Book Review: An Economist in The Real World- The Art of Policy- making in India

Book: An Economist in The Real World: The Art of Policy- making in India

Author: Kaushik Basu

Publisher: Penguin/Viking

240 pages

Kaushik Basu is an unabashed economic theorist, with all the mathematical stuff thrown in. One would have almost called him a nerd, but he is anything but that. He is more the intellectual sophisticate at home in salons and soirees. He brings with him his Bengali bhadralok credentials, not too loud but yet there. It was a pleasure to read the annual economic surveys when he was the chief economic adviser. One knew that when Henrik Ibsen's Nora is mentioned in Chapter 2 of the survey, it is a Basu signature. He must be a brilliant, self-deprecating teacher – yes, the two go together – and he is able to charm and inform, because that is what jumps out of many a page in this book.

He is no pedant. And this book is no personal memoir. It is about his time as chief economic adviser to then finance minister Pranab Mukherjee in the years between December 2009 and February, 2012. "My Delhi diary is too fresh to be published. There are also difficult ethical questions associated with such verbatim reporting so soon after having had the privilege of an insider's view," he says.

But Basu throws in enough of those teeny-weeny tantalising tidbits, like this one. The chauffeur, a finance ministry veteran, told him, "Sir, now that you are the chief economic adviser, you don't need to wear seat belt anymore." Initially, he felt like a Martian, but soon decided to follow in the footsteps of anthropologist Malinowski, who studied Trobriand Islanders and Darwin, who studied the flora and fauna of the Galapagos Islands. So he decided to observe bureaucrats and politicians. But as he eased into the job, Basu began to enjoy the work, "not just the work of observing the tribals of North Block, but also becoming one".

This is then a book about the economy with interesting 'Did you know?' gems from economic history thrown into the narrative. In the chapter Inflation: The Emperor of Economic Maladies, he gives the information in an anecdotal tone: "The biggest episodes of inflation occurred in Europe, once around 1923 and again around 1946. The all-time is held by Hungary from August 1945 to July 1946. During these twelve months, prices rose by 3.8x10 to the power of 27. That is, what cost one pengo on August 1, 1945, would cost 38,000…(a total of 26 zeros) pengos on July 31, 1946."

This kind of information being brought in to casually to illustrate a point can only be done by a learned and suave professor, and Basu is nothing but that. That is why, the reader gets to grasp some of the finer points of the difficult aspects of the economy as well as its theory because Basu puts it across with enough levity. This is very much evident at the beginning of this chapter, where he writes, "One thing that experts know and non-experts do not is that experts know less than non-experts think they do." It is a mild Zen koan in its own way.

Basu is a non-dogmatic econometrician, who believes that the 1991 reforms were the best thing to have happened to India, and the history before that is a mere prelude to the real beginning – the opening up of the Indian economy. He favours the market economy, but he is acutely aware of the limitations of a market economy in a developing country with a large number of poor people like in India. So he favours state intervention on behalf of the poor, but thinks welfare measures have to be done in a smart way. He would disagree with Thomas Piketty that taxing the rich would be an effective way of reducing inequality. He offers a mathematical model where skilled people who earn more and the unskilled who earn less are more or less equal, and he shows how taxing the skilled force beyond a certain point would force them to work less and earn less, and therefore get taxed less.

This is pure theory, but Basu does not hesitate to invoke theory to look at the problems of the real world.