The Economics of Enough: How to Run the Economy as If the Future Matters
By Diane Coyle
(Princeton £16.95, $24.95)
If Diane Coyle had written The Economics of Enough a year or so earlier, a British political party would probably have laid claim to its message during the general election campaign. Coyle’s work manages to tie up fiscal policy, inequality and the environment with reflections on civil society. Furthermore, while the book’s title has a revolutionary air, its contents do not.
Coyle joins the growing chorus of writers calling for a longer-term view of policy and politics. After lauding the inheritance we have received from the Victorians in terms of investment and institutions, she ends by posing a question to the reader: “What is our legacy going to be?”
A former member of the Competition Commission and the Browne review of higher education, Coyle is orthodox in most of her analysis and makes no grand philosophical claims. Nor is she a rabble-rouser: the first demand in the “manifesto” with which she concludes the book is a call for better economic statistics. Other proposals include more pension saving in the deficit countries, more long-term business investment and government institutions to represent the interests of future taxpayers.
This is hardly the stuff of placard-wavers. These prescriptions also occupy relatively little of the book, which is really a vehicle to deliver some blasts at woolly thinking on a host of issues. Coyle makes a particularly effective assault on the view, often espoused by environmentalists, that economic growth ought not to be a policy goal. While she calls for other objectives – and the use of a greater range of economic indicators – she backs output growth as an objective.
En route, she grapples with the claim that growth does not improve satisfaction. As she says: “Income and material goods do increase happiness; and there is no strong empirical evidence that rich western societies have reached a point where people are sated.”
Coyle also makes an effective case against income inequality. She steers clear of the sensationalism that infects much literature on the topic. Instead, she catalogues its pernicious effects on the poor and on the institutions that underpin economic development and public life. “Too great a degree of inequality,” she writes, “not only adversely affects the well-being of society’s losers, it also corrodes the social scaffolding on which a prosperous economy must be built.”
Her thoughts on the relationship between civil society, the state and markets are necessarily abstract: this is a nebulous area. But her musings say a great deal more than the endless bloviating on the topic of the “Big Society” that afflicts British politics.
Not all of her claims are convincing. Talking about the public and private sectors, she says that “the whole merry-go-round of bonuses and performance-related pay is a sham”. She is surely largely correct. There is, as Coyle says, also such a thing as a pernicious “bonus culture”. But does it follow that bonuses should be banned in the public sector, or that “nonfixed parts of people’s pay packages” ought to be taxed more heavily across all sectors in order to change social norms on pay? This is one of the few areas where Coyle attempts too great a leap.
There is also an element of wishful thinking in her call for each country to “pursue its own policies to address the risk and likely degree of climate change, absent international agreement”. She rather wishes away the incentives that each country has not to move faster than its neighbours on climate change.
The power of Coyle’s arguments comes from her deployment of research and careful step-by-step argument. Each of her assertions rests on thickets of name-checks and examples. This can go too far and at times the book has the feel of a literature review.
The book suffers slightly from its broad range, which distracts the reader from its argument. It is also weakened by indecision about who the target reader is. The text is aimed at the general reader, yet some might struggle to follow the book through some of its more complex sections.
A few slips have crept in (Coyle, for example, understates the scale of China’s investment in US treasuries). But the errors are not fatal. Indeed, Coyle’s rigour and careful research are this book’s greatest assets.
The Economics of Enough will not set the world on fire. None of its most convincing arguments are new. But it makes strong points in many areas and is a solid guide to the challenges that face governments in the coming years.
The writer is the FT’s education correspondent