Notes from Deirdre McCloskey at Mercatus

Last Thursday, I had the pleasure to sit in on a talk with Deirdre McCloskey at the Mercatus Institute at George Mason University. For those unfamiliar with McCloskey and her work, she and it span many disciplines and many labels. A professor of economics, history, English, and communications at the University of Illinois at Chicago, she is, in her own words, “a literary, quantitative, postmodern, free-market, progressive Episcopalian, Midwestern woman from Boston who was once a man.”

Needless to say, I thoroughly enjoyed hearing McCloskey’s views on a wide array of issues surrounding capitalism, its history, and the debates surrounding it today. It has been our intention at The Mendenhall for some time to introduce notes and comments on speaking events that we have attended, and there could not be a more fitting occasion with which to start. McCloskey, who was interviewed by George Mason’s Don Boudreaux, was speaking in support of her recently published third installment in the “Bourgeois” series on capitalism, Bourgeois Equality. Its theme is that, contrary to popular narratives today in economics and political science, it is neither resources and geography nor capital nor institutions that led to the rise of the industrialized world but, rather, ideas. It is certainly a theme that resonates with this publication and its staff. However, it occurred to me that rather than write a review of the talk, it would be better to present a brief, topic-by-topic summary, with quotes where available, to show McCloskey as she is. Without further ado…

  • Mccluskey repeatedly made clear throughout the talk that she remains at all times an optimist about capitalism and that though great cultural changes are needed in the United States, she believes that it will succeed
  • She was quick–and sharp-witted–in her disagreement with Matt Ridley on the importance of coal to the West’s success. Though she does not deny the significance of important resources such as coal, she sees them as overshadowed by the power of ideas.
  • Her views on Africa were perhaps the most unique comment in the ninety-minute talk. She was optimistic for Africa’s future and believes that with greater political freedom in Africa will come remarkable progress and growth. Of particular interest was her comment on the genetic diversity of the continent and the fact that, once free, the amount of genetic variability there could well spur a highly creative environment of scientific and artistic genius.
  • “Humanomics” appeared as a favorite phrase of McCloskey’s, which she defined as the disposition of “being a humanist as well as a quantifier.” She scolded economists generally as having become more arrogant over time, saying that they should pay more respect to other disciplines.
  • Interestingly, with an admirable objectivity, she spoke for several minutes on what Karl Marx has to teach us as proponents of capitalism. She called him “one of he greatest social scientists of the nineteenth century… who was wrong about everything.” She was convincing in her defense of his skill, saying that though he derived the wrong answers, he also asked some of the most important questions of his time: are ideas independent of our material conditions, and does history occur in stages?
  • Asked whether there was an industrial revolution, as it is commonly described, she answers with a resounding yes and expresses her preference for the term “the Great Enrichment” [Ed.– reminiscent of Andrew Bernstein’s term for the Gilded Age: “the Inventive Period”]. She noted that we are all the descendants of unspeakably poor people before this era increased human incomes by–depending on the measure– a factor of 30 or even 100! Intriguingly, she also claimed that there had been industrial revolutions before, of a sort, in Rome, Greece, and China. What was distinctive of this one, she claimed, was that it lasted. This, she said, was a function of the number of people who were allowed by a period of political openness to “have a go” at innovation.
  • Conversation then turned to what will likely be the most disputed contention of her book: the idea that institutions were not the reason for the progress witnessed in this period. On this subject, she had a number of comments.
    • She referred to the institutions school as “new institutionalism” and called it the “World Bank orthodoxy” now driving development.
    • Rather than mere institutional reform, she claimed, what is needed in developing countries is an ethical change and a means for a society to evaluate commercial honesty in order to facilitate trade.
    • Though property rights are important, she noted, Genghis Khan enforced property rights rigidly, and as a result people fled to his domain for its political protections; nonetheless, little in the way of an industrial revolution resulted. China likewise had a good property rights system for centuries without innovation, indicating that it is clearly not a sufficient condition by itself.
    • Likewise, she dispelled the notion that capital alone could do the job. “Bricks are capital, but if you don’t have the idea of a brick building, you won’t have a brick building.” The capital itself will not make growth.
    • Citing Keynes, she noted that without innovation a nation could wear down its capital stock in a few generations; what drives progress, however, is new ways of doing.
    • Property rights, she said, are “commonplace” without progress, though they are important if progress is to be had.
  • The “spark”, rather, was ideas, according to McCloskey. She noted that the widespread notion of political equality was only about 100 years old at the time of American Revolution, indicating its nascence and the fast progress that it achieved in that time.
  • In answer to this, Don Boudreaux asked the important question: why, then don’t economists like ideas as an explanation for progress? To this, McCloskey replied that from 1890 to 1980, most major thinkers were materialists–conservatives and Marxists alike. They were both prone to level accusations of bias said to have arisen inherently by virtue of property and “motivism”, the idea that “interest is all that matters.” This, she said, led them astray from the importance of ideas. Citing economists who were driven by the pursuit of motivism, she noted Chicagoans George Stigler and Gary Becker but said that Milton Friedman was much less so. Friedman, she said, believed that people were simply misled and could be taught– a view that, according to her, elicited contempt from Stigler.
  • Turning to other economists, she expressed a great respect for Julian Simon, admiring his recognition of the way in which resources are crafted by man’s demands. Simon, she said, would be much better known had he not died at such a tragically young age.
  • Returning to her theme, McCloskey articulated it further, stating that modern economic growth is not a matter of efficiency and simply fixing imperfect property rights; it is an explosion of human creativity driven by human minds.
  • Discussing capitalism, she could not help but address the popularity of its opposite in socialism. She spoke of the importance of 1848 to the history of the West, the revolutions of Europe, and how German migration to the U.S. was in part driven by the failures of those revolutions. She also addressed the need to dissuade American culture of the romanticized vision of socialism: “If we can get across the idea that the government is not run by Swedish philosopher kings, we will have accomplished a great deal.”
  • She discussed the way in which socialism became popular among the formerly liberal intellectuals of Western Europe, notably John Stuart Mill and said that by 1880, all of the intellectuals of Europe had turned against capitalism
    • On a note of irony, she mentioned how of all the European socialist journalists, editorialists, intellectuals, and tract writers, “almost all” were the sons of merchants and lawyers– men who had been made rich by capitalism’s flourishing, making the rise of socialism somewhat of a battle of fathers and sons.
  • She addressed how and why, despite all of the controls leveled against it, capitalism continues to produce. Surprisingly, she highlighted the role of disobedience, saying that people don’t always obey the laws and that through imperfect application and enforcement of controls, progress overcomes.
  • Among her upcoming projects, she mentioned a book of “sermons” on capitalism: brief arguments targeted toward leftist Christians. As a writer’s note, she said that one of her lessons learned over the years is that short chapters are the way to go.
  • Beginning the Q&A session, she addressed Robert Fogel’s and Putnam & Murray’s argument that cultural values may be crippling the poor. She called it “plausible that you could have cultural values that cripple you” and said that that may be happening with the less educated but that she worries “more about the rather obvious impositions of the government on the poor.”
  • Addressing the case of India, she noted the cultural progress over time towards a favorable view of businessmen and the interaction of social orders that has eroded the reverence for government power. In Bollywood movies in the 50s and 60s, she noted, the heroes were always in government and the villains were businesspeople. That changed over time, and the people came to adopt contempt for the regulators.
  • Despite her emphasis on ideas, in answering how ideas shape the modern debate, she was careful to say “not exactly that culture matters but that rhetoric matters.”
  • “Economics isn’t like geology,” she said, “It was invented by the Scottish in the 18th century. Why did this happen in a little corner of northwestern Europe?”
  • She noted the contagious character of freedom and how “equality tends to get bigger and bigger”, citing the role of women in American anti-slavery movements who later sought their own independence once they had organized for others.
  • “We have to take ideas seriously… Words matter and ideas matter, but one part of the intellectual world that deals with this is the humanities.” She again urged respect by economists for the humanities and efforts to reach those departments.
  • She emphasized the role of corruption in keeping impoverished countries poor and the misplaced belief in government as the solution: “Eighty-six percent of the world’s people are governed by people who everyone agrees are corrupt and untrustworthy.”
  • And in a surprising final question response, McCloskey mitigated–but did not deny– the role of trade in achieving progress. “Trade,” she said, “is an extremely important context… the efficiency effects of trade are fine and admirable… it makes us much better off… but the really big effect of trade is dynamic. It’s more about innovation… American automobiles were not very good until we dropped tariffs and American automakers had to compete… Trade is good, but… what made the British rich is widespread ingenuity.”

The discussion was broad and the noteworthy moments numerous, making ninety minutes fly by in a moment. It was, as you surely see, difficult to pick and choose moments worth sharing, so I have tried to include as many as possible. For those now piqued, however, I encourage you to read McCloskey’s new book, Bourgeois Equality. Economics is in need of a school of thought that prioritizes the role of ideas in human progress. McCloskey is among its most crucial voices in today’s world.

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