In her bold new book Cogs and Monsters: What Economics Is, and What It Should Be, Cambridge professor Diane Coyle offers a road map for how economics could play a more positive role in the twenty-first century.
There is one thing economists have yet to succeed in, and that is “changing the public image of economics as a being so dismal,” writes Diane Coyle, the Bennet Professor of Public Policy at the University of Cambridge, in her bold new book about the field of economics Cogs and Monsters: What Economics Is, and What It Should Be.
“The claim to objectivity has helped make economics influential in policy-making. There are economists in all central government departments, there are powerful economic regulators, not to mention the central bank; businesses employ economists to lobby government. So in effect modern capitalism is organized as a result of the outcome of a conversation among economists. Looking around at our economies today, post-GFC [global financial crisis], post-pandemic, with vast economic inequalities laid, the outcome is not pretty,” she writes. “The influence of economics is being challenged as it hasn’t in decades.”
To her, this provides economists with an opportunity to transform the field and engage in a public conversation about what it is that economists actually do. In an interview with ProMarket, Coyle explores valid criticisms of economics, the importance of diversity, and why Twitter and blogging might actually be good tools for holding economists accountable.
[The following conversation has been edited and condensed for clarity and length.]
Q: Why did you decide to write this book?
This book brings together two threads that I’ve thought about a lot over the years. One is about why economics is important and valuable. There have been many, many books—probably more since the financial crisis—criticizing economics. I think a lot of them missed the point and misunderstand some of the things that we assume or some of the techniques that we use. And in doing so, in focusing on something like saying economics is too mathematical, or it just seems people are rational all the time, when they’re not correct, it misses some very important and valid criticisms. They include things like the composition of the profession, which I’ve touched on in this book.
The other thread is my work over the years on digital markets, the digital economy, and increasingly also questions of sustainability and natural capital and environmental economics, where a lot of the issues that we treat as sort of special cases in economics, not the benchmark case, turned out to be the whole of the economy, really.
Q: You imply that there are a number of people in your profession, economists, who dismiss even valid criticisms. Do you think that has started to change?
I think things are changing. On the diversity of the profession, my sense is things have really started to change. Both in the United States and the UK, and in continental Europe, there’s much more focus now on the fact that it’s very male-dominated, far more than most other academic subjects, and that it’s got quite a narrow class base. We don’t talk about class very much, but that’s certainly true. In terms of ethnic or cultural diversity, that’s also quite narrow. On both sides of the Atlantic, the professional associations have initiatives to try and address that. That’s very encouraging.
I do sometimes wonder if they go far enough. If they really recognize that if you have a very narrow social base as a social science, you’re going to do bad social science. If people inside economics have really internalized the fact that you don’t know what you don’t know. You don’t know what questions to be asking if you’re in a department where it’s full of—to caricature—white, middle-aged men who all have the same kind of life experiences. I wonder a bit about that.
I’m really encouraged by the changes I’ve seen. Of course, that’s a very long haul. It involves going back to schools and undergraduates to try to change that pipeline, so that by the time you get to the more senior ranks, there’s a bigger pool of more diverse people in every sense, available to be appointed.
I’m not sure how far I think criticisms, the kind of critiques I would apply to methodology, have really made headway. One way to think about that is the focus on the narrowness of the top five journals that a number of Nobel laureates have picked out in recent Journal of Economic Literature papers. It is a very narrow set of questions and, I think, quite a narrow sense of what makes good economics. There’s a sort of focus on quantitative techniques, not qualitative. Certain kinds of techniques become fashionable, and certain subject areas become fashionable and I think that really needs to broadened. Unlike other disciplines, we need a broader set of top journals. Very few other [academic disciplines] have as few as five that are the main conduits for what’s considered to be brilliant.
Q: Throughout your book, you compare economists to a number of different professions: a dentist, a plumber, an engineer, and even Dr. Frankenstein. My favorite is the storyteller, because in order for the general public to connect with what you as an economist are trying to describe you have to put it in a way that anyone can connect to.
It’s why economic journalism is so important, having those mediators between the profession and the public. A lot of economists are great communicators, also. I completely agree with you about that. My own research is about economic statistics and one of the things that troubles me is that we have got so used to downloading statistics from the internet and running regressions on them, that we don’t think enough about how the statistics are constructed. Because we do tell ourselves stories about what’s happening to the economy as a whole based on the cycles that we see in GDP, and inflation, and so on. Whereas the reality is very messy. If you get into granular detail with any economic statistics, they generally paint a somewhat confused picture. And so there’s always an act of interpretation and storytelling going on. And it gets quite hard to shift those. I mean, that’s fine, that’s essential. But then you have to be prepared to change the story if the figures change. And that’s sometimes quite hard to dislodge those narratives.
Q: Near the end of your book, you write that economics needs to return to political economy in order to fix some of the other things you’ve mentioned along the way. What did you mean by that?
Well, one of the ways to get into this is to think about how often economists advocate structural reforms in economies. And that might be something like reforming the pension system or tax system or the welfare benefits people get paid. And very often, you’ll hear the comment: “Well, this is the right policy. We’ve done the analysis. We’ve run the data. This is the right thing to do, if only the politicians would implement it.” And generally the politicians can’t implement it, because there are winners and losers. And if you’re not thinking about: how can we really compensate the losers? Or what are the politics of navigating this distributional change? [Then] actually, the analysis that you’ve done is wrong. And I think certainly in policy economics, if you’re not analyzing the political context for taking decisions, then your economic analysis is not going to be well-founded or implementable. And there’s been a sort of general sense over the years that we do the positive analysis and politicians take the normative decisions.
We’ve really got to engage explicitly with things like these distributional questions. Given the times we’re in, politics is coming for us anyway. If you think about what’s happened in central banking, for instance—not my field, so I’m no expert on it. But, we had a period of great moderation when the independence of central banks was seen as really important to anchor inflation expectations. Central banks [made] independent decisions, free from political cycles. They [made] evidence-based decisions about what interest rates ought to be or what monetary policy settings ought to be. Now that we’re in an era where there are very large fiscal deficits, and quantitative easing, unconventional monetary policies mean that they are being monetized, then the politics has really come back into central banking. You can’t think about monetary fiscal policy in that separate way anymore.
You see that in the debate about MMT [Modern Monetary Theory], for instance. This will happen in other domains of policy. It will happen in competition policy, where there’s now much more emphasis on an industrial policy that favors national strengths. How does that play into competition policy, which like central banking, seems very technocratic? Politics is coming back in. Whether we like it or not, I suspect it will happen, because of the times we’re in and everything that’s been happening. But better to do these things explicitly. And I would welcome —and I think it’s happening —more political economy research being done in universities.
Q: Politics and economics are especially intertwined right now. You write that inequality is a political as well as an economic phenomenon. In the US at least, inequality is driving much of the political discourse right now.
It’s interesting that we as economists were so slow to notice [this], really. When Thomas Piketty’s book was published, and it had such an impact, there was a sense of economists going: “Oh, well, I think we knew that because we’ve had income distribution figures.” Yes, people who worked on income distribution had known about that, but somehow it hadn’t been part of the mental furniture of all of the rest of us. And so in that sense, it came as a bit of a surprise. But when you see that people of median incomes haven’t been making any gains for 10 years or more, it’s not really surprising it becomes a political phenomenon.
Q: You write that economists have gotten better at engaging with the outside world by becoming better bloggers, and by being active on Twitter. I feel so conflicted about this, because social media platforms can be toxic, and often drive the debate in very unproductive ways.
I think it’s had a positive effect on economics. Obviously, I recognize what you say about all the unpleasantness and trolling and bitter fights that go on on social media. But there are also spaces where people have quite reasonable conversations, and I think for probably a minority of economists, they become quite influential. These platforms have enabled them to have a much more direct conversation with people who are not in the formal structures of profession, to have a conversation with economists working in financial markets, or people who are just interested, but in quite a serious way—serious amateur economists, if you like. And that’s very healthy.
And similarly, getting [out] economics working papers. Unlike other disciplines, all of our papers go out as working papers first. Having those debated, and all that sort of extra review of the papers, I think it’s been a very positive development. But I’m a great believer in having this public conversation because economists are really influential in public policy.
Q: Is there anything you wanted to add that we haven’t touched upon yet?
The economy is changing now, in ways that we haven’t entirely internalized. The transformation that digital has brought into our lives in everything from how we spend our time—four hours a day on online platforms—to how businesses operate, to how a city is going to be managed in the future, it’s everywhere. And yet, it’s invisible in economic statistics. It’s actually, I think, really under-researched in academic economics. It’s partly because the data is impossible to get a hold of, a lot of it is held within very large companies, or hasn’t been collected for long enough yet. That means that many economists aren’t very comfortable, because we like to have a data set and run some regressions on it. But it’s really important for us to start engaging in the policy debate, and showing people whose lives are permeated by digital things that actually we have something to say about it. We need more of that. I hope that’s one of the messages that come out of the book as well.
Learn more about our disclosure policy here.