What Should Economists Do Now?

In the context of the contemporary revolt against economics, one might be at risk of airily dismissing the value of Diane Coyle’s latest book, Cogs and Monsters: What Economics Is, and What It Should Be. One may be tempted to merely note in passing the book as yet another literary assault on an academic discipline and profession under immense strain, but to dismiss Coyle’s contribution would be a significant mistake. I identify two key reasons as to why scholars, policymakers, and interested lay people should obtain Cogs and Monsters, and to carefully consider its key messages.

The first is that Coyle presents a multi-dimensional critique of economics, but strategically does not overdo some of the well-worn arguments about the ontological realism of homo economics, that much-caricatured economic actor making choices in accordance with well-ordered (and fixed) preferences. As is mentioned early in the book, “[e]conomics has changed a lot in recent decades. It needs to change a lot in future—but the critique needs to move on too, to address what really needs attention” (p. 2). Heterodox economists are prone to critique the economic mainstream but, as illustrated by Cogs and Monsters, the mainstream itself has evolved in relation to the scope of empirical methods and strategies, topical scope, and propensity to engage with other disciplines (such as ethics, psychology, and sociology). In addition to acknowledging intra-disciplinary changes, Coyle sets out a new set of intellectual wrinkles for economists—including challenges to thinking that arise from such phenomena as digitalization, the limits of technocratic expertise, and the public role of economists.

The second reason underlining the significance of Coyle’s book is that she complements her contemporaneous criticism of economic science with constructive suggestions to move forward. What impresses upon the reader is that Coyle’s decades-long expertise in policymaking and scholarship has not left an imprint of jaundice and resignation about the possibilities for rehabilitation of economics as a discipline of high esteem and good reputation. Nor does one find the destructively critical presentation of markets that disconcertingly goes with the latest niche-industry of economic critique: “[m]arket economies have made many people better off, innovating in ways that improve our lives, enabling us to make the choices that best suit us, given the constraints of income and time” (p. 39). With its calls for a refashioned economics featuring epistemic humility, and an embrace of the heterogeneous aspects of economic life, the reader of Cogs and Monsters is left with the distinct impression that economics can, once more, be regarded as an indispensable intellectual aid for understanding the bases of material progress, and, in turn, human flourishing.

There is sufficient insight and provocation presented in Diane Coyle’s book to cater for a wide reading audience. What will please scholars and other readers with an interest in Austrian and Virginia schools of political economy is that Cogs and Monsters amply acknowledges the importance of what Mark Pennington has described as “knowledge” and “incentive” problems,2 with such problems especially affecting the quality—if not the reasonableness—of technocratic policy advice and implementation in a complex world. It is often said that economics places boundaries upon the extent to which policies may be conscripted in the service of refashioning the world. Awareness of the dispersed—and oft-tacit—nature of economic knowledge, opportunity costs, costs of policy implementation and enforcement, the calculational limits of planning, and strategic interest-group incentives to seek rents are all seen to dampen the tendency toward misguided schemes reconfiguring the everyday business of economic life for the sake of grand political visions. As also indicated by Coyle, the reflexive nature of economic policy, whereby agents adjust their behavior in order to minimize the burdens posed by policy constraints, also warrants greater attention.

The ever-present challenge is that awareness of economic policy limitations is not sufficient to incentivize political agents (particularly legislators and their bureaucratic advisors) to engage in good (rule-guided) policy conduct. The temptation to deviate from accumulated economic knowledge—as to what kinds of economic institutions are more likely to harness market-tested entrepreneurial betterments—in an effort to garner the favor of certain interests or constituencies seems always to be in play. Coyle speaks of the continual pressures faced by economic policymakers to please their political paymasters by producing “policy-based evidence” in support of the politically-ordained policy position. In particular, “economists often end up appearing or claiming to be certain where they are deeply uncertain, while at the same time being too diffident about expressing inconvenient truths about which we can be much more certain” (p. 56). The ever-tightening entanglement of bureaucratic advisors with economic qualifications with the legislative class—whom, in turn, entangle with close-knit policy communities that include consultancy firms, large financial intermediaries, and similar organizations—have been increasingly called into question. For her part, Coyle raises issues regarding the tendency toward policy groupthink, and the reliance by technocrats upon close-ended quantitative models in the construction of economic policy advice.

An important contribution of Cogs and Monsters is its critical appraisal of the tendency toward “big data” haulage by policymakers in the development of public policies. The development of information and communication technologies have not only engendered the emergence of a digital economy characterized by increasing returns that, even now, is conceived to be evading comprehension using economic theories and empirical tools devised decades, if not centuries, ago. The Internet, mobile phones, and a new wave of technologies centered upon artificial intelligence, robotics, blockchain, and so on, are being viewed as the catalysts for the reinvigoration of dreams of a “computer socialism,” wherein digitalization is supposed to usher in possibilities for the central planning that Mises and Hayek previously warned about in the famous “socialist calculation” debates of the 1920s and 1930s.

In Cogs and Monsters, Coyle incisively punctures the hopes of computer socialism to advance the technocratic dream of comprehensive economic planning. The first problem is that a world characterized by increasing returns and network effects radically increases the effective challenge of processing the interactions transpiring in the real economy. The second problem for computer socialists is that computation is incommensurable with what Hayek described as the tacit economic knowledge generated by interactions by heterogeneous agents in circumstances of time and place. Furthermore, “[c]omputers do not do constructive ambiguity” (p. 186) in light of genuinely interpersonal differences in desires and priorities, which are prone to spill over into irreconcilable conflicts. Whilst Coyle urges her economic peers “to start providing policy-makers with guidance for an increasing returns economy,” her ultimate conclusion on the computer socialism question is that “a bias toward government solutions is no answer. The idea that clever people in the centre can now have big enough data to solve such big problems remains illusory” (p. 209).

In light of the difficulties associated with economic policymaking, Coyle invites the reader to carefully consider the intersection of economics and ethics. What is the public contribution and role of economics in a complex, evolving world? What is it that economists should do now? Consistent with the rise of economics within the firmament of the modern bureaucratic state, economists have attributed a host of metaphorical markers to describe what they see as the appropriate contribution of economics toward the policymaking process. John Maynard Keynes believed that economists should work to modify economic deficiencies in a manner akin to the humble competency of a dentist. Esther Duflo urged economists to assume the mindset of a tinkering plumber. Others have considered economists to embrace engineering, in the spirit of adapting planning methodologies and technological availabilities to reconfigure an economy. To varying degrees these ideas hint at a neo-feudalistic, social control mindset in which the advice of economists qua physicians/plumbers/engineers supports projects of nudging (or, perhaps more aptly, shoving) otherwise freely-interacting individuals into modes of economic behavior and conduct as prescribed by policy objectives.

Coyle offers an intriguing alternative descriptor for the role of the modern economist: the economist as storyteller. If my interpretation of her suggestion is correct, the position of the economist as a storyteller (or at least, an interpreter of economic narratives) is intended to encapsulate the inherent endogeneity of an economist as one-of-many interdependent actors in the world. On this view, economists are ultimately incapable of standing outside the models they use to try to represent reality, and the agents that economists try to model are not things of stone and wood—they are fallible-yet-capable beings with the capacity to create, think, persuade, and act entrepreneurially. Coyle’s economist-as-storyteller vision is, then, intended to equip the economist with agency to adjust their narratives as actions and norms reflexively, and potentially structurally, change.

I consider Coyle’s suggestion that economists narrate stories about the economy in which they, and others, interact feeds into broader understandings of the economy as constituted by webs of conversation combined with prices and other symbols.3 A key insight here is that how economists, and all others, normatively speak about the economy has economic effects. In short, talk is not cheap. After a decade of severe limitations of economic activity—first due to the GFC [Global Financial Crisis] and the subsequent sovereign debt crisis and, now, due to pandemic lockdowns and related restrictions—there is room for economic storytelling not only recognizing the limits of discretionary policy but that underlines the inherently emancipatory function of economic liberalism. Talk that inspires people to pursue their ambitions, to experiment, to use their knowledge in the fruitful economic service of others, and to become who they wish to become might well be necessary to help break the shackles of largely policy-induced economic repression. Conversation of this nature would desirably be accompanied by talk, and indeed action, of a nature institutionally constraining the degree of policy discretion on the part of the legislative-bureaucratic neo-feudal lords of the economic manor.

Diane Coyle’s Cogs and Monsters is an important book that is deserving of wide attention and deep contemplation. With a clear talent for writing about complicated economic ideas in a straightforward manner, Coyle illustrates how mainstream economics has evolved yet remains hamstrung by conceptual and empirical constraints. Economics is not internally unreformable, however, and Coyle provides a range of thoughtful suggestions as to what economists should do now (and next). Fundamentally, Cogs and Monsters presents a call for a humble and humane economics that is genuinely attentive to the needs and concerns of diverse beings as they continually seek material betterments. Scholars familiar with Austrian and Virginia political economy theories, and other heterodox economists, will discover much of value in this book.

Footnotes

[1] Diane Coyle, Cogs and Monsters: What Economics Is and What It Should Be. Princeton University Press. 2021.

[2] Mark Pennington, Robust Political Economy: Classical Liberalism and the Future of Public Policy. Edward Elgar. 2011.

[3] Deirdre McCloskey, Knowledge and Persuasion in Economics. Cambridge University Press. 2010; Don Lavoie, “Subjectivism, entrepreneurship and the convergence of groupware and hypertext.” In Jack Birner and Pierre Garrouste (eds.), Markets, Information and Communication: Austrian Perspectives on the Internet Economy, pp. 21-46. Routledge. 2004.