A talk with Nobel winners Esther Duflo and Abhijit Banerjee : Planet Money : The Indicator from Planet Money Nobel economics prize winners Esther Duflo and Abhijit Banerjee on whether foreign aid, french bread and dating an economist are overrated or underrated.

Overrated Or Underrated: The Nobel Edition

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UNIDENTIFIED PERSON: NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

CARDIFF GARCIA, HOST:

Hey, everyone. This is THE INDICATOR FROM PLANET MONEY. I'm Cardiff Garcia.

STACEY VANEK SMITH, HOST:

And I'm Stacey Vanek Smith. So, Cardiff, I was thinking, you know, it has been a while since we have done an Overrated/Underrated episode.

GARCIA: Yeah, that's right. I mean, these are, like, such serious times, and Overrated/Underrated is usually fun. It's a game.

SMITH: It is a game. Here are the rules. We have a guest, and we throw out a bunch of topics - you know, pop culture, news, economics, food items, whatever we want - and we ask them if this thing, this topic, this food item is overrated, underrated or appropriately rated. That's the game.

GARCIA: Yeah. And mandatory perennial disclosure - we stole the game from economist Tyler Cowen, or stole it-ish (ph).

SMITH: You stole it.

GARCIA: Stole it-ish, you know?

SMITH: We stole it.

(LAUGHTER)

SMITH: We stole it. Today on the show, though, we have a very special treat because we are playing Overrated/Underrated with a Nobel Prize-winner.

GARCIA: Two Nobel Prize-winners.

SMITH: Yes, that's true. Two Nobel Prize-winners.

GARCIA: Yeah. Esther Duflo and - Esther Duflo and her husband, Abhijit Banerjee. They won the Nobel last year for work that they have done together.

SMITH: Cardiff, these guys are couple goals.

GARCIA: Yeah. Kind of like squad goals, but for a couple.

SMITH: I know. They're both economics professors at MIT. Esther Duflo made history as the youngest person to win a Nobel Prize in economics. She was 46. And she's also only the second woman ever to win the economics Nobel.

GARCIA: And today, we are going to find out if they think that vacations, economist spouses and the Nobel itself are overrated or underrated. That's coming up right after the break.

SMITH: I'm glad we're making use of these sort of brilliant, world-class minds to ask about vacations (laughter).

GARCIA: OK, Esther Duflo, Abhijit Banerjee, welcome to the show, and welcome to Overrated/Underrated.

SMITH: We are very excited to have you here. OK, so our first question relates to your Nobel Prize-winning work. Foreign aid - overrated or underrated?

ABHIJIT BANERJEE: Underrated.

SMITH: Oh, explain.

BANERJEE: I think what people do is they say, look; on average, countries that get foreign aid seem to be doing really badly. So how could it be good? I think the real question is, is there a good way to use foreign aid? And my view is yes. You can use it in many bad ways. The U.S. gives aids to many of its friends for reasons we have nothing to do with welfare of the people. And therefore, you don't get welfare of the people. That doesn't mean that you couldn't get it. I think if you actually spent effort trying to figure out what's the best way to use it - it's flexible money. It's often money that, you know, countries don't have, so it's money that can be used kind of creatively. And when it's used creatively, you get a huge bang for the buck.

ESTHER DUFLO: I would say it's both overrated and underrated. It's overrated in the sense that people dramatically exaggerate how much is there of it and the role it plays in developing countries. Foreign aid is miniscule. And as a result, it's underrated because people say, oh, there's so much foreign aid, and it hasn't made a difference. Well, of course. It's minuscule, so it's not going to make a difference. I agree with Abhijit. On top of that, it's underrated for its potential.

GARCIA: Overrated or underrated - being married to an economist.

BANERJEE: Underrated.

(LAUGHTER)

BANERJEE: Excellent.

DUFLO: Underrated, of course.

SMITH: (Laughter). What about overrated/underrated - dating an economist?

BANERJEE: I mean, if you're married to one (laughter) overrated.

SMITH: I mean, did you guys, like, split checks? Or, like, how did that work? Did you run into any economic quandaries early on?

BANERJEE: We were pretty flexible. We're not really money people, so we didn't - never spent a minute thinking about it.

GARCIA: Overrated or underrated - taking a vacation.

BANERJEE: Oh, underrated. In America, people haven't understood that if they took a bit more vacation, they would be more productive. So just from a purely economic point of view, people do need to take vacation.

SMITH: We should play this recording for our bosses and be like, this woman won a Nobel Prize (laughter).

GARCIA: The two other countries where the two of you spend a lot of time are France and India. So let's take those in turn. Overrated or underrated - France.

DUFLO: Underrated. It's, like, amazing.

BANERJEE: The quality of life is so great. And people complain a lot, but they forget that the quality of what you can get, you know, food and just the environment in tiny, tiny villages in France is much higher than most places in the world.

SMITH: Overrated/underrated - French bread.

DUFLO: Oh, just right.

SMITH: (Laughter).

DUFLO: Yeah. I think most people think French bread is quite good, and it really is.

BANERJEE: Yeah. And Au Bon Pain seems to be founded on the principle that it's quite good.

(LAUGHTER)

GARCIA: How about India and Indian bread - overrated or underrated?

BANERJEE: I think Indian bread is underrated. It's actually - not the kind of puffy bread, which is not wonderful, but the flatbreads in India. There is just millions of them - not millions, but thousands of different kinds. And they're incredibly good. The flatbreads in India are something else.

DUFLO: I can predict that it's going to become a health trend in New York within a couple of years.

(LAUGHTER)

GARCIA: So you've described economists as social scientists who should be more like plumbers.

(LAUGHTER)

GARCIA: So overrated or underrated - plumbers.

DUFLO: Underrated. So the way we think about economist is - and the way we think economists should think more about themselves is to not just think deep thoughts about the fundamental reasons for phenomena and social phenomena but also about thinking - solving practical problems in the field. And as soon as you do that, you can't have the security of, you know, your fixed set of assumption that you manipulate. You have to - you will encounter things that you didn't expect. Things will not be the way you want. Very much like a plumber when they try to fit the new sink, the new tap, it might or might not work. And they will tinker, and they will take things out. And if it doesn't work the way they want it, they are going to do it again and fix it. And it's this particular tinkering, plumbing-like approach we think is underrated in economics and could - because those details are so incredibly important in the success or the failure of a particular output.

GARCIA: Overrated or underrated - microcredit. For our listeners, microcredit is establishing a way to give very small loans to poor people in developing countries so they can do whatever they want - start a business, that kind of thing. Microcredit - overrated or underrated?

DUFLO: I think it has been overrated for a very long time because it was perceived to be the one solution to all the problems in the world and the one silver bullet that would help people exiting out of poverty. And, in fact, several experiments have shown that that's not the case.

I think it's becoming appropriately rated in the sense that, being confronted with evidence, a lot of microcredit organizations have come to realize that look; we understand we are not all things to all people, but there are some benefits to financial services for the poor. Maybe they can be designed in a more targeted way so when poor people use microcredit to save, it's not the most efficient way. And maybe we can get savings products. Or if they use it to transfer money to each other, we can use - we can have financial services of that kind. And for the entrepreneurs for whom microcredit can actually really help their business, then we would need - maybe it is possible to design products that are more targeted to entrepreneurs, that are a bit more flexible for their needs, et cetera. So I think we are in a phase where it's kind of a question mark of how well rated it is. And there is a lot of creativity in work in making it better such that it's not overrated soon enough.

SMITH: OK. This is the big one. Overrated/underrated - winning a Nobel Prize.

BANERJEE: Oh, I think it's rated just fine. I think if people think it's a big deal, then it's a big deal.

SMITH: It's a big deal, I think.

BANERJEE: Yeah.

SMITH: (Laughter). I mean, I haven't won a Nobel Prize, but it seems like a very big deal.

DUFLO: Appropriate.

GARCIA: Appropriate.

(SOUNDBITE OF MUSIC)

SMITH: Thank you for playing Overrated versus Underrated with us.

BANERJEE: Thank you.

DUFLO: Thank you.

BANERJEE: That was fun.

(SOUNDBITE OF MUSIC)

GARCIA: This episode of THE INDICATOR was produced by Jared Marcel (ph), Jamila Huxtable and Nick Fountain. It was fact-checked by Brittany Cronin. Our editor is Paddy Hirsch, and THE INDICATOR is a production of NPR.

TYLER COWEN: I'm Tyler Cowen, and I approve of this use of Underrated versus Overrated.

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