Deirdre McCloskey

Dr. Deirdre McCloskey is currently the Distinguished Professor of Economics, History, English, and Communication at the University of Illinois – Chicago, Emerita, where she has worked since 2000. Before that, she was a tenured associate professor at the University of Chicago in history and economics. Between her years at the University of Chicago and the University of Illinois – Chicago, Dr. McCloskey was a professor of history and economics at the University of Iowa. Praxis Circle interviewed Dr. McCloskey because she is one of the most outstanding and fascinating economic historians in the world and because of her interest in and explanations for the West’s and the world’s vast increase in wealth since 1800, a little known and certainly not celebrated fact.

How and why: the Bourgeoisie as a great theme.

Deirdre McCloskey:

Well, I started thinking about these matters really as I gradually moved away from socialism and started to regard what’s so ill-advisedly called capitalism with favor, with thinking this is a good thing and good for poor people. I don’t care about the rich one way or the other, but I do care about poor people. That’s why I got into economics in the first place. But by the 1990s, I was increasingly impatient with my friends on the left, and some on the right, who said that, well, this capitalism, these business people, they’re vulgar.

And I’m a professor or something. I’m better than they are. And I didn’t like that so I wrote an essay for a magazine called The American Scholar, called The Bourgeois Virtues, which was just a brief attempt to think this way. Ask what was favorable about capitalism so-called. And there’s a version of this in the 1700s called [foreign language 00:01:13] in French. Sweet commerce, and that was my theme. And so then, by 2005, I had wrote the first of these volumes and it was a defense of the bourgeoisie, the middle class.

And then I realized that as an economic historian, which is my scientific field, I had stumbled on an explanation for the Great Enrichment that came over the West, and now the world, since 1800. And I saw that it had to do… I finally saw, I didn’t know this before I started it. I finally understood that it was the attitude of other people in the society towards the middle class, towards the inventors, towards the Benjamin Franklin types that changed. Anciently, until the 18th century, people were hostile to the business class.

The only way to honor was either in the church or in the battlefield or the court, either as a clergyman or as an aristocrat, whereas in the 18th century in England and its offshoots, starting actually the century before in Holland, business people became respectable in the eyes of the rest of the society. And that was amazing. Combine that with democracy, the idea that all people are created equal, and you get a really explosive combination where people respect inventors and everyone’s an inventor.

How did you move left to rightward through graduate school?

Doug Monroe:

Your life’s journey.

Deirdre McCloskey:

Well, I was the son of a professor at Harvard. His name was Robert McCloskey, not the man who wrote children’s books, but the man who wrote books on the Supreme Court. And my mother was a, kind of, beginning opera singer when I was young. I was born in 1942. And so I was in a very rich environment where scholarship and books were admired. So I was a bookish kid because of my parents. And then my mother was the real intellectual in the family because she’s 96 now and she’s always been interested in ideas, and persuasion, and argument, and this side and that side. Whereas my dad was sort of the expert.

Not that he was a stuffier, bad man, but he was not the kind of rough and tumble intellectual I became. But I was influenced as an adolescent, say, 15 or 16 by folk singing, which I started to do. And of course that’s from the left, so Woody Guthrie, and Pete Seeger, and Joan Baez, and so on, were all people of the left. And I was too. I was a typical upper middle class kid who suddenly realizes there are poor people in the world and reckons that the way to help them is to open daddy’s wallet. And so those were great influences on me, those sort of loosely left wing thinking. And then early in college, we had to read a lot of Marx. And I came to think of myself as a Marxist.

Actually my first influence was anarchism, Prince Kropotkin of Russia, whom I discovered as I discovered the other left wing classics in the Carnegie finance library in Wakefield, Massachusetts, when I was a kid. So as I entered college, I was a socialist, but then having switched my major to economics from history, I started to learn Keynesian economics and became a Keynesian, which is a much more moderate position. It’s not overthrowing capitalism, but it’s perfecting capitalism by introducing a good deal of socialism. So I was kind of a quasi-socialist.

And then as I proceeded, I had an engineering roommate and learned a kind of engineering attitude towards the world from him, problem solving, mathematics, quantities. So I became kind of a social engineer. So by the end of college, and then I went to graduate school at Harvard University and then gradually saw the applicability of economics to history at a great mentor, Alex, Gerschenkron, a famous economic historian. And so I drifted more and more towards the view that economics was usable, applicable. And finally, I came to the conclusion that the economy worked pretty well for poor people. In fact, extraordinarily well, contrary to the kind of, “Let’s go down and join the union”, attitude of my youth.

How are you postmodern?

Deirdre McCloskey:

Well, I became postmodern in the 1980s when I was investigating the rhetoric, first of economics and then of science generally. And what the word rhetoric means, Aristotle said is the study of the available means of unforced persuasion. Not with a gun, but with words. And it’s what science does. It’s how science advances. People persuade each other. It’s how anything advances. It’s how marriage advances. It’s how politics advances or doesn’t. It’s all about persuasion. And so I became a student of the humanities in a serious way in the 1980s.

And what I regard postmodernism as is the opposition to, well, modernism. Modernism is not what it seems on the surface. It means, it’s the conviction that we can persuade each other, or that we don’t need to persuade each other, we need to lay down the facts and the logic and that’s it. And that’s not true of any science. It’s not true of physics. It’s not true of mathematics. It’s not true of any human subject. We’re humans. We argue with each other, persuade each other. I hope honestly, and sincerely, and then we improve our thinking.

So I’m postmodern in the sense of being against modernism. And I went to the, 1988, to the summer School of Criticism and Theory, which is kind of a summer camp for advanced graduate students and assistant professors in English and French, and then an occasional full professor of economics. And there I learned deconstruction and this, that, and the other thing, and they don’t have to be left wing. In fact, one of their heroes, Foucault, the great French sociologist and philosopher, towards the end of his life, studied Milton Friedman and Gary Becker, the Chicago school economist, in a very serious way, very serious and respectful way. And Foucault is nothing if not postmodern. So I’m a postmodern, but a liberal in the 19th century sense and a Christian. And I was a convert from agnosticism and I’m literary. And I study novels and poetry, but I also do quantitative work. So I’m all those things.

As a Liberal or Libertarian, does the average person need God to avoid Nihilism?

Deirdre McCloskey:

What we all need as humans is a transcendent. We need some answer to the question, “So what?”

On one hand, we can get adequate nutrition and a little education and we can get rich and that’s very nice, and we can travel the world and we can read books and so on and so forth. All those are very nice, but then the question comes, “So what?”

And it can be answered in various ways. I have a friend who’s a tremendous Chicago Cubs baseball fan, and his life is largely about being a Cubs baseball fan so that’s his answer. Or it can be the family or science or art, or it can be God. And I think of God as being the ultimate answer to the question, “So what?” Because all those other things, as Saint Augustine said, pass away and all that remains ultimately is God.

But I’m a progressive Episcopalian. I’m not by any means a fundamentalist. I came to Christianity slowly after 1998 but it’s become important to me. And actually to be completely candid, my transcendence is scholarship, truth, scientific truth, but I do believe that behind it is a… and this is something that my priest, my spiritual advisor keeps saying to me, he says, “Deirdre, your work is prayer.”

Why did you become a woman?

Deirdre McCloskey:

Why did I become a woman? It’s like asking why you like chocolate ice cream? I mean, why you buy a Ford rather than a Mercedes has an answer in the realm of prudence. Oh, Mercedes is too expensive. I just need it for transport. So I got a Ford. But why you prefer chocolate to vanilla ice cream is a sentiment as the 18th century, Scottish philosophers would say, that just is. And it’s not susceptible to reason. That doesn’t mean you’d go off half-cocked. My mom was very wise, says don’t do anything more interesting than this gender change stuff. Don’t decide to become a horse or something. And I think that’s wise. Go back to being a boring professor. And so it’s not cost and benefit.

In fact, about a month before I realized that I could do it and was going to do it, this is the middle of August 1995 when it hit me. I’m an economist. So I actually literally drew up a cost benefit study of changing gender. And this is nuts. It’s not why you decide who to marry. In large parts it’s not how you decide what occupation you’re going to have or what your passions are. They just are you. That you just do them. And so I came to understand that this prudential cost benefit way of looking at life useful, though it is for building roads and doing lots of practical things, is not an answer to the question so what. Or the very closely connected question, “Who are you dear? Who are you?”

What do you think of men and masculinity?

Deirdre McCloskey:

I was a man, and I was a regular type man. As macho as a professor can be, I was. And I missed the things that women are better at seeing. The importance of love, what love entails, for example. Or a sensitivity to social circumstances that meant now, when I was a guy, I was a little bit above average for a man in detecting social situations. And now I’m below average for a woman, but way above what I was as a guy.

I admire men and think they’re just fine. But I think they’ve got to be full men. Donald Trump is not a full man, he’s a boy. He’s a 12 year old boy, and that’s not how to be a man. Being a man is not being contemptuous of women, or beating up on people, or being tough. It’s being a gentleman in the most fundamental sense. And the same thing is true of women. It’s not just being sexy and so on, it’s being a lady in a serious way. And I think both are valuable.

In fact, of course, what I think and what I think lots of people think is that we all have elements of both. A man has his mother inside him or his sister, and a woman has her brother or her uncle. And when encouraged, those things can come out, and a certain balance of cliche gender characteristics are desirable in both. There should be this emphasis on love and cooperation that women have, and this emphasis on competition and courage that men have, both genders should have a good deal of both.

Why was the Great Enrichment not noticed sooner?

Doug Monroe:

Later. Why was it not noticed?

Deirdre McCloskey:

Well, it was starting to be noticed by the- about a century into it. But even John Stuart Mill, who is a very clever man and a very wise man, didn’t notice it. His, the last edition of his book on economics, he wrote lots of other books, was 1871 and he still didn’t quite get that there was a revolution of production going on. His contemporary and fellow liberal, the historian McAuley, Thomas Bevington McAuley was much more perceptive about this. Though he’s just a historian he understood that this was revolutionary, but it kept happening. Look, it’s about 2% a year of increasing real income in the world. Well, not the world in places like the United States or Britain, Japan, and so forth. Since 1800, 2% a year doesn’t sound like much, but it means that income doubles about every third of a century.

So on a full century, that’s a factor of eight and a factor of eight. And then in two centuries, a factor of 16 and more, that’s a revolution. I mean, it’s, we keep using the word revolution. It doesn’t quite adequately express it. It’s a tsunami of enrichment. I call it the great enrichment. So it was hard for people to get out of their malthusian mindset that well, having more people is bad for you. We have the same problem. When we talk about immigration in the United States, “Oh no, too many people that’s bad for people.” No, it’s not one more person to trade with in the modern world is a betterment for everyone else. And that was true. Came to be true in the 19th and 20th century, as the humans got more and more human capital got more educated. And as we moved in this liberal erection, not government sponsored, but allowing people to have a go more and more people, first poor men, then slaves, then women and colonial people, then gays, et cetera.

How does the Trilogy integrate bourgeois virtues, dignity, and equality?

Deirdre McCloskey:

This trilogy is partly bec…. At first I was going to do six books. Ugh, crazy. Then four. And then I thought, “Well, three books, a trilogy, might be considered somewhat self-indulgent, but a tetralogy is an abomination.” The third volume is the thickest. It’s 700 pages, because I had to fit everything in. But the other two are thick, too. And the first book, called the Bourgeois Virtues, asks the question, “Is a life in commerce or a life in modern innovation corrupting? Is it inevitably corrupting?”

Because I believe as a Christian or as a person with common sense that it doesn’t help you if you gain the world and lose your immortal soul. So I felt I had to establish, first of all, that this system we have, which I call commercially-tested betterment… The short word is innovism. Capitalism, I don’t like. It’s a stupid word. Innovism. Is this corrupting of the human spirit? My answer is no. So that’s good, have that out of the way. Then I kind of realized that having defended innovism, I had an implicit theory of how the modern world happened, how we got so very, very rich.

And this point is crucial. It’s a quantitative point. We’re 30 times richer than we were per person, so the poorest among us is vastly better off than she was in 1800, and this is about 3000%. When you ask people how much better off the poor are now than they were in 1800, they’ll say oh well, they’re a hundred percent better off or 50%, or maybe even 200%. No, no. It’s way off. It’s 3000% better off. And this you can see in healthcare, you can see it in number of rooms, space per person. You could see it in how much clothing people have, their transport, their ability to travel, their education, et cetera. All these things have vastly improved since 1800.

So then I had to go back as an economic historian in Volume II, Bourgeois Dignity, and go through all the other explanations and show that they’re just not up to it. They haven’t got quantitative oomph. And you say, I don’t know, slavery is the cause of modern enrichment. Well, there have been slave societies since the beginning of agriculture. So there’s something wrong with that because there were slave societies in the Middle East and they didn’t have a great enrichment. Come on, let’s get serious here. So I went through those and came conclusion that it was this dignifying of the middle class, bourgeois dignity, that had to be the key.

And then in the third volume called Bourgeois Equality, I showed it, which is sort of sticking a thumb in the eye of people like Thomas Piketty who think that equality, not the rising of all the boats, is what’s important about the modern world. I tried to show why liberal equality of the sort that Adam Smith advocated in 1776, why that was the key to innovation. So we got rich because we became free is the final conclusion of the trilogy, and yet our souls were not lost.

What caused the Great Enrichment or Hockey Stick?

Deirdre McCloskey:

What caused the hockey stick is freedom. It’s really as simple as that. Agricultural societies are naturally hierarchical and always have been. People are trapped as milkmaids or plowmen or Lords and ladies for their whole lives. And then it changed. It was the idea of equality in the 18th century that made the modern world.

What are the bourgeois virtues?

Deirdre McCloskey:

Well, the virtue ethical tradition in the West from the Greeks to the modern world, is that there are seven virtues. In the ancient classical Mediterranean there are four, so-called cardinal virtues. Courage, justice, temperance and prudence. Prudence is the virtue of common sense, know how. Justice is doing the right thing. Courage is control of fear and temperance is control of desire. Those are the four virtues of a polis, a Greek polis, or of a military camp. And then added to that very strangely by Christianity, was faith, hope and love and the greatest of these in love. They can be given a secular definition. Faith is identity. Hope is having a project. If you’re actually hopeless, you go home this afternoon and shoot yourself. And love is the evaluation, the valuation of all these things. And it turns out by actual psychological studies, that these seven pretty much cover the good things about humans.

Now there are corresponding vices. Lust and anger and so on and those are there too, alas. But it turns out that these seven or five or six or eight are reproduced in every culture. Confucianism or salvation thinking in the Epics. Those two admire a package of virtues that are almost identical to these seven in the West. And thinking about how to be good is best done, I think and some other philosophers do, by thinking of these individual virtues behind which each of which is a library of the reflection back to the [inaudible 00:02:38] and the Analects of Confucius or the Hebrew Bible. And we can think about what it means to be courageous or faithful individually. Whereas in the 18th century there are all these theories came up, utilitarianism, Kantianism, contractarianism, that all have kind of formulas for how to be good. Those are not very useful. The way we learn to be a good people, good business people, good soldiers, is through stories.

Off program comments

Doug Monroe:

Beautiful. As I was a student at North Carolina studying Trotsky with that professor I was talking to you about, reading about all these capitalists and what motivated them, according to them. I was thinking of my father and going, “That doesn’t motivate him at all. What motivates him is taking care of my mom, doing the right thing,” it has nothing to do with scientific materialism.

Deirdre McCloskey:

Yeah, well I had some of the same experience because my grandfather was an electrical contractor and I knew that he was an admirable man, although he had a problem with alcohol, but I knew that it wasn’t true that only professors are good. I knew that was stupid.

Why was Weber’s Protestant Work Thesis wrong?

Deirdre McCloskey:

Max Weber was one of the founders of sociology and a very fine scholar, a German. And he wrote a great book in 1905 called The Protestant Ethic and the Spirit of Capitalism, which every educated person should read.

It’s an amazing book, but it’s wrong. And it’s been shown to be wrong over and over and over again yet it’s very attractive because it says that spiritual things, the spirit of capitalism, which he traces back to Calvinism has material consequences. Although Weber was very much influenced by Marx, this is kind of turning Marx back on its head upside down, because it makes ideas the spring of history, the spring and the mechanical watch of history.

And to that extent, I agree with Weber that it is ideas are the spring. But he’s got the wrong idea. He says, along with Marx and with Adam Smith for that matter, that the source of enrichment is capital and hard work. But the trouble is that all societies have capital and hard work. Everyone works hard. The Filipino peasants planting rice are working hard. Everyone works hard. Everyone accumulates capital. We’ve been doing that since the caves.

What’s unusual is the innovations, the creativity, the working smart not hard. And that’s what Max Weber didn’t ever get. He holds up Benjamin Franklin as a model, and boy I’m with that, Ben is my hero too, but Ben Franklin didn’t get rich and creative and an important person who joined a revolution when he was 70 years old by hard work or saving a lot. People think that Benjamin Franklin is all about saving. No, he is not, he’s about invention. Inventing the Franklin stove, the flexible catheter, which will appeal to men. He discovered the Gulf stream and mapped it. He was the great theorist, early theorist of electricity, he invented the lightning rod, blah, blah, blah. This is only part of it. He was a creative man, and it’s the new honoring of mechanical, biological, institutional creativity in the 1700s and then very much in the 1800s and 1900s that made us rich and reasonably virtuous.

Is family the basis of society?

Deirdre McCloskey:

Well it’s the basis of every human society west, east, north, and south and to act as though love doesn’t figure in these mammals called human beings is crazy.

What’s unusual about mammals is they raise their young, as do birds by the way, the descendants of the dinosaurs, but reptiles and fish don’t. So what’s strange about us is that. And then in humans it’s particularly elaborated and full and it can’t be that we can have an economics that works very well if we don’t acknowledge love. Yet most men, most male economists and most economists are male want to… Well, as a famous economist said once, “Economics is the theory that economizes on love, that you don’t need love to make an economy work.” Well, I don’t think that’s true. I think these virtues love, and faith, and hope, justice, temperance, courage, and prudence all work together in an economy.

What does the cowboy movie Shane mean to you?

Deirdre McCloskey:

Well, the cowboy myth grew up starting after the Civil War. When there were, well there were always cowboys. But what’s funny about cowboys, one quarter of them were people of color, either African Americans or Hispanic. They were the bottom of the occupational distribution. They were the hired hands of the cattle industry. And yet they’ve been made into these knights, which comes across very clearly in my favorite cowboy movie called Shane, which everyone should see. Shane. Shane. I love the movie. And it’s the heroic male side of the American character. A similar mythical character that is exposed first in novels as the cowboy myth was. And then develops into movies as the hard boiled private eye. That’s another of these genres. And they are ways that men can understand their lives as lives of courage and independence.

And the problem is that this myth, which has its uses in making boys into men also can corrupt them. If all you have is courage. If all you are is a thrusting, two-fisted cowboy fighting with people all the time. Then you’re not a complete human being. And indeed in Shane there’s Shane himself, as a more complicated character than that simply. And certainly his friend who’s the farmer, especially in the novel as against the movie, is a highly bourgeois figure. He’s in the business of farming to make money. To support his family and to have a good life. And it’s not just this gun fighter mentality. So in a way that movie, Shane, has the message as some of the cowboy movies and a few of the hard boiled detective stories do, that there’s more to being a man than courage.

Did the Great Recession (2008-09) influence your Trilogy? Recessions Explained

Deirdre McCloskey:

No, I don’t think the Great Recession is that great. I’m an economic historian since 1800 in the United States. There have been about 40 recessions. About six of them, maybe five, have been as deep as the recession of 2008. The 1930s was much, much worse. So as the 19- 1840s, the 1870s, the 1890s, these were very serious, setbacks in the economy. And yet in every case, including 2008, by the time the downturn was finished and we’re back at the next peak, the peak was higher. So it’s a scallop effect, my own explanation of these… They aren’t ups and downs, and not quite how to look at. It’s scalloped. It goes up, up, up, up by a factor of 30 in the end. Transformative, 3000%. My own explanation is that there are waves of optimism and pessimism that are very natural in a changing economy.

In an economy. That’s innovative, that’s experimenting with railways. You’re going to over build them with dot com companies. You’re going to say, “Oh boy, we all ought to do dot com companies.” And then you do too many of them. You overbuild the automobile industry. You keep overbuilding, you keep doing too much, and then you correct. But then in the end you’ve got the innovation. You’ve got the railways, you’ve got the computer companies, you’ve got the automobiles.

So it’s this one to two steps forward, one step back kind of stuff that… It’s true in our lives, we make mistakes all the time. I made a mistake this last weekend of leaving my bag open and a purse was stolen from on the subway in Chicago. Well, live and learn.

Isn’t Bourgeoisie Dignity (second in trilogy) the heart of it all?

Deirdre McCloskey:

Well, yes, I think, I think it’s true that, But, but I don’t want to put it in such Protestant terms as that expression. Yes. Original sin, which is Saint Augustine and St. Paul are the big exponent of these in early Christianity. But that’s simply to admit that we’re in a world in which we can fail. A world in which we can sin. Because if that’s, so if we’re not in the real world, if we’re God’s pets instead of free spirits, then we don’t have real free will. And among the attributes of God that God created us with is free will. And it’s, if, if we were automatons, if God, just then he could make us perfect and we would never fall into sin. But in order to have the chance, we have to live in a real world in which we can sin. Now deep in Christianity is the notion and that all souls are equal. This isn’t true in Hinduism, for example, but it is true in Christianity and Islam and Judaism.

So we’re equal, but we didn’t start treat each other equally until the ideology of liberalism in the 18th century, until we start saying, Voiltare, and Smith and Mary Wollstonecraft and etc. Until we start saying to each other, yes, I am committed to treating you with equal dignity, getting away from the agricultural hierarchy, which had dominated us for so long, only then did economic growth happen only then. So it’s only this equal quality that gives us permission. I’m starting to think, now that permission is the big way to put liberalism. It’s not so much equality of opportunity. That’s how it’s often expressed. That’s its certainly not equality of outcome. That’s the socialist Russo-French Enlightenment way of looking at it. No, no, it’s the Scottish Enlightenment, but it’s not equality of opportunity exactly, as equality of permission.

Doug Monroe:

Yes. And it’s, it seems when the Protestant Reformation occurred, not because it was Protestantism, but because the Bible went into the vernacular, it became broadly read that they got the priests out of it and they just started reading the words as they were written.

Deirdre McCloskey:

Yeah, well, that’s certainly true.

Doug Monroe:

It multiplied because of the printing press.

Deirdre McCloskey:

Yeah, absolutely. I have a whole chapter on the printing press in my third volume and how important it was. Yes, the Protestant Reformation after 1517 was not the first time that people had tried to go back to the purity of the early church, but it was the first time that was successful against the established institutional church. And what my main argument, there is not so much doctrine, it’s not so much Calvinism to go back to Max Weber, but it was church governance. That was the key here. Congregationalists are so called because they chose their own minister. It wasn’t someone, some church hierarchy as in Anglicanism or in Luther them that made the decision. It was the congregation itself. The extreme of this are the Quakers, the society of friends from the 1640s in England, who didn’t have a minister. Where Luther’s famous formula, the priesthood of all believers, which he in the end didn’t really believe, came to be in force. If you, if you go to a Quaker meeting, they sit around in a circle and wait until the spirit of the lord descends, and then someone speaks.

What are the basic false theories of the Hockey Stick?

Deirdre McCloskey:

There’re basically two kinds of theories. There’s the exploitation theories and the savings theories. And the claim on the left… They’re left wing and right wing. The claim on the left, is that we are rich because slaves were exploited or because the third world is exploited or the working class is exploited, anyway, it’s exploitation. And indeed, then the point of the argument in Marx is that this exploitation, is used to invest. And that’s what made us rich. And on the other side, on the right hand, on the right, the explanation is that very savings, except now it’s virtuous savings. It’s these wise and rich people, who save their money and invest and then we’re all made better off. Neither of them makes any sense. For two reasons. One is that, mutual advantageous exchange in the labor market is not exploitation. Wage slavery is a meaningless phrase. It’s a contradiction in terms. That’s the economic problem with the theory on the left. The other problem is that exploitation is universal. The old joke is that, under capitalism man exploits man. Under socialism, it’s the other way around.

So, historically and economically, the left wing exploitation argument doesn’t make any sense. There was as large a slave trade from East Africa, up the coast into the slave markets of Cairo, Constantinople, Istanbul, as there was across the Atlantic. And yet the Middle East didn’t have an Industrial Revolution or a Great Enrichment. On the right, the problem is, that without innovation, without innovism, piling brick on brick or bachelor’s degree on bachelor’s degree, doesn’t accomplish anything, it has sharply diminishing returns. And then furthermore, people have always invested. Acheulean handaxes, they were somewhat misnamed because they weren’t really axes, but they were sharpened on one side dull on the other side so you could hold them and throw them or cut things with them. Those were used by humans, Homo sapiens and before, for almost a million and a half years. And you find them in archeological sites in very large numbers. So, people were accumulating making these so-called axes in large numbers, even before we were homo sapiens, which is the modern human race. So, accumulation doesn’t work either economically or historically. So, something else changed. And what changed was ideology, liberalism, the attitude towards the middle class, towards the bourgeoisie, towards innovators and investors.

Doug Monroe:

The asset game. It’s your move. It’s not how many assets you have, it’s what they are, how you use them-

Deirdre McCloskey:

What you do with them. Exactly.

Doug Monroe:

And da, da, da. And like her dad, I famously heard in my mind when I was in MBA school, an organizational behavior professor said, “There’s a man who’s one of our key alumni that says what capitalism is, is serving human needs.”

Deirdre McCloskey:

Yeah, well that’s right. And that’s-

Doug Monroe:

Giving them the stuff, as you say.

Deirdre McCloskey:

That’s terribly important for people to understand. People are always saying to people in the military when they see them in the airport, “Thank you for your service.” And I’m not against that. I think it’s nice to be a soldier, although I don’t care much for American foreign policy, but anyway, being a soldier is honorable and I’m not against it, but people in business serve, people who work serve, people who teach or heal serve. We’re all serving each other. That’s what specialization and trade is all about, service.

Doug Monroe:

Service.

How can charity harm the poor?

Deirdre McCloskey:

The theory in a way on both the left and the right is that poor people need to be subsidized, judged, supported. One of the defenses of slavery before the civil war was that we slave owners, are the generous and good aristocracy, helping these poor darkies to be useful in England. It was Thomas Carlyle making exactly this argument from a conservative point of view. And then on the left, the idea is, oh yeah, we’ve got to take care of the poor people by handouts. And as Charles Murray says, and Brooks and others, of course, the much better way is to give people the ability to in a dignified way, support themselves. You can help a man by giving him bread, but you help him more by giving him seeds and a plow to grow his own bread.

When and why did innovation take off?

Deirdre McCloskey:

No. It’s very much the 1800s.

Doug Monroe:

1800s, yeah.

Deirdre McCloskey:

There’s slow innovation beforehand. There are scientific advances in the 1600s, but those don’t have any economic effect until really around 1900. So there’s not much going on the scientific side until very late in this history. But what happens is that if you start treating people equally, allowing them as the English say to have a go, they have a go. They try it out. If you say to them No, no, no. You’re a milkmaid, shut up. Stay where you are. Then they don’t have a go. They don’t try to, I don’t know, improve milkmaid hood. And that’s the story.

Look, it’s not the elite of scientists and engineers that make this happen. It’s that everyone starts thinking of themselves as a scientist or an engineer.It’s the common people making themselves into innovators that does the trick. And it has to be that way. It has to be that everyone’s trying to improve themselves and not just improve themselves by stealing from other people, which is one way to improve yourself or by get getting the government to steal from other people for your benefit. No, no, that’s the bad way. The good way is to try to make better mouse trap. And then that’s what millions of people, more and more millions started to do.

Now in the modern world, we’ve got China and India turning in this liberal economic erection, the direction of freer markets. Freer, not perfectly free, with the result that 40% of humankind has been encouraged to open a hairdressing salon here, start a factory here, move to new work over here. The largest migration in human history just happened in China. 200 million people move from the center of China to the East Coast in order to work in the factories, 200 million. And it’s that kind of enterprise that’s permitted. I come back to this word permission. It’s permission that’s the key.

Further dialogue

Doug Monroe:

I like it’s. If you look at it as human needs, there’s so many human needs everywhere in this room that if you don’t turn other humans in the same room with you loose and give him permission to solve it, it’s not going to happen. You also sound very much like Rodney Stark when he talks about the Scientific Revolution. He says, the reason it happened in the West the way it did was because they felt like, he says humans, don’t do what they don’t think is possible. So if they don’t think it’s possible to look at the world and find reasons for science doing what it does, they’re not going to look for it. And it’s the same thing with the innovation and the 200 years later, if they don’t have permission to go do it, they’re not going to do it.

Deirdre McCloskey:

I admire Rodney Stark’s sociological historical work very much. I might quarrel with him by pointing out that he might be a little bit Euro-centric in this respect. And that, in fact, if you were going to bet in 1492 which part of the world would have a Great Enrichment at one point, you would’ve bet the farm on China. Because in 1492 China had the best ships, had the best law, had the best property rights, the best science, the best mathematics, the best technology, the best peace, long periods of completely secure internal peace. If that’s all you needed, then China would’ve been the great success. But in fact, what happened is this quarrelsome corner of the Eurasian continent, where people were slaughtering each other in large numbers over the doctrine of transubstantiation, turned out to be the place where liberalism happened. And that was the spring in the mechanical launch of the modern world. It was the force. It was the energy.

Doug Monroe:

I agree with all those observations. Wow, I feel like I’ve got another half an hour.

Deirdre McCloskey:

Keep going.

Thomas Picketty and his book “Capital in the 21st Century” (2013)

Deirdre McCloskey:

Thomas or Tomas, they say in French; Piketty or Piketty, is an honorable man, I’m sure, and an excellent economist in many ways, and a hard worker, and a good economic scientist, but he’s wrong on almost every point.

He’s wrong that if there’s an inherent tendency in innovism to inequality, quite the contrary. The most inequal societies were traditional agricultural societies. In the middle ages, in Europe half of income went to the landlords. Half. Whereas now it’s about four or five percent that goes to landlords.

So he’s got it wrong on all kinds of currencies. He talks about capital, but he doesn’t include human capital, which is the dominant form of accumulation, and income earning assets in the modern world. It’s what’s between our ears, not the machinery in buildings that we have that’s most important.

And then he’s wrong factually. It’s not true that incomes have stagnated, which is a common claim. You hear it on the TV all the time. And above all, it’s not at all desirable to make envy the central idea in social policy that people are rich. Good for them, as long as they didn’t steal it, I’m I’m in favor of it. If they inherited it, I’m inclined to tax a good deal of it away; I’m not against inheritance taxes as most Republicans are these days. But I’m very much against stealing, against crime.

But if you got rich by being Bill Gates, are even more to the point Steve Jobs, or Andrew Carnegie. If you got rich by doing well for the economy as a whole, which all three of those people did, then that you have an estate in Scotland doesn’t bother me. So what. Because it’s not true as is implied in Picketty’s story that taking from the rich and giving to the poor is how to make things better off. It’s not the case. What makes the poor better off. And that’s all I care about is, letting the economy grow. And you let the economy grow by allowing, or permitting the creative energies of ordinary people to be exercised.

Off program comments

Doug Monroe:

That story is astounding. I know that, yeah, when I was in college, about 10 years after you, there were books written about how the population would grow to 5 billion, 7 billion, and that we’d be dead. We’d all starve to death. Well, the population did grow there.

Deirdre McCloskey:

Yep.

Doug Monroe:

But yet the poverty’s gone from 80% to 20% or something like that, as defined. No one would’ve believed that possible in the seventies. It was absolutely crazy.

Deirdre McCloskey:

There’s a man named Ehrlich, Paul Ehrlich, who wrote a book called, “The Population Bomb,” where he said, by now, civilization would be over. We’d be fighting with each other and.

What are the building blocks of prosperity?

Deirdre McCloskey:

We of course need the institution of private property. We need the rule of law. We need a good spirit in business. We need people in business who have some answer to the questions, so what, some transcendent beyond just the bottom line. So we need ethical business people. But you know, these things are commonplace in human history. And I think it’s a big mistake to think that there’s some new improved property rights that makes for instant progress. Now what the real sources of leaps in welfare in human history, this Great Enrichment, are new ideas. New institutional ideas like the modern university invented in 1810 in the University of Berlin. Or another institutional change way at the other end of this history, the invention of the container ship, a brilliant, simple invention of 1956, Malcom McLean in North Carolina. Then all the mechanical and biological inventions of the modern world which we see all around us.

Of course you need a capital market. Of course you need private property, but of course you also need oxygen in the air. You also need, I don’t know the arrow of time. You also need the existence of a labor force. There are an infinite number of necessary conditions for anything to happen. But what we need to figure out and what I claim to have figured out, is what the spring is, what the sufficient condition is. Once you have the necessary conditions, what makes for innovation, innovism. And that I say comes from liberalism understood as a society of free people.

Can we separate social science from the humanities, facts from values?

Deirdre McCloskey:

I’m a quantitative person. I was trained quantitatively and I always ask how big things are. This is something I got from engineers, an engineering roommate I had. And then I worked for an economics project that involved MIT engineers. And they asked how big? So, I’m quantitative. But in the 1980s, I started to think more about the humanities and I finally come and this took quite a long time. I’m very slow at these things. I finally came to realize that the humanities are about categories, simple one is good, bad from an ethical point of view, or good, bad from an aesthetic point of view. But it’s also the categories of any science, red-giant stars as against white dwarf stars is a categorical exercise. You might say, well, the stars are stars. Let’s not talk about that.

And that would be an original humanistic style of reasoning, such as we get in pure economic theory or in pure mathematics, where we’re just looking for on-off categories. But you need that in every scientific enterprise in order to study Homo sapiens as against Homo neanderthals, you need to know what the difference is qualitatively. And then at the end, you need an answer to the question, so what? An answer to the question, well, okay. [foreign language] say the Dutch, and now, there has to be some reason that you are making a distinction between, say, Americans and foreigners for purpose of immigration policy.

And if then you have to, that’s the stage of evaluation. So, in between, there’s the quantification and the experiments and the observations. But before it, let me be behind the blackboard, before it, there are the humanities, and after are the humanities. This applies even to statistics. There’s a recent movement in statistics to abandon the very foolish mechanical use of tests of statistical significance. And the way to criticize these tests of statistical significance is precisely to note that before you measure, you’ve got to know what the categories are. And after you measure, you have to ask what for. So, I think the humanities and the quantitative sciences are inextricably bound up with each other.

Off program comments

Doug Monroe:

Great answer. I love that. That really… And I’ve never heard it explained that way. That’s…

Deirdre McCloskey:

It’s an idea I had.

Doug Monroe:

Yeah. So now we’re moving to, what I have in quotes, “capitalism today”. And I do think that you are sitting with the person who hates that word more than anyone in the world. Okay. Without any question, I’m going to dedicate the rest of my life to being a good husband and to getting rid of that word.

Deirdre McCloskey:

Good for you.

Definitions of Capitalism (Innovism) and Socialism

Deirdre McCloskey:

Well, I prefer to call capitalism, innovism, because the word capitalism was a word invented by its enemies. And it embodies a mistake that economics has made ever since, I’m afraid, Adam Smith. Which is to suppose that capital accumulation is how the world becomes rich. And it’s not. The world becomes rich, and the capital accumulation projects becomes sensible, only when you have an idea. Only when you have an idea, as I said, that you could open a hairdressing salon in this neighborhood, and that would be a good idea. Or you can invent a filament for an electric light, and try a thousand times to figure it out. So, the big difference is that innovism is a system of a liberal society. A society of free people, who are free to make trades with each other, and free to get together in corporations or partnerships, and free to try out stuff as long as the stuff doesn’t hurt other people.

Free to do things up to the point of other people’s noses. Whereas, socialism is the system that the bosses, the elite, the people in Washington or Moscow, make our decisions about what we’re going to do, what we’re going to invest in. So industrial policy, a popular phrase on the left of the United States, is a form of socialism. But so too, is military invasions, which is popular in the right. They’re both social. They’re both ideas that, well, you know this individual stuff, maybe we’ll let that go on a little bit. But mainly we’re going to have the government deciding what we’re going to do, the King, or the Congress. And I think that having that socialism is a big mistake. I believe in helping the poor. I believe that a very small part of what is government expenditure, indeed, does help the poor. Most of it goes to the middle class. I believe as a Christian classical liberal, that the main responsibility we owe to the poor is to allow them to work. Again, this word permission, that’s what we need to give people, not orders.

Are the Nordic countries – Sweden, Norway, and Denmark – socialist?

Deirdre McCloskey:

I just wrote an article, a short article for the conservative magazine, the National Review, attacking the notion that Sweden is socialist. It’s called, at least I called it, maybe they’ll change the title when it actually comes out in a couple of days, Sweden is capitalist.

Because it is. Most prices in Sweden are determined by supply and demand freely arrived at. Inherited wealth is not admired. Sweden has for the last 150 years been a very innovative economy. Innovism is admired. One of the great Swedish inventions is the ball bearing, which you don’t need to know much about how the modern world works to know that’s an important invention. And Volvo, the automobile company, was a spinoff of the great ball bearing company in Sweden. Volvo means in Latin, “I roll.” In the 1920s, that company came out of it.

So Sweden is not socialist. When, speaking of automobiles, the Saab automobile company went bankrupt, they came hat in hand to the Swedish government. Swedish government said, go away. We’re not going to give you any money. When Volvo a few years ago was purchased by the Chinese, Volvo is now a Chinese company, the government said, “Sure, feel free. You want to be Chinese? Go ahead.”

Imagine similar events in the United States. You don’t have to imagine it because on at least two occasions, the Chrysler corporation has been bailed out by the American taxpayer, and GM. And the very idea that Ford or General Motors would be taken over by the Chinese, imagine how the American Congress would react to that. So I ask you, which is the socialist country, the United States or Sweden?

All State’s spend; is socialism “collective spending”? (hint: that but more in the State’s %)

Deirdre McCloskey:

Well, I don’t know. Now, I would think that socialism is exactly that. Socialism is collective spending, period. So, as against individual spending. Now, understand, look, a family is a socialist enterprise. The mother is the central planner. The father, the income comes like manna from heaven on the children. And it’s collective. You work, your wife works, whoever works and you get income, which then is distributed in the family. You buy things in collectively. You buy a house together.

And the same thing happening for a family of 330 million people is socialism. Now, you can have 10% socialism, which is what I would like to have where the money that government is collecting is going to help actually help poor people. Or you can have a 35% socialism, which is what the United States has or 55%, which is what France has, or a 100%, which is what North Korea has. So, you got a choice. And I prefer the smaller element of social expenditure that we once had in the United States, in all civilized countries. Now it’s gotten way out of hand. The government is too big. There’s too much collective consumption. Now, one way of organizing the collective consumption is for the government to own the means of production but you can either own it or you can tax it. It amounts to the same thing. If the government is taking 55% of your income and taxes, that’s 55% slavery. Your human capital is owned by the government to the extent of 55%.

Collective Consumption (that works!!)

Doug Monroe:

You bring a phrase that I haven’t heard all that much, collective consumption. I think that’s very valuable. It’s a very valuable thought. You also bring up a great point that arguably the only communist organization that’s really ever worked is the family. It works beautifully and that’s what we ought to invest in.

Deirdre McCloskey:

Or indeed a group of friends. If you buy a pizza for your friends and you say, well, I paid for the pizza, I’m going to eat the whole thing. Then you won’t have those friends very long. As the great Dutch origin philosopher and theologian, a contemporary of Martin Luther, Erasmus of Rotterdam said, among friends all goods are common. And that’s true enough. But it’s only among friends and family, not this crazy idea that we can have in Sweden 9 million people in a family, in the United States, 330 million people.

Doug Monroe:

The common element is a threshold degree of love, I would say otherwise it doesn’t work. That’s hard to come by.

John Mackey’s “Conscious Capitalism” Conference

Doug Monroe:

Certainly. So-

Deirdre McCloskey:

I gave a talk two weeks ago at John Mackey’s conscious capitalism meeting in Arizona in Phoenix. And it was only 15 minutes, I was a little startled that they brought me all the way there for such a short talk. But I gave my shtick in 15 and they loved it. And these were CEOs and marketing people from the real world, they’re not a bunch of academics. So it worked.

Doug Monroe:

Give me the pitch in a nutshell.

Deirdre McCloskey:

Well, the pitch in a nutshell was that we became rich by becoming free. And that freedom, not collective consumption, is the way forward. Collective consumption, collective expenditure, collective production, to look at the three ways of measuring national income is not the way forward. The way forward is innovation.

So the middle class has been under-appreciated, even vilified?

Deirdre McCloskey:

It’s this dignified story of the bourgeois, of the middle class, of the urban middle class, that my first book of the trilogy, The Bourgeois Virtues was about, to show to the clerisy, to the journalists, professors, filmmakers, and so forth, that they’re wrong to take the view that commerce is corrupting. Everything’s potentially corrupting. We’re fallen creatures. There’s no doubt about that. We’re capable of sin, but we’re also capable of heroism and virtue and charity and love.

That was the point of the book is to show that of course you can be evil under socialism or nice under socialism, as we just said. The family is a socialist enterprise and if it’s a good family, it’s egalitarian. It’s from each according to her ability, to each according to his need. That’s a very reasonable motto for a family or a small group of friends.

So it I’m trying to stop Hollywood producers who are the most corporate people you can imagine, attacking constantly the modern corporation, which is what they do in their movies. Wall Street, for example, the two Wall Street movies. What I’d like them to do is movies like Joy about Joy Mangano, the inventor of the self-squeezing mop or the founder, the Keaton vehicle, about Kroc, who made McDonald’s what it is. We should be not worshiping people in business, but admiring them as much as we do priests and soldiers and saints and so forth. We shouldn’t assume they’re saints, but we should be admiring them when they do good, and they do good on the whole.

The word capitalism’s origin; Why ditch the name?

Deirdre McCloskey:

Well, the word “capitalism” was not used by Marx, but it was his followers who started to call it “ismus” in German, but he uses the word “capitalist” in his own way. Originally the word “capitalist” in French meant “a person who was an investor.” That’s all it meant. Marx gave it greater valence, greater importance because then it became the bosses, the capitalist class, this whole group of people who he regarded as not necessarily evil, but not even that… I was going to say an evil role in history, but they didn’t because it’s the fruits of this capitalism, which are supposed to be plucked for the benefit of socialism and eventually of a stateless society, which is the ideal of communism. It didn’t work out, but that’s what they had in mind.

But it’s a foolish word because it focuses on the accumulation of capital as the heart of the modern world and that’s wrong. True, we’ve certainly accumulated a lot of capital. Boy, it’s all over the place, buildings all over and roads and ships and airplanes and so forth. It’s human capital, educated people by the millions. So yeah, we’ve accumulated a lot, but sheer accumulation is not what makes us rich. It’s intelligent accumulation that makes us rich. Just as sheer labor doesn’t make us rich. You can be a very hard working dirt farmer who doesn’t know anything about agriculture and get it all wrong. You work just night and day, but it doesn’t do you any good unless you know how to work smart. It’s the smartness that’s the key. It’s knowing what to do and that we keep getting better at it.

We invent, well, this classic example is reinforced concrete, which is what my loft is made of. Reinforced concrete takes an ancient technology, which they had in China and in Rome. It says, “Now let’s see, we’ve got cheap steel. I wonder, I suppose you put steep, cheap steel inside the concrete. Won’t it be even better?” And sure enough, it was. That was invented by a French, I call him a gardener, but actually he was an aristocrat interested in gardening in the middle of the 19th century. So, it’s these ideas that come out of a free society. Ultimately, you can copy free societies. That’s what the Soviet Union did and what China’s doing now in Japan before. That’s fine. I’m in favor of them copying us. Please do, because then there’s more stuff available in the world. But the way we get out of poverty and have in the last two centuries is with new ideas. Those come from a free society. You can’t get good ideas out of a slave society. It doesn’t work.

Doug Monroe:

Exactly. All right.

How important is balancing the budget?

Doug Monroe:

…is balancing the budget?

Deirdre McCloskey:

Well, I’m an economist and I believe in… And I’m a Smithian, Adam Smithian economist. And he said famously, “That which is prudence in the affairs of any private family cannot be folly in the affairs of a great nation.” And a private family that borrows more and puts more on its credit card than it can pay is going to get into trouble. So I worry about the deficit. Apparently the Republican Party has stopped worrying about it. I find this puzzling. But I don’t regard it as an explosive danger. Look, at the end of the Napoleonic War, 1815, the funded national debt of the United Kingdom was two times annual income, two times, much, much higher than it is now in the United States where we’re gradually approaching 100%, two times. At the end of the Second World War in the United States, the funded debt, that is to say the outstanding bonds were again two times national income in the United States.

In both cases, it didn’t matter very much. The subsequent economic growth after 1815 in Britain and after 1945 in the United States made the burden of the debt fall, because if income is growing fast, then it’s easy to pay off the debt. And that’s what happened in both those cases. So we went down to a much lower ratio of funded debt to national income. Of course the problem in the modern world, say the United States now is against Britain in the 19th century, is that the federal government, especially in local governments for that matter, like the state of Illinois or the city of Chicago have promised other payments besides bonds. They’ve promised pensions and they’ve promised healthcare for old people like me.

And those are out of control. Those are getting bigger and bigger. Those are promises we made. They’re not bonds with a promise to pay $10,000 in so many years. It’s not what they are, but they’re still promises and there’re still debts. And those we need to worry about. Now, we can solve them pretty easily by just not paying them. We can do the same with bonds for that matter. So this is all something that’s only a burden if we carry out our promises. So you can see, I’m not really worried about this right now. I think it’s irresponsible for the Trump administration to go on adding to the national debt at $1 trillion a year. And I wish they’d stopped doing it, but I don’t regard it as dangerous as the extension of the power of the government that both parties seem to want.

Doug Monroe:

Yeah, I get you on that very much. And I can’t speak for the 1815 and the Napoleonic Wars. I bet it was the same, but there was definitely a will to reduce the deficit. After World War II, people just thought differently and-

Deirdre McCloskey:

Yeah, they did.

Doug Monroe:

And we don’t have that. We don’t have the idea.

Deirdre McCloskey:

No, we don’t.

Doug Monroe:

It’s going to be painful, we get it.

Deirdre McCloskey:

Yeah, I agree with you.

Doug Monroe:

All right.

How important is the nation-state?

Deirdre McCloskey:

One of the clerisy, as I call them, the intellectuals, the artists, the makers of films and books and newspapers, the college professors, had in the last three centuries three ideas, three political ideas, two of which were just terrible and one which was excellent.

The excellent one is the liberalism that I’ve emphasized. The idea that we should have a society in which everyone is free. The two terrible ideas are socialism and nationalism. Nationalism and socialism, if you like them, maybe you’ll like national socialism, namely the Nazi Party of Germany in the 1930s.

Both of them, you see, are collectivist, are this idea of collective consumption: we’re going to do stuff together. I think it’s much better to do stuff together by cooperation in trade and exchange and invention. That’s the nice form of cooperation, not this militarized… Socialism is a militarized version of the economy, war socialism it’s called.

And the same thing is true of nationalism, obviously. It’s a militarized version of local pride. I’m not against local pride. I mean, I’m glad to be an American. I’m proud of being an American. But if being proud of being an American involves invading Canada, I’m against it. So I think that nationalism socialism are dangerous ideas.

Doug Monroe:

Well-

Don’t liberal societies need rules and organization?

Deirdre McCloskey:

Well, there’s a little bit of enforcement of the law and the provision of courts and police, which we need, but that’s pretty small. That you could get along on with 5 or 6% expenditure of national income, maybe. You know this in business, most of the enforcement of the laws happens outside of the state, outside of the courts. If you, as a business person, Trump being an excellent example, don’t pay your suppliers. You’re not going to be able to get anyone to work for you. If you keep not paying off your loans as again, Trump did, then banks are not going to want to work with you. We have locks on our doors. In fact, an increasing part of the way people live is in private communities. You could call them gated, where they have private police forces, private enforcement of law.

I live in a condo. The condo form was invented in Puerto Rico in the 1950s. The condo legal form and a condominium is a private state for certain purposes, namely for housing. Most of what we do has nothing to do with the government. There’s a deep error that people have, that the only way we get laws is through the government. In fact, people think, well, what you mean by law is government enforcement. No, it’s not. We mainly get our rules under which we work from each other by voluntary deals, by contract, which is a tiny little piece of government put down on a piece of paper with this is the way most of society works. Think of the analogy with language, language like the economy is a massive system of cooperation, and language develops on its own. I mean, the French academy tries to keep le weekend out of the French vocabulary and fails or computer. They have some other French phrase for the machine called a computer, and it didn’t work. The French called computers a computer.

You can have a regular system that people agree with. That really has nothing to do with the government.

Doug Monroe:

Well…

America the Galactic Empire; Who rules?

Doug Monroe:

Like that-

Deirdre McCloskey:

In fact, it’s very strange that science fiction tends to talk about the Galactic Empire. There’s a kind of fascism, that’s very prominent in the traditions of science fiction, especially in the United States. And I don’t quite get why this is so, but even Star Wars, love the Star Wars movies, but princess Leia is a princess, what’s going on there. “What?” I thought, “We got rid of…” A nice statement is that in the 1700s, kings had power and women had none, now it’s the other way around.

What about transgenders in sports, changing genders, single-sex bathrooms, and transhumanism?

Deirdre McCloskey:

The transgender sports thing, I think, is pretty simple. I think it’s unfair that a person who has developed as I did, male muscles and so on, competes in women’s sports. I think that’s just stupid, and I wish people wouldn’t do it. For the most part, they don’t. If you’re going to just play tennis with someone else just for fun, I don’t care, but if you’re going to compete, for money or for glory, then you shouldn’t take advantage of male muscle mass in the same way that you shouldn’t, as a woman, as an XX person, a person with XX chromosomes, take male hormones to get stronger muscles to run faster. I think that defeats the purpose of the women’s NBA, or something.

That’s one way of looking at it. I think that, in a free society, people who want to change gender should be allowed to, and there should be the minimal intervention of the state. I don’t believe that it should be paid for by other people. Changing gender is not expensive, costs about as much as a small car. When I see a bunch of new, small cars on the street, I think, “Oh, I wonder why those people didn’t change gender.” They don’t want to change gender. I’m always surprised, so my forehead is flat. I keep going, “Oh, why?”

I think people should… It shouldn’t be subsidized. It shouldn’t be a public expenditure, but if you want to do it, you want to buy a house, you want to buy a car, you want to buy a gender, go ahead. Feel free. I think the bathroom issue, which is a big deal in some quarters, is a silly issue. What, as I am, I’m supposed to go into the men’s room? Come on, give me a break. That’s stupid. And I’m not in the lady’s room in order to peek up someone’s dress, I’m in the lady’s room to pee. The whole thing is quite absurd, and what’s so ridiculous about the bathroom issue is that every private home in the United States has bi-gender bathrooms. Both men and women go to the bathroom in the bathroom in the house, so come on. This is silly, to have, “Oh, we got to have a lady’s room and a men’s room.” My word. “We’ve got to check people’s…” What? Check people’s genetics at the door? How are you going to do that? It’s a silly idea.

As far as Francis Collins and the manipulation of the genome is concerned, I think that carefully done, that’s well worth doing. There are terrible inherited diseases that we may eventually be able to eliminate this way. I know it’s controversial in the case of down syndrome, but there are some that are not controversial. If you have some terrible inherited disease that completely cripples you, then we’d rather not have such children, but you got to know your history here, because genetic… Eugenics means good genes. That’s what it means in Greek, and the eugenic movement a hundred years ago, every major scientist believed in it on the basis of very primitive understanding of how genetics worked. They didn’t even know about DNA. Now, maybe we’re in a position to do a more subtle job, but we got to watch out for it, because we know how the eugenic movement ended. It ended in the Holocaust.

Are you optimistic or pessimistic about America? The world?

Doug Monroe:

… Question.

Deirdre McCloskey:

Well, I’m very optimistic about the world, and about the United States. I think it’s important that the United States is part of the world. And in 50 years, maybe a little longer, the whole world will be rich, and that’s going to result in a cultural and scientific, entrepreneurial explosion. Musical, cuisine is already happening, such as we’ll put 5th century Athens and 15th century Florence into the shade. This is going to be a great future that we have.

Now we can take careful aim at our foot and shoot it off. And fear of terrorism, or fear of environmental degradation, or fear of this, and fear of that can drive us to do stupid things. I hope we don’t.

Doug Monroe:

Thank you for being a Praxis Circle Contributor.

Deirdre McCloskey:

You’re very-

Doug Monroe:

It’s been a beautiful interview.

Deirdre McCloskey:

Thank you, dear. Glad you liked it.

Doug Monroe:

That’s by far the most-

We found it! True PMA (positive mental attitude)

Deirdre McCloskey:

People love pessimism. For these reasons, I was just looking it up, a thing I wrote on this. For some reason, people love to be told that the world is coming to an end, that the sky is falling. They just love to hear it. It makes them feel cool, I think. “Hey, I know about the sky is falling. You optimist, you’re just silly, cock-eyed optimist. I’m in the know.” I don’t know what they have in mind, but I’m not pessimistic at all.

Post program comments: C-a-n-t spells Cant

Deirdre McCloskey:

He’s a good son.

Doug Monroe:

You’re welcome.

Deirdre McCloskey:

Thank you all.

Doug Monroe:

You’re not predictable either.

Deirdre McCloskey:

Well, I try not to be.

Speaker 3:

That keeps it from being boring.

Deirdre McCloskey:

Well, I try to tell the truth. That’s what I try to do. You know, there’s an 18th century word that we ought to revive. Dr. Johnson, Samuel Johnson used to use it all the time. Can’t. C-A-N-T. Can’t means ill-considered, sloppy thinking, moralistic opinions, such as people have. Now people say, “Oh, environment is going to hell. We’ve got to stop industrial civilization.” That’s can’t, and there’s a lot of it. Most of people’s opinions… not most, but big percentage of can’t. And he used to say, Johnson used to say, “Sir…” He always said, sir. “Sir, clear your mind of can’t.”

Doug Monroe:

And I can’t is very much a day to day thing. We don’t see the overall good that occurs day to day.

Deirdre McCloskey:

No, we don’t. That’s right.

Doug Monroe:

We tend to be very-

Deirdre McCloskey:

That’s right.

Doug Monroe:

… worried about stupid stuff.

Deirdre McCloskey:

That’s right.

Post program comments: Solutions to the Healthcare Issue

Deirdre McCloskey:

That’s right. What’s the problem? People are always talking about the problem. And then of course the only we that’s around to solve the problem is the State. And I wish they’d get over that. I wish they’d say, “Well, do we really have a big problem here or…” Let’s take healthcare. How to solve the problem that the United States spends 50 to 100% more than any other country in the world on healthcare. Well, in some cases it’s not a problem because we have high quality healthcare. That’s very expensive, open heart surgeries say. Okay, that’s one point.

The second point is, what should we do? Should we pour more money into a monopolized system? Or should we go after the monopolies? I was talking about this at lunch. Should we allow, let’s take the pharmacy, big pharma. Should we allow the importation of drugs from anywhere in the world? Yes we should. And that would instantly stop us being… It would radically reduce the cost of American medical care. So should we go in the direction of better markets or should we go in the direction of subsidies? I’m going to be in Argentina in a couple of weeks.

Doug Monroe:

Yeah. To me.

Post program comments: Efficiency and Innovation

Doug Monroe:

It’s a no brainer, but the country’s not thinking.

Deirdre McCloskey:

No, they’re not. You ask the democratic candidates what we should do. And they say, medicare for all. I say, efficient medicine for all. That’s how you do it. You get the medical system working the way it should be.

Doug Monroe:

Oh, we can take care of the 1% that doesn’t have the coverage.

Deirdre McCloskey:

Exactly, fine with me.

Doug Monroe:

Don’t bomb the 99%. The other thing…. And this is just getting to the personal conversation part of it, but I mentioned… You don’t have time for this, and you would know most of it probably, but Professor Allitt at Emory, did a series of lectures in the great courses about the industrial revolution. And he gets into great detail about the basic stages; the steam engines and canals and railroads and all. But he takes you through pollution and how we solve that. But little stuff like, does the average person know that probably the most amazing pre-industrial thing was the English ship, which took 30 years to build. They couldn’t just manufacture more ships. They had to cure everything a certain way and it took decades of innovation and thoughts to make a ship

Deirdre McCloskey:

In fact, the ship at the age of sail was continuously under repair in the Royal Navy. They all always had lots of carpenters on their ships because they were constantly falling apart.

Doug Monroe:

Yeah, yeah, yeah.

Deirdre McCloskey:

So they’d be very old. They have ships of the line at Trafalgar, which were 50 years old, sort of like bombers, like our B52’s which are again, more than 50 years old.

Doug Monroe:

Yeah. Yeah.

Deirdre McCloskey:

And you keep repairing them, keep updating them.

Doug Monroe:

Amazing things.

Print

Overview

Deirdre McCloskey

Dr. Deirdre McCloskey is currently the Distinguished Professor of Economics, History, English, and Communication at the University of Illinois – Chicago, Emerita, where she has worked since 2000. Before that, she was a tenured associate professor at the University of Chicago in history and economics. Between her years at the University of Chicago and the University of Illinois – Chicago, Dr. McCloskey was a professor of history and economics at the University of Iowa. Praxis Circle interviewed Dr. McCloskey because she is one of the most outstanding and fascinating economic historians in the world and because of her interest in and explanations for the West’s and the world’s vast increase in wealth since 1800, a little known and certainly not celebrated fact.
Transcript

How and why: the Bourgeoisie as a great theme.

Deirdre McCloskey:

Well, I started thinking about these matters really as I gradually moved away from socialism and started to regard what’s so ill-advisedly called capitalism with favor, with thinking this is a good thing and good for poor people. I don’t care about the rich one way or the other, but I do care about poor people. That’s why I got into economics in the first place. But by the 1990s, I was increasingly impatient with my friends on the left, and some on the right, who said that, well, this capitalism, these business people, they’re vulgar.

And I’m a professor or something. I’m better than they are. And I didn’t like that so I wrote an essay for a magazine called The American Scholar, called The Bourgeois Virtues, which was just a brief attempt to think this way. Ask what was favorable about capitalism so-called. And there’s a version of this in the 1700s called [foreign language 00:01:13] in French. Sweet commerce, and that was my theme. And so then, by 2005, I had wrote the first of these volumes and it was a defense of the bourgeoisie, the middle class.

And then I realized that as an economic historian, which is my scientific field, I had stumbled on an explanation for the Great Enrichment that came over the West, and now the world, since 1800. And I saw that it had to do… I finally saw, I didn’t know this before I started it. I finally understood that it was the attitude of other people in the society towards the middle class, towards the inventors, towards the Benjamin Franklin types that changed. Anciently, until the 18th century, people were hostile to the business class.

The only way to honor was either in the church or in the battlefield or the court, either as a clergyman or as an aristocrat, whereas in the 18th century in England and its offshoots, starting actually the century before in Holland, business people became respectable in the eyes of the rest of the society. And that was amazing. Combine that with democracy, the idea that all people are created equal, and you get a really explosive combination where people respect inventors and everyone’s an inventor.

How did you move left to rightward through graduate school?

Doug Monroe:

Your life’s journey.

Deirdre McCloskey:

Well, I was the son of a professor at Harvard. His name was Robert McCloskey, not the man who wrote children’s books, but the man who wrote books on the Supreme Court. And my mother was a, kind of, beginning opera singer when I was young. I was born in 1942. And so I was in a very rich environment where scholarship and books were admired. So I was a bookish kid because of my parents. And then my mother was the real intellectual in the family because she’s 96 now and she’s always been interested in ideas, and persuasion, and argument, and this side and that side. Whereas my dad was sort of the expert.

Not that he was a stuffier, bad man, but he was not the kind of rough and tumble intellectual I became. But I was influenced as an adolescent, say, 15 or 16 by folk singing, which I started to do. And of course that’s from the left, so Woody Guthrie, and Pete Seeger, and Joan Baez, and so on, were all people of the left. And I was too. I was a typical upper middle class kid who suddenly realizes there are poor people in the world and reckons that the way to help them is to open daddy’s wallet. And so those were great influences on me, those sort of loosely left wing thinking. And then early in college, we had to read a lot of Marx. And I came to think of myself as a Marxist.

Actually my first influence was anarchism, Prince Kropotkin of Russia, whom I discovered as I discovered the other left wing classics in the Carnegie finance library in Wakefield, Massachusetts, when I was a kid. So as I entered college, I was a socialist, but then having switched my major to economics from history, I started to learn Keynesian economics and became a Keynesian, which is a much more moderate position. It’s not overthrowing capitalism, but it’s perfecting capitalism by introducing a good deal of socialism. So I was kind of a quasi-socialist.

And then as I proceeded, I had an engineering roommate and learned a kind of engineering attitude towards the world from him, problem solving, mathematics, quantities. So I became kind of a social engineer. So by the end of college, and then I went to graduate school at Harvard University and then gradually saw the applicability of economics to history at a great mentor, Alex, Gerschenkron, a famous economic historian. And so I drifted more and more towards the view that economics was usable, applicable. And finally, I came to the conclusion that the economy worked pretty well for poor people. In fact, extraordinarily well, contrary to the kind of, “Let’s go down and join the union”, attitude of my youth.

How are you postmodern?

Deirdre McCloskey:

Well, I became postmodern in the 1980s when I was investigating the rhetoric, first of economics and then of science generally. And what the word rhetoric means, Aristotle said is the study of the available means of unforced persuasion. Not with a gun, but with words. And it’s what science does. It’s how science advances. People persuade each other. It’s how anything advances. It’s how marriage advances. It’s how politics advances or doesn’t. It’s all about persuasion. And so I became a student of the humanities in a serious way in the 1980s.

And what I regard postmodernism as is the opposition to, well, modernism. Modernism is not what it seems on the surface. It means, it’s the conviction that we can persuade each other, or that we don’t need to persuade each other, we need to lay down the facts and the logic and that’s it. And that’s not true of any science. It’s not true of physics. It’s not true of mathematics. It’s not true of any human subject. We’re humans. We argue with each other, persuade each other. I hope honestly, and sincerely, and then we improve our thinking.

So I’m postmodern in the sense of being against modernism. And I went to the, 1988, to the summer School of Criticism and Theory, which is kind of a summer camp for advanced graduate students and assistant professors in English and French, and then an occasional full professor of economics. And there I learned deconstruction and this, that, and the other thing, and they don’t have to be left wing. In fact, one of their heroes, Foucault, the great French sociologist and philosopher, towards the end of his life, studied Milton Friedman and Gary Becker, the Chicago school economist, in a very serious way, very serious and respectful way. And Foucault is nothing if not postmodern. So I’m a postmodern, but a liberal in the 19th century sense and a Christian. And I was a convert from agnosticism and I’m literary. And I study novels and poetry, but I also do quantitative work. So I’m all those things.

As a Liberal or Libertarian, does the average person need God to avoid Nihilism?

Deirdre McCloskey:

What we all need as humans is a transcendent. We need some answer to the question, “So what?”

On one hand, we can get adequate nutrition and a little education and we can get rich and that’s very nice, and we can travel the world and we can read books and so on and so forth. All those are very nice, but then the question comes, “So what?”

And it can be answered in various ways. I have a friend who’s a tremendous Chicago Cubs baseball fan, and his life is largely about being a Cubs baseball fan so that’s his answer. Or it can be the family or science or art, or it can be God. And I think of God as being the ultimate answer to the question, “So what?” Because all those other things, as Saint Augustine said, pass away and all that remains ultimately is God.

But I’m a progressive Episcopalian. I’m not by any means a fundamentalist. I came to Christianity slowly after 1998 but it’s become important to me. And actually to be completely candid, my transcendence is scholarship, truth, scientific truth, but I do believe that behind it is a… and this is something that my priest, my spiritual advisor keeps saying to me, he says, “Deirdre, your work is prayer.”

Why did you become a woman?

Deirdre McCloskey:

Why did I become a woman? It’s like asking why you like chocolate ice cream? I mean, why you buy a Ford rather than a Mercedes has an answer in the realm of prudence. Oh, Mercedes is too expensive. I just need it for transport. So I got a Ford. But why you prefer chocolate to vanilla ice cream is a sentiment as the 18th century, Scottish philosophers would say, that just is. And it’s not susceptible to reason. That doesn’t mean you’d go off half-cocked. My mom was very wise, says don’t do anything more interesting than this gender change stuff. Don’t decide to become a horse or something. And I think that’s wise. Go back to being a boring professor. And so it’s not cost and benefit.

In fact, about a month before I realized that I could do it and was going to do it, this is the middle of August 1995 when it hit me. I’m an economist. So I actually literally drew up a cost benefit study of changing gender. And this is nuts. It’s not why you decide who to marry. In large parts it’s not how you decide what occupation you’re going to have or what your passions are. They just are you. That you just do them. And so I came to understand that this prudential cost benefit way of looking at life useful, though it is for building roads and doing lots of practical things, is not an answer to the question so what. Or the very closely connected question, “Who are you dear? Who are you?”

What do you think of men and masculinity?

Deirdre McCloskey:

I was a man, and I was a regular type man. As macho as a professor can be, I was. And I missed the things that women are better at seeing. The importance of love, what love entails, for example. Or a sensitivity to social circumstances that meant now, when I was a guy, I was a little bit above average for a man in detecting social situations. And now I’m below average for a woman, but way above what I was as a guy.

I admire men and think they’re just fine. But I think they’ve got to be full men. Donald Trump is not a full man, he’s a boy. He’s a 12 year old boy, and that’s not how to be a man. Being a man is not being contemptuous of women, or beating up on people, or being tough. It’s being a gentleman in the most fundamental sense. And the same thing is true of women. It’s not just being sexy and so on, it’s being a lady in a serious way. And I think both are valuable.

In fact, of course, what I think and what I think lots of people think is that we all have elements of both. A man has his mother inside him or his sister, and a woman has her brother or her uncle. And when encouraged, those things can come out, and a certain balance of cliche gender characteristics are desirable in both. There should be this emphasis on love and cooperation that women have, and this emphasis on competition and courage that men have, both genders should have a good deal of both.

Why was the Great Enrichment not noticed sooner?

Doug Monroe:

Later. Why was it not noticed?

Deirdre McCloskey:

Well, it was starting to be noticed by the- about a century into it. But even John Stuart Mill, who is a very clever man and a very wise man, didn’t notice it. His, the last edition of his book on economics, he wrote lots of other books, was 1871 and he still didn’t quite get that there was a revolution of production going on. His contemporary and fellow liberal, the historian McAuley, Thomas Bevington McAuley was much more perceptive about this. Though he’s just a historian he understood that this was revolutionary, but it kept happening. Look, it’s about 2% a year of increasing real income in the world. Well, not the world in places like the United States or Britain, Japan, and so forth. Since 1800, 2% a year doesn’t sound like much, but it means that income doubles about every third of a century.

So on a full century, that’s a factor of eight and a factor of eight. And then in two centuries, a factor of 16 and more, that’s a revolution. I mean, it’s, we keep using the word revolution. It doesn’t quite adequately express it. It’s a tsunami of enrichment. I call it the great enrichment. So it was hard for people to get out of their malthusian mindset that well, having more people is bad for you. We have the same problem. When we talk about immigration in the United States, “Oh no, too many people that’s bad for people.” No, it’s not one more person to trade with in the modern world is a betterment for everyone else. And that was true. Came to be true in the 19th and 20th century, as the humans got more and more human capital got more educated. And as we moved in this liberal erection, not government sponsored, but allowing people to have a go more and more people, first poor men, then slaves, then women and colonial people, then gays, et cetera.

How does the Trilogy integrate bourgeois virtues, dignity, and equality?

Deirdre McCloskey:

This trilogy is partly bec…. At first I was going to do six books. Ugh, crazy. Then four. And then I thought, “Well, three books, a trilogy, might be considered somewhat self-indulgent, but a tetralogy is an abomination.” The third volume is the thickest. It’s 700 pages, because I had to fit everything in. But the other two are thick, too. And the first book, called the Bourgeois Virtues, asks the question, “Is a life in commerce or a life in modern innovation corrupting? Is it inevitably corrupting?”

Because I believe as a Christian or as a person with common sense that it doesn’t help you if you gain the world and lose your immortal soul. So I felt I had to establish, first of all, that this system we have, which I call commercially-tested betterment… The short word is innovism. Capitalism, I don’t like. It’s a stupid word. Innovism. Is this corrupting of the human spirit? My answer is no. So that’s good, have that out of the way. Then I kind of realized that having defended innovism, I had an implicit theory of how the modern world happened, how we got so very, very rich.

And this point is crucial. It’s a quantitative point. We’re 30 times richer than we were per person, so the poorest among us is vastly better off than she was in 1800, and this is about 3000%. When you ask people how much better off the poor are now than they were in 1800, they’ll say oh well, they’re a hundred percent better off or 50%, or maybe even 200%. No, no. It’s way off. It’s 3000% better off. And this you can see in healthcare, you can see it in number of rooms, space per person. You could see it in how much clothing people have, their transport, their ability to travel, their education, et cetera. All these things have vastly improved since 1800.

So then I had to go back as an economic historian in Volume II, Bourgeois Dignity, and go through all the other explanations and show that they’re just not up to it. They haven’t got quantitative oomph. And you say, I don’t know, slavery is the cause of modern enrichment. Well, there have been slave societies since the beginning of agriculture. So there’s something wrong with that because there were slave societies in the Middle East and they didn’t have a great enrichment. Come on, let’s get serious here. So I went through those and came conclusion that it was this dignifying of the middle class, bourgeois dignity, that had to be the key.

And then in the third volume called Bourgeois Equality, I showed it, which is sort of sticking a thumb in the eye of people like Thomas Piketty who think that equality, not the rising of all the boats, is what’s important about the modern world. I tried to show why liberal equality of the sort that Adam Smith advocated in 1776, why that was the key to innovation. So we got rich because we became free is the final conclusion of the trilogy, and yet our souls were not lost.

What caused the Great Enrichment or Hockey Stick?

Deirdre McCloskey:

What caused the hockey stick is freedom. It’s really as simple as that. Agricultural societies are naturally hierarchical and always have been. People are trapped as milkmaids or plowmen or Lords and ladies for their whole lives. And then it changed. It was the idea of equality in the 18th century that made the modern world.

What are the bourgeois virtues?

Deirdre McCloskey:

Well, the virtue ethical tradition in the West from the Greeks to the modern world, is that there are seven virtues. In the ancient classical Mediterranean there are four, so-called cardinal virtues. Courage, justice, temperance and prudence. Prudence is the virtue of common sense, know how. Justice is doing the right thing. Courage is control of fear and temperance is control of desire. Those are the four virtues of a polis, a Greek polis, or of a military camp. And then added to that very strangely by Christianity, was faith, hope and love and the greatest of these in love. They can be given a secular definition. Faith is identity. Hope is having a project. If you’re actually hopeless, you go home this afternoon and shoot yourself. And love is the evaluation, the valuation of all these things. And it turns out by actual psychological studies, that these seven pretty much cover the good things about humans.

Now there are corresponding vices. Lust and anger and so on and those are there too, alas. But it turns out that these seven or five or six or eight are reproduced in every culture. Confucianism or salvation thinking in the Epics. Those two admire a package of virtues that are almost identical to these seven in the West. And thinking about how to be good is best done, I think and some other philosophers do, by thinking of these individual virtues behind which each of which is a library of the reflection back to the [inaudible 00:02:38] and the Analects of Confucius or the Hebrew Bible. And we can think about what it means to be courageous or faithful individually. Whereas in the 18th century there are all these theories came up, utilitarianism, Kantianism, contractarianism, that all have kind of formulas for how to be good. Those are not very useful. The way we learn to be a good people, good business people, good soldiers, is through stories.

Off program comments

Doug Monroe:

Beautiful. As I was a student at North Carolina studying Trotsky with that professor I was talking to you about, reading about all these capitalists and what motivated them, according to them. I was thinking of my father and going, “That doesn’t motivate him at all. What motivates him is taking care of my mom, doing the right thing,” it has nothing to do with scientific materialism.

Deirdre McCloskey:

Yeah, well I had some of the same experience because my grandfather was an electrical contractor and I knew that he was an admirable man, although he had a problem with alcohol, but I knew that it wasn’t true that only professors are good. I knew that was stupid.

Why was Weber’s Protestant Work Thesis wrong?

Deirdre McCloskey:

Max Weber was one of the founders of sociology and a very fine scholar, a German. And he wrote a great book in 1905 called The Protestant Ethic and the Spirit of Capitalism, which every educated person should read.

It’s an amazing book, but it’s wrong. And it’s been shown to be wrong over and over and over again yet it’s very attractive because it says that spiritual things, the spirit of capitalism, which he traces back to Calvinism has material consequences. Although Weber was very much influenced by Marx, this is kind of turning Marx back on its head upside down, because it makes ideas the spring of history, the spring and the mechanical watch of history.

And to that extent, I agree with Weber that it is ideas are the spring. But he’s got the wrong idea. He says, along with Marx and with Adam Smith for that matter, that the source of enrichment is capital and hard work. But the trouble is that all societies have capital and hard work. Everyone works hard. The Filipino peasants planting rice are working hard. Everyone works hard. Everyone accumulates capital. We’ve been doing that since the caves.

What’s unusual is the innovations, the creativity, the working smart not hard. And that’s what Max Weber didn’t ever get. He holds up Benjamin Franklin as a model, and boy I’m with that, Ben is my hero too, but Ben Franklin didn’t get rich and creative and an important person who joined a revolution when he was 70 years old by hard work or saving a lot. People think that Benjamin Franklin is all about saving. No, he is not, he’s about invention. Inventing the Franklin stove, the flexible catheter, which will appeal to men. He discovered the Gulf stream and mapped it. He was the great theorist, early theorist of electricity, he invented the lightning rod, blah, blah, blah. This is only part of it. He was a creative man, and it’s the new honoring of mechanical, biological, institutional creativity in the 1700s and then very much in the 1800s and 1900s that made us rich and reasonably virtuous.

Is family the basis of society?

Deirdre McCloskey:

Well it’s the basis of every human society west, east, north, and south and to act as though love doesn’t figure in these mammals called human beings is crazy.

What’s unusual about mammals is they raise their young, as do birds by the way, the descendants of the dinosaurs, but reptiles and fish don’t. So what’s strange about us is that. And then in humans it’s particularly elaborated and full and it can’t be that we can have an economics that works very well if we don’t acknowledge love. Yet most men, most male economists and most economists are male want to… Well, as a famous economist said once, “Economics is the theory that economizes on love, that you don’t need love to make an economy work.” Well, I don’t think that’s true. I think these virtues love, and faith, and hope, justice, temperance, courage, and prudence all work together in an economy.

What does the cowboy movie Shane mean to you?

Deirdre McCloskey:

Well, the cowboy myth grew up starting after the Civil War. When there were, well there were always cowboys. But what’s funny about cowboys, one quarter of them were people of color, either African Americans or Hispanic. They were the bottom of the occupational distribution. They were the hired hands of the cattle industry. And yet they’ve been made into these knights, which comes across very clearly in my favorite cowboy movie called Shane, which everyone should see. Shane. Shane. I love the movie. And it’s the heroic male side of the American character. A similar mythical character that is exposed first in novels as the cowboy myth was. And then develops into movies as the hard boiled private eye. That’s another of these genres. And they are ways that men can understand their lives as lives of courage and independence.

And the problem is that this myth, which has its uses in making boys into men also can corrupt them. If all you have is courage. If all you are is a thrusting, two-fisted cowboy fighting with people all the time. Then you’re not a complete human being. And indeed in Shane there’s Shane himself, as a more complicated character than that simply. And certainly his friend who’s the farmer, especially in the novel as against the movie, is a highly bourgeois figure. He’s in the business of farming to make money. To support his family and to have a good life. And it’s not just this gun fighter mentality. So in a way that movie, Shane, has the message as some of the cowboy movies and a few of the hard boiled detective stories do, that there’s more to being a man than courage.

Did the Great Recession (2008-09) influence your Trilogy? Recessions Explained

Deirdre McCloskey:

No, I don’t think the Great Recession is that great. I’m an economic historian since 1800 in the United States. There have been about 40 recessions. About six of them, maybe five, have been as deep as the recession of 2008. The 1930s was much, much worse. So as the 19- 1840s, the 1870s, the 1890s, these were very serious, setbacks in the economy. And yet in every case, including 2008, by the time the downturn was finished and we’re back at the next peak, the peak was higher. So it’s a scallop effect, my own explanation of these… They aren’t ups and downs, and not quite how to look at. It’s scalloped. It goes up, up, up, up by a factor of 30 in the end. Transformative, 3000%. My own explanation is that there are waves of optimism and pessimism that are very natural in a changing economy.

In an economy. That’s innovative, that’s experimenting with railways. You’re going to over build them with dot com companies. You’re going to say, “Oh boy, we all ought to do dot com companies.” And then you do too many of them. You overbuild the automobile industry. You keep overbuilding, you keep doing too much, and then you correct. But then in the end you’ve got the innovation. You’ve got the railways, you’ve got the computer companies, you’ve got the automobiles.

So it’s this one to two steps forward, one step back kind of stuff that… It’s true in our lives, we make mistakes all the time. I made a mistake this last weekend of leaving my bag open and a purse was stolen from on the subway in Chicago. Well, live and learn.

Isn’t Bourgeoisie Dignity (second in trilogy) the heart of it all?

Deirdre McCloskey:

Well, yes, I think, I think it’s true that, But, but I don’t want to put it in such Protestant terms as that expression. Yes. Original sin, which is Saint Augustine and St. Paul are the big exponent of these in early Christianity. But that’s simply to admit that we’re in a world in which we can fail. A world in which we can sin. Because if that’s, so if we’re not in the real world, if we’re God’s pets instead of free spirits, then we don’t have real free will. And among the attributes of God that God created us with is free will. And it’s, if, if we were automatons, if God, just then he could make us perfect and we would never fall into sin. But in order to have the chance, we have to live in a real world in which we can sin. Now deep in Christianity is the notion and that all souls are equal. This isn’t true in Hinduism, for example, but it is true in Christianity and Islam and Judaism.

So we’re equal, but we didn’t start treat each other equally until the ideology of liberalism in the 18th century, until we start saying, Voiltare, and Smith and Mary Wollstonecraft and etc. Until we start saying to each other, yes, I am committed to treating you with equal dignity, getting away from the agricultural hierarchy, which had dominated us for so long, only then did economic growth happen only then. So it’s only this equal quality that gives us permission. I’m starting to think, now that permission is the big way to put liberalism. It’s not so much equality of opportunity. That’s how it’s often expressed. That’s its certainly not equality of outcome. That’s the socialist Russo-French Enlightenment way of looking at it. No, no, it’s the Scottish Enlightenment, but it’s not equality of opportunity exactly, as equality of permission.

Doug Monroe:

Yes. And it’s, it seems when the Protestant Reformation occurred, not because it was Protestantism, but because the Bible went into the vernacular, it became broadly read that they got the priests out of it and they just started reading the words as they were written.

Deirdre McCloskey:

Yeah, well, that’s certainly true.

Doug Monroe:

It multiplied because of the printing press.

Deirdre McCloskey:

Yeah, absolutely. I have a whole chapter on the printing press in my third volume and how important it was. Yes, the Protestant Reformation after 1517 was not the first time that people had tried to go back to the purity of the early church, but it was the first time that was successful against the established institutional church. And what my main argument, there is not so much doctrine, it’s not so much Calvinism to go back to Max Weber, but it was church governance. That was the key here. Congregationalists are so called because they chose their own minister. It wasn’t someone, some church hierarchy as in Anglicanism or in Luther them that made the decision. It was the congregation itself. The extreme of this are the Quakers, the society of friends from the 1640s in England, who didn’t have a minister. Where Luther’s famous formula, the priesthood of all believers, which he in the end didn’t really believe, came to be in force. If you, if you go to a Quaker meeting, they sit around in a circle and wait until the spirit of the lord descends, and then someone speaks.

What are the basic false theories of the Hockey Stick?

Deirdre McCloskey:

There’re basically two kinds of theories. There’s the exploitation theories and the savings theories. And the claim on the left… They’re left wing and right wing. The claim on the left, is that we are rich because slaves were exploited or because the third world is exploited or the working class is exploited, anyway, it’s exploitation. And indeed, then the point of the argument in Marx is that this exploitation, is used to invest. And that’s what made us rich. And on the other side, on the right hand, on the right, the explanation is that very savings, except now it’s virtuous savings. It’s these wise and rich people, who save their money and invest and then we’re all made better off. Neither of them makes any sense. For two reasons. One is that, mutual advantageous exchange in the labor market is not exploitation. Wage slavery is a meaningless phrase. It’s a contradiction in terms. That’s the economic problem with the theory on the left. The other problem is that exploitation is universal. The old joke is that, under capitalism man exploits man. Under socialism, it’s the other way around.

So, historically and economically, the left wing exploitation argument doesn’t make any sense. There was as large a slave trade from East Africa, up the coast into the slave markets of Cairo, Constantinople, Istanbul, as there was across the Atlantic. And yet the Middle East didn’t have an Industrial Revolution or a Great Enrichment. On the right, the problem is, that without innovation, without innovism, piling brick on brick or bachelor’s degree on bachelor’s degree, doesn’t accomplish anything, it has sharply diminishing returns. And then furthermore, people have always invested. Acheulean handaxes, they were somewhat misnamed because they weren’t really axes, but they were sharpened on one side dull on the other side so you could hold them and throw them or cut things with them. Those were used by humans, Homo sapiens and before, for almost a million and a half years. And you find them in archeological sites in very large numbers. So, people were accumulating making these so-called axes in large numbers, even before we were homo sapiens, which is the modern human race. So, accumulation doesn’t work either economically or historically. So, something else changed. And what changed was ideology, liberalism, the attitude towards the middle class, towards the bourgeoisie, towards innovators and investors.

Doug Monroe:

The asset game. It’s your move. It’s not how many assets you have, it’s what they are, how you use them-

Deirdre McCloskey:

What you do with them. Exactly.

Doug Monroe:

And da, da, da. And like her dad, I famously heard in my mind when I was in MBA school, an organizational behavior professor said, “There’s a man who’s one of our key alumni that says what capitalism is, is serving human needs.”

Deirdre McCloskey:

Yeah, well that’s right. And that’s-

Doug Monroe:

Giving them the stuff, as you say.

Deirdre McCloskey:

That’s terribly important for people to understand. People are always saying to people in the military when they see them in the airport, “Thank you for your service.” And I’m not against that. I think it’s nice to be a soldier, although I don’t care much for American foreign policy, but anyway, being a soldier is honorable and I’m not against it, but people in business serve, people who work serve, people who teach or heal serve. We’re all serving each other. That’s what specialization and trade is all about, service.

Doug Monroe:

Service.

How can charity harm the poor?

Deirdre McCloskey:

The theory in a way on both the left and the right is that poor people need to be subsidized, judged, supported. One of the defenses of slavery before the civil war was that we slave owners, are the generous and good aristocracy, helping these poor darkies to be useful in England. It was Thomas Carlyle making exactly this argument from a conservative point of view. And then on the left, the idea is, oh yeah, we’ve got to take care of the poor people by handouts. And as Charles Murray says, and Brooks and others, of course, the much better way is to give people the ability to in a dignified way, support themselves. You can help a man by giving him bread, but you help him more by giving him seeds and a plow to grow his own bread.

When and why did innovation take off?

Deirdre McCloskey:

No. It’s very much the 1800s.

Doug Monroe:

1800s, yeah.

Deirdre McCloskey:

There’s slow innovation beforehand. There are scientific advances in the 1600s, but those don’t have any economic effect until really around 1900. So there’s not much going on the scientific side until very late in this history. But what happens is that if you start treating people equally, allowing them as the English say to have a go, they have a go. They try it out. If you say to them No, no, no. You’re a milkmaid, shut up. Stay where you are. Then they don’t have a go. They don’t try to, I don’t know, improve milkmaid hood. And that’s the story.

Look, it’s not the elite of scientists and engineers that make this happen. It’s that everyone starts thinking of themselves as a scientist or an engineer.It’s the common people making themselves into innovators that does the trick. And it has to be that way. It has to be that everyone’s trying to improve themselves and not just improve themselves by stealing from other people, which is one way to improve yourself or by get getting the government to steal from other people for your benefit. No, no, that’s the bad way. The good way is to try to make better mouse trap. And then that’s what millions of people, more and more millions started to do.

Now in the modern world, we’ve got China and India turning in this liberal economic erection, the direction of freer markets. Freer, not perfectly free, with the result that 40% of humankind has been encouraged to open a hairdressing salon here, start a factory here, move to new work over here. The largest migration in human history just happened in China. 200 million people move from the center of China to the East Coast in order to work in the factories, 200 million. And it’s that kind of enterprise that’s permitted. I come back to this word permission. It’s permission that’s the key.

Further dialogue

Doug Monroe:

I like it’s. If you look at it as human needs, there’s so many human needs everywhere in this room that if you don’t turn other humans in the same room with you loose and give him permission to solve it, it’s not going to happen. You also sound very much like Rodney Stark when he talks about the Scientific Revolution. He says, the reason it happened in the West the way it did was because they felt like, he says humans, don’t do what they don’t think is possible. So if they don’t think it’s possible to look at the world and find reasons for science doing what it does, they’re not going to look for it. And it’s the same thing with the innovation and the 200 years later, if they don’t have permission to go do it, they’re not going to do it.

Deirdre McCloskey:

I admire Rodney Stark’s sociological historical work very much. I might quarrel with him by pointing out that he might be a little bit Euro-centric in this respect. And that, in fact, if you were going to bet in 1492 which part of the world would have a Great Enrichment at one point, you would’ve bet the farm on China. Because in 1492 China had the best ships, had the best law, had the best property rights, the best science, the best mathematics, the best technology, the best peace, long periods of completely secure internal peace. If that’s all you needed, then China would’ve been the great success. But in fact, what happened is this quarrelsome corner of the Eurasian continent, where people were slaughtering each other in large numbers over the doctrine of transubstantiation, turned out to be the place where liberalism happened. And that was the spring in the mechanical launch of the modern world. It was the force. It was the energy.

Doug Monroe:

I agree with all those observations. Wow, I feel like I’ve got another half an hour.

Deirdre McCloskey:

Keep going.

Thomas Picketty and his book “Capital in the 21st Century” (2013)

Deirdre McCloskey:

Thomas or Tomas, they say in French; Piketty or Piketty, is an honorable man, I’m sure, and an excellent economist in many ways, and a hard worker, and a good economic scientist, but he’s wrong on almost every point.

He’s wrong that if there’s an inherent tendency in innovism to inequality, quite the contrary. The most inequal societies were traditional agricultural societies. In the middle ages, in Europe half of income went to the landlords. Half. Whereas now it’s about four or five percent that goes to landlords.

So he’s got it wrong on all kinds of currencies. He talks about capital, but he doesn’t include human capital, which is the dominant form of accumulation, and income earning assets in the modern world. It’s what’s between our ears, not the machinery in buildings that we have that’s most important.

And then he’s wrong factually. It’s not true that incomes have stagnated, which is a common claim. You hear it on the TV all the time. And above all, it’s not at all desirable to make envy the central idea in social policy that people are rich. Good for them, as long as they didn’t steal it, I’m I’m in favor of it. If they inherited it, I’m inclined to tax a good deal of it away; I’m not against inheritance taxes as most Republicans are these days. But I’m very much against stealing, against crime.

But if you got rich by being Bill Gates, are even more to the point Steve Jobs, or Andrew Carnegie. If you got rich by doing well for the economy as a whole, which all three of those people did, then that you have an estate in Scotland doesn’t bother me. So what. Because it’s not true as is implied in Picketty’s story that taking from the rich and giving to the poor is how to make things better off. It’s not the case. What makes the poor better off. And that’s all I care about is, letting the economy grow. And you let the economy grow by allowing, or permitting the creative energies of ordinary people to be exercised.

Off program comments

Doug Monroe:

That story is astounding. I know that, yeah, when I was in college, about 10 years after you, there were books written about how the population would grow to 5 billion, 7 billion, and that we’d be dead. We’d all starve to death. Well, the population did grow there.

Deirdre McCloskey:

Yep.

Doug Monroe:

But yet the poverty’s gone from 80% to 20% or something like that, as defined. No one would’ve believed that possible in the seventies. It was absolutely crazy.

Deirdre McCloskey:

There’s a man named Ehrlich, Paul Ehrlich, who wrote a book called, “The Population Bomb,” where he said, by now, civilization would be over. We’d be fighting with each other and.

What are the building blocks of prosperity?

Deirdre McCloskey:

We of course need the institution of private property. We need the rule of law. We need a good spirit in business. We need people in business who have some answer to the questions, so what, some transcendent beyond just the bottom line. So we need ethical business people. But you know, these things are commonplace in human history. And I think it’s a big mistake to think that there’s some new improved property rights that makes for instant progress. Now what the real sources of leaps in welfare in human history, this Great Enrichment, are new ideas. New institutional ideas like the modern university invented in 1810 in the University of Berlin. Or another institutional change way at the other end of this history, the invention of the container ship, a brilliant, simple invention of 1956, Malcom McLean in North Carolina. Then all the mechanical and biological inventions of the modern world which we see all around us.

Of course you need a capital market. Of course you need private property, but of course you also need oxygen in the air. You also need, I don’t know the arrow of time. You also need the existence of a labor force. There are an infinite number of necessary conditions for anything to happen. But what we need to figure out and what I claim to have figured out, is what the spring is, what the sufficient condition is. Once you have the necessary conditions, what makes for innovation, innovism. And that I say comes from liberalism understood as a society of free people.

Can we separate social science from the humanities, facts from values?

Deirdre McCloskey:

I’m a quantitative person. I was trained quantitatively and I always ask how big things are. This is something I got from engineers, an engineering roommate I had. And then I worked for an economics project that involved MIT engineers. And they asked how big? So, I’m quantitative. But in the 1980s, I started to think more about the humanities and I finally come and this took quite a long time. I’m very slow at these things. I finally came to realize that the humanities are about categories, simple one is good, bad from an ethical point of view, or good, bad from an aesthetic point of view. But it’s also the categories of any science, red-giant stars as against white dwarf stars is a categorical exercise. You might say, well, the stars are stars. Let’s not talk about that.

And that would be an original humanistic style of reasoning, such as we get in pure economic theory or in pure mathematics, where we’re just looking for on-off categories. But you need that in every scientific enterprise in order to study Homo sapiens as against Homo neanderthals, you need to know what the difference is qualitatively. And then at the end, you need an answer to the question, so what? An answer to the question, well, okay. [foreign language] say the Dutch, and now, there has to be some reason that you are making a distinction between, say, Americans and foreigners for purpose of immigration policy.

And if then you have to, that’s the stage of evaluation. So, in between, there’s the quantification and the experiments and the observations. But before it, let me be behind the blackboard, before it, there are the humanities, and after are the humanities. This applies even to statistics. There’s a recent movement in statistics to abandon the very foolish mechanical use of tests of statistical significance. And the way to criticize these tests of statistical significance is precisely to note that before you measure, you’ve got to know what the categories are. And after you measure, you have to ask what for. So, I think the humanities and the quantitative sciences are inextricably bound up with each other.

Off program comments

Doug Monroe:

Great answer. I love that. That really… And I’ve never heard it explained that way. That’s…

Deirdre McCloskey:

It’s an idea I had.

Doug Monroe:

Yeah. So now we’re moving to, what I have in quotes, “capitalism today”. And I do think that you are sitting with the person who hates that word more than anyone in the world. Okay. Without any question, I’m going to dedicate the rest of my life to being a good husband and to getting rid of that word.

Deirdre McCloskey:

Good for you.

Definitions of Capitalism (Innovism) and Socialism

Deirdre McCloskey:

Well, I prefer to call capitalism, innovism, because the word capitalism was a word invented by its enemies. And it embodies a mistake that economics has made ever since, I’m afraid, Adam Smith. Which is to suppose that capital accumulation is how the world becomes rich. And it’s not. The world becomes rich, and the capital accumulation projects becomes sensible, only when you have an idea. Only when you have an idea, as I said, that you could open a hairdressing salon in this neighborhood, and that would be a good idea. Or you can invent a filament for an electric light, and try a thousand times to figure it out. So, the big difference is that innovism is a system of a liberal society. A society of free people, who are free to make trades with each other, and free to get together in corporations or partnerships, and free to try out stuff as long as the stuff doesn’t hurt other people.

Free to do things up to the point of other people’s noses. Whereas, socialism is the system that the bosses, the elite, the people in Washington or Moscow, make our decisions about what we’re going to do, what we’re going to invest in. So industrial policy, a popular phrase on the left of the United States, is a form of socialism. But so too, is military invasions, which is popular in the right. They’re both social. They’re both ideas that, well, you know this individual stuff, maybe we’ll let that go on a little bit. But mainly we’re going to have the government deciding what we’re going to do, the King, or the Congress. And I think that having that socialism is a big mistake. I believe in helping the poor. I believe that a very small part of what is government expenditure, indeed, does help the poor. Most of it goes to the middle class. I believe as a Christian classical liberal, that the main responsibility we owe to the poor is to allow them to work. Again, this word permission, that’s what we need to give people, not orders.

Are the Nordic countries – Sweden, Norway, and Denmark – socialist?

Deirdre McCloskey:

I just wrote an article, a short article for the conservative magazine, the National Review, attacking the notion that Sweden is socialist. It’s called, at least I called it, maybe they’ll change the title when it actually comes out in a couple of days, Sweden is capitalist.

Because it is. Most prices in Sweden are determined by supply and demand freely arrived at. Inherited wealth is not admired. Sweden has for the last 150 years been a very innovative economy. Innovism is admired. One of the great Swedish inventions is the ball bearing, which you don’t need to know much about how the modern world works to know that’s an important invention. And Volvo, the automobile company, was a spinoff of the great ball bearing company in Sweden. Volvo means in Latin, “I roll.” In the 1920s, that company came out of it.

So Sweden is not socialist. When, speaking of automobiles, the Saab automobile company went bankrupt, they came hat in hand to the Swedish government. Swedish government said, go away. We’re not going to give you any money. When Volvo a few years ago was purchased by the Chinese, Volvo is now a Chinese company, the government said, “Sure, feel free. You want to be Chinese? Go ahead.”

Imagine similar events in the United States. You don’t have to imagine it because on at least two occasions, the Chrysler corporation has been bailed out by the American taxpayer, and GM. And the very idea that Ford or General Motors would be taken over by the Chinese, imagine how the American Congress would react to that. So I ask you, which is the socialist country, the United States or Sweden?

All State’s spend; is socialism “collective spending”? (hint: that but more in the State’s %)

Deirdre McCloskey:

Well, I don’t know. Now, I would think that socialism is exactly that. Socialism is collective spending, period. So, as against individual spending. Now, understand, look, a family is a socialist enterprise. The mother is the central planner. The father, the income comes like manna from heaven on the children. And it’s collective. You work, your wife works, whoever works and you get income, which then is distributed in the family. You buy things in collectively. You buy a house together.

And the same thing happening for a family of 330 million people is socialism. Now, you can have 10% socialism, which is what I would like to have where the money that government is collecting is going to help actually help poor people. Or you can have a 35% socialism, which is what the United States has or 55%, which is what France has, or a 100%, which is what North Korea has. So, you got a choice. And I prefer the smaller element of social expenditure that we once had in the United States, in all civilized countries. Now it’s gotten way out of hand. The government is too big. There’s too much collective consumption. Now, one way of organizing the collective consumption is for the government to own the means of production but you can either own it or you can tax it. It amounts to the same thing. If the government is taking 55% of your income and taxes, that’s 55% slavery. Your human capital is owned by the government to the extent of 55%.

Collective Consumption (that works!!)

Doug Monroe:

You bring a phrase that I haven’t heard all that much, collective consumption. I think that’s very valuable. It’s a very valuable thought. You also bring up a great point that arguably the only communist organization that’s really ever worked is the family. It works beautifully and that’s what we ought to invest in.

Deirdre McCloskey:

Or indeed a group of friends. If you buy a pizza for your friends and you say, well, I paid for the pizza, I’m going to eat the whole thing. Then you won’t have those friends very long. As the great Dutch origin philosopher and theologian, a contemporary of Martin Luther, Erasmus of Rotterdam said, among friends all goods are common. And that’s true enough. But it’s only among friends and family, not this crazy idea that we can have in Sweden 9 million people in a family, in the United States, 330 million people.

Doug Monroe:

The common element is a threshold degree of love, I would say otherwise it doesn’t work. That’s hard to come by.

John Mackey’s “Conscious Capitalism” Conference

Doug Monroe:

Certainly. So-

Deirdre McCloskey:

I gave a talk two weeks ago at John Mackey’s conscious capitalism meeting in Arizona in Phoenix. And it was only 15 minutes, I was a little startled that they brought me all the way there for such a short talk. But I gave my shtick in 15 and they loved it. And these were CEOs and marketing people from the real world, they’re not a bunch of academics. So it worked.

Doug Monroe:

Give me the pitch in a nutshell.

Deirdre McCloskey:

Well, the pitch in a nutshell was that we became rich by becoming free. And that freedom, not collective consumption, is the way forward. Collective consumption, collective expenditure, collective production, to look at the three ways of measuring national income is not the way forward. The way forward is innovation.

So the middle class has been under-appreciated, even vilified?

Deirdre McCloskey:

It’s this dignified story of the bourgeois, of the middle class, of the urban middle class, that my first book of the trilogy, The Bourgeois Virtues was about, to show to the clerisy, to the journalists, professors, filmmakers, and so forth, that they’re wrong to take the view that commerce is corrupting. Everything’s potentially corrupting. We’re fallen creatures. There’s no doubt about that. We’re capable of sin, but we’re also capable of heroism and virtue and charity and love.

That was the point of the book is to show that of course you can be evil under socialism or nice under socialism, as we just said. The family is a socialist enterprise and if it’s a good family, it’s egalitarian. It’s from each according to her ability, to each according to his need. That’s a very reasonable motto for a family or a small group of friends.

So it I’m trying to stop Hollywood producers who are the most corporate people you can imagine, attacking constantly the modern corporation, which is what they do in their movies. Wall Street, for example, the two Wall Street movies. What I’d like them to do is movies like Joy about Joy Mangano, the inventor of the self-squeezing mop or the founder, the Keaton vehicle, about Kroc, who made McDonald’s what it is. We should be not worshiping people in business, but admiring them as much as we do priests and soldiers and saints and so forth. We shouldn’t assume they’re saints, but we should be admiring them when they do good, and they do good on the whole.

The word capitalism’s origin; Why ditch the name?

Deirdre McCloskey:

Well, the word “capitalism” was not used by Marx, but it was his followers who started to call it “ismus” in German, but he uses the word “capitalist” in his own way. Originally the word “capitalist” in French meant “a person who was an investor.” That’s all it meant. Marx gave it greater valence, greater importance because then it became the bosses, the capitalist class, this whole group of people who he regarded as not necessarily evil, but not even that… I was going to say an evil role in history, but they didn’t because it’s the fruits of this capitalism, which are supposed to be plucked for the benefit of socialism and eventually of a stateless society, which is the ideal of communism. It didn’t work out, but that’s what they had in mind.

But it’s a foolish word because it focuses on the accumulation of capital as the heart of the modern world and that’s wrong. True, we’ve certainly accumulated a lot of capital. Boy, it’s all over the place, buildings all over and roads and ships and airplanes and so forth. It’s human capital, educated people by the millions. So yeah, we’ve accumulated a lot, but sheer accumulation is not what makes us rich. It’s intelligent accumulation that makes us rich. Just as sheer labor doesn’t make us rich. You can be a very hard working dirt farmer who doesn’t know anything about agriculture and get it all wrong. You work just night and day, but it doesn’t do you any good unless you know how to work smart. It’s the smartness that’s the key. It’s knowing what to do and that we keep getting better at it.

We invent, well, this classic example is reinforced concrete, which is what my loft is made of. Reinforced concrete takes an ancient technology, which they had in China and in Rome. It says, “Now let’s see, we’ve got cheap steel. I wonder, I suppose you put steep, cheap steel inside the concrete. Won’t it be even better?” And sure enough, it was. That was invented by a French, I call him a gardener, but actually he was an aristocrat interested in gardening in the middle of the 19th century. So, it’s these ideas that come out of a free society. Ultimately, you can copy free societies. That’s what the Soviet Union did and what China’s doing now in Japan before. That’s fine. I’m in favor of them copying us. Please do, because then there’s more stuff available in the world. But the way we get out of poverty and have in the last two centuries is with new ideas. Those come from a free society. You can’t get good ideas out of a slave society. It doesn’t work.

Doug Monroe:

Exactly. All right.

How important is balancing the budget?

Doug Monroe:

…is balancing the budget?

Deirdre McCloskey:

Well, I’m an economist and I believe in… And I’m a Smithian, Adam Smithian economist. And he said famously, “That which is prudence in the affairs of any private family cannot be folly in the affairs of a great nation.” And a private family that borrows more and puts more on its credit card than it can pay is going to get into trouble. So I worry about the deficit. Apparently the Republican Party has stopped worrying about it. I find this puzzling. But I don’t regard it as an explosive danger. Look, at the end of the Napoleonic War, 1815, the funded national debt of the United Kingdom was two times annual income, two times, much, much higher than it is now in the United States where we’re gradually approaching 100%, two times. At the end of the Second World War in the United States, the funded debt, that is to say the outstanding bonds were again two times national income in the United States.

In both cases, it didn’t matter very much. The subsequent economic growth after 1815 in Britain and after 1945 in the United States made the burden of the debt fall, because if income is growing fast, then it’s easy to pay off the debt. And that’s what happened in both those cases. So we went down to a much lower ratio of funded debt to national income. Of course the problem in the modern world, say the United States now is against Britain in the 19th century, is that the federal government, especially in local governments for that matter, like the state of Illinois or the city of Chicago have promised other payments besides bonds. They’ve promised pensions and they’ve promised healthcare for old people like me.

And those are out of control. Those are getting bigger and bigger. Those are promises we made. They’re not bonds with a promise to pay $10,000 in so many years. It’s not what they are, but they’re still promises and there’re still debts. And those we need to worry about. Now, we can solve them pretty easily by just not paying them. We can do the same with bonds for that matter. So this is all something that’s only a burden if we carry out our promises. So you can see, I’m not really worried about this right now. I think it’s irresponsible for the Trump administration to go on adding to the national debt at $1 trillion a year. And I wish they’d stopped doing it, but I don’t regard it as dangerous as the extension of the power of the government that both parties seem to want.

Doug Monroe:

Yeah, I get you on that very much. And I can’t speak for the 1815 and the Napoleonic Wars. I bet it was the same, but there was definitely a will to reduce the deficit. After World War II, people just thought differently and-

Deirdre McCloskey:

Yeah, they did.

Doug Monroe:

And we don’t have that. We don’t have the idea.

Deirdre McCloskey:

No, we don’t.

Doug Monroe:

It’s going to be painful, we get it.

Deirdre McCloskey:

Yeah, I agree with you.

Doug Monroe:

All right.

How important is the nation-state?

Deirdre McCloskey:

One of the clerisy, as I call them, the intellectuals, the artists, the makers of films and books and newspapers, the college professors, had in the last three centuries three ideas, three political ideas, two of which were just terrible and one which was excellent.

The excellent one is the liberalism that I’ve emphasized. The idea that we should have a society in which everyone is free. The two terrible ideas are socialism and nationalism. Nationalism and socialism, if you like them, maybe you’ll like national socialism, namely the Nazi Party of Germany in the 1930s.

Both of them, you see, are collectivist, are this idea of collective consumption: we’re going to do stuff together. I think it’s much better to do stuff together by cooperation in trade and exchange and invention. That’s the nice form of cooperation, not this militarized… Socialism is a militarized version of the economy, war socialism it’s called.

And the same thing is true of nationalism, obviously. It’s a militarized version of local pride. I’m not against local pride. I mean, I’m glad to be an American. I’m proud of being an American. But if being proud of being an American involves invading Canada, I’m against it. So I think that nationalism socialism are dangerous ideas.

Doug Monroe:

Well-

Don’t liberal societies need rules and organization?

Deirdre McCloskey:

Well, there’s a little bit of enforcement of the law and the provision of courts and police, which we need, but that’s pretty small. That you could get along on with 5 or 6% expenditure of national income, maybe. You know this in business, most of the enforcement of the laws happens outside of the state, outside of the courts. If you, as a business person, Trump being an excellent example, don’t pay your suppliers. You’re not going to be able to get anyone to work for you. If you keep not paying off your loans as again, Trump did, then banks are not going to want to work with you. We have locks on our doors. In fact, an increasing part of the way people live is in private communities. You could call them gated, where they have private police forces, private enforcement of law.

I live in a condo. The condo form was invented in Puerto Rico in the 1950s. The condo legal form and a condominium is a private state for certain purposes, namely for housing. Most of what we do has nothing to do with the government. There’s a deep error that people have, that the only way we get laws is through the government. In fact, people think, well, what you mean by law is government enforcement. No, it’s not. We mainly get our rules under which we work from each other by voluntary deals, by contract, which is a tiny little piece of government put down on a piece of paper with this is the way most of society works. Think of the analogy with language, language like the economy is a massive system of cooperation, and language develops on its own. I mean, the French academy tries to keep le weekend out of the French vocabulary and fails or computer. They have some other French phrase for the machine called a computer, and it didn’t work. The French called computers a computer.

You can have a regular system that people agree with. That really has nothing to do with the government.

Doug Monroe:

Well…

America the Galactic Empire; Who rules?

Doug Monroe:

Like that-

Deirdre McCloskey:

In fact, it’s very strange that science fiction tends to talk about the Galactic Empire. There’s a kind of fascism, that’s very prominent in the traditions of science fiction, especially in the United States. And I don’t quite get why this is so, but even Star Wars, love the Star Wars movies, but princess Leia is a princess, what’s going on there. “What?” I thought, “We got rid of…” A nice statement is that in the 1700s, kings had power and women had none, now it’s the other way around.

What about transgenders in sports, changing genders, single-sex bathrooms, and transhumanism?

Deirdre McCloskey:

The transgender sports thing, I think, is pretty simple. I think it’s unfair that a person who has developed as I did, male muscles and so on, competes in women’s sports. I think that’s just stupid, and I wish people wouldn’t do it. For the most part, they don’t. If you’re going to just play tennis with someone else just for fun, I don’t care, but if you’re going to compete, for money or for glory, then you shouldn’t take advantage of male muscle mass in the same way that you shouldn’t, as a woman, as an XX person, a person with XX chromosomes, take male hormones to get stronger muscles to run faster. I think that defeats the purpose of the women’s NBA, or something.

That’s one way of looking at it. I think that, in a free society, people who want to change gender should be allowed to, and there should be the minimal intervention of the state. I don’t believe that it should be paid for by other people. Changing gender is not expensive, costs about as much as a small car. When I see a bunch of new, small cars on the street, I think, “Oh, I wonder why those people didn’t change gender.” They don’t want to change gender. I’m always surprised, so my forehead is flat. I keep going, “Oh, why?”

I think people should… It shouldn’t be subsidized. It shouldn’t be a public expenditure, but if you want to do it, you want to buy a house, you want to buy a car, you want to buy a gender, go ahead. Feel free. I think the bathroom issue, which is a big deal in some quarters, is a silly issue. What, as I am, I’m supposed to go into the men’s room? Come on, give me a break. That’s stupid. And I’m not in the lady’s room in order to peek up someone’s dress, I’m in the lady’s room to pee. The whole thing is quite absurd, and what’s so ridiculous about the bathroom issue is that every private home in the United States has bi-gender bathrooms. Both men and women go to the bathroom in the bathroom in the house, so come on. This is silly, to have, “Oh, we got to have a lady’s room and a men’s room.” My word. “We’ve got to check people’s…” What? Check people’s genetics at the door? How are you going to do that? It’s a silly idea.

As far as Francis Collins and the manipulation of the genome is concerned, I think that carefully done, that’s well worth doing. There are terrible inherited diseases that we may eventually be able to eliminate this way. I know it’s controversial in the case of down syndrome, but there are some that are not controversial. If you have some terrible inherited disease that completely cripples you, then we’d rather not have such children, but you got to know your history here, because genetic… Eugenics means good genes. That’s what it means in Greek, and the eugenic movement a hundred years ago, every major scientist believed in it on the basis of very primitive understanding of how genetics worked. They didn’t even know about DNA. Now, maybe we’re in a position to do a more subtle job, but we got to watch out for it, because we know how the eugenic movement ended. It ended in the Holocaust.

Are you optimistic or pessimistic about America? The world?

Doug Monroe:

… Question.

Deirdre McCloskey:

Well, I’m very optimistic about the world, and about the United States. I think it’s important that the United States is part of the world. And in 50 years, maybe a little longer, the whole world will be rich, and that’s going to result in a cultural and scientific, entrepreneurial explosion. Musical, cuisine is already happening, such as we’ll put 5th century Athens and 15th century Florence into the shade. This is going to be a great future that we have.

Now we can take careful aim at our foot and shoot it off. And fear of terrorism, or fear of environmental degradation, or fear of this, and fear of that can drive us to do stupid things. I hope we don’t.

Doug Monroe:

Thank you for being a Praxis Circle Contributor.

Deirdre McCloskey:

You’re very-

Doug Monroe:

It’s been a beautiful interview.

Deirdre McCloskey:

Thank you, dear. Glad you liked it.

Doug Monroe:

That’s by far the most-

We found it! True PMA (positive mental attitude)

Deirdre McCloskey:

People love pessimism. For these reasons, I was just looking it up, a thing I wrote on this. For some reason, people love to be told that the world is coming to an end, that the sky is falling. They just love to hear it. It makes them feel cool, I think. “Hey, I know about the sky is falling. You optimist, you’re just silly, cock-eyed optimist. I’m in the know.” I don’t know what they have in mind, but I’m not pessimistic at all.

Post program comments: C-a-n-t spells Cant

Deirdre McCloskey:

He’s a good son.

Doug Monroe:

You’re welcome.

Deirdre McCloskey:

Thank you all.

Doug Monroe:

You’re not predictable either.

Deirdre McCloskey:

Well, I try not to be.

Speaker 3:

That keeps it from being boring.

Deirdre McCloskey:

Well, I try to tell the truth. That’s what I try to do. You know, there’s an 18th century word that we ought to revive. Dr. Johnson, Samuel Johnson used to use it all the time. Can’t. C-A-N-T. Can’t means ill-considered, sloppy thinking, moralistic opinions, such as people have. Now people say, “Oh, environment is going to hell. We’ve got to stop industrial civilization.” That’s can’t, and there’s a lot of it. Most of people’s opinions… not most, but big percentage of can’t. And he used to say, Johnson used to say, “Sir…” He always said, sir. “Sir, clear your mind of can’t.”

Doug Monroe:

And I can’t is very much a day to day thing. We don’t see the overall good that occurs day to day.

Deirdre McCloskey:

No, we don’t. That’s right.

Doug Monroe:

We tend to be very-

Deirdre McCloskey:

That’s right.

Doug Monroe:

… worried about stupid stuff.

Deirdre McCloskey:

That’s right.

Post program comments: Solutions to the Healthcare Issue

Deirdre McCloskey:

That’s right. What’s the problem? People are always talking about the problem. And then of course the only we that’s around to solve the problem is the State. And I wish they’d get over that. I wish they’d say, “Well, do we really have a big problem here or…” Let’s take healthcare. How to solve the problem that the United States spends 50 to 100% more than any other country in the world on healthcare. Well, in some cases it’s not a problem because we have high quality healthcare. That’s very expensive, open heart surgeries say. Okay, that’s one point.

The second point is, what should we do? Should we pour more money into a monopolized system? Or should we go after the monopolies? I was talking about this at lunch. Should we allow, let’s take the pharmacy, big pharma. Should we allow the importation of drugs from anywhere in the world? Yes we should. And that would instantly stop us being… It would radically reduce the cost of American medical care. So should we go in the direction of better markets or should we go in the direction of subsidies? I’m going to be in Argentina in a couple of weeks.

Doug Monroe:

Yeah. To me.

Post program comments: Efficiency and Innovation

Doug Monroe:

It’s a no brainer, but the country’s not thinking.

Deirdre McCloskey:

No, they’re not. You ask the democratic candidates what we should do. And they say, medicare for all. I say, efficient medicine for all. That’s how you do it. You get the medical system working the way it should be.

Doug Monroe:

Oh, we can take care of the 1% that doesn’t have the coverage.

Deirdre McCloskey:

Exactly, fine with me.

Doug Monroe:

Don’t bomb the 99%. The other thing…. And this is just getting to the personal conversation part of it, but I mentioned… You don’t have time for this, and you would know most of it probably, but Professor Allitt at Emory, did a series of lectures in the great courses about the industrial revolution. And he gets into great detail about the basic stages; the steam engines and canals and railroads and all. But he takes you through pollution and how we solve that. But little stuff like, does the average person know that probably the most amazing pre-industrial thing was the English ship, which took 30 years to build. They couldn’t just manufacture more ships. They had to cure everything a certain way and it took decades of innovation and thoughts to make a ship

Deirdre McCloskey:

In fact, the ship at the age of sail was continuously under repair in the Royal Navy. They all always had lots of carpenters on their ships because they were constantly falling apart.

Doug Monroe:

Yeah, yeah, yeah.

Deirdre McCloskey:

So they’d be very old. They have ships of the line at Trafalgar, which were 50 years old, sort of like bombers, like our B52’s which are again, more than 50 years old.

Doug Monroe:

Yeah. Yeah.

Deirdre McCloskey:

And you keep repairing them, keep updating them.

Doug Monroe:

Amazing things.

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