The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [100]
A more important point is that in spite of the many measurement avenues being pursued, there is an absence of a broad conceptual underpinning for thinking about the shape the economy is taking and should be taking. None of these statistical innovations, important as they are, will do enough to alter our mental model and the political dynamics. The evolution of existing statistics into the national income accounts, which still frame our assessment of the strength of the economy, came about in the 1930s as a response to the urgent challenges of the Great Depression. In the same way, we need to respond to today’s crisis by shaping a new framework for understanding, measuring, and taking action.
SEVEN Values
The theme of the previous chapter was the need to measure better what we value. This chapter is about identifying what we value, in the context of an economy whose structure has been changing in fundamental ways, because better measurements in themselves won’t improve social welfare. What’s the right weight for policymakers to put on different indicators? How should they assess the metrics? One answer, the one many people would have given until recently, is that this challenge is best left to markets. Markets automatically reflect information widely dispersed through the economy and also the preferences of countless individuals, and aggregate all of that to match supply with demand, “as if by an invisible hand,” to use Adam Smith’s famous phrase.
For a generation—certainly for the twenty years after the end of the Cold War and fall of communism—relying on market mechanisms seemed the obvious way to ensure the economy delivered for all. Questions of value and values fell out of fashion. For obvious reasons, the earlier big ideological questions of communism versus capitalism seemed to have been settled by history. Political parties ran on their competence rather than ideology in most countries (at least outside the United States, where the culture wars took over from the Cold War as an ideological battleground). The economy was recession free for most of the period. Financial crises were isolated rather than systemic and typically occurred in distant countries where it was easy to imagine the people weren’t really up to running a modern economy. In prosperous times, complacency isn’t surprising. What’s more, that prosperity seemed to validate the often-strident pro–free market views of the politicians who had “won” the battle with communism. Free markets seemed to be delivering all that was promised of them, such as growth, innovation, globalization, and the miracle of the Chinese economy.
Now, from the perspective of the most serious recession and biggest financial crisis since the 1930s, the benefits of markets are doubted and the question of values has come to the fore. This change in sentiment about markets as a means of organizing the economy builds on the earlier anticapitalism of those who protested about globalization. Many people now would probably agree that markets can’t be relied on to deliver automatically what we value. In which case, the question is how can what society values be identified and achieved? After all, central planning is no more appealing today than it was in 1989. Are we really forced to choose between the inefficient (a government-run economy) and the immoral (a market-based one)?
In this chapter, I argue that this is a false dilemma. Markets are never value free, and so the abstract idea of a “free” market is not practically meaningful. That phrase disguises a particular value-laden version of how markets should operate. There are other sets of values that can and should shape markets in different ways. One reason that the financial crisis has thrown the merits