Nobel laureate Thaler clarifies: note ban okay, but Rs2,000 notes bad

20 November 2017

With the first anniversary of demonetisation just past, Nobel Prize-winning economist Richard Thaler has said while the withdrawal of high value currencies was ''per se is a good move'', its execution by the Narendra Modi government was "deeply flawed".

Thaler who won the Nobel Prize in economics this year for his work in the field of behavioural economics (See: Economics Nobel for American economist Richard H Thaler) was particularly critical of the introduction of Rs2,000 notes. His comment on the controversial note ban came as a reply to an email sent by his student Swaraj Kumar.

''The concept was good as a move to a cashless society to impede corruption but the rollout was deeply flawed and the introduction of the Rs2000 note makes the motivation for the entire exercise puzzling,'' Thaler told Kumar.

Kumar had asked the economist, "After the announcement of Nobel committee, your tweet on India's demonetisation got a lot of attention and many people are quoting it to support the whole exercise. I know that you have suggested in the past to demonetise higher denomination to reduce corruption and to move towards a cashless society. But I was wondering what's your thoughts on the execution, like demonetising 86 per cent of the notes in circulation and only 50 days for the note exchange?''

The email was sent to clarify Thaler's stance on the issue as previously, the Bharatiya Janata Party had claimed on Twitter that he had supported the demonetisation of Rs500 and Rs1,000 notes.

"This is a policy I have long supported. First step toward cashless and good start on reducing corruption'', read Thaler's tweet from 2016 that was shared by members of the ruling party after he won the Nobel Prize.

However, when he was notified by Twitter users that the government was introducing Rs2,000 currency notes, Thaler wrote, ''really? Damn.'' This part of his tweet was however not highlighted by BJP supporters.

Along with Thaler, a number of economists who hailed the demonetisation found the introduction of Rs2,000 notes puzzling and contradictory to the objective of note ban.

The twitter exchange between Thaler and Kumar was brought out by Rupa Subramanya, who also tagged Thaler, who retweeted her tweet: ''Now, with the latest development, it is clear that Thaler never supported Modi's drive and even considered it deeply flawed''.

Economists have said the introduction of Rs 2,000 notes is contradictory to the very objectives of demonetising high-value notes.

After the demonetisation announcement, the government's currency presses worked overtime to print Rs2,000 notes to meet the cash shortfall, clearly indicating that the move was not fully thought out.

However, the Reserve Bank of India has now reportedly stopped printing Rs2,000 notes, with the focus shifting to lower denominations.

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