[How About This Book] Can We Become Equal?

The Moment of Choice: Inferring Opponents with 'Game Theory'
Effective Responses When Facing Life's Challenges
The Most Serious Issue in Modern Society: 'Income Inequality'
The Rich Should Pay More, the Poor Should Receive Support

As with any social phenomenon, the conflict between progressives and conservatives is intense in the economic field as well. Both sides engage in a desperate struggle, insisting that their own camp's logic is correct for growth and prosperity, refusing to back down even a step. However, reading "How Economists Find Answers to Life" makes this extreme struggle seem meaningless. The author, Kausik Basu, a professor at Cornell University, argues, "A controlling state and an extreme laissez-faire state may seem completely opposite, but the final outcome is very similar. Both eventually lead to crony capitalism."

This argument appears persuasive. Historically, Russia and China, which controlled their markets, have always exhibited serious problems of collusion between politics and business. The United States, which values market autonomy, is not free from controversies over crony capitalism either. Lobbyists representing the interests of specific industries exert enormous influence on the legislative process in Congress. It is well known that despite frequent gun accidents, gun control bills fail to pass due to the powerful lobbying of the National Rifle Association (NRA).

[How About This Book] Can We Become Equal?

Ultimately, the fundamental cause of problems in either progressive or conservative economic systems may be human nature that pursues extreme self-interest. Professor Basu emphasizes that recognizing humans as ‘Homo Economicus,’ who are motivated to maximize their own performance and profits, is key. Homo Economicus refers to rational market participants who pursue economic benefits.

Professor Basu is a world-renowned economist and former chief economist at the World Bank. He majored in economics at St. Stephen's College in Delhi, India, and earned his master's and doctoral degrees in economics from the London School of Economics. While attending lectures at the London School of Economics, he developed a strong interest in economics and philosophy, and in March 2019, at an invited philosophy department seminar at Cornell University, he found the inspiration to write this book. This is why the book’s title is styled like a philosophy book. In fact, the content covered in the early part of the book is closer to attitudes toward life and philosophical reflections on how to cope with problems encountered in daily life rather than economic issues. Professor Basu explains that by developing reasoning skills based on game theory, one can effectively respond to various life problems. The core of game theory is to anticipate how the other party will respond when you try to make a choice advantageous to yourself and to prepare alternatives accordingly.

Professor Basu explains that the U.S. government wisely resolved the Cuban Missile Crisis in 1962 based on game theory. When the Soviet Union deployed nuclear warhead missiles in Cuba, U.S. President John F. Kennedy led the Soviets to withdraw the missiles through a so-called second-strike strategy, demonstrating retaliatory capability. One year before the Cuban Missile Crisis, President Kennedy was deeply impressed by a paper on nuclear strategy, whose author was Thomas Schelling, an American economist who won the Nobel Prize in Economics in 2005 for his work on game theory. The book’s latter part deals with practical economic problems and solutions.

The biggest problem in modern economics that Professor Basu considers most serious is the enormous income inequality. He says that today’s income inequality is so extreme that someday our descendants will be shocked by the severe inequality of humanity today. He predicts that the shock experienced by future generations will be similar to the shock we feel today from slavery, class systems, and untouchability. He also diagnoses that there is ample evidence that poverty is a trap from which one cannot escape, passed down from one generation to the next.

Professor Basu argues for a tax system that can redistribute wealth without changing the current asset rankings. To this end, he proposes an ‘accordion’ tax system that sets a benchmark at the average income level, where those earning more than the benchmark pay taxes, and those earning less receive subsidies. He explains that the tax amount can be imposed by applying a tax rate greater than 0 and less than 100 to the difference between income and the benchmark income. Professor Basu also argues that if the influence of platform companies such as Amazon, Uber, and Airbnb grows absolutely, radical policies to convert them into non-profit organizations should be considered. He mentions the historical case of the Bank of England (BOE), established in 1694, which started as a for-profit company with 1,200 shareholders but later became a non-profit institution. He also insists that social issues of discrimination based on poverty should be treated as importantly as gender or racial discrimination.

As can be seen from his prediction that future generations will be shocked, Professor Basu is optimistic that humanity will eventually resolve the extreme inequality problem because he believes in human morality. He says that while fish in a village pond risk being overfished due to someone’s selfishness, food in a household refrigerator is never at risk of disappearing. This is due to the norms and morality within the family community that consider other family members. In other words, if we cultivate the morality inherent in humans, we can solve the problem. Professor Basu says, "If the motivation of individuals pursuing development is the fuel that drives the economy, then our morality is the key component that keeps the complex machine called the economy from falling apart."