Tag: deirdre mccloskey

The Great Fact of Economic Growth, in Three Glimpses

In Bourgeois Dignity: Why Economics Can’t Explain the Modern World, economic historian Deirdre McCloskey writes about the “Great Fact” – the enormous and unprecedented growth in living standards that began in the western world around 1700. She calls it “a factor of sixteen”: we moderns consume at least 16 times the food, clothing, housing, and education that our ancestors did in London in the 18th century. Two new books help us to understand what that means.

In Sunday’s Washington Post, Jonathan Yardley reviews Flyover Lives, a family memoir by Diane Johnson. She found diaries from some of her Midwestern ancestors, and Yardley notes what they tell us:

It must be just about impossible for a denizen of middle-class 21st-century America to imagine the toil and suffering that Catharine Martin [born 1800] and her counterparts underwent every day: living in crude houses — mere huts when they first settled in Illinois and elsewhere — slaving at open fires to prepare food for their families, and worst of all watching children fall ill and having nothing in their powers to help them: “Within a year of her marriage, with the fated fertility of women then, Catharine had her first baby, and named her Catharine Anne, after herself. They called her Sissie. This baby was followed by Charlotte Augusta in 1830 and Martha Olivia in 1831. When they were one, three, and five years old, all three little girls died in the space of a week or two.” Catharine herself was ill but survived to write many years later: “When I got up, my house was empty, three little prattlers all gone, not one left.”

This isn’t so long ago. Catharine Martin was the great-great-grandmother of Diane Johnson. Go back another century, and read about 18th-century life in another new book, Three Squares by Abigail Carroll:

Invited to dine with a ferryman and his family, [a 1744 traveler from Maryland to Maine] declined. He described the meal: “They had no cloth upon the table, and their mess was in a dirty, deep, wooden dish which they evacuated with their hands, cramming down skins, scales, and all. They used neither knife, fork, spoon, plate, or napkin because, I suppose, they had none to use.”

By the standards of the age, the ferryman’s repast was ordered: “Only about a third of the families in seventeenth-century Virginia had chairs or benches, and only one in seven had both,” writes Ms. Carroll. Only about a quarter of the early Virginian houses had tables.

And finally, I note an older book on my own Scottish ancestors, The Scotch-Irish: A Social History by James G. Leyburn:

The squalor and meanness of [lowland Scottish] life around 1600 [or 1700] can hardly be conceived by a person of the twentieth century. A cluster of hovels housed the tenants and their helpers….A home was likely to be little more than a shanty, constructed of stones, banked with turf, without mortar, and with straw, heather, or moss stuffed in the holes to keep out the blasts….The fire, usually in the middle of the house floor, often filled the whole hut with malodorous clouds, since the smoke-clotted roof gradually stopped the vent-hole. Cattle were tethered at night at one end of the room, while the family lay at the other end on heather piled upon the floor….Vermin abounded…skin diseases…Infectious diseases were propagated readily.

According to scholars such as Angus Maddison and Brad DeLong, GDP per capita hardly rose for thousands, or tens of thousands, of years before the emergence of capitalism. And then after 100,000 years of stagnation (by DeLong’s estimates), around 1750 capitalism and growth began, first in Northern Europe and the American seaboard, and spreading ever since to more parts of the world. That is, the existence of relatively free markets is the reason we don’t live like my Scottish ancestors. This is indeed the Great Fact of the modern world. We should celebrate it, even as we work to extend the benefits of markets to people and nations who don’t yet enjoy as much capitalism as they should.  

Free Deirdre McCloskey E-Book from University of Chicago Press

Every month, the University of Chicago Press offers a free e-book from its catalog of thought-provoking titles. This month it’s Deirdre McCloskey’s The Bourgeois Virtues: Ethics for an Age of Commerce (2006).

We discussed her follow-up volume, Bourgeois Dignity: Why Economics Can’t Explain the Modern World (2010), in last month’s Cato Unbound. Back in 2006, Cato Policy Report gave a short summary of McCloskey’s argument in The Bourgeois Virtues.

Her argument as I understand it is that commerce and virtue can be mutually reinforcing. Obviously they aren’t always so, but this positive feedback loop has governed much of world history in the modern era, helping to create the world we see around us today. I’d encourage anyone who takes interest in the intersection of markets, virtue, and modernity to take a look. And best of all, it’s free.

Deirdre McCloskey at Cato Unbound

This month’s Cato Unbound features a lead essay by economist and polymath Deirdre McCloskey. Though she’s been professionally associated with the Chicago School, her ideas are anything but predictable, and she’s been one of the strongest critics of the mainstream of her discipline.

Economic activity, she argues, is driven primarily by forces outside of conventional economic theory. Sure, there’s supply and demand, and we all know the story, and there’s nothing terribly wrong with it, at least as far as it goes. Elaborations on the model aren’t wrong either – externalities, transaction costs, asymmetrical information, problems of coordination and public goods – these too are fine, as far as they go.

Where she disagrees is in her claim that a whole lot of things have to happen inside people’s minds before these things become terribly interesting to talk about. The decision to enter a marketplace, or to behave in ways that we might call “a market,” or even just the decision to look for economic incentives, all depend on some fairly deep value judgments. The creation of a highly market-driven society implies a commitment to a set of values.

What values are we talking about? Here’s a sample:

The Big Economic Story of our times has not been the Great Recession of 2007–2009, unpleasant though it was. And the important moral is not the one that was drawn in the journals of opinion during 2009 — about how very rotten the Great Recession shows economics to be, and especially an economics of free markets. Failure to predict recessions is not what is wrong with economics, whether free-market economics or not. Such prediction is anyway impossible: if economists were so smart as to be able to predict recessions they would be rich. They’re not. No science can predict its own future, which is what predicting business cycles entails. Economists are among the molecules their theory of cycles is supposed to predict. No can do — not in a society in which the molecules are watching and arbitraging.

The important flaw in economics, I argue here, is not its mathematical and necessarily mistaken theory of future business cycles, but its materialist and unnecessarily mistaken theory of past growth. The Big Economic Story of our own times is that the Chinese in 1978 and then the Indians in 1991 adopted liberal ideas in the economy, and came to attribute a dignity and a liberty to the bourgeoisie formerly denied. And then China and India exploded in economic growth. The important moral, therefore, is that in achieving a pretty good life for the mass of humankind, and a chance at a fully human existence, ideas have mattered more than the usual material causes.

A society that denigrates small businesses, small landowners, entrepreneurship, thrift, and innovation will see less of each. It will have different laws, customs, and institutions. Its resources will be used differently. Even its class structure will be different.

Societies that make a place for the artisan, the entrepreneur, the innovator – societies that see these people as valuable – will prosper. That’s the essence of the argument, anyway, and I’m only disappointed that we can’t present it in more detail (McCloskey is in the middle of a four-book series on this one very big idea).

Through the rest of the week, we have a lineup of notable response essayists, including U.C. Davis’s Gregory Clark, science journalist Matt Ridley, and Yale University’s Jonathan Feinstein. Be sure to stop by often, or just subscribe to our RSS feed.

Cell Phones and Ingratitude

When I was a kid in the 1960s and we came back from a visit to my grandmother’s, my mother used to call my grandmother, let the phone ring twice, and then hang up. It was important for my grandmother to know that we’d arrived home safely, but long-distance telephone calls were too expensive to indulge in unnecessarily. When I entered Vanderbilt University in 1971, my parents had to decide whether to pay for a telephone in my dorm room. They decided to do so, but most of the thoroughly upper-middle-class students on my floor did not have phones. Phones cost real money back then. Then came the breakup of the AT&T monopoly in 1984. Phone technology and competitive service provision exploded. In 1982, Motorola produced the first portable mobile phone. It weighed about 2 pounds and cost $3995. Within a very few years they were much smaller, much cheaper, and selling like hotcakes.

Today there are some 4.6 billion mobile phones in the world, and counting, or about 67 per every 100 people in the world. The newer ones allow you to carry in your hand more computing power than the computers that put Apollo 11 on the moon.  You can cruise the internet, find your location with GPS, read books, send texts, pay bills, process credit cards, watch video, record video, stream video to the web, take and send photos – oh, and make phone calls from just about anywhere. Unimaginable just a few years ago.

And to celebrate this incredible achievement, Slate and the New America Foundation are holding a forum titled “Can You Hear Me Now? Why Your Cell Phone is So Terrible.”

This is an old story. Markets, property rights, and the rule of law provide a framework in which technology and prosperity soar, and some people can only complain. I was reading some of Deirdre McCloskey’s forthcoming book Bourgeois Dignity this week. She points out that the average person lived on the equivalent of $3 a day in 1800. Today there are six and a half times as many people, but the average person earns and consumes 10 times as much, far more than that in the most capitalist countries. And yet some people, most leftist intellectuals, continue to ignore what McCloskey calls “the gigantic gains from bourgeois dignity and liberty” and to denounce the markets, economic liberalization, and globalization that have liberated billions of people from eons of back-breaking labor.

Now don’t get me wrong. I’m a big fan of consumer reporting and analysis, which is an important part of a robust marketplace. Competition and consumer reporting both help to keep prices low and quality improving. And there’s plenty of room for criticism of cell phone pricing, contracting, and service. But when a discussion like this is held by a public policy research organization and a public-affairs magazine as part of a program on public policy, then it’s not just consumer advice. It is presumably a discussion of what the sluggish, coercive institution of government can do to improve – or more likely impede – a fabulously dynamic, constantly improving consumer-directed industry. And that usually ends in tears.

Maybe we should hold a forum titled “Can You Hear Me Now? And Watch Me on Video? And Read My Book on Your Handheld Device? And Check Your Blood Pressure and Glucose? How Markets, Innovation, and Entrepreneurs Have Taken Cell Phone Technology from Clunker to Computer in Barely a Generation.”

Entrepreneurship for Good

At last week’s Mont Pelerin Society meeting in Stockholm, Deirdre McCloskey argued that it was important for society to affirm entrepreneurship.  How right she is.

The economic benefits of the new technologies and processes constantly created by people with new economic ideas is obvious.  But the social benefits of such inventions also are enormous.

Consider James C. Marsters, who helped end the isolation of the deaf around the world.  The Wall Street Journal reported on his death:

As an orthodontist, a licensed pilot and a sometime-professional magician, James C. Marsters mastered fields challenging for anyone, even more so for a profoundly deaf person such as himself.

His greatest feat was to conjure the text telephone, or TTY, which for the first time gave deaf people independent access to the telephone via teletype machines. It was the first in a string of technologies that help deaf people communicate.

Mr. Marsters, who died July 28 at 85 years old, defied the isolation many deaf people of his generation experienced. He willed himself into the mainstream long before there were technologies and programs to help deaf people do so.

People like Marsters exemplify how the market encourages people to do good while doing well.  Markets are not perfect, nor are the entrepreneurs who drive them.  But then, human beings are not perfect.  However, human liberty – in the form of economic freedom in this context – is the best environment in which to foster a society that is both prosperous and good.