleasure or for just freedom I think lots of rich people around they you know Iraq Iraq less so I think Iran and Saudi Arabia probably are two big countries with lots of rich people who need a playground I I I don't know that there is 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 I tend to believe Kolkata so do I however and I have no loyalty per se uh I think largely because Kolkata actually also which is less known has I think absolutely amazing food in general the food is amazing uh it having had a a very I mean relative to the rest of India Kolkata had a very um large middle
class who 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 they were cast and other reasons why restaurants didn't flourish that's a 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 habas and that those are cast has a lot to do with but you
know sweets are just too difficult to make at home 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 suets made out of of in these in these specific places made by these casts there was all kinds of conversations about this in the early early to mid 19th century on what you can eat out what is eating out what what can you buy in a shop Etc and I
think the late 19th century you see that basically sweet shops are and sweet shops actually provide um not just sweets but for travelers you can actually eat a lunch there for 50 cents even now uh and excellent lunch there some savories some and a suite and maybe for 40 rupees you get all of that and it it was actually the core mechanism for reconciling um brahminical cultures of different kinds with a with uh a certain
amount of you know social Mobility people came from outside they were working in Kolkata Kata 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 sweet you get savories as well and the savories are excellent in Kolkata if you go out for the day the safest place to eat is in a sweet shop it's always freshly made
saies available you eat 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 I I think the US is exceptional in quality of the um let me say the you know the fact that you don't get actually excellent um suits in
like most places hardly anywhere and you pay ex through your nose fronts we spend lots of time in a small village in provance it's a really small village not one of these Villages where whatever you know Albert kamu used to live it's like a noname village uh at the edge of the lubero and the Sweet Shop there produces better sweets uh 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 is no name there two bakeries one is cheaper and less good the highend bakery you pay 10 cents more for a baguette you know instead of 95 P whatever cents you pay €1 and5 cents for a baguette or something and the baguettes are always excellent and the cakes are excellent it's it's it's I I actually think that it's it's interesting question why us is so exceptional
in in this in Italy is the same I mean I don't love the bread but the you know the pastry is excellent in Spain it's the same but are Indian suits in particular so labor intensive in their construction that you can't sustain them no no actually they're not more labor intensive I I 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 a MILF or something those are extremely labor intensive and they require extremely mindful labor um 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 I I prefer much prefer to make Indian sweets
than French sweets so I love cooking and I will make any anything in a if you know if I have the time and and uh mostly because I'm greedy what country other than India has the best Indian food not counting Pakistan or Bangladesh the 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 but I mean the UK has excellent excellent and trashy and horrible and kind of Gloppy every the whole range but including the high end which is really quite excellent there's a long-standing 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 go goes back to the
fact that Bengali were the first group of people maybe a little bit with the pares as being the comprador class as we Max is one day Once Upon Time used to call them of the British the people who worked for the British with the with with the British um and made a a good livings 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 uh about Russo you they're reading European writers mostly in English but they've 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 uh English 18th century um liberal and conservative discourses using them this very nice histo historical there's a bunch of historians who study this period the 18 1800 to 1840 in in Bengal and it's really fascinating period like
you know they're up in arms they're fighting the bral Traditions the bical tradition is fighting back um 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 we 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 D roio who was a
Christian uh he was the first and perhaps the most visible sign and it was 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 1817 Jefferson was very proud of having set up Virginia as a liberal arts university where where the library is the center 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 the encounter with the British the sense that you know there is this extremely successful culture out there whether this good or bad we don't know but and people are saying that when they're writing that you know we need to know what this bastards are up to or whatever you know they have their own 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 we really need to know what they're doing so they start reading up on all this stuff and they're writing about it and there actually by 1820s actually even before the 1820s Ramon Roy who is the first I think great Bengali intellectual who's who's not I would say not left leaning I think he very he was kind of a benthamite wasn't he
benthamite exactly benthamite but not so much Bentham is he's contemporary of benams he dies in 1825 or something so's he's a contemporary of benams and he's but he's absorbed all this and he writes um he writes in persan a lot um because that's the old he's from the old aristocracy which was trained in persan but he writes about all these very Li important liberal idea he's a liberal in in a very important sense in which he's
much more than a leftist he's a liberal and I think that liberal tradition ition becomes extremely contentious uh immediately you know with the 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 I could talk about them but they they didn't 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 push back uh conservative means conservative not I don't mean right or left I mean conservative push
back wasn't the first IIT in in Bengal in Kolkata not in Kolkata in in kakur kakur yeah that's about 100 miles from Kolkata but I think those were neru um already by this time there is a national plan for these things and even though it's a first one gets built there's one in Bombay one in Madras one in Delhi one in kpur so every part of the country gets one the first five iots and I think that was that was already conceived of
as a single plan but going back to the question of left I I think the left comes actually later the the Liberals become left later partly in reaction to just the horrors of the last years of British rule I think the 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 aous completely uh you
know a callous government um with maybe some sympathy for the people who control the rice Supply uh 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 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 it the' 40s is the Bengal famine is a defining event of that period so I think that that's and this is one of the biggest famines ever it's it's a such a 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 the from tagor who basically a a liberal we moov to to the left very quickly in the 40s Tor dies in 41 and after that the
bengali's move quite sharply to the left it started before it's not that it didn't there was elements of marxist influence before but I think the general uh move of Bengali intelligence 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 and you know he was he had selftaught him kind of British 20th century philosophy quite quite well and I think it was Russell and G Moore that he looked up to most and you Russell is
left G more 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 donon asogo in his new book The Narrow Corridor argues that the Indian cast system has held back Indian economic growth quite a bit but Pakistan and Bangladesh are poorer than India and
don't have a similar cast system do you have a perspective on this whole debate I think that maybe he's I mean may we don't know the counterfactual maybe other things were went wrong I think certainly uh the fact that there was a liberalism that was built into the nouvian state encourage a certain type of person to stay Hindu Muslim Christian and those the self- selection was important I I don't know what all the
ways in which that was these countries are different it's a it's a very interesting thought I I don't know whether I actually believe that I mean I certainly believe the cast system is awful I I don't know whether I would think it first order effects are on on growth directly or because they just happen to be a way of ethnic organization so I you know whether without the cast system we would have had like in in Pakistan Pakistan is a
war zone between the punjabis the pashun and the CIS you know the the MQM the the kind of the movement of Karachi is exactly the all of these people are fighting the muaji or the people who come from India so it's a bunch of ethnic violence whether India would have had other acces 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 whether that's a desirable thing or not I I I I tend to think that diversity is is helpful actually so I 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 and anti- minority lines part of the division the fact that the scheduled cast don't trust the upper cast it might actually be a way of creating enough counterveiling power if you like so kind of stabilizing property yeah in the short run at least yeah so it's not obvious to me that where the the what the counterfactual is then that's the point I making if I look at the earlier history of Indian
classical music uh in Bengal two Outsiders Ravi Shankar is best known but there are many top performers and more recently Bengal and 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 in instrumental Bengal was always very strong um right now one of the best vocal vocalist 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 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 ravish Shankar Ali Akbar Khan nikil banery 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 vat Khan and ish and imrat Khan were the two great non-bengali um instrumentalists of that period I would say and they both settled in
Kolkata so the the children grew up in Kolkata and they are the the other great instrumentalists are these Kolkata born they went to the same high school as I did they were this the Kolkata born not of Bengali families but from very much the same culture so I think calata still is the place which produces the best instrumentalist why is the better vocal music so often from the south oh that's a separate question separ 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 these that's a the Deep South has a completely different tradition they sing in entirely different ways uh the the tradition that I listen a lot to is the tradition of of
of Maharashtra and uh and Northern Karnataka and that's where to me my mind the great home of of classical vocal music right now is that part of India the the area kind of starting at Bombay going down to Bangalore that chunk of India 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 that was just fabulous
Amari she's not young anymore she she died Kish she died few years ago I didn't know she was she was the best I think till I would say I mean I heard her 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 I and in fact I heard her first time live at Harvard uh when we were students together in 1985 and she sang an unbelievable concert in the old fog Museum Courtyard it was probably the best concert I've ever heard she was but no much younger people women who are in their 30s they are really some very talented ones but I can't remember the names right now uh
they are um I I'm blanking on their names I can I would remember them as soon as I walk out of the room but there's actually lots of talented people in their 30s 40s um that's Indian classical musum 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 so I I I think that but through concertizing or
overseas work or how I think through concertizing I I do think that the if you look at the top chelon of these people they they you know their fees have gone up a lot and they're in demand I 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 the movie industry all 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 a 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 well 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 I think that the old Norms were a little bit too parochial now in the middle of these conversations we usually have a segment
of 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 Balzak I think rated about right I I think Balzak is 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 uh how well it connects to the rest of Economics I think it's it's that's seems to me that people think that this is some Boutique exercise that's happening elsewhere but in fact 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 TL sto I think rated about right again I don't think tol I mean I think
tolto is wonderful F but I think people think he's wonderful they don't read him but that's a separate question is is he rated High yes sure he's rated High he's the Canon The Beatles underrated or overrated neither they are the cannon they're the cannon economic growth prospects for Pakistan it seems to me 30 years behind India will it catch up converge or not I 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 may maybe it'll catch up but it 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 it's not that's not not nothing to laugh at who is an underrated Indian writer of
importance to you any number of the vernacular writers who are not not not read I would say among novelists I only really read Bangla but but that's not because that's not to say that there aren't other similar people in other languages but bian B tankar bopi manik bondad um shat bhuri just is amazingly good novel form literature from the 20s to the' 70s and also amazingly good poetry uh both of which I think are just
not read by anybody is it translatable into English or yes it is translated even some of it but it can be translated but not translatable so to speak I think it's translatable I 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 and I I mean I think we
given incentives I think that is just so much great literature bang 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 only in my mind only two competition the competition is either Chennai or Hyderabad I think Hyderabad has a even broader range of food in the sense that it goes from very meat-based uh and different styles of meat-based the kind
of the hyderabadi nawabi kuine Andra 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 it's a bizar enough though we associate the South with vegetarian food and Andra Pradesh has fabulous food of across the r range I mean if you go to small towns in Andra Pradesh the meat the vegetables
everything is stunningly good fish is stunningly good so I I would pick I would have picked Andra Pradesh but Tamil Nadu being the other other possible Tamil Nadu is where Chennai is those are the two tamad also has enormous variety again going from meat chiad food all the way to you know very very proper vegetarian food and all that it's really great I that part of the South the the East 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 part 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 the ghad market in Kolkata there's this part of GAD Market where
you buy by basically old ladies who who the whose sons have sent them from their Village to 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 dur I mean in the US tomatoes are designed for durability and that takes away from other things Johan Sebastian Bach the Canad is overrated or underrated my wife will kill me but I'll
say over right boring you have a 2015 science paper with Esther Dean Carlin 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 per. 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 have a reasonable 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 uh and I think what
that does to your self-confidence your sense of who you you are I think those things we 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 and this is the kind of people I 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 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 never taken a bus I didn't know where whether you know I couldn't read so if it's a number X bus number 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 you know 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 bit more than that it's also build saying you can do it and here are the steps I think turning things
into a set of processes is important it's otherwise it looks like a you know unlikely proposition that I can do it how do 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 a bit more than that I think setting turning things into Pro process is important also you know that here is how you get on a bus you go there you pay this much money you
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 pretty scalable I don't think it's difficult I think it will need a change in I think one 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 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 NOS after all and there are often people who want to do things for the world who who are positive people so I I don't I don't imagine it being that
difficult I mean it's it will require investment in training a particular kind of person but I don't know that is any different from training somebody for you know collecting money in a micr finance 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 six 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 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 proti us for this and we get called in but actually the story is kind of doing the rounds um the governments many state governments in India now want to just do it and 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 orisa in the east of India that wants to do it so I I think it's it's 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 you run big things I'm a lousy manager uh I I can't
be right no I well I think I can be because I am 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 I'm only only good at that but I do go 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 I I feel I'm I get a great deal out of working with wonderful brilliant people japal is full of such people how many consumer loyalty programs do you belong to two I think and you still think they're collusive uh yeah yeah the fact that I belong to it in equilibrium I should belong to them absolutely I I think that the airlines are completely uh you know 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 s since the airline industry is the problem with the airline industry is also this you know what in economics we were taught as but trand Edgeworth competition you pay your fixed cost and then you compete the others out so it's it's known to be unstable we knew we we were taught that you and I we were taught that by andreo
that they were unstable and I see the airlines industry is being the first order of problem the a IND is that which is that it's 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 you see absolutely the butand Edgeworth pattern and you're seeing it right now in India where you a
bunch of airlines are going out of business because they were the prices were just too low at some level the competition was too hard and Jet a has gone and Kingfish has gone India basically now down to three and a half Airlines you have a 1999 QJ paper with agion and Thomas petti 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 like properly you know all the bells and whistles that make macro models they like it we we went for a very different idea basically theorist so we trained to write models that just deliver what you wanted to deliver and not much else so in that sense I I'm very proud of that paper I think it's a good good exercise it never flew uh 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 inter open economies but I think most people the most macro people real macro people didn't see it as being it's they thought it was too toy the model do you miss being a theorist or maybe you still do theory in secret uh no not even in
secret I I have a 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 I have a 2019 paper on how people choose um 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 I think a randomized control trials are in a sense they appeal very much to a theorist I would say because what's nice about them and this what I always tell people is that it's really not about you know getting unbiased estimates that's a sort
of a red hering 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 control trials and what made me real is to say that look you know I'm going to 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 and time independent is not helpful that I think what's the best thing about economics is that it gives you toolkit you interrogate things and 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
of thinking through multiple hypothesis that's what theory is about is in a sense building you know ways to uh accommodate multiple hypothesis into the sparest narrative possible so you you 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 uh context so I 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 I think is still what makes me excited to when I think about a new ar City I think about you know maybe we can try this maybe we can try that now I'm more I'm 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 you 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 not wrong I think the way they use theory was very very appropriate which is to be interrogative how should we reform graduate training and economics we're trying very hard in 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 I do feel
that we we sort of stun people with uh with uh 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 they they don't learn anything or they don't look enough because I think some level what maybe we we got by having been at an early point is that we had we got a lot of portable insights and portable is the key word which is that I you 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's that's that to me is less useful than knowing how the Insight of why complete Mar 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 uh what's going wrong in this one spot 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 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 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 doctor supervisor I had two actually I had Eric maskin and an even maybe more pure theorist andreo mascal 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 it said 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 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 Pro Show You conditions under which this doesn't happen but think about the picture and you are in a sense done so 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 where the what gives leverage to the argument in both directions in sense and that that's what I learned and I think it's 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 this three 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 tiid even now she goes on a TI about all kinds of things that she
thinks are wrong and in a sense her passion is not un unrelated to the economics she thinks of the economics and says but this economics is kind of backwards that you know this you know it 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 me 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 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 that's funny and non-confrontational and I try but I'm not as good as he is abaj thank you very much thank you that was wonderful thanks for listening to conversations withth Tyler and don't forget to visit conversations withth tyler.com /d donate to please support the show before the year's [Music] end