Raaj Kumar Sah
Professor of Public Policy and Economics
University of Chicago
Harris School of Public Policy
Chicago, IL 60637, USA
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Raaj Kumar Sah is Professor of Public Policy and Economics, at the University of Chicago, Harris School of Public Policy.
He has previously held faculty positions, in business, economics, and public policy at the Massachusetts Institute of Technology, Princeton University, the University of Pennsylvania, and Yale University. Among the honorary positions that he has held are at the Indian Institute of Management Ahmedabad, where he presently is Distinguished Fellow, and at the Ministry of Finance Japan. He has received several honors for his teaching, including three at the University of Chicago.
Professor Sah has received the Order of the Rising Sun, Gold Rays with Neck Ribbon. The Government of Japan has conferred this honor on behalf of His Majesty the Emperor of Japan. Professor Sah has contributed to the analysis of Japan’s economic and financial policies. Among the policies that he has engaged with are on tax reforms, public revenues, deficits, and redistribution. These have been some of the central issues for contemporary Japan.
Professor Sah holds a PhD in economics from the University of Pennsylvania. He is an MBA from the Indian Institute of Management Ahmedabad. His earlier education is from Birla Institute of Technology and Science Pilani, and from St. Xavier’s College Ranchi. Born in India, he is a US citizen.
Three of his contributions to economics are briefly summarized below:
1. A hard-wired human characteristic is their fallibility. This fallibility resides deeper than what can be removed by more logic, bigger data, vastly greater computational power, etc. Professor Sah has shown how, within various kinds of organizations, individuals’ fallibilities combine together to produce different overall consequences of fallibility. This work has been applied in many contexts. Among them are finance, several branches of management sciences, comparisons of alternative societal systems (e.g., polyarchies versus hierarchies), the architectures of organizations and, as described below, the issue of decentralization versus centralization.
The decentralization versus centralization of authority and leadership is an ever-present and foundational issue in social sciences. It arises at all scales and complexities of organizations; e.g., from families to large corporations. This issue is also central in politics; its variations are at least as old as Plato and, at the same time, as present-day as the centrifugalities and centripetalities surrounding the European Union. Professor Sah was the first to make specific and testable predictions on this topic. One such prediction (the Sah conjecture) is that: A greater decentralization of authority reduces the volatility of outcomes. Other scholars have confirmed this prediction through their own empirical investigations.
2. Comparable societies and geographical regions can display markedly differing levels of crime and corruption. Analogously, comparable business organizations often have quite differing internal work ethe and ecologies. Such differences are typically attributed to differences in cultures. This is often another way of saying that one does not understand such phenomena. Professor Sah has shown how perceptions and realities influence each other dynamically across time. Peoples’ current perceptions are influenced by the present and past realities. These perceptions affect the individuals’ current choices and actions. These choices, in turn, shape future realities, which then influence future perceptions. This line of work has explained many difficult-to-understand phenomena and patterns.
3. One of the contributions of Professor Sah to public finance is as follows: An idea that has been popular for centuries is that inequalities of welfare across people can be reduced by taxing the necessities of life, and by subsidizing the luxuries. Variations of this idea continue to have strong appeal, especially in poorer countries, where taxes on goods and services are the primary foundations of governments’ finances. Professor Sah was the first to ask the question: How much redistribution is actually possible through such policies? This is because without ascertaining what is feasible, any other analysis will not be meaningful.
The following is a quotation (from Tresch) on one of his many previously-unavailable results on this topic: “Raaj Sah developed a simple and ingenious method for determining the limits of redistribution under commodity taxation that relies only on the government’s budget constraint. His method led him to conclude that commodity taxes and subsidies are unlikely to have much equalizing effect on the distribution of income.”