The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [0]
THE ECONOMICS
OF ENOUGH
HOW TO RUN THE
ECONOMY AS IF THE
FUTURE MATTERS
DIANE COYLE
PRINCETON UNIVERSITY PRESS PRINCETON AND OXFORD
Copyright © 2011 by Diane Coyle
Requests for permission to reproduce material from this work should be sent to Permissions, Princeton University Press
Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540
In the United Kingdom: Princeton University Press, 6 Oxford Street, Woodstock, Oxfordshire OX20 1TW
press.princeton.edu
Jacket art: Julee Holcombe, Babel Revisited, copyright © 2004.
All Rights Reserved
Library of Congress Cataloging-in-Publication Data
Coyle, Diane.
The economics of enough : how to run the economy as if the future matters / Diane Coyle.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-691-14518-1 (hardcover : alk. paper)
1. Economic policy. 2. Values. 3. Happiness. I. Title.
HD87.C69 2011
330—dc22 2010041654
British Library Cataloging-in-Publication Data is available
This book has been composed in Sabon and Futura
Printed on acid-free paper. ∞
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
CONTENTS
Overview
PART ONE: CHALLENGES
ONE Happiness
TWO Nature
THREE Posterity
FOUR Fairness
FIVE Trust
PART TWO: OBSTACLES
SIX Measurement
SEVEN Values
EIGHT Institutions
PART THREE: MANIFESTO
NINE The Manifesto of Enough
Acknowledgments
Notes
References
Illustration Credits
Index
The Economics of Enough
OVERVIEW
In mid-september 2007 my sister phoned me to ask whether she should withdraw her savings from the bank and put the money somewhere else—and if so, where would be safe. She was with Northern Rock, and there was an old-fashioned run on the bank. It was unable to meet customers’ demand for withdrawals and had to ask the Bank of England to lend it the cash. The television news showed lines of anxious depositors hoping to take out all their funds. It was the first full-fledged bank run in living memory in the United Kingdom. I told her that the government would bail out all the depositors, as it would be political suicide to do anything else. My sister ignored my advice (although it ultimately turned out to be right) and joined the line outside her local branch. As for Northern Rock, it had to be taken over by the British government.
A year later, in September 2008, the investment bank Lehman Brothers collapsed. Within a day or two, as financial markets around the world plunged, it was clear that this bankruptcy threatened to bring down the entire global financial system like a house of cards. The banks didn’t know if they would get repaid for transactions they had engaged in, which through a massively complex series of links, might end up at Lehmans. They stopped trusting each other, literally overnight. The interbank market, the engine room of the financial system, came to a halt. For a whole week, I went to the cash machine and withdrew my daily limit. It seemed entirely possible that if the interbank market had stopped working, so might the clearing and settlements systems between banks which make possible everyday payments with credit and debit cards or checks. Going to the store, ordering online, paying bills would have become impossible. Companies wouldn’t have been able to pay each other for goods they ordered. Salaries would not have come through into people’s bank accounts. The economy would have ground to a halt. A year later, the Bank of England confirmed that this catastrophe had been horrifically close. The financial system is the pinnacle of the trust on which all economies and all societies have to operate—and that trust almost evaporated.
This is not a book about the financial crisis. But that crisis has proven a catalyst for many people to ask fundamental questions about the way the economy is organized, and about the links between the economy and the kind of society we’d like. The Economics of Enough looks at this wider question, or rather set of questions. It is about how to ensure that government