Policymaker's Journal: An Intimate Exploration of Economics and Decision-Making.

In the realm of economics and policymaking, there are a select few individuals whose contributions and insights have shaped the course of nations and economies. One such luminary is Kaushik Basu, a distinguished economist, policymaker, and thought leader whose expertise and influence have left an indelible mark on the field.

Hailing from Kolkata, India, Kaushik Basu's intellectual journey began with a thirst for knowledge and an insatiable curiosity about the intricacies of economic systems. Fuelled by a profound desire to understand the dynamics of development and societal progress, Basu embarked on a path that would see him become one of the most respected figures in his field.

His academic pursuits took him to some of the world's most prestigious institutions, where he honed his intellect and expanded his horizons. Armed with a master's degree in economics from the renowned Delhi School of Economics, he then ventured to the London School of Economics (LSE) to pursue his Ph.D., immersing himself in the intricacies of economic theory and research methodologies. This academic foundation served as a springboard for his illustrious career.

His contributions extend beyond the academic realm. With a desire to make a tangible impact on the lives of people worldwide, he ventured into the realm of policymaking. As the Chief Economic Advisor to the Government of India from 2009 to 2012, Basu played a pivotal role in shaping the country's economic policies during a critical period. His exceptional ability to bridge the gap between theory and practice, coupled with his deep understanding of the political landscape, allowed him to navigate complex challenges and advocate for policies that fostered inclusive growth and reduced inequality.

Throughout his journey, he has been a prolific author, gifting the world with thought-provoking books that delve into the complexities of economics and policymaking. His works, such as "Beyond the Invisible Hand: Groundwork for a New Economics" and "The Republic of Beliefs: A New Approach to Law and Economics," challenge conventional wisdom and offer fresh perspectives on how economic systems and societal norms intertwine.

As a distinguished economist and policymaker, his insights have transcended academic circles, capturing the attention of policymakers, scholars, and aspiring economists alike. His unique ability to blend rigorous economic analysis with a deep understanding of social dynamics has earned him global acclaim.

Today, he continues to inspire and educate through his extensive body of work and his dedication to creating a more equitable world. With a steadfast commitment to evidence-based policymaking, he advocates for the integration of empirical research and economic modeling into decision-making processes. Basu's vision for the future of policymaking embraces innovation, interdisciplinary collaboration, and global cooperation, recognizing the interconnectedness of our complex world.

In our exclusive interview with Kaushik Basu, we delve into the pages of his captivating book, "Policymaker's Journal," gaining unique insights into his experiences, challenges, and invaluable lessons learned. Join us as we explore the mind of this visionary economist and policymaker, unraveling the complexities of his thought process and the wisdom he imparts for a brighter future.

Excerpts from the Interview :-

Q1) Hello everyone, I had the privilege of speaking with a renowned policymaker today, who had released a captivating book titled "Policymaker's Journal." Could you please shed some light on the origins of this fascinating project?

Kaushik Sir: Thank you for having me. I must clarify that although it is referred to as a diary, it is actually a Policymaker's Journal, as decided by my publisher. Initially, I wrote it purely for personal reasons, as a form of therapy. The intention of publishing it did not exist during the writing process. Its purpose primarily revolves around preserving my memories.

Q2) I appreciate your explanation. It seems that the decision to publish this journal came about after your experiences in India and your time at the World Bank in Washington. Could you provide some insight into the events that led to this decision, particularly the involvement of your publisher, Simon and Schuster?

Kaushik Sir : After my endeavors in India and subsequent stint at the World Bank, my publisher, Simon and Schuster, approached me regarding my frequent mentions of maintaining a diary and journal. This sparked the realization that there may be intriguing material worth exploring. I must emphasize that while this book does contain scattered snippets of economics, it does not delve deeply into the subject matter as my previous works have done.

Q3) The book offers readers a unique glimpse into your experiences. Can you share your experience transitioning from Cornell to a government role with hierarchies? How did you navigate the work process and deal with the hierarchical structure?

Kaushik Sir : To provide some context, when I transitioned from my role as a department chair at Cornell University to joining the government in India in December 2009, it was a significant and unsettling change. Not only did I face immense work pressure, which I was accustomed to managing, but I also had to adapt to a hierarchical culture and the dynamics of working closely with political processes. These challenges initially left me feeling unsettled. However, recognizing the potential embarrassment it could cause to the Indian Prime Minister and others if I were to resign abruptly, I decided to keep a diary from the very beginning as a means of documenting my experiences.

Initially, the hierarchy in government troubled me, but I had to accept its necessity. Running a government requires a certain level of hierarchy. In the World Bank, hierarchy existed but not as strongly as in the Indian government. I realized the importance of hierarchy in a large administration, even though I personally didn't care for that style. There were comical aspects, like the protocol of entering someone's office without knocking, which I found challenging. However, I came to see some advantages in the direct approach of Indian culture, where you don't waste time knocking but enter the room immediately.

I approached my time in the government as a valuable anthropological expedition, similar to how Malinowski immersed himself in the culture of the Trobriand Islands for an extended period. I committed myself to observing and understanding the unique culture within the Indian government bureaucracy, and this led me to take my diary writing more seriously. Thus, the therapeutic aspect of maintaining the journal was born.

Q4) That's fascinating. It seems like your journey into the government began unexpectedly. Could you share the details of how this opportunity presented itself and the pivotal moment when you were approached to be the chief economic advisor to the Indian government?

Kaushik Sir :  The circumstances surrounding my entry into the government were quite surprising. On August 9, 2009, while I was still serving as the department chair at Cornell University, I received an unexpected phone call from the office of the Indian Prime Minister, Dr. Manmohan Singh. His assistant wasted no time and quickly informed me that the Prime Minister was interested in considering me for the role of chief economic advisor. This revelation caught me off guard, as there had been no prior indications or discussions about this possibility.

Given the magnitude of the decision, I requested an opportunity to speak directly with the Prime Minister to better understand his vision and intentions. However, with limited time as my stay in India was concluding the following day, the assistant proposed a plan. I was asked to pack my bags, visit the Prime Minister's residence that evening, engage in a 45-minute one-on-one conversation with him, and then proceed directly to the airport. Intrigued by the sincerity of the Prime Minister's purpose and his desire to bring fresh ideas to India, I agreed to the arrangement.

During our meeting, Dr. Manmohan Singh expressed his commitment to enhancing the advisory capacity of India and his belief in my ability to contribute effectively. While he emphasized that my approval did not guarantee the position due to checks and balances in the system, I was deeply moved by his earnestness. By the end of our discussion, I had virtually made up my mind to accept the opportunity. I promptly conveyed my decision, and after the government went through its process, I officially began my new role on December 8, 2009. This marked a significant and dramatic turning point in my career, which spanned seven years with a brief interlude in Ithaca before assuming the position of Chief Economist at the World Bank.

Q5) In the book , you also provided intriguing insights into your experiences within the Indian government. Could you share a specific example that showcases the impact of your expertise and ideas on policymaking?

Kaushik Sir :  One significant incident that stands out occurred shortly after my arrival in the Indian government. The prime minister called a meeting to address the pressing issue of inflation, which was rampant in the country. This inflation level had not been witnessed since 1973, with food prices particularly skyrocketing at an alarming annual rate of nearly 20%. During this meeting, attended by a small group of top bureaucrats, myself, and the prime minister, a concrete realization struck me regarding India's food release strategy.

India, similar to the United States releasing gasoline when oil prices rise, maintains a stock of food grain that can be released into the market when food prices surge. However, the process and channels through which this release occurs were flawed. Drawing inspiration from Augustine Cournot's work in 1838, I had a clear idea of how the food release technology should be improved. During the meeting, I tactfully presented this idea in plain and simple English, refraining from mentioning Cournot's name to avoid being dismissed as another academic with impractical suggestions.

Fortunately, the prime minister, who possesses a remarkable understanding of economics, grasped the concept immediately. With his phenomenal intellect, he endorsed the proposed change, instructing the Food Corporation of India to implement the revised food release strategy. I share this example not to highlight instances where my advice was accepted, as there were numerous occasions where it wasn't, which is to be expected in a complex organization like the government. However, this particular idea was indeed embraced and implemented.

Q6) In your extensive experiences within the Indian government, could you share another significant instance that had a notable impact on policymaking?

Kaushik Sir : One pivotal example I would like to highlight is the 3G spectrum auction. Shortly after my entry into the government, the Indian government planned to sell the 3G spectrum, a technology I was unfamiliar with. The original approach involved bureaucrats calling in experts to assess the value of the spectrum and then sell it at that price. Drawing on my background in economics, I proposed a different approach to the prime minister: conducting a spectrum auction rather than relying on bureaucrats to set the price.

I emphasized that auctions, when properly designed, can ensure optimal pricing based on market demand. I repeatedly met with the prime minister, advocating for a spectrum auction. While I initially suggested involving academic economists skilled in auction design, the prime minister rightly recognized the need for a specialized company to handle the organizational aspects of such a massive auction. Ultimately, a foreign company, possibly a British one, was selected to manage the auction and brought in specialists to design it.

The decision to conduct a spectrum auction proved immensely successful. Despite facing some political criticism, the auction surpassed expectations. While we initially estimated it would generate $7 billion for the government, the final outcome yielded an impressive $15 billion. This success can be attributed to the auction's ability to extract the market price to its fullest extent.

Q7 ) In your role as an economist within the Indian government, could you share an interesting incident that reflects the cultural differences you experienced?

Kaushik Sir : Let me recall a particular incident from my early days in the government, shortly after joining in January 2010. At that time, I was tasked with providing a brief note on the pros and cons of opening up futures markets in grain. Despite lacking expertise in this area, I had limited time to prepare the report, as the finance minister requested it to be submitted by the following day.

Recognizing the urgency, I quickly gathered some common-sense knowledge and conducted a brief study to draft a concise note. This incident highlights the contrasting culture between academia, where thorough research and analysis are valued, and the government, which often requires swift decision-making due to various factors. Ultimately, I presented the note to the finance minister within the tight deadline.

This particular incident reminds me of the cultural difference and the need to adapt to quick decision-making processes within the government, even on important topics. It also underscores the role of India's vibrant media, which constantly monitors and reports on government activities, contributing to transparency and India's global standing. Additionally, I shared a lighthearted anecdote about a humorous battle for access to a well-maintained bathroom, which showcases the nuances of bureaucratic dynamics within the Ministry of Finance.

Q8) Could you elaborate on a serious matter you encountered during your time as Chief Economic Advisor to the Indian government, specifically related to corruption?

Kaushik Sir : One significant issue I addressed was the prevalence of bribery in India and its impact on society. I proposed a thought-provoking solution to amend the existing Prevention of Corruption Act, suggesting that bribe-giving should not be considered illegal while making bribe-taking a punishable offense. This idea garnered both support and criticism, leading to a controversial public discussion.

As the debate intensified, I sought advice from the Indian Prime Minister, who disagreed with my proposal. Despite our disagreement, he encouraged me to openly express and defend my ideas, recognizing the importance of free expression. Working with Dr. Manmohan Singh, the Prime Minister, was a remarkable experience due to his unwavering commitment to ethics and his dedication to his vision.

Overall, this incident shed light on the challenging dynamics of corruption in India and the need for innovative approaches to address this deep-rooted problem.

Q9) Could you share your experience of joining the World Bank as the Chief Economist? How did the opportunity come about, and what were some significant moments during your tenure?

Kaushik Sir : As my time in the Indian government was coming to an end, I received a call from Jim Kim's office, the newly appointed President of the World Bank. They expressed a keen interest in meeting with me and discussing various matters. Initially hesitant to travel, I eventually agreed to a meeting in London, where the offer of Chief Economist was extended. Three months later, after the necessary processes, I joined the World Bank.

Being Chief Economist involved traveling extensively, meeting with influential figures such as finance ministers, prime ministers, and presidents. Some meetings left a lasting emotional impact, like the encounter with President Daniel Ortega in Nicaragua. In hindsight, the evolution of his regime into something brutal and oppressive deeply disturbs me.

Overall, my tenure at the World Bank was a mix of remarkable experiences and challenges, with moments of significance and personal reflection.

Q10) Could you reflect on the transformation of our world and the intersection of policymaking and intellectual exploration? What are your thoughts on the urgency of today's concerns and the need for intellectual commitment?

Kaushik Sir : Looking back at my time in Kolkata and now in Ithaca, the conundrum of how yogurt is made symbolizes the nature of policymaking. It's like an infinite regress, satisfying only if you're not interested in the next question. While trying to change the world is gratifying, understanding it brings sheer joy. Observing our rapidly changing world, with the pandemic and polarized politics, raises existential questions that demand urgent answers.

This moment calls for exciting research, philosophical investigations, and a deeper understanding of morality and ethics. We must seek novel ways of thinking about the economy, embracing rapid growth that encompasses valuable aspects such as longer life, better health, and the pursuit of arts and knowledge. With the rise of robotics and AI, human focus will shift toward research and creativity. To ensure survival, radical policies are necessary, promoting income and wealth redistribution for a more equitable world.

Our concerns remain the same at a fundamental level, but the urgency is heightened. We need both passion and intellectual commitment to combat exploitation, corruption, hate, and discrimination. The intertwined worlds of activism and policymaking, alongside research and analysis, play crucial roles in addressing immediate challenges and long-term issues of poverty, inequality, and discrimination

Q11) What do you consider the major challenges faced by subcontinent economies, and what solutions do you propose?

Kaushik Sir : One significant challenge in the subcontinent is the lack of trade and interaction among the South Asian countries. There is immense potential for collaboration, such as sharing resources like electricity or utilizing strategic locations for trade. However, political barriers often hinder this progress. Promoting intellectual engagement and fostering dialogue among the countries can be a step towards addressing these challenges. Specific policy initiatives need to be explored in areas like Bangladesh and India to further economic development in the region.

Q12) How do the perspectives on policy problems differ between academicians, practitioners, and individuals in India compared to elsewhere?

Kaushik Sir : Academics sometimes struggle to bridge the gap between theoretical ideas and practical policy implementation. In India and many developing countries, there is a tendency for established ideas to hinder progress. John Maynard Keynes' observation that entrenched ideas can impede change holds true in the policy world. Encouraging collaboration and bringing fresh perspectives from academia into policymaking can help overcome these challenges.

Q13) What is your primary goal now and what do you seek to achieve in the future?

Kaushik Sir : I am deeply interested in exploring the interface between various disciplines such as economics, law, politics, philosophy, and moral philosophy. I find the application of game theory to address collective problems and polarized politics fascinating. My goal is to understand and find solutions to these challenges through intellectual inquiry and interdisciplinary analysis. While I don't expect immediate breakthroughs, engaging in this pursuit and writing about it brings me great satisfaction.

Thank you all for reading and a big thanks to Kaushik Basu Sir for collaborating!

It’s a pleasure!