Preview: Trillion Dollar Economists, by Robert Litan

In the tradition of passing judgment on books I haven't read, let me say that Trillion Dollar Economists, by Robert Litan, looks like it mostly agrees with my priors. From the inside flap:

A trillion dollars, and most likely more – that’s how much economists contribute to the U.S. economy. But you’d never know it by reading the jokes and criticisms (some of it fair) about economists in the media and in the blogosphere. 

In Trillion Dollar Economists, one of the nation’s leading policy analysts, Robert Litan, explains with lucidity and precision how the insights of many economists, mainly over the past fifty years, have helped to revolutionize business, resulting in huge benefits for companies and consumers. 

Economists and their ideas are embedded throughout the economy, Internet-based companies (even on-line dating sites), and increasingly in sports. Whether they know it or not, Internet retailers owe their existence to economists who in earlier decades helped convince policy makers to remove limits on prices and entry into the transportation business, while providing much of the intellectual impetus for breaking up the telephone monopoly that otherwise most likely would have inhibited the growth of the Internet. 

The widespread use of auctions in on-line commerce and search has its origins in economic research. 

Consumers and businesses that have benefited from the oil and gas boom have economists to thank for convincing policy makers to remove energy price controls. Investors in indexed mutual funds and other financial products are in debt to entrepreneurs who got their ideas or inspiration from financial economists.

This sounds a lot like what I wrote here, except without the macro-bashing.

Anyway, it looks like Litan divides the benefits of econ into two categories: 1) engineering applications, and 2) policy advice. That sounds right to me. I would have added a third: 3) ideas.

Economists helped prepare the public psychologically for the advent of neoliberalism in the 80s and 90s. Neoliberalism has had its costs and its benefits, but overall I'm glad we went down that road, since I've seen the alternative (Japan). Economists eased this transition by basically being priests of the free market. That often meant ignoring things like externalities and public goods, which was bad, but it might have been necessary in order to convey a simple message to the public: Don't be afraid of economic liberalization. Economists assured Americans that although liberalization would destroy many jobs, more would be created in their place. That turned out to be pretty much true. But anyway, now that the gains from neoliberalism have been mostly reaped in the U.S. (though not in Japan, Korea, or some European countries), economists may have to shed the role of "priests of the free market," and start talking about how to fix the market failures that they glossed over in the 80s.

So I'm interested to see if Litan deals with this idea.

I'm also interested to see what he thinks will be economists' most important role going forward. My guess has always been that micro theory would become more and more important, as tech companies find more ways to exploit things like auction theory, search and matching theory, etc., and that policy advice would become a bit less important now that the big liberalization boom is over. So I want to see if Litan agrees. I also want to see if he thinks that economists' policy advice will continue to shift from simple deregulation to designing "smart" regulation (a shift I think has already occurred to some degree with things like pollution permits).

Anyway, looks like a cool and interesting book. I'll of course write a review after I've read it.