New Release Books by Kaushik Basu

This book charts the course of Kaushik Basu’s career over seven years, as he moved out of the cloisters of academe to the frenetic world of policymaking, first in India as Chief Economic Adviser to the Indian Government and after that as Chief Economist at the World Bank in Washington. The Indian years were a period of high inflation, growth challenges (as the global financial crisis arrived in India), and also a remarkable growth recovery story, with India moving past China’s GDP growth rate. There were corruption scandals breaking, causing widespread street protests, a lot of late-night decision-making, which one knew would rock the stock market the next day, and getting to know politicians who were outstanding as statesmen in the midst of all this, and also many who were not. The World Bank years weren’t that close to actual policymaking, but nevertheless breath-taking in their scope. They ranged from interacting with policymakers in tiny remote countries like Samoa to gigantic nations with comparable heft, such as China. It entailed sitting down with leading researchers to compute and announce global numbers on extreme poverty and rankings on how easy it is to do business in different countries (fully aware that there would be calls from irate finance ministers as soon as these were published). And there was the handling of politics within the World Bank, which could actually be as enjoyable as any global economic problem! This book is a revised version of the diary that Kaushik Basu kept for seven years. Revised because he often wrote the diary in a hurry at the day’s or even week’s end. He has now inserted some reflections in retrospect, without altering any descriptions of what actually happened.

"[This book] argues that the traditional economic analysis of the law has significant flaws and has failed to answer certain critical questions satisfactorily. Why are good laws drafted but never implemented? When laws are unenforced, is it a failure of the law or the enforcers? And, most important, considering that laws are simply words on paper, why are they effective? Basu offers a provocative alternative to how the relationship between economics and real-world law enforcement should be understood. Basu summarizes standard, neoclassical law and economics before looking at the weaknesses underlying the discipline. Bringing modern game theory to bear, he develops a 'focal point' approach, modeling not just the self-interested actions of the citizens who must follow laws but also the functionaries of the state: the politicians, judges, and bureaucrats enforcing them. He demonstrates the connections between social norms and the law and shows how well conceived ideas can change and benefit human behavior. For example, bribe givers and takers will collude when they are treated equally under the law. And in food support programs, vouchers should be given directly to the poor to prevent shop owners from selling subsidized rations on the open market. Basu provides a new paradigm for the ways that law and economics interact: a framework applicable to both less developed countries and the developed world"--Jacket.

‘Philosophy has to be deductive, poetry romantic, plays and fiction humorous, and politics intriguing if they are to catch my attention,’ writes Kaushik Basu. All these interests are on display in An Economist’s Miscellany, which brings together an eclectic collection of writings on the world of academe, politics, policy, travel, and more. This book offers unique glimpses of the author’s engagement with the world: his opinions on contemporary policies and economic issues; his exploration of different parts of the world; and his reflections on people, ideas, and books that have influenced him. An Economist’s Miscellany also puts on display his literary forays—translations of two hilarious Bengali short stories and a four-act play on academe, love, and cultural misunderstandings. This second and much-expanded edition of the book features a new set of essays that reflects the author’s dual perspective of the world: one from the groves of academe and one from the olicymaker’s perch. In the world of policymaking, he was not just an observer but an active participant, and many of the new essays dwell on ideas gathered from this hands-on engagement.

One of the central tenets of mainstream economics is Adam Smith's proposition that, given certain conditions, self-interested behavior by individuals leads them to the social good, almost as if orchestrated by an invisible hand. This deep insight has, over the past two centuries, been taken out of context, contorted, and used as the cornerstone of free-market orthodoxy. In Beyond the Invisible Hand, Kaushik Basu argues that mainstream economics and its conservative popularizers have misrepresented Smith's insight and hampered our understanding of how economies function, why some economies fail and some succeed, and what the nature and role of state intervention might be. Comparing this view of the invisible hand with the vision described by Kafka--in which individuals pursuing their atomistic interests, devoid of moral compunction, end up creating a world that is mean and miserable--Basu argues for collective action and the need to shift our focus from the efficient society to one that is also fair. Using analytic tools from mainstream economics, the book challenges some of the precepts and propositions of mainstream economics. It maintains that, by ignoring the role of culture and custom, traditional economics promotes the view that the current system is the only viable one, thereby serving the interests of those who do well by this system. Beyond the Invisible Hand challenges readers to fundamentally rethink the assumptions underlying modern economic thought and proves that a more equitable society is both possible and sustainable, and hence worth striving for. By scrutinizing Adam Smith's theory, this impassioned critique of contemporary mainstream economics debunks traditional beliefs regarding best economic practices, self-interest, and the social good.

'Philosophy has to be deductive, poetry romantic, plays and fiction humorous, and politics intriguing if they are to catch my attention, ' writes Kaushik Basu. All these interests are on display in An Economist's Miscellany, which brings together an eclectic collection of writings on the world of academe, politics, policy, travel, and more. This book offers unique glimpses of the author's engagement with the world: his opinions on contemporary policies and economic issues; his exploration of different parts of the world; and his reflections on people, ideas, and books that have influenced him. An Economist's Miscellany also puts on display his literary forays-translations of two hilarious Bengali short stories and a four-act play on academe, love, and cultural misunderstandings. This second and much-expanded edition of the book features a new set of essays that reflects the author's dual perspective of the world: one from the groves of academe and one from the policymaker's perch, in New Delhi and in Washington, DC. In the world of policymaking he was not just an observer but an active participant, and many of the new essays dwell on ideas gathered from this hands-on engagement.

Appointed as the chief economic adviser (CEA) to the Government of India in 2009, Basu—a theorist, with special interest in development economics, and a professor of economics at Cornell University—discovered the complexity of applying economic models to the real world. Effective policymaking, Basu learned, integrates technical knowledge with political awareness. In this book, he describes the art of economic policymaking, viewed through the lens of his two and a half years as CEA.

OCyThe Retreat of DemocracyOCO presents an expanded and reworked selection of Basu's best journalistic writings on political and economic themes since the late 1990s."

This volume is a collection of the author's inter-disciplinary essays straddling several of the social sciences and also the philosophical foundations of economics. Most essays have a development slant and several make explicit reference to India.

This volume is a collection of the author's inter-disciplinary essays straddling several of the social sciences and also the philosophical foundations of economics. Most essays have a development slant and several make explicit reference to India.

Virtually all industrialized nations have annual per capita incomes greater than $15,000; meanwhile, over three billion people, more than half the worlds population, live in countries with per capita incomes of less than $700. Development economics studies the economies of such countries and the problems they face, including poverty, chronic underemployment, low wages, rampant inflation, and oppressive international debt. In the past two decades, the international debt crisis, the rise of endogenous growth theory, and the tremendous success of some Asian economies have generated renewed interest in development economics, and the field has grown and changed dramatically. Although Analytical Development Economics deals with theoretical development economics, it is closely grounded in reality. The author draws on a wide range of evidence, including some gathered by himself in the village of Nawadih in the state of Bihar, India, where—in huts and fields, and in front of the village tea stall—he talked with landlords, tenants, moneylenders, and landless laborers. The author presents theoretical results in such a way that those doing empirical work can go out and test the theories. The book is a revision of Basu's The Less Developed Economy: A Critique of Contemporary Theory (Blackwell, 1984). The new edition, which has several new chapters and sections, incorporates recent theoretical advances in its comprehensive, up-to-date treatment of the subject. It is intended primarily as a textbook for a one-semester graduate course, but will also be of interest to researchers in economic development and to policymakers.

Mainstream economics was founded on many strong assumptions. Institutions and politics were treated as irrelevant, government as exogenous, social norms as epiphenomena. As an initial gambit this was fine. But as the horizons of economic inquiry have broadened, these assumptions have become hindrances rather than aids. If we want to understand why some economies succeed and some fail, why some governments are effective and others not, why some communities prosper while others stagnate, it is essential to view economics as embedded in politics and society. Prelude to Political Economy is a study of this embeddedness; it argues for an 'inclusive' approach to institutions and the state. Modern economics recognizes that individuals' pursuit of their own selfish ends can result in socially suboptimal outcomes - the Prisoner's Dilemma being the stark example. It has been suggested that what we need in such an eventuality is 'third-party' intervention, which can take the form of imposing punishment on players. Kaushik Basu objects to this method of wishing third parties out of thin air. He argues that if a third party that could impose its will on others were available, then it should have been modeled as a player to start with. The adoption of such an inclusive approach has implications for our conception of the state and the law. It means that the law cannot be construed as a factor that changes the game that citizens play. It is instead simply a set of beliefs of citizens; and, as such, it is similar to social norms. What the law does for an economy, so can social norms. The book discusses how the nature of policy advice and our conception of state power are affected by this altered view of the state and the law. As corollaries, the book addresses a variety of important social and philosophical questions, such as whether the state should guarantee freedom of speech, whether determinism is compatible with free will, and whether the free market can lead to coercion.

Basu and Ray use the collective model of the household and show, theoretically, that as the woman's power rises, child labor will initially fall, but beyond a point it will tend to rise again. A household with a balanced power structure between the husband and the wife is least likely to send its children to work. An empirical test of this relationship using data from Nepal strongly corroborates the theoretical hypothesis. This paper--a product of the Office of the Senior Vice President, Development Economics--is part of a larger effort in the Bank to understand how gender affects development outcomes and to identify the causes of poverty. The authors may be contacted at kbasu@mit.edu or ranjan.ray@utas.edu.au.

With reference to the Indian scene.

Abstract: June 1999 - When will a landlord prefer to supply both land and credit to a tenant rather than allow the lender to borrow from a separate moneylender? The paper shows that if tenancy contracts are obtained prior to contracting with the moneylender, and the tenant has limited liability, interlinked deals will predominate over the alternative situation where the landlord and the moneylender act as noncooperative principals. Basu, Bell, and Bose analyze the example of a landlord, a moneylender, and a tenant (the landlord having access to finance on the same terms as the moneylender). It is natural to assume that the landlord has first claim on the tenant's output (as a rule, if they live in the same village, he may have some say in when the crop is harvested). The moneylender is more of an outsider, not well placed to exercise such a claim. A landless, assetless tenant will typically not get a loan unless he has a tenancy. Without interlinkage, the landlord is likely to move first. In the noncooperative sequential game where the landlord is the first mover and also enjoys seniority of claims if the tenant defaults, interlinkage is superior, even if contracts are nonlinear - a result unchanged with the incorporation of moral hazard. The main result is that if a passive principal - one whose decisions are limited to exercising his property rights to determine his share of returns - is the first mover, allocative efficiency is impaired unless his equilibrium payoffs are uniform across states of nature. The limited liability of the tenant creates the strict superiority of interlinkage by making uniform rents nonoptimal when, with noncollusive principals, the landlord (the passive principal) is the first mover. A change in seniority of claims from the first to the second mover (the moneylender) further strengthens this result. But uniform payoffs for the first mover are not essential for allocative efficiency if he is the only principal with a continuously variable instrument of control. So, the main result is sensitive to changes in the order of play but not to changes in the priority of claims. This paper - a product of the Office of the Senior Vice President and Chief Economist, Development Economics - is part of a larger effort in the Bank to understand the institutional structure of rural markets and its welfare implications. The authors may be contacted at kbasu@worldbank.org, clive.bell@urz.uni-heidelberg.de, or psbose@cc.memphis.edu.

This is a book of academic asides, of reportage from, in, and around the world of research and academia. From Simone de Beauvoir to Joseph Schumpeter, from evolutionary scientists in Abisko (above the arctic Circle) to social choice theorists in Valencia or the Mediterranean, this book is an irreverent traverse over a large canvas. Woven into the fabric of these light essays are observations on economic dilemmas and philosophical conundrums that confront everyone, everday. In addition, there are chapters devoted explicitly to economics. In keeping with the style of the book, these combine arguments with comments on personalities and places as well as constitute a jargon-free introduction to some of the more pressing economic-policy problems of our times. Like his earlier Economic Graffiti (Oxford India Paperbacks), this book of sharp, wry, witty and precisely observed sketches will seem a delight most specially to general readers who don't normally by books by economists.

The paper argues that to achieve compliance of firms with regulations such as product quality or environmental or health standards it is better to have industries with a few large corporations than numerous small firms. A model is constructed to show that limited liability constraints bind more easily in competitive industries, making it harder to impose sufficiently severe penalties and costlier to send sufficient monitors. Having large corporations allows the government effectively to delegate some of its monitoring functions to the managers of the corporation. The tradeoff between this issue and the usual argument in favor of competition is considered.

The paper develops a new theory of group discrimination in which the discrimination in favor or against certain groups is simply a coordination device. It is built on the axiom that a person who gets to perform many tasks is more effective in carrying out each task, which implies increasing returns to productivity in doing the same task or strategic complementarity between doing different tasks. The theory helps us understand discrimination in free markets and the .finding of some empirical studies that show that people discriminate in job markets against certain groups even when all other traits are held constant. The model gives insight into the relation between group size, discrimination, and productivity.

The World Bank Group recently adopted two overarching goals -- the end of extreme, chronic poverty in the world by 2030 and the promotion of shared prosperity in every society. The paper examines the normative properties of these goals, their strengths and weaknesses, and their implications for actual policymaking, especially in the presence of globalization. This is closely related to the age-old debate on growth versus direct welfare interventions as instruments for countering poverty. The paper analyzes past trends on poverty and tries to shed new light on this old debate.