AUSTIN – Diane Coyle, an economist and professor of public policy at the University of Cambridge, has set a daunting task for herself: to provide a reasoned critique of the economics discipline from an insider’s perspective, while defending mainstream economics from the harsh – and mounting – criticism leveled by outsiders. Regime Change in the Global Economy Ji Haixin/VCG via Getty Images The Alchemy of Angst PS OnPoint Getty Images Subscriber Exclusive COVID Goes to Court Anna MoneymakerGetty Images
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AUSTIN – Diane Coyle, an economist and professor of public policy at the University of Cambridge, has set a daunting task for herself: to provide a reasoned critique of the economics discipline from an insider’s perspective, while defending mainstream economics from the harsh – and mounting – criticism leveled by outsiders.
In Cogs and Monsters, Coyle seeks to advance an engaged, policy-relevant vision of economics drawn from the work of leading academics in the field. The implication is that the pieces are there and need only to be assembled. “For economics itself,” she tells us, “the agenda is clear”:
“We need to build on the work that already exists to incorporate as standard externalities, non-linearities, tipping points, and self-fulfilling (or self-averting) dynamics. We need to revive and rethink welfare economics. ... We need a modern approach to the public provision and regulation of information goods, applying the rich literature on asymmetric information. ... And we need to put the social, not the individual, at the heart of the study of economics ...”
Dismissing macroeconomists as “forecasters” (harsh, but not completely wrong), Coyle would prefer to dwell on the applied microeconomics that preoccupies most academic economists nowadays. This dodge allows her to quote John Maynard Keynes on numerous side issues without having to account for the fact that he himself repudiated micro theory. Having shunted Keynes onto an intellectual siding, Coyle argues that it is microeconomists who have advanced the field beyond the simple doctrines of 40 years back; it is they who are now on the cusp of making economics into something useful.
The Micro Perspective
One can understand and even sympathize with Coyle’s project. The real world has overtaken Friedrich von Hayek and his lead disciple, former British Prime Minister Margaret Thatcher. Today’s profound inequalities are becoming politically unacceptable. Financial crises are endemic, and now climate change is upon us, too. The free-market, deregulate-and-privatize verities of Coyle’s professional youth have lost their appeal.
But as Coyle points out, the discipline is still exceptionally disciplined. Academic success demands publication in one of only five “top” journals, all of which are tightly controlled by acolytes of the mainstream orthodoxy. For most economists today, the only practical way to get ahead is to build on (and therefore accept) that orthodoxy.
Deference, even sycophancy, is required. Thus, Coyle herself recites from the catechism: “What markets do brilliantly, nevertheless, is coordinate the use of resources in a process of discovery and challenge. The information signaled by the prices set by demand and supply is a wonderful coordinating device.”
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To be sure, the modern applied microeconomics that Coyle celebrates is scattered and diverse, often without the crisp self-assurance of free-market legionaries from decades past. It makes room for those who question the axioms of “rational” economic calculation, showing by experiment that real people’s decision-making bears little resemblance to textbook predictions.
The new microeconomists point to problems such as pervasive “asymmetric information” – a favorite theme of the very progressive neoclassical economist