HARD HEADS, SOFT HEARTS Tough-Minded Economics For a Just Society By Alan S. Binder Addison-Wesley. 256 pp. $17.95

ARE ECONOMISTS out of the doghouse? Not quite yet, perhaps, but if all practitioners of the dismal science wrote as persuasively as Alan Binder, they soon might be.

Binder's theme in this essay in "tough-minded economics" is a perversity he calls Murphy's Law of Economic Policy: "Economists have the least influence . . . where they know the most . . . {and} the most . . . where they know the least." Moreover, under O'Connor's Corollary, "when conflicting advice is offered, only the worst will be taken."

The implication is bold, if not brazen: Most economic policy messes result from the neglect of sound economic advice, not from following it.

Binder doesn't have to look far for confirmation of Murphy's Law. With the exception of the 1986 Tax Reform Act, most recent ventures in U.S. economic policymaking bear Murphy's fingerprints and show politicians following their own lines of least resistance rather than good counsel. How else did we dig ourselves into a hole of national debt with "supply-side" fiscal policies whose results were persistently, and correctly, predicted by most mainstream economists of both parties?

What else explains the Reagan administration's romance with "voluntary" import quotas? Most economists are free-traders; no doctrine is more solidly established in economics than that of comparative advantage. But free trade has steadily lost ground during the 1980s. The reason, Binder thinks, is that when international competition distresses certain uncompetitive industries (steel, auto-making, shoes, textiles) you can often do big favors for the afflicted at the expense of small penalties for the many. Elected officials are thus tempted to override the advice of economists, with dire cumulative results. Binder cites one estimate that the post-1981 import quotas on Japanese cars eventually cost Americans $160,000 for every U.S. auto industry job they saved. But the cost was so indirect, so thinly distributed, that few wheels squeaked outside Detroit. Detroit got the grease.

What then, you might ask, would economic policy look like if the advice of economists were followed -- at least where it represents a consensus? Certainly the United States would eschew protectionism, direct or indirect, as a sure loser. Workers troubled or displaced by foreign competition would enjoy generous transitional assistance, even compensation. Either would be cheaper than quotas. Some inflation would be tolerated, if necessary, as the price of full employment. Inflation would not be ignored, of course, simply moved down on the rhetorical scale to, say, "public enemy number five." Inflation would be fought, not by credit crunches and tight money but, preferably, by devices like tax-based incomes policies. Another change would be in environmental policy. The high price of pollution control, which Binder estimates at some $70 billion a year, would be reduced substantially by swapping inefficient direct controls for incentive-disincentive policies. "Pollution permits" might be sold (and freely traded on the open market), whereby for an appropriate payment an industry may buy the privilege of dirtying air and water. Or government might tax pollution with "effluent charges." Such a policy, Binder argues, might be less morally and rhetorically satisfying than a policy that damns pollution in absolute terms but ends up allowing so much of it anyway. Pollution would be diminished at lower cost.

In Binder's view, the single exception to the recent reign of Murphy's Law was the 1986 Tax Reform Act. Even it was the result less of deference to economists (their influence reached its height in the bill known as Treasury I, soon revised) than of curious, even freakish circumstances: the allure of low tax rates; the persistence and knowledge of Sen. Bill Bradley; the improbable sudden conversion of Sen. Bob Packwood and others on the Senate Finance Committee to the principle of tax reform.

Binder, also, by the by, discusses some recent theoretical controversies. He has a bit of jaunty fun at the expense of the monetarists, whom he seems to respect, and the Lafferites, whom he seems not to -- whom, indeed, he forthrightly accuses of "quackery." (According to his scorecard, out of eight predictions regarding economic performance, the supply-siders were right about one and a half.) Clearly neither the monetarists nor the supply-siders would qualify, for him, as members of the policy-making club; nor would the so-called rational expectationists. Binder is, in fact, a Keynesian, and his confidence suggests that Keynesian macro theory, left for dead in the 1970s, might be enjoying a resuscitation with modifications.

Hard Heads, Soft Hearts is, in short, one of the more readable and literate attempts of recent date to revive the prestige of economic advice. Binder would offer us a chastened economics, no longer claiming, as in the palmy days of the 1960s, an ability to fine-tune the economy or abolish the business cycle. (To say nothing of its eschewing the claim of the Reaganomists that they could make water, fiscally speaking, run uphill.)

Economics, he thinks, has suffered unduly harsh criticism in recent years, for a number of reasons. There is the alleged tendency of economists to disagree, much exaggerated in his view. (Ronald Reagan said that the game of Trivial Pursuit for economists would have 100 questions but 3,000 answers.) There was a tendency for sound but complex arguments to give way to slogans simple enough to be blazoned on T-shirts. There was a failure of intelligent political leadership. It was no accident, Binder insists, that the Kennedy-Heller miracle of the early '60s, when the U.S. economy hummed as it had not done before nor has since, was made feasible by President Kennedy's willingness to go head-to-head with some of the hoary superstitions of classical orthodoxy. Most "conservatives" then believed that the budget could never, ever be unbalanced. The problem with their heirs today -- especially the one living at 1600 Pennsylvania Avenue -- seems to be to persuade them, as a practical matter, that it ever needs balancing.

BINDER is an ingratiating polemicist, but not an infallible one. It is not surprising that he is most polemical where policy is most debatable. He is perhaps more enthusiastic about the recent tax reform than the incomplete returns might strictly warrant; and he is downright rude about state and local governments who screamed, properly, when the feds moved in to try to pre-empt their tax sources to fund another big tax break for upper-bracket taxpayers. Those who differ with him about a differential tax rate for capital gains are "the capital formation lobby." Their arguments, which are not inconsiderable, get a dismissive brushoff.

Such minor aberrations aside, Hard Heads, Soft Hearts is a compelling book and an amusing read which, taken seriously, really might improve economic policy. But there is always, alas, the folly factor. In her book The March of Folly, Barbara Tuchman has mused on the tendency of all societies at times to persist in foolish policies even after ample warning. It is the same with economic folly. Homo sapiens -- and one might add Homo politicus -- has not yet reached that consummate stage of rationality achieved by the mythic Homo economicus. That fact may explain more about bad policy than Murphy's Law.

Edwin M. Yoder Jr. is a syndicated columnist with The Washington Post Writers Group.