The Soulful Science: What Economists Really Do and Why It Matters (英語) ペーパーバック – 2009/12/7
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For many, Thomas Carlyle's put-down of economics as "the dismal science" rings true--especially in the aftermath of the crash of 2008. But Diane Coyle argues that economics today is more soulful than dismal, a more practical and human science than ever before. The Soulful Science describes the remarkable creative renaissance in economics, how economic thinking is being applied to the paradoxes of everyday life.
This revised edition incorporates the latest developments in the field, including the rise of behavioral finance, the failure of carbon trading, and the growing trend of government bailouts. She also discusses such major debates as the relationship between economic statistics and presidential elections, the boundary between private choice and public action, and who is to blame for today's banking crisis.
"Praise for Princeton's previous editions: "Coyle's style is very accessible, and this book is an excellent survey of the frontiers of economics for the general reader. . . . The Soulful Science can be recommended highly.""---Paul Ormerod, Times Higher Education Supplement
"Praise for Princeton's previous editions: "The simple aim of The Soulful Science is to describe what economists do, how the field has changed in the past 10 years or so, and why you should care. It succeeds admirably.""--Financial Times
"Praise for Princeton's previous editions: "This is an astonishing book: beautifully written.""---Andrew Hilton, Financial World
"Praise for Princeton's previous editions: "Fluently written with the balance of a good novel, the result is a tour de force.""---Donald Anderson, Business Economist
"Praise for Princeton's previous editions: "The Soulful Science is . . . a grand whirlwind tour of modern economics, with fascinating vignettes of individual economists. It's a trip worth taking.""---David Colander, American Scientist
"Coyle is a talented writer and her book shows that good communication skills, to and with readers, assure wide appeal to almost the entire spectrum of economic thinkers."---Liviu Drugus, European Legacy
People are generally ignorant of modern science and they know it. They are even more ignorant of the basic principles of economics, but they think they know more than they do. Therefore, they despise and fear economists, who are easily pilloried as other-worldly academics who throw around big equations but couldn't meet a payroll or punch a time clock if their professional future depended on it. Conservatives and liberals alike cherish basic principles of economics that are as stupid and inane as intelligent design and flat-earth-ism. We need a dozen more books like this excellent contribution by Diane Coyle.
Coyle covers the history and theory of economic growth, the sources and potential cures for world poverty, the nature and source of happiness and its relationship with income and wealth, the economics of adverse selection and moral hazard, rent-seeking and the politics of state intervention, evolutionary economics, behavioral economics, and the new, analytical institutional economics. Since she has a Ph.D. in economics from Harvard, Coyle for the most part acts as a participant in dealing with the issues, not simply a journalist reporting the news. Generally, her take on the various issues is insightful, balanced, and engaging. However, I would be remiss if I failed to find something in the book to grumble about, so I will discuss her treatment of behavioral economics, which I consider more of a journalistic than a professional account.
The common take on behavioral economics is that traditional economics assumes people are rational optimizers whereas the experimental evidence is that they are boundedly rational, or even irrational, non-maximizers. This is incorrect and indeed dangerous. I say this is incorrect because the evidence shows that people are not purely self-interested and they are prone to committing decision-making errors based on both weaknesses of human nature and on having incorrect theories of stochastic events. But there is no evidence that people are not fully rational. This is very important, because the economist's "rational actor model" is probably the most important tool in their tool box, and one which other social science disciplines (e.g., sociology and social psychology) ignore and thereby render systematic social theorizing impossible. It is even incorrect to say that people are boundedly rational, because basic information theory tells us that bounds on information processing are ensured by the laws of physics and not due to human frailty. Moreover, confusing incomplete or asymmetric information for bounded rationality is a highly serious error that leads us to study human psychology as opposed to the social conditions that determine the distribution of information among agents.
Of course, behavioral psychologists love to criticize the rational actor model, but in fact, there would be no modern behavioral psychology (a la Tversky and Kahneman) if it were not for the rational actor model, which they use in each and every one of their experiments. Prospect theory, for which Kahneman was awarded the Nobel prize in economics, is totally predicated upon the rational actor model, adding to the standard choice model only the notion that choice is always with respect to a status quo position. Since I have gone into this issue in detail in a recent target article in Behavioral and Brain Sciences ("A Framework for the Integration of the Behavioral Sciences"), I will forgo the pleasure of expanding on the subject here.
I doubt that I will be interested in reading other similar books. Graphs and tables
are scarce in a subject area that requires them.
For a time, the disgruntled students found support among Parisian intellectuals and the French news media. This is a country, after all, where a literary critic specializing in nineteenth century poet Arthur Rimbaud can write a book about L'Horreur économique and get invitations to talk shows where she would comment on the state of the economics discipline. Form matters more than content for the French literati who have never accepted the fact that economics no longer belongs to the humanities. Essayists with a vague veneer of economic culture but a sharp pen and a wide social circle can pass as experts on a wide range of issues they comment upon in the pages of Le Monde or Le Figaro. Likewise, the post-autistic students were smart, they wrote well and, even though their grades in university exams did not improve as a result of their campaign, they tended to carry the day in the public debate on the direction economics should take. Orthodox economists were simply too busy to care. Those who did were overwhelmed by the rhetoric of the protest students, and retreated from the debating arena with bruises and frustration.
That is, until the publication of the Soulful Science by Diane Coyle. The Parisian students have found their match in this British-born, Harvard educated economist who combines academic knowledge with witty humor and a real pedagogical talent. Her goal is to introduce a wide readership to the developments in the economics discipline that occurred since people ceased to care and sound bite commentators replaced learned scholars in the media. Although her role is not to defend neo-classical economics from its critics--economics is a vibrant science and doesn't really need a defense, thank you--she argues that most of the critics attack a caricature of economics, for reason related to their ideological belief or personal agenda. For its critics, neoclassical economics is a multifaceted straw man, a shorthand for student frustration with math assignments, leftwinger anger against market reforms waged in the name of neo-liberalism, and the general public's puzzlement with a discipline that addresses seemingly "soft" issues with methods directly borrowed from the hard sciences.
Economics is sometimes referred to by its critics as an ideology, the only one remaining after communism exited from the world scene. But as communism should be judged not according to its promoters' ideals, but through the experience of countries which tried to implement "really existing socialism", likewise economics needs to be referred not to the image that its critics paint of it, but to what economists actually do when they practice their discipline. As the author writes, the "popular unpopularity of economics" rests on perceptions which are twenty or thirty years out of date and were always a bit of a caricature anyway. In fact, "actually existing economics" as it is practiced in universities and government agencies has experienced, virtually unnoticed by the wider public, a golden age of discovery. It is this tale of intellectual renaissance that Diane Coyle attempts to tell, charting the new terrains where economics is reclaiming its soul.
She begins by asking the big questions. Why do some economies grow and get rich, while other stagnate in abject poverty? Is there something we could do about it? Among the many development projects and policy interventions, what works, what doesn't, and why? As Nobel prize winner Robert Barro once remarked, when you start thinking about these issues, you can't think about anything else. But you should, Coyle may add, because progress in one corner of the discipline may affect the way economists think about the whole system, and the tools they use to answer the big questions. It is therefore important to keep an eye on the broad picture, and to monitor what other economists are up to these days, even when one specializes in one corner of the academic field. This is in a way an impossible task: it is hard enough to keep track of all the new publications in one's own subfield, let alone in the whole discipline. Any survey on the state of economics will inevitably miss some developments that may exert a huge influence on the future of the discipline, and dwell on some research topics that sound exciting on the moment but may prove to be dead ends. Coyle's random walk through economics should therefore be taken not as an extensive survey, but rather as an invitation to the voyage by a sympathetic and humorous guide.
One of the themes throughout the book is the importance of new data sets, allied with cheap computer power and the development of econometric techniques, in the current renaissance in economics. The author draws the spotlight on unsung heroes such as Angus Maddison, who patiently gathered statistical estimates of the levels of material output and growth for the whole world from the year 1000 to the present. As she writes, it is hard to overstate the importance of the painstaking statistical detective work in assembling the figures of past growth performance of many countries. It is the equivalent of the detailed forensic search of the crime scene and the dull door-to-door and telephone enquiries made by the police--this, rather than the brilliant insights of a charismatic detective, is what solves crimes. In particular, Maddison's estimates show the West overtaking China by 1400, and not by 1800 as alleged by other historians like Paul Bairoch and Kenneth Pomeranz. This point of timing matters: those who argue that China remained the world's economic leader until around 1800 see the subsequent Western growth takeoff as the direct result of European exploitation of the resources of the rest of the world and imperialism, including the submission of China. On the other hand, those who think the West overtook China much earlier see nineteenth- and twentieth-century growth in the West as the acceleration of an internal process, driven by technology and social change.
Other, more theory-minded economists, also get their tribute. Joseph Stiglitz, the guru of the antiglobalization crowd, is credited early in his career with finding a very tractable way of introducing monopolistic competition, product differentiation, and fixed costs in models that had hitherto relied on the twin assumptions of perfect competition and constant returns to scale in production. Paul Krugman, now the famous New York Times columnist, made his name applying increasing returns to scale to models of international trade, and subsequently to questions of industrial location in general. Paul Romer pioneered the theory of endogenous growth by introducing knowledge spillovers, whereby individual decisions have an immediate effect on others. In the new growth theory, as in reality, long-run growth is driven primarily by innovation and the accumulation of knowledge. In the mid to late 1980s, economists working on endogenous growth models and those working on new models in industrial organization and trade transformed all three areas of the discipline, in a spectacularly fruitful period of mutual exchange of ideas.
If Diane Coyle extends lavish praise to the statisticians-detectives and to the theoreticians who helped solve the growth puzzle, she is less charitable to the aid community and particularly to its most vocal advocate, Columbia economist Jeffrey Sachs. Having a stake in the aid business, I may have developed what the author labels "an institutional self-interest in keeping the money flowing". But I would be more positive than she is on the aid effectiveness debate, which she nonetheless summarizes beautifully. I was less familiar with her treatment of happiness research and well-being accounting. I found her introduction to the topic much better than Stiglitz's, and much more funny too (see her prescription that, to increase national well-being, more people need to have more sex). I was on even less familiar grounds in her covering of recent research in behavioral economics, and on the field of neuroeconomics which applies insights from brain science to study the cognitive aspects of economic decisions. But this is what this book is all about: not to rehash what readers already know, but to introduce them to new and exciting areas of research.
As mentioned in the beginning, Diane Coyle is harsh on economics critics, who simply haven't done their homework and paint a distorted picture of neoclassical economics without observing what economists actually do. She also scratches in passing the political scientist Karl Polanyi, a revered figure of the thinking Left, who seemed to wish we could all go back to reciprocal barter and the gift economy. She rightly points out that the so-called Washington consensus is a fact- and research-based convergence of minds among professional economists about macroeconomic policies, not a conspiracy on the part of Wall Street financiers in cahoots with the IMF, as the critics have it. But she is also lucid about why economists are so unpopular in so many quarters. Perhaps the greatest vulnerability of economists is also their greatest strength: their inability to compromise. "We economists, she writes, are unwilling to tolerate imprecision, wishful thinking, or flattering illusion in the study of human behavior and society." If some disgruntled French students want to label as autistic this passion for rigor and unwillingness to yield ground to the fads of the day, then so be it.