Course Correction
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Bibliographic details
- Authors: MARTIN SCHINDLER
- Published: September 2, 2021
Overview
- Title reviewed: Cogs and Monsters: What Economics Is, and What it Should Be
- Reviewer: MARTIN SCHINDLER, deputy division chief, IMF Institute for Capacity Development
- Publication: F&D Magazine, September 2021
- Format and price: 272 pp., $24.95
- Read time indicator on page: Less than a minute(0 words) Read
- Note: Opinions expressed are those of the author; they do not necessarily reflect IMF policy.
Central framing (Cogs and Monsters)
- "Cogs": Criticisms of standard economic models, notably:
- Stylized nature of models and excessive "mathiness" that can obscure underlying assumptions.
- The idealization of fully rational agents optimizing complex objective functions.
- Author’s proposed remedy includes greater tolerance for "theoretical ad-hoc-ery", which the reviewer views as unlikely to enhance model credibility.
- "Monsters": Structural changes in the global economy that challenge existing economic frameworks, including:
- Complex, evolving financial markets whose vulnerabilities were not foreseen prior to the global financial crisis.
- Disruptions from COVID-19 that call into question tightly integrated, globally distributed production chains.
- The digital economy’s measurement and modeling challenges (highlighted as a persuasive point).
Assessment of specific arguments and examples
- Pareto criterion critique:
- Coyle laments the Pareto criterion as not useful for policymaking.
- Reviewer’s counterpoint: Most economists accept policies (e.g., trade liberalization) that create net gains despite distributional losers; the policy failure typically lies in compensation of losers, not the Pareto framework itself.
- Handling of criticisms:
- The reviewer credits Coyle with distinguishing valid criticisms of the profession from straw-man arguments, while also noting she occasionally constructs straw men of her own.
Profession-level problems identified
- Entrenched academic and policy networks impeding fresh ideas.
- An aggressive debating culture within the discipline.
- Persistent lack of gender and racial diversity.
- Consequence: These issues absorb attention and may reduce focus on some substantive policy-relevant topics.
Noted strengths and omissions
- Strengths:
- Convincing exposition of challenges posed by the digital economy for GDP measurement and economic modeling.
- Persuasive highlighting of several issues the profession should address in both academia and policy circles.
- Omissions (missing or insufficiently addressed topics):
- Role of economic policy in addressing climate change.
- Strategies to make economic growth more inclusive.
- Implications of increasing automation for the future of work.
Implicit recommendations and implications for the profession
- Reassess model formulation practices to reduce obscuring "mathiness" while maintaining rigor.
- Improve mechanisms for compensating distributional losers from broadly beneficial policies (e.g., trade liberalization).
- Prioritize inclusion of digital-economy measurement issues in standard macroeconomic and policy toolkits.
- Address internal profession dynamics: open networks to fresh ideas and improve gender and racial diversity.
- Expand focus to pressing policy topics omitted in the book: climate policy, inclusive growth, and automation impacts.
Source: IMF F&D Magazine page — Course Correction, September 2021
Content in this bundle
- Book Review: Cogs and Monsters - IMF F&D
- Corregir el rumbo ● Finanzas y Desarrollo ● Septiembre de 2021
- Changement de cap
- Книжное обозрение – Финансы и развитие – Нельзя терять время– сентябрь 2021 года