Featured: THE ECONOMICS OF ENOUGH By Diane Coyle [Vol. 4, #15.5]

July 23, 2011 — 2 Comments


“Economics as a Truly Social Science”

A review of

The Economics of Enough:
How to Run the Economy as If the Future Matters
By Diane Coyle

Review by Matthew Kaul.

ECONOMICS OF ENOUGH - CoyleThe Economics of Enough:
How to Run the Economy as If the Future Matters
Diane Coyle
Hardback: Princeton UP, 2011.
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At few points in American history has the intersection of politics and economics featured so centrally in the news, in our discussions, in the ways we live our lives day to day. Internationally, we watch as the Greek debt crisis spirals down and down, drawing Portugal, Spain, Italy along with it, and threatening the very existence of the European Union. Domestically, we listen to pundits repeat platitudes and slogans ad naseum as the divided federal government carries itself ever closer to default while the unemployment rate, when it’s not stagnating, continues to rise. Locally, we’ve been reminded of the possibility of protest and civil disobedience as political acts (a possibility much more easily forgotten in American than in most of the rest of the world), as protests engulfed a capital (Indianapolis) that some state legislators had fled. In all these events, in the continual lingering of a crisis that doesn’t seem to quit, we see just how deeply the economy is politicized, and likewise we come to recognize the economic costs of poor political decision-making.

If you’re like me, you frequently throw up your hands in despair over the mess in which we find ourselves—a global mess provoked in the first place by the egregious greed and recklessness of a few. Add to that concerns over global warming and our abuse of the environment, a population in the West that’s aging and hasn’t properly planned for the financial costs of that aging (even as the developing world’s population explodes at an equally unsustainable rate), wars that seem never to end, etc.  The sheer scope of and complex connections between these problems begs for some assuring voice of reason to simply explain to us what is going on. How can we hope to understand something as complex as contemporary political economy? If we can, how should we do so?

After a strange, meandering, and largely superfluous introduction, Diane Coyle’s The Economics of Enough reveals its author to be a clear and helpful expositor of the chaotic mess of facts, theories, hopes and fears tumbling around our minds and through our world. Coyle structures The Economics of Enough in three parts. In the first, she simply states the problems facing us today: natural, social and demographic; problems related to happiness and justice, trust and economic well-being. In the second, she outlines the chief obstacles preventing us from resolving, or at least making some sort of progress toward resolving, these problems: inadequate tools of measurement, incoherent, poorly defined, or simply non-existent social values, and a lack of institutions that can act effectively on our measures and values. The third part, titled “The Manifesto of Enough,” offers some ways to set aside the obstacles in order to start responding to the challenges laid out in part one.

Some of the book’s most illuminating moments come in the first part, when Coyle simply explains the problems we’re facing. Chapter three, “Posterity,” explains the grim realities surrounding the world’s changing demographics, and the incredible social costs of not addressing these impending demographic shifts. For instance, the population of the United States and Europe is aging rapidly, and people are not having enough children to replace themselves, which puts (as we’ve been hearing) great strain upon our social welfare programs for the retired and elderly—Social Security, pensions, health insurance, etc. For the United States, fortunately, the program caused by these costs exploding while fewer people are available to pay for them is largely mitigated by immigration, though in this respect Europe (where policies tend to be less friendly toward immigrants) is not so fortunate. The basic point: expect to work longer—longer hours each day and week, for more years. Her explanation of national debt levels in this chapter is especially illuminating and timely, worth reading while you bite your fingernails waiting for Congress and the President to raise the debt ceiling.

Part two is likewise helpful in clarify the gap between changes that have taken place in our contemporary economy and the tools we use to measure and assess value in the economy. As factory and manufacturing work continue to be outsourced and the economy turns increasingly “technological,” “digital,” “service-based,” or “creative” (pick your favorite buzzword), measures such as GDP, which are focused on assessing real, tangible things simply fail to be as helpful as they once were in depicting the state of the economy. Coyle’s point is that not only do we need to come up with better ways to assess what we value in our economy, we must also better articulate precisely what it is that we value. In short, we need to come to at least some sort of position on that classic liberal tension between freedom and equality: should we value absolute freedom at all costs, and are we willing to accept the risks entailed by opening up every public service to the competition of the private market? Or can we instead come to a more reasonable position, having experienced firsthand the market failures that led to the financial meltdown, and acknowledge that some level of interplay between the public and private sectors is necessary to ensure at least a modicum of basic equality for all?

Coyle’s answer, laid out in the “Institutions” chapter of part two and the book’s final “manifesto” chapter, draws heavily from the work of Indiana University professor and Nobel laureate in economics, Elinor Ostrom. Ostrom’s work focuses on the intermediary institutions that occupy some intermediary, civic space between the market and the government. Coyle’s point, via Ostrom, is that “markets work well when governments work well”; civic institutions, which provide the rules governing human interactions in those other spheres, are therefore central to the proper functioning of both government and business. For Coyle, the chief area in which institutions are needed to properly channel both business and government is long-term planning and decision-making.

In the final chapter, the “Manifesto of Enough,” then, Coyle attempts to articulate precisely how changes to our measurements, values, and institutions might help solve the problems we face now—the problems she outlined in part one. Coyle’s proposed changes in measurement include redefining income to better account for the ways we use (or squander) our natural resources; her chief suggested change in values is that stewardship—of both natural and fiscal resources—must become central to our thinking if we are to leave any sort of inhabitable world for future generations. Not only must governments provide greater incentives for and protections of the environment, but they must also incentivize much greater levels of saving by individuals and figure out ways to emphasize future growth (rather than short-term profit seeking) among businesses.

Not that these tasks should fall entirely to the government, however: Coyle also goes to great length to suggest the civic institutional changes that must be made to help people reorient themselves toward stewardship and planning and saving for the future, to better incorporate technologies of communication and measurement as tools to make governments more responsive and effective, and to increase public understanding of and planning for the potential costs of climate change.

Coyle’s book is, on the whole, a very welcome supplement to the current dearth of smart, broad, readable economic literature now available—it’s nowhere near as felicitous as Wendell Berry, but, coming from a trained economist concerned with the same issues, it has the potential to speak to people who would never go near Berry. Some of the book’s most interesting moments come when the author makes comparisons to or draws from Victorian thinkers, who were similarly confronted with the large-scale crises and technological changes we face today, and whose government likewise failed to respond to these changes, with similarly terrible results in terms of increased income inequality, fiscal recklessness, and governmental impotence. Coyle’s book demonstrates her to be a political economist of the old school, concerned with economics as a truly social science rather than an abstract mass of numbers. As such, her work merits a much broader audience than it is likely to find in our contemporary political climate.

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