------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (September 2007)

Diane Coyle, _The Soulful Science: What Economists Really Do and Why 
It Matters_. Princeton, NJ: Princeton University Press, 2007. vii + 
255 pp. $28 (cloth), ISBN: 978-0-691-12513-8.

Reviewed for EH.NET by John A. MacDonald, Department of Economics, 
Wake Forest University.


With the title "The Soulful Science: What Economists Really Do and 
Why it Matters," Diane Coyle surely inspires interest in economists 
and non-economists alike. The point of her book is presumably to 
rally economists while explaining the importance of our discipline to 
anyone else who views it with suspicion. Unfortunately, while the 
book is thoughtfully presented and thoroughly researched, the 
presentation of this point is largely obscured by some rather dense 
prose. But if the reader gets past this drawback, the underlying 
message becomes clear: economics is more than you think, and yes, it 
really does matter.

To make her case, Coyle begins with a chapter devoted entirely to the 
seemingly innocuous topic of data. The ensuing discussion reveals how 
economists have risen to the enormous task of accumulating and 
reconstructing all sorts of data. The central character in this 
discussion, economic historian Angus Maddison, is known for having 
estimated GDP and growth rates for almost two hundred nations dating 
back to the year 1000 A.D. Incredible efforts like Maddison's enable 
researchers to tackle questions that, in the absence of data, were 
essentially impossible to answer. Hence, economists provide the 
extremely vital service of collecting and maintaining important data 
sets.

The next thing economists do, once the data are in place, is test 
theories and refine their tools of analysis. With this in mind, the 
second and third chapters are primarily concerned with the evolution 
of post-neoclassical endogenous growth theory. Along with the advent 
of powerful computers and increasingly sophisticated econometrics, 
the massive data expansion has enabled empiricists to treat 
previously exogenous variables as endogenous. This has led to both a 
testing of long-accepted growth theories (i.e., Solow's model) and 
the development of new ones (i.e., human capital and technology 
growth models). Such theoretical developments in turn enable 
policymakers to better address - and potentially fix - vexing social 
issues, such as poverty. Clearly the implications of these synergies 
are profound.

At this point, assuming that the reader has developed a strong grasp 
of "why it matters," Coyle shifts the focus of the discussion 
inwards. She devotes the middle three chapters (4-6) to an 
introspective examination of several key assumptions generally made 
by economists. For example, while economists have long believed that 
per capita GDP is an appropriate indicator of well-being, many are 
questioning it as a truly useful measurement of "happiness." Possible 
substitutes include the Index of Sustainable Economic Welfare (ISEW), 
the Genuine Progress Index (GPI), and the Human Development Index 
(HDI). Each is constructed with emphasis on a particular aspect 
considered important to its promoters. However, any such emphasis is 
inherently subjective, revealing biases that can be exploited to fit 
just about anyone's agenda. After much consideration, Coyle concludes 
that GDP is a pretty good measurement of well-being after all, and 
that any permutations that push us away from it unnecessarily damage 
consensus (and, therefore, our collective credibility).

Not all innovative work is viewed so skeptically, however. Chapter 5 
challenges the assumption that all people are rational, utility 
maximizing robots. New models and policy angles instead suggest that 
people are, in a sense, predictably unpredictable. For instance, 
normal people exhibit inertia to the point where they take what's 
given to them most of the time, even when they know such behavior 
isn't rational. A good example is "opt-out" versus "opt-in" 
retirement savings programs: opt-out participation is in the 70-80% 
range, while opt-in participation for identical programs is in the 
20-30% range. We also have a problem getting normal people to be 
objective in the first place: they often get set in their opinions 
and refuse to believe the truth even when it stares them in the face. 
Paying attention to such things helps keep models as realistic as 
possible, which helps maximize the persuasiveness of their 
conclusions.

Shifting gears one last time, Coyle concludes her book with three 
chapters intended to bring together "the social nature of the economy 
and the human nature of the individuals making up society." Chapter 7 
provides a convincing account of evolutionary economics: why markets 
are Darwinian, how economics influenced Charles Darwin, and how 
Darwin, in turn, influenced economics. She links the concept of 
natural selection to the gradual transformation of markets over time. 
Successful firms are much like successful biological entities in that 
they persevere as a result of gradual mutation/innovation, constant 
adaptation, and chance. Joseph Schumpeter is oft-discussed here as a 
sort of visionary user of evolutionary principles, being among the 
first modern economists to really embrace dynamic questions. But 
evolutionary economics has only recently caught on because, as Coyle 
points out, it fell out of fashion after WWII due to its association 
with the Nazis (through eugenics). Nevertheless, she sums up its 
reemerging appeal by striking a centuries-old nostalgic chord: "the 
attraction of evolutionary theory is the absence of a plan, a 
designer, a central organizing intelligence - the invisible hand, the 
emergent, self-organizing economic order." Despite commanding a 
minority interest in economics, it is hard to disagree with her 
conclusion that "any economist who studies industrial organization 
and technical change clearly has a strong intuition that it is an 
evolutionary process."

While these topics might sound very interesting, they suffer from a 
lack of obvious cohesion when presented one after another in the 
book. Ironically, one might say "The Soulful Science" lacks soul: 
there is no single, central, pervasive point that inspires much 
emotional excitement. This is a problem because the title of the book 
would seem to suggest otherwise. The problem is compounded by the 
strange sense that "what economists really do" is nothing more than 
deal, around the clock, with data: they collect it, construct it, 
argue about how to interpret it, devise complex models around it - 
undeniably important stuff, but not exactly soulful. Further, 
although one gets the feeling throughout that there must be a punch 
line somewhere in the text revealing "why it matters," it doesn't 
materialize until the third to last page. This is strange because it 
is arguably the most important point of the book. Nonetheless, it is 
summarized by Coyle as follows: "The availability of solid empirical 
evidence on an array of social issues is?going to make economics very 
controversial. ... A lot of sacred political cows are heading for the 
slaughterhouse?" In other words, the mounting evidence provided by, 
analyzed by, and interpreted by economists will eventually, when 
combined with the massive proliferation of information, lead to 
incredible political momentum towards all sorts of change. THAT's why 
it matters. Why did it take 253 pages to say so?

In short, the book is a good reference for economists interested in 
how the discipline has flourished in the past thirty years or so. It 
might also be appropriate for economic history courses that focus on 
the modern era. But the length and editing make "The Soulful Science" 
unlikely to capture the attention of casual readers.

John A. MacDonald recently defended his dissertation, "An Examination 
of Airline Pricing: Testing the Effects of Mergers and Uncertainty on 
Average Fares and Dispersion," at the University of North Carolina -- 
Chapel Hill.

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