We know that economics is not a perfect science. Many even dispute that it is a science at all as the ability to do controlled experiments is limited. We economists construct models not because they are necessarily a completely true reflection of reality but because they are useful pointers. And we are often wrong – and admit it.
Of course we think economics is at the centre of things and we could do better as a society if only we were listened to. But that is a far cry from believing that economics explains everything that goes on in people's lives . Nor does it claim to. But without it, the ability to understand what is going on, price options accordingly and be able to make informed decisions would be reduced.
Philip Roscoe does not agree. He bemoans the power of economics and argues that since it only explains a small part of real life, discourages collective action and promotes self-interested behaviour, it must be rethought and a new economics developed in its place. He uses some intriguing examples to make his case, such as prostitution and online dating. But it is difficult to see why economics is failing us just because interactive internet sites depersonalise prostitutes and their individual services and render them a "commodity" like any other.
Similarly with online dating, which he believes alters the true basis for making choices as one is forced to narrow down the desired qualities (blond, blue-eyed) rather than be guided by the way attraction really works (lovely eyes, great smile). We are therefore encouraged to assign values which cannot truly reflect the complexity of a whole person or the importance of the way people interact with each other.
But I fail to see exactly what is wrong here. Online dating could be seen as what economics can do well: it cuts down the cost of transactions. You don't have to go to wine bars every night looking for someone who might fit the bill; you can do your initial research from home. What's more, the sites offer extra choice and increase the number of people involved; no one is forced to go down this route and it isn't necessarily replacing other ways of meeting. The data he uses himself shows that online dating is just as likely to result in good long-term relationships.
Similarly with externalities [the costs or benefits that affect those who did not choose to incur them] – an area that exercises him, and quite rightly too. Economics here has most to offer. The only way to account for the true cost of a car journey, for example, is through applying economic principles to value the extra burden to society in terms of pollution, congestion, depletion of resources, etc. Yet Roscoe derides the cost benefit and value for money calculations made by government to allocate resources, as he believes "economic efficiency" should not be the overriding factor. But it is only economics that attempts to gauge how society may want to maximise social welfare and then assigns values to alternative options to allow comparisons.
To my surprise, Roscoe ends with a reference to one of my favourite films, Babette's Feast. It is about a woman fleeing the French revolution who turns up in an ascetic Norwegian town. She uses all the money from a lottery win to bring over food and wine from France. As a trained chef, she cooks a brilliant meal for dour villagers who turn into rather inebriated but happier human beings.
Roscoe asks "when has economics ever achieved such transformation?" Yet Babette uses skills that were once valued and well-paid. She buys the lottery ticket having assessed the cost benefit and the likely probability of winning. And when she wins the money she puts it to good use. What gives her satisfaction is to spend it the way she does, something which the economists refer to as "revealed preference". Well, if this isn't economics, what is?
By the end of what is otherwise a very readable and entertaining book, I wasn't any the wiser.
Vicky Pryce will be speaking at the launch of PEN’s prison anthology, 'Running to Stand Still: stories from the inside', on Monday 24 February at the Free Word Centre, Farringdon, London