An interview with Jean Tirole, author of Economics for the Common Good
What Inspired you to write this book?
I wanted to show how economics can open a window to the world. Since receiving the Nobel Prize, I have regularly been asked to explain to general audiences the nature of economic research and what it contributes to our well-being. In this book, which is accessible to any intellectually curious reader with little or no previous knowledge of economics, I explain how economics can help us understand the world and guide policy.
What is the benefit of making economics ideas comprehensible to a general audience?
Repeatedly blaming politicians for flawed policies won’t get us very far. Like everyone, politicians respond to the incentives they face, in their case the hope of being elected. Very rarely do they go against public opinion. So we get the policies we deserve. And as I explain in the book, our understanding of economic phenomena is obfuscated by various cognitive biases; we are dependent on rules of thumb and narratives, and we often believe what we want to believe, and see what we want to see. Economics acts as a deciphering key, although of course it has its own shortcomings.
In the book you talk about economics for the common good. What exactly is the common good?
Economics for the common good is an ambition: to suggest policies that help our institutions align social and private interests. The invisible and visible hands–the market and the state–are complementary; to function well, a market economy needs an efficient state to correct its failures. But sometimes the state does not work for the common good. For example, many countries are leaving their children unemployment, unfunded public debt, a degraded education system, inequality, and a lack of preparation for digital upheaval. And the world does little to contain climate change. The book therefore pays particular attention to what is going wrong with governments and how this can be remedied to promote the common good.
Economics has come under sharp attack, especially since the 2008 financial crisis. Is it a science?
We must be humble and accept that it is a science, economics is an inexact one. Overall, an economist will generally feel more comfortable analyzing past events and proposing future policies rather than forecasting. Incidentally, this is a characteristic shared by doctors and seismologists, who detect environments that are conductive to heart attacks and earthquakes, and provide useful recommendations, but are hard-pressed to predict the exact timing of these events, or even whether they will occur at all.