Coin toss

David Orrell’s primer on alternative economics
may (or may not) help you understand the
last few grizzly weeks

by JULIET WATERS

“Something is askew in the global economic system.” These days, the opening sentence of The Other Side of the Coin, David Orrell’s primer on alternative economics, reads like a serious understatement. Then again, pretty much any description short of “totally fucked up” would sound understated after a week where even John McCain is calling for stricter regulations.

I’m not sure why last summer, during the few weeks I had off to read a book that didn’t come out in the last six months, I ended up reading Naked Economics: Undressing the Dismal Science by Charles Wheelan. Somebody at the local bookstore near Kennebunkport recommended it as light summer reading, and the cover picture of a guy in U.S. dollar print bathing trunks reinforced this idea.

This week, however, I’m really glad I did. As I struggled through some of the more confusing sections of The Other Side of the Coin, I’m happy I had another primer on economics to refer to. This isn’t to say that Naked Economics is a better book. It’s not as provocative, and for anyone well versed in economics, it’s probably less interesting. But it was way easier to grasp. The main weakness in Orrell’s book is that while he claims to demystify mainstream economics, some of his alternative theories feel just as slippery on the brain.

He can’t help it. He’s an economist, and the worst kind for general readers, an economist with a background in mathematics. Economists as a group are not known for the lucidity of their writing. Orrell is better than most, but he’s still best for a particular kind of reader, one that’s willing to put in the brainpower to understand ideas like fuzzy logic and fractals, and how they are to Pythagorean theory what Jimi Hendrix is to the Big Band era. Frankly, on a week when the markets have gone so seriously grizzly, reading Orrell feels a little like deciding to read a book on chaos theory sometime around September 11, 2001.

Wheelan, on the other hand, is a journalist with a preference for behavioural economics over formulas. After reading him, Orrell’s claim that contemporary economics hasn’t changed much since its neoclassical roots in the 19th century feels a little overstated. Neoclassical economics is based on two things, the assumption of scarcity, and the presumption that humans act rationally. Contemporary economics, however, is barely older than your average baby boomer. Yes, it grew out of these predicates, but no one looking at the U.S. economy in the last 50 years would get the vibe that anyone in power seriously thinks resources are scarce.

And if there’s been an underlying assumption about human nature, it’s not that we’re rational, it’s that we’re greedy. Thus economics is now the science of managing incentives and predicting outcomes in a civilization where we can safely assume that individuals are self-interested and corporations are machines organized around profit.

This isn’t to say that Orrell’s book has nothing to offer us in these dark days. I would love nothing more than to live in the kind of world that would fit the solutions that he proposes. I think it’s a fantastic idea to impose salary caps on CEOs, just like in professional sports. This would work better, however, if CEOs were more like players than owners. But players are more like lower level executives. And theoretically we do have salary caps on lower level executives. We call it income tax (in an ideal world where they actually pay it).

People need to educate themselves in economics. Still, I’m not sure anybody this week needs to read a whole book to figure out that the rules of the game have changed, and that the time has come to have some serious talks about profit caps.

THE OTHER SIDE OF THE COIN:
THE EMERGING VISION OF ECONOMICS
AND OUR PLACE IN THE WORLD BY
DAVID ORRELL, KEY PORTER,
HC, 376 PP, $29.95