The Soulful Science: What Economists Really Do and Why It Matters

Published by EH.NET (September 2007)

Diane Coyle, The Soulful Science: What Economists Really Do and Why It Matters. Princeton, NJ: Princeton University Press, 2007. vii + 255 pp. $28 (cloth), ISBN: 978-0-691-12513-8.

Reviewed for EH.NET by John A. MacDonald, Department of Economics, Wake Forest University.

With the title “The Soulful Science: What Economists Really Do and Why it Matters,” Diane Coyle surely inspires interest in economists and non-economists alike. The point of her book is presumably to rally economists while explaining the importance of our discipline to anyone else who views it with suspicion. Unfortunately, while the book is thoughtfully presented and thoroughly researched, the presentation of this point is largely obscured by some rather dense prose. But if the reader gets past this drawback, the underlying message becomes clear: economics is more than you think, and yes, it really does matter.

To make her case, Coyle begins with a chapter devoted entirely to the seemingly innocuous topic of data. The ensuing discussion reveals how economists have risen to the enormous task of accumulating and reconstructing all sorts of data. The central character in this discussion, economic historian Angus Maddison, is known for having estimated GDP and growth rates for almost two hundred nations dating back to the year 1000 A.D. Incredible efforts like Maddison’s enable researchers to tackle questions that, in the absence of data, were essentially impossible to answer. Hence, economists provide the extremely vital service of collecting and maintaining important data sets.

The next thing economists do, once the data are in place, is test theories and refine their tools of analysis. With this in mind, the second and third chapters are primarily concerned with the evolution of post-neoclassical endogenous growth theory. Along with the advent of powerful computers and increasingly sophisticated econometrics, the massive data expansion has enabled empiricists to treat previously exogenous variables as endogenous. This has led to both a testing of long-accepted growth theories (i.e., Solow’s model) and the development of new ones (i.e., human capital and technology growth models). Such theoretical developments in turn enable policymakers to better address – and potentially fix – vexing social issues, such as poverty. Clearly the implications of these synergies are profound.

At this point, assuming that the reader has developed a strong grasp of “why it matters,” Coyle shifts the focus of the discussion inwards. She devotes the middle three chapters (4-6) to an introspective examination of several key assumptions generally made by economists. For example, while economists have long believed that per capita GDP is an appropriate indicator of well-being, many are questioning it as a truly useful measurement of “happiness.” Possible substitutes include the Index of Sustainable Economic Welfare (ISEW), the Genuine Progress Index (GPI), and the Human Development Index (HDI). Each is constructed with emphasis on a particular aspect considered important to its promoters. However, any such emphasis is inherently subjective, revealing biases that can be exploited to fit just about anyone’s agenda. After much consideration, Coyle concludes that GDP is a pretty good measurement of well-being after all, and that any permutations that push us away from it unnecessarily damage consensus (and, therefore, our collective credibility).

Not all innovative work is viewed so skeptically, however. Chapter 5 challenges the assumption that all people are rational, utility maximizing robots. New models and policy angles instead suggest that people are, in a sense, predictably unpredictable. For instance, normal people exhibit inertia to the point where they take what’s given to them most of the time, even when they know such behavior isn’t rational. A good example is “opt-out” versus “opt-in” retirement savings programs: opt-out participation is in the 70-80% range, while opt-in participation for identical programs is in the 20-30% range. We also have a problem getting normal people to be objective in the first place: they often get set in their opinions and refuse to believe the truth even when it stares them in the face. Paying attention to such things helps keep models as realistic as possible, which helps maximize the persuasiveness of their conclusions.

Shifting gears one last time, Coyle concludes her book with three chapters intended to bring together “the social nature of the economy and the human nature of the individuals making up society.” Chapter 7 provides a convincing account of evolutionary economics: why markets are Darwinian, how economics influenced Charles Darwin, and how Darwin, in turn, influenced economics. She links the concept of natural selection to the gradual transformation of markets over time. Successful firms are much like successful biological entities in that they persevere as a result of gradual mutation/innovation, constant adaptation, and chance. Joseph Schumpeter is oft-discussed here as a sort of visionary user of evolutionary principles, being among the first modern economists to really embrace dynamic questions. But evolutionary economics has only recently caught on because, as Coyle points out, it fell out of fashion after WWII due to its association with the Nazis (through eugenics). Nevertheless, she sums up its reemerging appeal by striking a centuries-old nostalgic chord: “the attraction of evolutionary theory is the absence of a plan, a designer, a central organizing intelligence – the invisible hand, the emergent, self-organizing economic order.” Despite commanding a minority interest in economics, it is hard to disagree with her conclusion that “any economist who studies industrial organization and technical change clearly has a strong intuition that it is an evolutionary process.”

While these topics might sound very interesting, they suffer from a lack of obvious cohesion when presented one after another in the book. Ironically, one might say “The Soulful Science” lacks soul: there is no single, central, pervasive point that inspires much emotional excitement. This is a problem because the title of the book would seem to suggest otherwise. The problem is compounded by the strange sense that “what economists really do” is nothing more than deal, around the clock, with data: they collect it, construct it, argue about how to interpret it, devise complex models around it – undeniably important stuff, but not exactly soulful. Further, although one gets the feeling throughout that there must be a punch line somewhere in the text revealing “why it matters,” it doesn’t materialize until the third to last page. This is strange because it is arguably the most important point of the book. Nonetheless, it is summarized by Coyle as follows: “The availability of solid empirical evidence on an array of social issues is?going to make economics very controversial. … A lot of sacred political cows are heading for the slaughterhouse?” In other words, the mounting evidence provided by, analyzed by, and interpreted by economists will eventually, when combined with the massive proliferation of information, lead to incredible political momentum towards all sorts of change. THAT’s why it matters. Why did it take 253 pages to say so?

In short, the book is a good reference for economists interested in how the discipline has flourished in the past thirty years or so. It might also be appropriate for economic history courses that focus on the modern era. But the length and editing make “The Soulful Science” unlikely to capture the attention of casual readers.

John A. MacDonald recently defended his dissertation, “An Examination of Airline Pricing: Testing the Effects of Mergers and Uncertainty on Average Fares and Dispersion,” at the University of North Carolina ? Chapel Hill.