26 July 2023

How Economics Can Save the World

Simple Ideas to Solve Our Biggest Problems

Erik Angner
2023, Penguin Business, 288 pages,
ISBN 9780241502693

Reviewer: Lavan Mahadeva

A short cut to knowing what Erik Angner’s book is not about is to read the concluding chapter. It is certainly not about lionising all economists. Angner, a Professor of Practical Philosophy, wants to demonstrate that economics has a scientific approach suited to tackling problems of social interactions with an economic trade-off.

The book follows a nicely structured syllabus. I would see the book as a textbook as to what economics should be about and also a complement to a guide to the profession, like “How to be a Successful Economist”.

Working through different themes, Angner also shows how economists have worked to diminish some of the world’s greatest problems such as climate change and poverty.  I imagined Elinor Ostrom in the back of a police car but then back at her desk, going beyond the descriptive to pose and test counterfactuals.

The book also explained progress unfamiliar to me on social norms and market design, offshoots of game theory. Back in the 1980s during my studies, I avoided game theory as I felt it was disappearing into a morass of assumption-sensitive predictions. My mistake was to identify a branch of economics by the tools used and not by the problems tackled.

Angner is explicit that conclusion must depend upon imperfect data drawn from complex human interactions. But imprecision does not negate the need for a scientific approach and expertise, just as with medicine. It does, though, make it easier to cheat. Not all those who adopt the title economist choose to follow a scientific approach; there are dodgy economists just like there are populist quacks. But most economists I know do try.

Angner is not seeking to make economists popular. The typical answer as to why economists are unpopular is because we have to say things that people do not like to hear. Yes, resources are scarce and policies have unintended consequences. But Angner reminds us that we are also annoying because we also must say these things in ways in which people do not want to hear: causality is complex and answers imprecise.

I am reminded of Piggy in Lord of the Flies:

“Nobody knows where we are,” said Piggy. He was paler than before and breathless. “Perhaps they knew where we was going to; and perhaps not. But they don’t know where we are ’cos we never got there.”  

Well, we know what happened to him. In the school playground that is social media, there is a huge temptation to pretend to be more precise to gain widespread popularity and respect. As a way keeping our balance, Angner has a brilliant chapter on how to be humble and still true by self-reflecting on biases.

The book fills me with optimism about the future. The book reveals an explosion in new methods of gathering data and testing hypotheses, and a greater integration with other disciplines.  Many of the world’s best decisions still have had to be made on bad data and economists know how to do that. As for the lack of popularity, I do not expect that to change, and not if we do things right. Maybe we should just hang out together.

Reviewing this, I found it difficult to look beyond what is the most pressing problem of today to analyse tomorrows’ problems. As the Dasgupta Review has explained, prior to the 1980s there were other priorities such as poverty and development and it was convenient for most to assume that natural resources are not the constraint. Nowadays, however, things are very different. Indeed, as Sir David Attenborough has observed:

“We have a finite environment—the planet. Anyone who thinks that you can have infinite growth in a finite environment is either a madman or an economist.”

The long-awaited Dasgupta Review describes Nature as “our most precious asset” and finds that humanity has collectively mismanaged its “global portfolio”: our demands far exceed Nature’s capacity to supply “goods and services” upon which we all rely.