December 6, 2010


Needed: An Economics for Grownups: Around 1700, a new way of speaking about commerce gave birth to the modern world. (Matthew Shaffer , 11/22/10, National Review)

Solving the mysteries of the birth of the Industrial Revolution (and, subsequently, the modern world) has been the primary task and test of economic history. And, according to Deirdre McCloskey, all explanations so far have failed. Those failures, in turn, indicate the failings of modern economics. Her magnum opus, an explanation of the birth and flourishing of the bourgeoisie and its subsequent transformation of the modern world, will occupy at least six volumes. This month, Chicago University Press releases the second installment: Bourgeois Dignity: Why Economics Can’t Explain the Modern World. [...]

NRO: How do you evaluate economics today and economists’ function as modern America’s preeminent public intellectuals?

McCloskey: With alarm. But non-economist intellectuals need to understand some elementary economics: There is no such thing as a free lunch; national income equals national product equals national expenditure; free trade is nice; more money causes inflation; governments are not all-wise; spontaneous order is not chaos.

My alarm comes from the economist’s tendency to reduce humans to Maximum Utility machines. We need a humanomics, of the sort that Adam Smith and John Stuart Mill and John Maynard Keynes and Friedrich Hayek and Gunnar Myrdal and Kenneth Boulding and Albert Hirschman practiced. Some current practitioners are Nancy Folbre, Arjo Klamer, and Richard Bronk. It’s an economics for grownups.

NRO: What should Americans do to preserve bourgeois society, or is our rhetoric so naturally pro-bourgeois that we don’t need to worry?

McCloskey: We need to worry a little less than the average northern European does. Arguments about bourgeois virtue that strike most Americans as pretty obvious (“The middle class, not the clerisy or the state, is the source of good innovation”; “Making money is all right”; “We can solve environmental problems by invention”) are fighting words in the Netherlands or Sweden. Old Europe distrusts innovation. In the United States the task is to embarrass the anti-capitalist Left with facts, without arousing moralistic, anti-innovation fervor on the Right.

NRO: You spend a lot of time demolishing cherished lefty myths about capitalism. What do you think the Right has gotten wrong on capitalism?

McCloskey: A certain disdain for innovation, or attributing the few good parts of innovation to heroic figures, Nature’s Noblemen. A conservative suspects that innovation will result in disaster, not improvement, unless under the control of Us Aristocrats. Let us not flee to evils we know not of. He is naturally pessimistic. He hates rock music and feminism and everything else that came from the Decade of Innovation, the 1960s. A libertarian, by contrast, is naturally optimistic about change. She sees a spontaneous order in non-hierarchical, unplanned societies. She loved the 1960s as liberating blacks, women, gays, handicapped people, colonialized people, youth.

NRO: You say that dignity and liberty were “the greatest externalities” of our pro-bourgeois rhetoric for ordinary people. Are liberty and bourgeois dignity tethered? Many point to China, Singapore, etc., as examples of places where economic advance has not produced other kinds of liberalism.

McCloskey: They are correct. The problem is the fallacy of Right Now. In 1969 one would have said the same thing about South Korea and Taiwan, or for that matter about Spain and Portugal. Outside the low, dishonest decade of the 1930s, with preparations in the 1920s, it has always gone one way, since the cats of liberty and dignity were let out of the bag in the late 17th century. Do all the statistical analysis you want, but we “liberals” (19th-century European definition) have history on our side.

NRO: Now that the march of classical liberalism has proceeded so far . . .

McCloskey: . . . but has miles to go before we sleep, / And miles to go before we sleep . . .

NRO: . . . and the world accords more dignity to the bourgeoisie than ever before, was our recent rocky passage just a blip in an overwhelmingly positive trend?

McCloskey: I and Matt Ridley (author of The Rational Optimist) and Joel Mokyr (author of The Enlightened Economy) agree, as anyone acquainted with the numbers would. We’ve had 40 of these recessions since 1800, and even a half-dozen as bad as this one. We should have acquired in two centuries a cautious faith in the trend, which is up and up and up since 1800 by about 2,000 percent per person, conservatively measured.

NRO: You say you’re relatively unworried about rapacious public-sector unions. Doesn’t the example of Greece trouble you on this point?

McCloskey: Well, if the police and municipal workers work very hard at it they can bring a society to ruin. But the United States is not heavily unionized. (Sweden, which is heavily unionized, has rational unions, which know that Sweden must trade to live.) And Americans are not willing to leap off a cliff holding hands with the unions, as the Greeks were until this year. In Chicago the city and state just broke the power of the electricians’ union to overcharge exhibitors at our massive McCormick Place for such highly technical tasks as plugging in extension cords. The exhibitors are coming back.

NRO: Before Bourgeois Dignity you wrote The Bourgeois Virtues. Do you think our debt-ridden culture is a manifestation of a decline in the bourgeois virtues, or is that just romantic nonsense?

McCloskey: Conservative romantic nonsense, similar to the cries in the 18th century that commerce would corrupt the Spartan virtues. Dr. Johnson, who was a conservative but no sort of romantic, said in 1778, “Depend upon it, sir, every state of society is as luxurious as it can be. Men always take the best they can get.” And the blessed David Hume had said in 1742, “Nor is a porter less greedy of money, which he spends on bacon and brandy, than a courtier, who purchases champagne and ortolans [little songbirds rated a delicacy]. Riches are valuable at all times, and to all men.” Of course.

There’s a progressive version of the nonsense, the complaining about “consumerism.”

A more up-to-date reply is that so long as various Oriental protectionists (in the 1970s it was the Japanese, not the Chinese) are so foolish as to send Americans TV sets and hammers and so forth in exchange for IOUs and green pieces of paper engraved with American heroes, wonderful. Would you personally turn down such a deal? If your personal checks circulated as currency, and the grocer was willing to give you tons of groceries in exchange for eventually depreciated Matt-dollars, wouldn’t you go for it? I would, and drink champagne.

NRO: Do you think bourgeois virtues can be inculcated by public institutions, including schools?

McCloskey: The merchant academies of England in the 17th and 18th centuries raised up prudent bourgeois boys (they were mostly excluded from Oxford and Cambridge because many of the merchant families were not conforming members of the Church of England). The universities in Scotland had teachers like Adam Smith, and raised up boys (they were very young in Scotland) who admired commerce. Our culture, so corrupt and so little reflecting the classical virtues in the eyes of conservatives like Allan Bloom, admires innovation extravagantly in its rock music and its movies and its ethernet. It’s innovation, not respect for hierarchy or love of military glory, that makes for a successful society. the difference between individualism and the dignity of the individual.

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Posted by Orrin Judd at December 6, 2010 6:31 AM
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