An Economist in the World of Policy and Politics
Acceptance speech by
On the occasion of being conferred laurea honoris causa by the
Universita degli studi Firenze. 8 October 2018, Florence, Italy
The Rector of the University, the Director of the Department, fellow economists, students and friends from Florence and Italy,
I cannot tell you, how happy and honored I feel to stand before you on this special occasion. This recognition of my work, especially in the area of development economics, means a lot to me. And to get it from your university, in the city of Florence, adds special significance.
There are some cities in the world that are known for their burst of creative energy, —in the arts, philosophy and science—, so big, that it marks a turning point for all of humanity. Florence is one such city. As Bertrand Russell wrote in his History of Western Philosophy, “The modern as opposed to the medieval outlook began in Italy, with the movement called Renaissance. Florence was the most civilized city in the world, and the chief source of the Renaissance.” Even during the one and a half days that I have spent this time in Florence I managed to see some of the great works of Rennaissance. In addition, I saw for the first time the amazing Opera del Duomo Museum.
All these great works of art cannot detract from the fact that I also discovered this time that Florence has the world’s best ice cream. I now believe that no visit to Florence is complete without a visit to Badiani.
More seriously, since you live in Florence, it is easy for you to forget the role this city has played in the world’s development. So I thought I would begin by reminding you of that, especially because, thanks to the honorary degree you are giving me, I am now going to go away from here with a piece of Florence in me. Thank you very much for this honor.
I mentioned at the outset the special significance of development economics to me. One reason for this is I grew up in a developing country, in India, and I am still a citizen of that country. I spent the first 16 years of my life in Kolkata—a remarkable city. Kolkata had its burst of intellectual energy in the early nineteenth century and had a huge influence on the Indian sub-continent—on its literature, science, and philosophy—and it was a major hub of ideas during India’s struggle for Independence. At the same time, Kolkata is over-crowded and home to lots of poor people. It is a city that sheltered waves of migrants. It is impossible to grow up in that city and not be aware of the pain of people who live in extreme poverty and the challenge of development that we, as human beings, collectively face.
After I became an economist, doing my PhD in London, I returned to India, and lived there for 17 years. I had never formally studied development economics. It was an interest acquired not from books but from everyday interaction, with ordinary people, rich and poor, in India.
I remember in the late 1980s in a poor village in the state of Jharkhand (then Bihar) meeting a farmer who had given his land to a tenant on a share tenancy contract. Sitting under a tree, outside the village tea shop, I tried to explain to him that he had made an irrational decision by giving out his land on a share contract. I told him, as simply as I could, of the theories of Adam Smith and the works of David Newbury and Joseph Stiglitz. But he made it clear that was not impressed by these people. He explained to me, in the jargon-free language of farmers, what seemed to me to be a limited-liability argument as to why he had done what he did. It was that discussion that led me to write one of my early papers in development economics. It was on limited liability and the existence of share tenancy.
Another area where I did a lot of work is child labor. This too began from real-life experience. In 1994, I moved from India to United States, to Cornell. At that time, the US was considering a new law to ban products that had any child labor input. The presumption was that child labor was caused by (A) the greed of employers searching for cheap labor and (B) the laziness of parents sending their children out to work instead of working harder themselves. Having lived in India and seen child labor, I was upset by assumption (B). Parents, who send their children to work, typically do so because of extreme poverty. The employers may be maximizing profit, but for parents to send their children to work is an act of desperation.
Child labor is dreadful and need to be banished, but in designing policy we need to be sensitive to the deprivation and suffering of the poor that cause child labor in the first place. The foremost need is to improve labor-market conditions so that the parents earn a decent income. If that happened, they would of their own accord not send their children to work. Reacting spontaneously to this, I wrote an article for New York Times. I had never published in New York Times before and was taken aback by the reaction. Lots of people wrote to me. Some were angry, some sympathized with me. I was invited to debates and also to a radio discussion. That is when I decided, now that I had written on child labor, it was time to do some reading. That is how my interest developed in the field and I began doing serious research on child labor. I published a paper with my student Pham Hoang Van on child labor in American Economic Review in 1998, and that was the start of several papers on the subject.
Work on child labor also became the basis of my earliest research contacts with Italy. I can see Alessandro Cigno in the audience. He, Mario Biggeri, Gianna Claudia Giannelli, Furio Rosati easily come to mind as scholars who have made valuable contributions to the field. This research also connected me to people around the world, from India, though Africa, to Latin America.
One of the joys of research is that you have to be a global citizen. It gives you the scope for counting among your friends, people of different nationalities, continents, religions and races. This is something I treasure. In today’s world, with rising hyper-nationalism, all kinds of in-group chauvinisms and hatred of the other, we need to remind ourselves that we share a small world, that all of us have a common origin—we all come from Africa—and, in the end, we are all citizens of the world.
There is another reason why a research career is so good. Research is one of those activities in which you go through life feeling over-paid, because you would anyway want to do what you do. However, for the students in the audience, who are planning to become researchers, I have an advice. Don’t let your employer know this. This may result in a salary adjustment.
I would have continued to do research and teach if it was not for the unexpected phone call from the Indian Prime Minister’s office on 9 August 2009 when I was vacationing in Delhi. I was asked, quite out of the blue, if I would consider being Chief Economic Adviser to the Indian Government. That marked my entry into the world of policymaking for 7 years, nearly 3 in the Indian government in Delhi, and, after that, 4 at the World Bank in Washington.
One reason I took the job was atonement for the life of indulgence until then. Many people become economists because they want to create a better world. My reasons were more selfish. It was pure indulgence. The puzzles of economics were too fascinating to ignore. I did research, I have to confess, not with the aim of helping society, but for its pure aesthetic joy.
Because I had led such a selfish life, I told myself, if I went to the world of policy, I would do so with the sole aim of trying to do some good for society. So, with that in my mind, I said yes to the Prime Minister and, in December 2009, I entered the world of policy and politics. The transition was not easy. I was moving from the academic world, with very few hierarchies, with almost total free speech, to a world of pyramidal hierarchy, of top-down discipline and lots of bars on what you say. But, in retrospect, I am glad I got the opportunity to take my research to the real world. I learned a huge amount and I hope I managed to contribute at least a little. I am convinced that we need more interaction between the worlds of practical policymaking and research.
When you invited me to speak, I decided I would read out the formal, celebratory part, and then switch to speaking extempore on contemporary policy challenges. In case you did not realize, this was the formal part. So let me now put away the paper.