During the dust and heat of political battle ahead of UP elections, PM Modi took a jibe at economists criticising demonetization. He had said that ‘hard work can triumph over hard work’. Most of the top line economists across the country and world had criticised government’s note ban decision which included the likes of Paul Krugman and Amartya Sen, both Nobel laureates.
Later the RBI data that 99% of legal notes came back to the central bank further raised doubts if demonetization carried out by the NDA government on November 8, 2016 raised further questions about the move. But in a development that will come as a major shot in the arm for government at a time it is facing flak from all and sundry about the economic condition of the country, it has emerged that 2017 Economics Nobel Prize winner Richard Thaler had supported demonetization.
BJP IT Cell head Amit Malviya put up a screenshot of a tweet of Thaler where he supported note-ban.
Here is the original tweet:
This is a policy I have long supported. First step toward cashless and good start on reducing corruption. https://t.co/KFBLIJSrLr
— Richard H Thaler (@R_Thaler) November 8, 2016
However he was against the idea of government introducing Rs 2000 notes.
The point highlighted by Thaler is also something the government has highlighted repeatedly. That demonetization is likely to give a big fillip to Digital india and will hopefully lead to less tax evasion by bringing more in the system. Incidentally, Thaler’s colleague in University of Chicago, Booth school of Business and former RBI governor Raghuram Rajan had strongly come out against demonetization. During his book tour, he indicated about advising the government not to resort to such measures. He said, “Although there may be long-term benefits, I felt the likely short-term economic costs would outweigh them, and felt there were potentially better alternatives to achieve the main goals,” he writes in his book. “I made these views known in no uncertain terms.”
According to reports, Rajan was in the running for the coveted prize but lost out at the end to Thaler who has made a mark for the idea of ‘nudging’ people to take the right decisions.
Influential in the field of behavioural economics, his research showed how traits such as lack of self-control and fear of losing what you already have prompt decisions that may not have the best outcome in the longer term.
“I think the most important impact (of my research) is the recognition that economic agents are human and economic models have to incorporate that,” Thaler, a professor at the University of Chicago Booth School of Business, said in call broadcast at the Nobel news conference.
Well the government just got one Noble laureate in their corner to survive the barrage of criticism from economists!
With inputs from agencies
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