Nobel Winner Richard Thaler Praised Demonetisation. But There's A Postscript.

New Delhi:  After the Nobel prize for economics was announced today, US academic Richard Thaler was the toast of Twitter. Congratulations poured in from around the world. Students and friends spoke of the lasting impact his theories left on them. In India, many pointed out that back in November, the celebrated economist had praised the government's move to pull out high denomination notes of Rs 1000 and Rs 500 to weed out black money and encourage cashless transactions. Others dug out a second tweet by the economist - one that was not so enthusiastic about the prospect of a Rs 2000 note.

Professor Thaler's specialty is behavioural economics. He had brought into prominence the idea that supposedly rational markets are affected by human behavior. The "Nudge" economics that he helped popularise, says individuals can be subtly guided toward beneficial behaviours, without any heavy-handed compulsion.

On November 8, hours after Prime Minister Narendra Modi's surprise announcement of notes ban, Professor Thaler tweeted:
 

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

But as responses poured in, pointing out that the government also plans to introduce a higher denomination currency of Rs 2000, his response was:
 

really? Damn.

— Richard H Thaler (@R_Thaler) November 8, 2016

The twitter handle @R_Thaler isn't a verified one, but it was one tagged by the official feed of the Nobel Prize.

Since the government's announcement in November, demonetization had been the subject of much debate. The matter was reopened last week after BJP veterans Yashwant Sinha and Arun Shourie squarely blamed the Prime Minister and the Finance Minister for the economic slowdown.

In an unsparing critique, Mr Shourie, former Union minister in Atal Bihari Vajpayee's government, told NDTV that the notes ban was the "largest money-laundering scheme ever, conceived and implemented entirely by the government".

Yashwant Sinha, who was Mr Shourie's colleague in the Vajpayee cabinet, said the economy is a mess and that it will not recover, despite the government's claims, by the next general election in 2019.

Days later, PM Modi refuted criticism of his government's handling of the economy, saying a "handful of people" were trying to spread pessimism on the basis of figures from the last economic quarter, when growth slowed to 5.7 per cent, the lowest in three years.  During the previous UPA regime, the GDP had registered far lower figures, he said, pointing out that "there were quarters when growth was 0.2 percent, 1.5 per cent".