Sex, Drugs and Economics: An unconventional introduction to economics by Diane Coyle, Texere, 拢16.99, ISBN 1587991470
Naked Economics: Undressing the dismal science by Charles Wheelan, W. W. Norton, 拢20.95/$25.95, ISBN 0393049825
A SENIOR computer executive once told me that the Internet had altered the basic laws of economics. Amazingly, his company is still in business, though I haven鈥檛 heard from him lately. I suspect he鈥檚 had one of those little letters regretfully citing 鈥渆conomic reality鈥� as the reason he needs to clear his desk.
Advertisement
We all know what a harsh mistress the dismal science can be. But what are these basic laws that control our lives? And why should they be immutable? Economics, after all, is a social, not a natural, science: its truths depend on assumptions that people will behave in certain ways. The problem is that a lot of the time, we don鈥檛.
Diane Coyle鈥檚 punchy and readable popular introduction Sex, Drugs and Economics tackles this methodological flaw up front. People don鈥檛 necessarily act rationally in economic terms 鈥� there are a lot of drug-using teenagers and lap-dancer-chasing middle-aged men around. A good economist, she says, realises that we need to turn to other disciplines such as psychology and history to understand fully why people do what they do.
Nevertheless, Coyle makes two big claims for the primacy of economics in the social sciences. First, it is based on empiricism. 鈥淲hen the facts change, I change my mind. What do you do, Sir?鈥� was John Maynard Keynes鈥檚 splendid put-down when accused of inconsistency.
Secondly, economics is uniquely hard-headed. 鈥淓conomists are the only people who warn about difficult choices and trade-offs,鈥� claims Coyle. That there鈥檚 no such thing as a free lunch, in other words.
What a contrast to environmentalism, which Coyle places in the 19th-century Romantic tradition: 鈥渋dealistic, not sceptical鈥�. Her stock environmentalist holds that pesticides are bad because they make people ill. The economist looks at the evidence, taking into account all causes of cancer and the cost to human health of not increasing production of the chemicals 鈥� starvation due to poor harvests because of pests, for example.
Of course, in real life such environmental fundamentalists are about as common as economic fundamentalists who sell their children to obtain maximum benefit. Coyle鈥檚 real targets are policy makers and pressure groups who use fuzzy thinking and popular prejudice to protect special interests. But she shows a softer side when it comes to culture, such as French cinema.
Charles Wheelan covers much of the same ground in Naked Economics, with the edge you鈥檇 expect (he鈥檚 the Midwest correspondent for The Economist. But even he shows a soft, if not outright socialist, touch by stressing that markets need government and other social institutions to function.
Both authors, however, revel in the chief intellectual attraction of economics: its truths, like those of natural science, are often counterintuitive and politically unpalatable. Try telling your constituents that technology and open immigration are good for employment, or that imports are better for the national economy than exports.
Coyle and Wheelan are also honest about the difficulty of translating such principles into public policy. Indeed, macroeconomic policy, the levers and indicators that dominate news coverage of economics, is in trouble. Japan has been taking all the right medicine but is still in the doldrums. 鈥淥ne of the lessons of this discussion is how little we still know about what makes economies as a whole perform well or badly,鈥� Coyle admits.
By contrast, microeconomics, the study of economic behaviour on the scale of the individual, household or business, is in good heart. Much of this is down to the new availability of empirical data and cheap computing.
Economics, Coyle concludes, is an attitude rather than a set of findings. 鈥淚ts most fundamental question is why.鈥� On that basis, it qualifies as a 鈥渞eal鈥� science. Either of these books would be a good introduction to its methods, though I preferred Coyle鈥檚 approach. I鈥檒l drop a copy to my executive friend next time I pass by skid row.