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

Howard Davies wants more detail on policies to leave the world in a fit state for our descendants

April 7, 2011

Diane Coyle is a quondam economic journalist who now runs a boutique economic consultancy. She is also a BBC trustee, so will shortly be sitting at the knee of the great Lord Patten, a favourite horse whom the Conservatives have brought back for a last ride. The BBC gets dragged into the argument at various points, but Coyle's principal intention is clear from the subtitle. She thinks we do not take enough account in economic management of the interests of future generations. The fundamental reasons are pretty obvious: generations yet unborn do not appear on the electoral roll. Coyle wrestles with how that brutal political reality might best be overcome.

On the whole I prefer intellectual wrestling to the physical kind - a wholly bogus sport with nothing to commend it - but this particular bout is a little puzzling. It is hard to know who the intended audience might be. The book is not targeted at professional economists, I think. There are many references to economic works: Coyle is especially keen on Elinor Ostrom and Oliver Williamson, the 2009 Nobel prizewinners, who are mentioned several times. But this is not - and I am sure she would not claim that it is - a work of original scholarship. It is more a survey of the literature.

I suppose it is aimed at that mythical beast, "the general reader", or possibly at "key influencers", those people so beloved of public relations consultancies. So what might such readers get for their £16.95?

Coyle begins with some sparring with two sets of newish economic arguments. First, she tilts at the happiness crowd, led by Richard Layard at the London School of Economics. Sad to say, she does not think much of their lines of argument. In particular, she takes issue with the notion that, beyond a certain point (and a long way below where we are now in the UK), there is no further relationship between growth in GDP and growth in well-being. Those who are interested in the to-ing and fro-ing on that front may find this a useful summary of the arguments.

Then she has a go at climate change and takes issue with some of the analysis, or perhaps more specifically with the policy prescriptions, of the 2006 Stern Review on the Economics of Climate Change. So once again she has parked her tanks on the LSE's (non-existent) lawn. Coyle is nothing if not brave.

She seems broadly sympathetic to the notion that climate change is happening, and that it reflects a massive market failure in that the interests of future generations have been ignored as our carbon emissions have risen. But she believes that there is currently little chance of persuading voters to make the growth sacrifices that are implicit in the Stern recommendations. She thinks we are not even close to finding a language that will convince the broader population.

After these and other diversions, including some not very well-argued points on financial regulation, Coyle moves on to articulate a kind of manifesto for the future. This is always risky territory, especially where the field of policymaking is very broad, as it is here. Recommendations may well seem either too detailed and footling, or too broad and unspecific.

At points, Coyle falls into both traps. So, at the start, she argues that "official statistical agencies (should) have the resources and the commitment to developing and publishing statistics on intergenerational accounts". And then, a little later, we are told that the government should "make the old fashioned virtue of public service a priority in implementing the inevitable cuts in public expenditure". This may or may not be an oblique reference to the Cameronian Big Society.

When we come to inequality, on which Coyle writes interestingly in the body of the book, the recommendations are again a mixed bag. She wants a "three pronged attack", where "the first prong is the use of the moral scope for governments to influence behaviour and norms for public comment". That may be a "nudge" point, I suppose. The second prong is a change to the tax system whereby "bonuses should not exceed base salaries". That might seem attractive in the banking sector just now, but is surely impractical and would be likely to make the costs of many volatile businesses much less flexible.

On climate change, her conclusion is barely a conclusion at all. It is that "each country should pursue its own policies to address the risk and likely degree of climate change, absent international agreement". That may indeed be what happens, but it seems a second- (or third- or fourth-) best solution, given our interdependence.

There is much good sense in The Economics of Enough, and Coyle writes efficiently and clearly. But answering the conundrum in her subtitle will need a bit more work in the longueurs of her BBC Trust meetings.

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

By Diane Coyle

Princeton University Press

336pp, £16.95

ISBN 9780691145181

Published 7 March 2011

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