The Economics of Enough: How to Run the Economy as if the Future Matters

Published by EH.NET (June 2011)

Diane Coyle, The Economics of Enough: How to Run the Economy as if the Future Matters. Princeton, NJ: Princeton University Press, 2011. iii + 346 pp. $25 (hardcover), ISBN: 978-0-691-14518-1.

Reviewed for EH.Net by Bradley K Hobbs, Department of Economics, Florida Gulf Coast University. ?

Recent developments in the world?s political and economic scene present indications of significant problems for humankind that will need to be addressed in the not-too-distant future according to Diane Coyle.? Her three-part book outlines what she considers to be (1) the five significant challenges facing our future, (2) three major obstacles to addressing these challenges, and (3) a policy prescription which she titles ?The Manifesto of Enough.? ?

The book revolves around the issue of sustainability in the broadest sense; which is, itself, refreshing. Coyle adroitly shows that the issue of sustainability is not simply and solely environmental.? She extends her analysis to other systematic problems including crushing government deficits, the unsustainability of generous entitlement programs, the collapse of faith and trust in institutions in the modern world, and the inevitable conflicts inherent to our human proclivity for individual prosperity combined with social fairness.

The first part of The Economics of Enough: How to Run the Economy as if the Future Matters presents the challenges that humanity faces as it enters the twenty-first century.? Coyle begins by addressing the recently-developed happiness literature where the conventional wisdom came to be that higher levels of income do not lead to higher levels of happiness.? She rejects the Easterlin Paradox and claims those findings to be driven by anti-capitalism ideology and the presupposition that economic crises are foremost and always rooted in social and political ills.? She links this to the pervasive anti-economic themes in the new environmentalism and, in particular, ?anthropogenic climate change? and the global politics surrounding it.? Part One goes on to address issues concerning posterity.? She explores the implications of demographic change, persistent budgetary shortfalls by governments, and the ongoing deterioration of faith in the political elite to seriously address reality.? As she notes at the end of Chapter 3, “The promises can’t be kept. The only question is how they will be broken, given the enormous political strains involved in fundamentally changing what people will get from their governments.”? Her analysis of the concepts of fairness and social cooperation within the frameworks of both domestic and global inequality is solid and she explores the effects of perceived income inequality on popular support for general economic growth. ?

The last part of the chapter on fairness addresses the financial crisis and leads us into an interesting discussion of the role that trust plays in all exchange relationships. Coyle notes the corrosive effects on trust that have been fueled by growing symbiotic relationships between the political and business elite. The recent financial and industrial sector bailouts offered up by the monetary and political authorities for moral-hazard embracing financiers and poorly-run manufacturing firms has produced highly damaging ripple effects for capitalism.? Issues of trust extend not only to business but also to the IMF, UN, EU, World Bank, and WTO.? These organizations are, often wrongly, viewed as primarily economic: but, in fact, they are predominantly global political organizations.? Coyle acknowledges the extreme complexity of the problems that these institutions are attempting to ?solve” and how difficult it is to do so, even with high levels of trust. She claims, in short, that governance is at many levels in trouble.? Thus, we simultaneously face a deep crisis in political leadership and significant issues that need early and apt attention. ?

In Part Two, the author turns to problems with measurement and the over reliance on relatively narrow, production-based, economic statistics. Her suggestion is that governments develop a much wider range of statistics that incorporate quality-of-life and human development measures designed to expand our conceptual framework of human flourishing. This section also addresses the framework of interpretation or values — which, particularly in this post-modern world, must lead us to ask ?Whose values??? Assuming the choice of metrics issues can be solved, we would still be left with the problem of valuing the relative weights and importance of those metrics.? Ultimately, Coyle is right in that the choice of the numbers measured, the numbers emphasized, and the numbers revealed to those outside of the inner circles are inherently subjective.? Often times, being measured confers an aura of objective fact, yet as one fine mentor of mine once noted ?Just because you can measure it doesn’t mean it’s worth measuring.?? As eloquently argued by Deidre McCloskey, in numerous places and in numerous settings, ?Pebbles lie around …; facts of the matter do not.? It is our human decision to count or weigh or mix the pebbles in constituting the pebbly facts? (The Secret Sins of Economics, 2002).? ?

Coyle argues that the values found in modern financial markets have contributed to a corrosion of social cohesion throughout the large Western economies.? While clearly stressing the efficiencies that can be achieved under free exchange, she questions whether markets can achieve and sustain long-term political support and legitimacy — particularly during periods of financial collapse.

Though the reader may support or reject Coyle?s policy prescriptions (Part Three), her assessment of major issues facing the world is thoughtful and wide-ranging.? It is clear that she has contemplated both the popularly-identified problems and some of their potential and admittedly partial solutions. It is refreshing for a book such as this to recognize the Hayekian-identified hubris embodied in finite solutions.? For this fact alone, I would certainly consider using this book as a more balanced alternative to the Worldwatch Institute’s annual publication: The State of the World.? ?

My major criticisms are, first, that the book is still far too pessimistic from an historical perspective.? Coyle?s post-materialist outlook almost ignores previous predictions of insurmountable problems producing imminent and inevitable collapse.? Good economic history would require one to seriously acknowledge and confront the weaknesses in Malthus?s An Essay on the Principle of Population (1798) or in William Stanley Jevons 1865 book, The Coal Question: An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal Mines. Predicting the future is dicey business: nearly all prognosticators would serve integrity and prudence by acknowledging their gross inability to actually tell the future.

Secondly, aspects of Coyle?s policy proposals remind me of a Veblenian fetish for the work of technocrats and price engineers.? This faith in the ability of the expert, inevitably rooted in central direction when combined with governments, is problematic.? This renewed faith seems far too short on Eastern Bloc history and far too long on faith in governance — governance which Coyle earlier notes has been incapable of addressing the complex problems she identifies. ?

The Economics of Enough is a thoughtful and reflective piece addressing the interplay between governments and markets in a ?post-financial crisis? world.? The subtitle seems to indicate a strong penchant for central direction and while that is an ongoing theme, Coyle acknowledges weaknesses, strengths, complementarities, and conflicts in both political governance and in markets.? The book serves as a good foil for deeper discussions of the implications and results of the attempt to govern complex systems — both political and economic — fraught with their inevitable webs of adverse selection, moral hazard, and self-interest. ?

Bradley K Hobbs is the BB&T Distinguished Professor of Free Enterprise at Florida Gulf Coast University.? His most recent work focuses on the measurement of entrepreneurial activity based upon the budgetary structures of metropolitan areas and the effects of economic freedom on job creation in the service industries across states.?? His most recent publication is ?My Father?s Drugstore,? which placed second in an international essay contest at the S.E.VEN Fund in Cambridge, Massachusetts.? The paper is forthcoming in ?Morality and Profit? in late 2011.

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