Beyond simple-minded economics (and policies)

Diane Coyle 01 May 2018

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First posted on: 

The Enlightened Economist, 23 March 2018

   

It isn’t that I haven’t been reading. I devoured a proof copy of Kaushik Basu’s The Republic of Beliefs and Michael Best’s How Growth Really Happens. As they’re not out until the summer, it’s a bit early to post reviews, but they will both be contenders for the 2018 Enlightened Economy Prize. They're essential reads.

It was interesting, in the light of reading those two books, to read an important pamphlet by Rachel Reeves MP, who chairs the Business, Energy and Industrial Strategy Committee in the House of Commons. The Everyday Economy starts the left-of-centre policy task of bringing together a vision of how the economy operates – or can operate –  more fairly, to the benefit of many more people than has been the case for a generation. It isn’t a work of economic theory, but is aligned with important strands of work in modern economics incorporating the importance of institutions and political economy, bargaining power, asymmetric information, and so on. 

I was pleased to see it cites the work of the Industrial Strategy Commission. Although the focuses of Reeves’s pamphlet are fairness and how to share the benefits of economic growth, rather than how that growth should be generated in the first place, this seems to me to be an important contribution to the development of a coherent and realistic policy framework for a left-of-centre party. It is particularly encouraging that the two main political parties in the UK now both speak of industrial strategy and the need for a strategic framework for managing the economy on the supply side. It’s about time.

Anyway, these three books signal in their various ways a decisive public intellectual shift away from simple-minded state v market economics – at least from the non-partisan and from thoughtful politicians. As I’ve been saying for some years now, the high tide of simplistic free-marketism in academic economics occurred a long time ago. I hope this is filtering through into the world of policy and politics. Maybe, reading the headlines, I’m being over-optimistic …

   

In between I read Jon Kalman Steffenson’s About the SIze of the Universe. I was in a discussion with Jón Kalman and Dharshini David (and director Anna Ledwich and Dharshini David, whose new book is The Almighty Dollar) on a BBC radio show called Start the Week recently, about the aftermath of financial crisis. The novel isn’t really about post-crash Iceland, as the discussion led me to expect, but the universal theme of escape from a small nowheresville and the pleasures and pains of uprooting.

Now with great eagerness I’m starting Benn Steil’s The Marshall Plan – first chapter is already ace.

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Topics:  Frontiers of economic research

Tags:  book reviews, growth, Iceland, Marshall Plan

Professor of Economics, University of Manchester; founder, Enlightenment Economics

CEPR Policy Research