David and Helen talk to Nobel Prize-winning economist (the youngest ever!) Esther Duflo about how to do economics better. From investing in left-behind places to helping people adapt to change, we discuss good and bad economic ideas about some of the biggest challenges we face, and how it all connects back to politics. Plus we talk about what some of the world's richest countries can learn from some of the poorest. Esther's new book, with Abhijit Bannerjee, is Good Economics for Hard Times https://bit.ly/33q6uOm
Why do economists believe “Invest in People not Places?” And why are they wrong?
- The idea is that it’s better to target interventions at individual people than places, in part because people will move.
- But research shows that people are remarkably sticky. They don’t really move.
- Even faced with really high costs, and the complete freedom to move to another place, people don’t. During the Greek financial crisis, very few people left.
- Mobility is easier at younger ages.
Why do people stick?
- In the U.S., one of the biggest factors is real estate. Wages may be higher on the coast, but housing is much more expensive.
- People are not driven only, or even primarily by financial incentives
The U.S. has not treated people who were left behind by manufacturing very well.
- There is an implosion of economic activity in one place because people don’t move.
The class and place categories are marred. The people who can afford to live in the big cities tend to be relatively well off.
- This was at the root of the Yellow Vests movement in France.
- Although there is also a lot of poverty in big cities.
- Class is no longer defining political lines in the same way.
How, as a society, can we prepare better for transitions?
- It starts at birth: an excellent preschool education, followed by an excellent primary and secondary school education, and finally equal access to University.
- When shocks happen, being willing to spend.
- Some people will never move and we should make their lives honorable where they are.
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