As policymakers, economists came of age in the 1970s and 1980s in the United States – a period dubbed ‘The Economists’ Hour’ by economic journalist and author Binyamin Appelbaum – when they were able to persuade successive US governments to adopt a range of libertarian policies including privatisation of public assets, deregulation, reduced government spending, tax breaks for the rich in pursuit of the now discredited trickle-down effect, and more. It was the stuff of Reaganomics, and it was enthusiastically embraced by Margaret Thatcher on the other side of the Atlantic. While these ideas are appealing to champions of individual libertarianism, and have provided the ideological playbook for right-wing think tanks in many countries, including here in Australia, they have also underpinned some of the worst failings in economic policy in recent times. The global economic crisis of 2008, for example, was a direct result of deregulated financial markets and a misplaced belief that the market would behave according to the idealised models of neoclassical theory.

In their book Good Economics for Hard Times: Better answers to our biggest problems, Abhijit V. Banerjee and Esther Duflo offer not so much an apologia for their profession as a suggestion that the concepts, analytical methods, and tools are there, if only economists knew how to use them sensibly and with regard for the human consequences of their recommendations. The authors, a husband-and-wife team who were joint winners of the Nobel Prize in Economics in 2019, are well placed to make such a judgement. They were awarded the discipline’s top accolade for their work on poverty alleviation and economic development. Their research in the developing world has brought them into direct contact with the inequities that continue to exist in the distribution of income and wealth both within and between countries. As a result, references to inequality and economic injustice run like leitmotifs through the book, providing a stern critique of the way in which mainstream economists, most of whom tend to accept uncritically the neoclassical tradition in which they have been trained, privilege efficiency over equity, private over public interest, markets over intelligent interventionism, and ideology over objective analysis of evidence.

The book devotes each of its nine chapters to a different area of economic and social concern where ‘good economics’ can be applied to yield ‘better answers’, beginning with migration, a topic described as the single most influential issue in the world’s richest countries. It is an issue that populist demagogues exploit to create fear and distrust of immigrants and refugees among their constituents. In a lengthy chapter that contains the volume’s only diagrams – two graphs showing why more migrants do not always lead to lower wages – the authors work through a range of illustrations, many drawn from their extensive experiences in India, to show that economic incentives cannot on their own explain population movements, nor can simplistic economic models necessarily predict the impact of immigrants on local economies. Subsequent chapters consider international trade, the future of economic growth, the causes of inequality, the impact of techno logy, and a surprisingly brief chapter on the role of government and civil society organisations in implementing socially progressive policies. There is a thoughtful analysis of racism, placed in the context of a discussion of the ways in which preferences, beliefs, and values inform economic behaviour.

The book pays particular attention to climate change, a field where the contrast between good and bad economics could not be more stark. For example, there are many studies that use spurious economic methods to show that reducing greenhouse gas emissions places excessive costs on the national economy. Despite the fact that such studies are inevitably only partial and ignore a range of associated benefits and costs, they are seized upon by politicians in defence of short-sighted and self-interested policy prescriptions. Other studies apply economics more judiciously, for example utilising a prediction of simple economic theory on which economists of all shades of opinion are likely to agree – namely that prices influence behaviour. If a policy strategy is aimed at changing consumption habits in order to reduce emissions, it is doomed to be ineffective if it fails to place a price on carbon, for example via a carbon tax or a tradable permits system. This chapter on environmental issues says little that is new, but it does provide a forceful reminder that it is our obsession with economic growth that underlies these problems, blunting the will of rich countries to take action, and exacerbating the global inequality that imposes increasingly disproportionate costs on the poor of the world.

This immensely readable book is well documented, authoritative, and extensively illustrated with the authors’ own experiences. It provides a scathing critique of the ways in which economics has been used and misused to entrench prejudice and to underwrite all sorts of political chicanery. There is a shelfful of recent books making much the same criticisms, but the difference here is that Banerjee and Duflo offer us some hope that economics can be redeemed. They provide a practical account of how a more enlightened and less ideologically driven economics could lead us towards a better, saner, more humane world. ‘Economics,’ they conclude, ‘is too important to be left to economists.’