Worth a Good Look

Donald J. Boudreaux reviews Deirdre McCloskey’s “Bourgeois Dignity: Why Economics Can’t Explain the Modern World”, Chicago: University of Chicago Press, 2010, in the Independent Review Institute's "journal of political economy"
HERE

"In an exhaustive history of English-language economics prior to Adam Smith, Jacob Viner wrote: “A constant note in the writings of the merchants was the insistence upon the usefulness to the community of trade and the dignity and social value of the trader, and in the eighteenth century it appears to have become common for others than the traders themselves to accept them at their own valuation” (Studies in the Theory of International Trade [New York: Harper & Bros., 1937], p. 107). …

I, too, would have reacted in this way to Viner’s observation had I not read Deirdre McCloskey’s Bourgeois Dignity. Although Viner himself quickly sped past his own observation to discuss other matters, my attention was gripped. This fact about attitudes in the eighteenth century, I realized, is evidence for the revolutionary theory that McCloskey offers to explain the Industrial Revolution.

And if any fact about human history demands explanation, it is the Industrial Revolution …the “Great Fact,” as McCloskey herself names it. ...

A fact so great does not languish for long without attempts being made to explain it. Such attempted explanations are as old as the Great Fact itself. They include exploitation of wage workers, slavery, colonialism, Protestantism, Catholicism, science, temperate climates, temperate citizens, glorious political revolutions, and lower transportation costs and the resulting expansion in trade.

None of these explanations, however, explain when the Great Fact manifested itself (the eighteenth century) and where it began (northwestern Europe).

… One of the many rewards of reading Bourgeois Dignity is to receive from a world-class historian as penetrating and eloquent a tour of commercial and industrial history as can possibly be fitted into a single volume. Along with this tour, the reader also is treated by a world-class economist to a masterful review of each of the major (and some not so major) contending explanations of the Great Fact.

Having convinced her readers (or at least this reviewer) of the inadequacies of each of the previously offered explanations of the Great Fact, McCloskey argues that what does explain it is a sea change in attitudes toward the bourgeoisie. For the first time in history, the bourgeoisie of northwestern Europe in the eighteenth century came to possess dignity. The bourgeoisie and their activities finally came to be regarded by a large enough swath of society as dignified and respectable.

Being group animals, we care deeply what other people think about us. And what people think about us is typically conveyed, to us and to others, by talk. McCloskey insists that, first in Holland and soon afterward in England, the way people talked about profit-seeking merchants and commercial and industrial innovators changed. That talk became more admiring. What we might call the “dignity return” to bourgeois activities rose.

And at the same time, at least the relative “dignity return” on non-bourgeois activities fell. Less were the relative amounts of dignity meted out to those who specialized in slaughtering people in battle or in idling about in manor houses counting the hectares on which peasants toiled to produce sustenance for the nobility and the clergy.

As the dignity return to bourgeois activity rose relative to that of other occupations, so predictably, too, did the amount of bourgeois activity. People do respond to incentives! The Industrial Revolution was launched.

Of course, McCloskey’s rhetoric-centered theory of the Great Fact does not deny the importance of secure property rights, the benefits of prudent and industrious behavior, the helpfulness of low-cost means of transportation, and the wonders of science. Even the most boundless glorification of the bourgeoisie would have done nothing to spark the Industrial Revolution if, say, private-property rights in northwestern Europe were insecure or if the terrain there was so rugged and harsh that transportation over even short distances cost a prince’s ransom.

… Secure property rights existed in England long before the Glorious Revolution of 1688, and prudent, sober attitudes about saving did not first appear then and there. Nor did big cities (by eighteenth-century standards) and their potentially thick markets. Nor did science. Nor did reductions in transportation costs.

It is possible that eighteenth-century northwestern Europe was the site of a perfect storm of all or most of these conditions coming together for the first time in history—secure property rights and a respect for science comingling for the first time with falling transportation costs and saved surplus values wrung by Calvinists from exploited peasants.
...
I close with a cavil. I dispute the truth of Bourgeois Dignity’s subtitle Why Economics Can’t Explain the Modern World. Economics can explain the modern world. Solid evidence is McCloskey’s own work. Although appointed to faculties of English, history, and communications in addition to economics, she is above all an economist. And her contributions as an economist to our understanding of the modern world rank second to none among scholars from whichever fields you might name.

McCloskey does economics correctly—as a systematic, open-minded, truth-seeking inquiry unburdened by dogmas about what does and doesn’t count as a “legitimate” explanation.

The economics that she rightly accuses of falling short in its efforts to explain the modern world—the economics that ignores human passions other than for the prudential pursuit of observable material gain and that bullyingly rejects as sissified any methods of inquiry other than those expressed in formal mathematics—is, although dominant, not the only species of economics. Economics properly done can indeed help to explain the modern world. Bourgeois Dignity is exhibit A.

Comment

I commend Donald Boudreaux's review in the Independent Review Institute's Blog HERE It is worth reading in full. Boudreaux writes for the Cafe Hayek Blog, which is worthy of reader's attention for its daily snippets on free trade and its enemies. My extracts above are brutal in deference to copyright rules, which if I have trespassed upon, I beg forgiveness.

I read McCloskey's, Bourgeois Dignity, recently and posted an appreciation of it, and her, on Lost Legacy.

I also commend a look at the Journal of the Independent Review Institute, of which I knew nothing until following Boudreaux's link.

Modern Physiocrats, Witch-Doctors and Their Pretensions

From ‘Quotation of the Day’ (July 14) at DON BOUDREAUX’s invaluable Café Hayek Blog (‘where orders emerge’) HERE:

From Hayek’s 1974 Nobel Prize lecture, “The Pretense of Knowledge“:

“This brings me to the crucial issue. Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable. And while in the physical sciences the investigator will be able to measure what, on the basis of a prima facie theory, he thinks important, in the social sciences often that is treated as important which happens to be accessible to measurement. This is sometimes carried to the point where it is demanded that our theories must be formulated in such terms that they refer only to measurable magnitudes.

It can hardly be denied that such a demand quite arbitrarily limits the facts which are to be admitted as possible causes of the events which occur in the real world. This view, which is often quite naively accepted as required by scientific procedure, has some rather paradoxical consequences. We know, of course, with regard to the market and similar social structures, a great many facts which we cannot measure and on which indeed we have only some very imprecise and general information. And because the effects of these facts in any particular instance cannot be confirmed by quantitative evidence, they are simply disregarded by those sworn to admit only what they regard as scientific evidence: they thereupon happily proceed on the fiction that the factors which they can measure are the only ones that are relevant.

The correlation between aggregate demand and total employment, for instance, may only be approximate, but as it is the only one on which we have quantitative data, it is accepted as the only causal connection that counts. On this standard there may thus well exist better “scientific” evidence for a false theory, which will be accepted because it is more “scientific”, than for a valid explanation, which is rejected because there is no sufficient quantitative evidence for it.”


Comment
This extract is well worth reading and considering, as we have come to expect from Don Boudreaux’s daily Blog (but I wish I could say the same about some of the comments he attracts from some of his readers) (follow the link to the Blog -but give the comments a miss).

Hayek puts his point so well and it is so relevant to the current cul de sac into which economic has driven itself under the influence of the ‘scientific’ mathematicians who drain it of much of its relevance as a guide to both policy and understanding, and are usually – nearly always – wrong in their predictions for the future, allowing for a minority, sometimes of only one, occasionally being right when ignored, because unquantifiable, events intervene.

Adam Smith is regularly criticized by many of today’s ‘scientific’ economists for his Wealth Of Nations being ‘obscure’ and difficult to read (apparently they do not appreciate 18th century literacy standards).

He was also given to drawing on empirical evidence (the quarterly prices of silver for example) that are no longer regarded as relevant, and for quoting from the statements of figures in Classical times, or, example, ancient interest rates in Cyprus and such like. That he was a competent mathematician for his times but chose not to use it to explain social phenomena is disregarded (mainly, I suppose, because facts about him are not widely known).

He sharply criticized the French Physiocrats for constructing a model of an economy that concluded that manufacturing labour was ‘sterile’ and erected an explanatory theory about this imagined fact, burdened with the handicap of it being utterly wrong.
Some modern economists (Jevons, Schumpeter, Rothard, etc.,) see Dr Quesnay’s ‘model’, and ignore the wrong policy prescriptions that Physiocrats claimed follow from it – but they praise its historic ‘scientific’ originality and denigrate Smith , as being ‘unscientific’, even a plagiarist, in some imagined race to be the ‘founder’ of economics.

Smith praised and respected Dr Quesnay; he didn’t agree with his theory of ‘sterile’ labour, a theory today that re-appears in the absurd idea that ‘services’ are less important – even parasitic – than 'proper jobs' in manufacturing; ironically, almost the reverse error of the Physiocrats disregard for manufacturing labour, who would have had society still dependent on agricultural toil.

Today their heirs would have us toiling in the ‘dark’ mills of heavy industry, still supplying the output of the Western ‘workshops to the world’, rather than supplying the world’s high-tech design and development, and all that goes with it in consumerism, entertainment, finance, medicine, life sciences, IT, and creativity.

There are serious threats looming, particularly in funding growth without unsustainable debts, and for as long as economists are bound by their obsessions with ‘scientific’ models that try to confine into 'thin' equations the complexities of high GNP economies, with large welfare policies, always worthy, but often unfunded, then the best brains of the profession are wasted in competing ‘witch-doctorism’, rather than enlightenment.

I think Hayek is worth a second look.

A Shanghai-ed Column on Free Trade

Donald Boudreaux posts (12 December) on the ever entertaining and educational Blog, Café Hayek (where “Orders Emerge”) HERE

I strongly recommend that you (especially if you are a student or recent graduate – or even if you are senior economist) bookmark Café Hayek and dip into it regularly.

Don Boudreaux specialises in short, snappy and, oh! so brilliant, ‘letters’ to US papers and tv news channels that are bitingly witty and to the point on pronouncements on the eternal (so it seems) nonsense spouted on public policy, especially on tariffs and trade, which preach the same nonsense that was spouted in Adam Smith’s day by mercantile-minded lobbyists in and around parliament. (An example of how Don Boudreaux would never compose a sentence for publication.)

Contrary to popular credulity, these tariff mongers never went away in the 19th century and are still with us since GATT and WTO slipped into the headlines, wrongly implying that the free-trade campaign could sit back and exclaim “job-done”.

Here is Don’s latest blast at the still-with-us past:

“My buddy Bruce McLane alerted me to Maureen Callahan’s article in today’s New York Post – in response to which I sent this letter:

The arguments that Maureen Callahan lobs as grenades against technological change and trade are duds (“Not made in the USA,” Dec. 12). The reason is that each of these arguments would have been equally applicable to 19th-century America, with the only difference being that the fear back then would have been the decline of agricultural employment rather than of manufacturing and low-skill service-sector employment.

In 1820, 79 percent of Americans worked in agriculture. This number, however, was progressively reduced by improvements in technology. Chemical fertilizers and pesticides; mechanized planting and harvesting equipment; refrigeration; improved veterinary medicine; better irrigation; faster transportation; and improved packaging for produce – along with more food imports made possible, in part, by motorized sea and air travel – all “destroyed” millions of agricultural jobs.

Would the proper policy in the 19th century have been to stymie these changes because many workers who knew nothing but farming lost their agricultural jobs? If you agree that the answer is “no,” then it’s senseless to draw policy conclusions from Ms. Callahan’s lament for “the 45-year-old toll taker replaced by the E-ZPass” and “the 50-something cashier replaced by a self-service scanner.” These jobs, and the others whose demise Ms. Callahan mourns, were themselves made possible only because technology and trade had earlier eliminated the need to have so many people toil on farms and ranches.

Contrary to Ms. Callahan’s claim, the trend of technology and trade changing the contours and contents of economic opportunity did not begin 30 years ago: it began in earnest in the 18th century. And contrary to M[s]. Callahan’s suggestion, this trend is utterly essential to continued economic prosperity.

Sincerely,
Donald J. Boudreaux”

Comment
Surely a delightful response, that is both polite and educational?

Bookmark Café Hayek now HERE and enjoy!

[Apologies to Don if I have invaded his copyright …]