The Best Books of 2021

The Best Economics Books of 2021

recommended by Diane Coyle

Cogs and Monsters: What Economics Is, and What It Should Be by Diane Coyle

Cogs and Monsters: What Economics Is, and What It Should Be
by Diane Coyle

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From the education of a Nobel Prize-winning economist to debates about privacy and the drawbacks of global supply chains, Professor Diane Coyle of Cambridge University's Bennett Institute for Public Policy chooses the best economics books of 2021. These are highly readable books that also shed important light on the Covid pandemic and the world we live in.

Interview by Benedict King

Cogs and Monsters: What Economics Is, and What It Should Be by Diane Coyle

Cogs and Monsters: What Economics Is, and What It Should Be
by Diane Coyle

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As you’ve kindly done for a number of years now, you’ve selected the best economics books of 2021 for us. Let’s go straight to your first choice, which is by the Nobel Prize-winning economist Amartya Sen. Tell us about his memoir, Home in the World

Sen is a really important and inspirational thinker. He is known for advocating the capabilities approach in economics. Conventional economics is based on the idea that people maximize their utility or maximize their profits. It’s one dimensional. Sen has advocated this much richer capabilities approach, where you try to take account of the many different kinds of things or dimensions that would affect people’s well-being. It’s been incredibly influential in development economics and, increasingly, in other areas of the subject, because of a new appreciation of the importance of the environment or of unpaid care, for example. This memoir is really fascinating. It’s beautifully written, a really good read. It’s all about his intellectual formation, growing up in Bengal in British India—which became part of Bangladesh—in a school established by Rabindranath Tagore and the philosophy of education that instilled in him. I suppose the fact that he received such a different intellectual formation, from such a different background, made it possible for him to challenge the conventional approach to economics that he would later be taught.

Tagore was a poet, right?

He was a poet and creative writer, but also a philosopher, statesman, and a very influential thinker.

As an account of someone’s intellectual formation, I think it’s an absolutely fascinating book. The questions Sen raises are of growing importance in how we think about what it is that economics is supposed to be all about. If you think of a person giving policy advice on the basis of economics and asking, ‘What am I doing to make things better?’ you really ought to be interrogating what you mean by ‘making things better’—for whom and in what ways. Like all conventional economists I’ve been trained in a very uni-dimensional social-planner way of thinking about doing things, so I really enjoyed reading the book.

He was 19 when he went to Cambridge. Was he subsumed into conventional academia quite early on or was he a rebel from the beginning?

It was a bit more complicated. The book goes up to the period where he has been a student at Cambridge and he’s got his first job in academia, in the United States. He was obviously an incredibly able student in terms of conventional economics. But one interesting thing about his background is the way that the mode of education in his school was to question. So there are passages in the Cambridge section where he talks about how much he enjoyed the conversations he had with senior figures, but also the disagreements he had with them. I don’t think he was being a rebel, particularly. It was just this ingrained habit, through his early education, of questioning.

Let’s move on to Shut Down: How Covid Shook the World’s Economy by Adam Tooze. So this is back to the big story of 2021?

Yes, it’s about the impact of the pandemic. Adam Tooze is an economic historian so he brings a historical perspective to the way he writes this first draft of history. It’s not a piece of journalism, but it’s very much addressing something that’s still happening to us. It’s this instant analysis of what happened.

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There are some other excellent books about the science of the pandemic, like the book by Sarah Gilbert and Catherine Green, Vaxxers, on the vaccine development, and Spike by Jeremy Farrar on the epidemiology and policy. But for an economist, what’s interesting about Adam Tooze’s book is the integration of economic policymaking alongside the unfolding events of the pandemic. It’s mainly focused on the US but does touch on global events too. His previous book, Crashed, was about the great financial crisis. What that very clearly established was the important role that the Federal Reserve Board played in maintaining world systemic economic stability. That, in effect, happened again in 2020. The actions the Fed took to make sure that we didn’t have an even bigger economic crisis—through financial markets seizing up and panicking—were important. The book is a ripping yarn of events, month by month. You feel that you’re plunged into that decision-making and it was economic aspects of the decisions that I found particularly interesting.

In comparison to the global financial crisis, it seems to me there’s been very little public discussion of the economics of the pandemic. That could be because it’s all happened behind closed doors, or it could be that there’s been a vast consensus about it, and so the arguments over policy in this area have been limited. Or it could be because it’s been handled incredibly well. Has there been much discussion?

In the US, the discussion has been about the size of the fiscal stimulus needed, so there has been some debate, and there’s also a debate around modern monetary theory and how much you should worry about ‘printing money.’ But I think you’re right to suggest that policy has actually succeeded incredibly well. As a result, the economic debate has been lacking a tempestuous quality, I suppose.

When this all started, it was an unprecedented event in modern history, that economies were shut down by governments. It was remarkable that governments could do that at all, given that we had got so used to thinking about how limited and ineffective they are compared to market organisations. The fact was that, despite this, there wasn’t a massive recession. If you cast your mind back to March and April 2020, the Bank of England, for instance, was saying that we would have the worst recession in 300 years. Measures of GDP absolutely plunged. Obviously, there are many people who were worse off as a result, but it wasn’t a complete disaster. In that sense, the economic policy response has been very successful. There’s also, in a more subterranean way, integration going on between the epidemiology and the more detailed economics—trying to understand better people’s own personal responses to the news about the virus in terms of their economic activity. Previously, these two kinds of modelling had gone on parallel tracks. Over time, once the pandemic started, they became more integrated with each other.

Do you think the global financial crisis was helpful as an early run of how to coordinate massive government interventions internationally?

I think so. That’s certainly what Adam Tooze argues. I find it very persuasive. And, of course, it was relatively recent in the scale of economic history.

The next book you’ve chosen for your best economics books of 2021 list is Good Data by Sam Gilbert. This is another book with a positive message. Tell us about this one.

I have to disclose, first of all, that this is by a colleague of mine here at the Bennett Institute, Sam Gilbert. It’s a very healthy counterbalance to the ‘surveillance capitalism’ trope that has become so popular. The underlying reality is that there are pros and cons of this new digital data economy in which we find ourselves. There’s a genuine trade-off between the degree of privacy that we might want in an ideal world and the goods and services that can be created for us using the information based on data.

Sam Gilbert was one of the co-founders of a very successful online insurance company and was responsible for a lot of the use of data in marketing that they deployed. He’s done a lot of subsequent research. The point about data is that it’s not useful in itself, it’s useful for the information it gives us that we can act on, or that allows us to do things differently, in order to give us better outcomes.

Quite often things that are useful require different sources of data to be brought together. To give you a pandemic related example, if I take my temperature, it’s only useful information to me if I know what the population average is, so I know what’s normal. In current circumstances, if I have a temperature that might also be useful information for other people. So there are these positive spillovers of data. At the same time, I’ve got reasonable expectations of privacy. Completely understandably, I might not want people to know many details about my health. These are the kinds of trade-offs that we’re trying to navigate in this world and yet the surveillance capitalism idea has made a lot of people just think it’s terrible that we’re sharing data at all.

“The point about data is that it’s not useful in itself, it’s useful for the information it gives us that we can act on”

If you think back to the start of the pandemic, there was a fuss about whether the NHS app to track people’s contacts, could actually have private information centralised and shared in the government database. That’s incredibly useful if you want to do a track and trace operation, and it’s what the physical track and trace operation does: it asks people about their personal contacts and follows them up. But because the data privacy debate has got to where it has in terms of surveillance, the government was not able to do that on the app and had to use the Google and Apple version, with embedded privacy. It’s all very decentralised. You alone will know if you’ve been near somebody who’s tested positive and they’ve reported it. But that’s much more limited in use when it comes to containing a pandemic, which is all about spillovers between people. So you can reasonably debate whether we got to the right point in that trade-off. That’s what the book is about. It’s about opening up that debate and saying it’s not all one-sided.

You’ve given examples from the pandemic, but the book also deals with much broader areas of political control. For instance, he argues that improved data use can help improve issues around inequality in society.

Using data in all kinds of ways can help address either public policy problems or business problems, or help businesses come up with new ideas. The potential is very wide. But, if we’re going to tap into that potential, we need to have a clear set of protocols about what data could be used when and by whom. There are certainly examples, like children in so-called ‘troubled families.’ If you can join up health data, school data, police data and social services data effectively, you can see that might help address all kinds of problems—social problems, inequalities—and help children at risk. But, equally understandably, there would be concern about anybody who got tagged with that label. Who would know that about them? How long would it follow them as they lived through their lives? Would that be a permanent digital fingerprint or could it be forgotten? There’s a lot of quite intricate policy detail to discuss. I find the surveillance capitalism argument very unsophisticated: it ignores the detail.

And Gilbert’s view is that data can be used properly, in the right way, to effectively improve society in many areas?

That’s the argument. I’m a bit less confident because it depends very much on the governance arrangements that we set in place, and they’re just not there yet. We’re only just starting this debate.

Okay. Let’s move on to Vaxxers by Sarah Gilbert and Catherine Green, two professors at the University of Oxford.

This is a fantastic account, absolutely gripping, by two of the principals involved in the development of the Oxford/AstraZeneca vaccine. There are all kinds of really interesting insights. One thing that interested me was how early people in the epidemiology community spotted the warning signs of the coming pandemic—well before it hit the headlines, and well before it came to the attention of people in Whitehall who are responsible for spotting trouble ahead. A bit like the financial crisis, there were some people who saw it coming well in advance, but it didn’t permeate through into the public consciousness or the policy consciousness as quickly as you might have hoped.

“One thing that interested me was how early people in the epidemiology community spotted the warning signs of the coming pandemic”

And—for somebody who’s in research—there’s a lot of very interesting material about how research gets funded and how hard it is actually to get the money for what might turn out to be fundamentally important research. You have to spend so much of your time writing proposals for short-term or relatively small pots of money, that it’s very difficult to sustain fundamental strands of research. So, kudos to the University of Oxford: they stumped up the money at their own risk for the vaccine development work to continue, before it was clear that it would get funded through the normal kinds of research channels. There’s also great material in the book about how to scale up, how to work alongside manufacturers, because the research facilities were quite small-scale and we needed millions, billions, of doses of vaccine eventually. So the discussions about how it got commercialised, how AstraZeneca came to be part of it and, actually, how well they come out of it in the sense of not taking a profit during the crisis, is all very interesting.

Then, at the human level, these are mothers juggling responsibilities of what are busy jobs at the best of times, and the sheer pressure of working at pace and this intensity on something of such fundamental importance. It’s a description of science in action, of how important research is, and raises questions about the kinds of structures of work and research funding that we have in place. Quite apart from this current pandemic, it leaves those as open questions for the future and for other areas.

There must have been very different models for development in the UK, the US and Russia and China. Generally, was this fundamentally a positive story, of people getting stuff right in the heat of the moment? Or is much more complicated than that?

This gets glossed in different ways. The science is clearly amazing, the vaccine development happening so quickly. I do remember back in March 2020 people talking about vaccines, and thinking, ‘but they take years and years to develop and get through clinical trials, how on Earth is that going to happen so quickly?’ So there is that fundamental awe at what the scientists have been able to do. But there are other structures that made it happen at such speed. There was a very interesting lecture by Kate Bingham, who headed the UK government’s Vaccine Taskforce, a couple of weeks ago. It was about how many barriers there were to getting things done that quickly and effectively, in terms of usual government procedures, and the battles she had to fight to overcome the risk aversion of civil servants, who wanted to go through lengthy procurement processes, and the lack of joining up across different departments in government.

The last book you’ve chosen for your best economics books of 2021 list takes us back to the Industrial Revolution. This is Radical Potter by Tristram Hunt.

I like reading history because when you’re researching technological change and innovation, as I do, there’s not a lot of non-historical data to go on. You have to look at the examples that we have from the past. This is a biography of Josiah Wedgwood. What’s interesting about it is the way it illustrates how you integrate basic research into manufacturing. He did lots of experiments about how glazes worked, what temperatures were needed, what kinds of clay gave you which different kinds of effects and so on. There are some beautiful illustrations of the kind of samples he created. It was basic research, but the book also shows the way that interacts with the manufacturing process, understanding the skills of the people who are actually loading the kilns and handling the pots. Then, further, the integration of what he could produce using these new techniques and styles with marketing. Marketing led to the importance of the designs of the different tea services and vases that he was creating. He sent free gifts to famous people, to influencers such as royalty, who would then help create the middle-class market for his goods.

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It was clearly a time when the Industrial Revolution was making a lot of middle-class people better off and they could start to think about affording luxuries, like a different tea service with a new pattern. But it’s that whole process of vertical integration—from basic research and digging up different kinds of clay on expeditions, through to a real attention to the detail of the design and the marketing and how you created that mass market—that has been taken out of a lot of modern manufacturing by global supply chains. Different stages get done in different places now. There are lots of companies that have outsourced manufacturing to Southeast Asian countries or are trying to. With hindsight, that looks like a mistake in terms of national policy. It might be fine for the companies themselves if they save money in the short-term. But that deep knowledge of how you innovate in the light of the manufacturing techniques you’re going to have to use—I think that’s something really valuable that’s been lost, and it was one of the things that really leapt out of this book.

And over what sort of period has that been lost—20, 30 years, or longer?

Since the 1980s, when globalisation started to take off. Trade liberalisation made it possible and information and communication technologies made it seem easy to have these very extended global supply chains. So it’s been relatively recent. But a lot of British companies lost their way with spending on R&D earlier. We’re not very innovative. The number of companies that say they do R&D in the UK is pretty low.

I remember a TV series called Troubleshooter, presented by Sir John Harvey-Jones. He was a famous businessman, very successful. He used to go to failing businesses to ask them what was going wrong. Could he help give them some advice? And he actually went to one of the pottery companies in Stoke-on-Trent.  They had, in effect, stopped spending on the design part, the R&D, to cut costs in the face of overseas competition. So they had lost that magic source that made Wedgwood and other British pottery companies so successful in the first place. That was, essentially, his diagnosis in the TV programme. The book illustrates how important the research and innovation was.

Interview by Benedict King

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Diane Coyle

Diane Coyle

Diane Coyle is Bennett Professor of Public Policy at the University of Cambridge and co-director of the Bennett Institute for Public Policy. She also runs Enlightenment Economics, a consultancy specialising in the economic and social effects of new technologies. She was awarded a CBE for her contribution to the public understanding of economics in 2018.

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Diane Coyle

Diane Coyle

Diane Coyle is Bennett Professor of Public Policy at the University of Cambridge and co-director of the Bennett Institute for Public Policy. She also runs Enlightenment Economics, a consultancy specialising in the economic and social effects of new technologies. She was awarded a CBE for her contribution to the public understanding of economics in 2018.