Subtitle: Why Economics Can't Explain the Modern World, Univ. of
Chicago, Chicago, 2010, 571 pgs., index, notes, bibliography, paperback
Reviewer Comment -
This is a terrific book even as a 'stand alone' study, but it gains great
strength and value when read with the two other volumes in the author's series
on the Bourgeois. This is a study of the concept that 'Ideas have
Consequences" so may be read with others on this concept. It also may be
read with a counterpart - Frank Trentmann's Empire of Things: How We Became a World of
Consumers, from the 15th Century to the 21st. which describes the
material side of the 'rise' of the Bourgeois and its effect on history. From
the chapter titles the reader already sees the author's methods. With so many
other theories that attempt to explain the historically unique explosion in
material well-being (standard of living) since 1800 (mostly materialistic in
one form or another) the author sets out to demolish these one by one. Other
studies, such as Lawrence White's, The Clash of
Economic Ideas, clearly show that the academic field called
"Economics" is fundamentally materialistic - which itself explains
the author's subtitle. The list below contains some other authors' theories
about how 'the West' came to create the Modern World. I have written a general
review and comments on the three volumes here.
Volume I - Bourgeois Virtue
Volume III - Bourgeois Equality
Polyani, Karl - The Great Transformation
Very influential when published, but less so today. The author did not describe
pre-capitalist medieval and classical civilizations correctly and he completely
misunderstands the role and impact of machines in the modern world. The book is
border line polemics and Dr. McCloskey refutes much of the ideas in it. Yet, in
chapter 58 she gives him too much credit.
Landes, David & Joel Mokyr & William Baumol -The
Invention of Enterprise
A very valuable multi-authored set of essays describing the role of
entrepreneurs in economies from ancient Mesopotamia to modern times. Market
economies, entrepreneurs, and credit are not new phenomena. This book refutes
Polyani's ideas about ancient economies. The essays on economic developments in
Holand and Great Britain from 1600 to 1800 are especially relevant.
Acemoglu, Daron & James Robinson - Why Nations Fail
The authors ascribe economic and social conditions to institutional factors.
They believe the 'betterment' was a result of the overthrow of medieval
institutions. Their main purpose is to claim that progress today would be
achieved by the change of government and social institutions that are deterring
progress. More materialism here. Dr. McCloskey cites them to refute their
Muller, Jerry - The Mind and the Market-
The author provides biographies and analysis of their theories about capitalism
for 16 major intellectuals who were significant commentators on the revolution
that Dr. McCloskey describes. He includes those before and after, and for or
against. In some chapters he devotes more space and analysis to the
contemporary social and cultural environment that he believes shaped the
author's theories. Of great interest is that he reveals a strong correlation
between anti-Jewish and anti-capitalism in these authors. His representative
authors confirm Dr. McCloskey's point that since about 1840's there has been a
strong movement of the intelligentsia to denounce and oppose what they call
Stark, Rodney - The Victory of Reason
Another book maintaining European domination was due to intellectual causes
developed over centuries.
Stark , Rodney - How the West Won
One of the books that claims European domination over much of the world was a
result of centuries of historical preparation - A view Dr. McCloskey does not
Morris , Ian - Why the West Rules - for Now|
An interesting effort to quantify the standard of living of a society from
Neolithic era to the present. He shows the same amazing and immense increase in
living standards in western Europe around 1800 that Dr. McCloskey describes,
but without her explanation of causes. This is very strongly not only the
materialistic view but also the result of econometrics - reliances on
statistics and mathematics.
Andrade, Tonio - The Gunpowder Age
Another new study that refutes many myths about the relative economic and
military power of China and Western Europe prior to 1800 or so and describes
what really enabled some Europeans to then gain trade power in China.
Spufford, Peter - Power and Profit: The Merchant in Medieval Europe
A huge study of the actual conditions of commerce in late medieval times based
on both the author's personal visits throughout Europe and his mining of
original sources. I believe he presents a view of a much more advanced economy
in late middle ages Europe. This book refutes Polyani's ideas about medieval
economies. It also indicates that the 'betterment' had a more gradual
development in Western Europe than Dr. McCloskey claims.
Gilder, George - Knowledge and Power
Progress depends on creation of new ideas - new meaning surprising. He
describes the theory of knowledge now driving future expansion of eeryone's
standard of living.
Gilder George - Wealth and Poverty
The author's theory on the causes of relative economic conditions in different
Bury J. B. - The Idea of Progress
The fundamental change in increasing social belief that progress is not only
possible but historically proven. Dr.. McCloskey somehow does not discuss
Bury's thesis. Although Dr. Bury discusses in detail the ancient and medieval
belief that she cites as preventing economic progress.
Gordon, John Steele - An Empire of Wealth
Another historical look at the expansion of American living standards, but this
one starts earlier than Robert Gordon's examples. This author includes the role
of financial causes such as credit - in fact he stresses the role of credit.
The first several chapters on colonial and early constitutional U.S. are
particularly full of evidence of the role of credit. And the description of the
role of Alexander Hamilton is excellent. Another compendium of the material
results of economic expansion, but Hamilton's ideas and those of significant
individual inventors and entrepreneurs are stressed. The author also provides
detailed data that shows Dr. McCloskey is correct in stating the early
'Industrial Revolution' did not require significantly large amounts of capital
nor was it from a lengthy accumulation, Capital, that is financing, was
available on the spot when needed.
Kwartgung, Kwasi - War and Gold: A 500-year history of Empires,
Adventures, and Debt
An excellent study. For purposes of relationship to Dr.. McCloskey's books this
author's description of the role of money, that is credit and debt, from 1600
to 1800 is essential. Her descriptions of what took place during those
centuries is missing much important analysis of the bourgeois participation in
this economic activity. The new mode for providing capital was very
significant. There are many other books on the history of money and banking,
but this is a recent as well as relovant one.
Martin, Felix - Money: The Unautorized Biography
The author discusses the importance of the Great Monetary Settlement which
created the Bank of England and led to the trust in private money created by
the bourgeois and secured by the power of the sovereign. The author discusses
the subject that Dr. McCloskey minimizes
Ingham, Geoffrey - The Nature of Money
An excellent reference to the history of money and especially its central role
in society - it is not limited to an economic role.
Whalen. R. Christopher - Inflated: how Money and Debt Built the
The first chapters are about the effect of money - (credit=debt) in America.
Ferguson, Niall - The Ascent of Money
An alternative view of the role of banking and credit in creating thefinancial
basis for 'betterment'.
Ferguson, Niall - The Great Degeneration
Description of what has happened in recent decades.
Melloan, George - The Great Money Binge
Another view on the expansion of credit
Mantoux, Paul - The Indistrial Revolution in the Eighteenth Century
The author describes in detail specific inventions and developments in specific
industries such as textiles and iron.
Trentmann, Frank - Empire of Things: How We Became a World of
Consumers, from the15th Century to the 21st
This as the description of the material results of the 'betterment' Dr.
McCloskey describes. Itr contains a mass of specific details on the great
volume of privately owned goods that resulted from the expanded production.
Further Recommended reading
Dr. McCloskey sets right off to state her thesis. "A big change in the
common opinion about markets and innovation, I claim, caused the Industrial
Revolution, and then the modern world. The change occurred during the
seventeenth and eighteenth centuries in North-western Europe." "That
is, ideas, or 'rhetoric;' enriched us." The change was about the rhetoric
about prudence and the other virtues necessary for a flourishing commercial
society. Her fundamental point is that the change was not a matter of
materialism as presumed (from opposite perspectives ) by the left and right
political positions today. The cause is not any of the varied theories (she
mentions some) that one reads in economics and history texts.
She is explicit. "The important flaw in economics, I argue here, is not
its mathematical and necessarily mistaken theory of future business cycles, but
its materialist and unnecessarily mistaken theory of past growth." The big
story is about ideas. "Innovation backed by ideology, then, promises in
time to give pretty good lives to us all."
This is what George Gilder and many other
proponents of innovation and reduced government manipulation advocate today.
Hence Dr. McCloskey's thesis and argument is of vital importance today.
Chapter I - The Modern World Was an Economic, Tide, But Did Not Have
The author opens with a basic fact that she repeats frequently. The average
person circa 1800 lived on $3 a day in our prices. Now in the advanced
countries that is $100 a day. By 1800 only the very wealthy and powerful lived
on very much more.
I believe this is an exaggeration - or her 'average' is reduced by the millions
who did live on near nothing in Africa and much of Asia and the Americas. But
by 1800 many people in Western Europe lived on more than $3 a day. In fact,
when she gets into detailed descriptions of European development she describes
living standards in - for instance- Netherlands, England and Italy at a higher
level than $3 per day prior to 1800. Read both Trentmann and
Spufford. She asks, "How did average income in the world move from $3
to $30 a day?" Clearly, here she means average for entire world.
"The main point of this book is that the hockey-stick handle leaps, such
as Norway's from $3 to $137 per head, with its cultural and political
accompaniments, did not happen mainly because of the usual economics." She
is referring to the graph of material progress on pages 161 and 492 of
Morris's' book that shows a straight line along
the x axis for centuries until it abruptly turns straight up in 1800 and
continues in recent centuries. But Morris's theory about why is totally
different from McCloskey's.
Chapter 2 - Liberal Ideas Caused the Innovation
Dr. McCloskey agrees that 'talk and thought about the bourgeoisie' in Europe
during the century prior to her selected era had an influence (rather like
setting the stage for the main event). Then came a 'probably more powerful'
shift - the Revolts and Revolutions in Holland, Britain and America, and Poland
and France. But she will show that it was the 'Bourgeois Revaluation" that
developed in Holland and Britain in the 17th and 18th centuries that was
She writes: "But you can't imagine the enrichment part without the
Revaluation." This 'revaluation' was about raising the new status - the
'dignity' - accorded to the bourgeois by society and themselves. And with this
came also a new level of 'liberty'. And "both were rhetorical
She then switches to her thesis that these two are linked to concepts of
'virtues'. "Among the seven principal virtues, faith is the virtue of
backward looking, of having an identify...... Dignity encourages faith.....
Hope by contrast is the virtue of forward looking, of having a project....
Liberty encourages hope."
She writes clearly, "I claim here that the modern world was made by a new,
faithful dignity accorded to the bourgeois - in assuming his proper place - and
by a new, hopeful liberty - in venturing forth." ... "Both were
necessary." She describes the meaning of both. "It matters that
dignity and liberty work together." She asserts that, "All this
(previous social beliefs) changed on a large scale, first in Holland, in the
Bourgeois Revaluation from the 17th through the 19th centuries."
Dr. McCloskey writes that Weber, Lucas, Marx, Engels, and North were wrong in
ascribing other causes. The change was sociological, historical and political.
She refers to Shakespeare and Jane Austen for their examples of contemporary
views on the bourgeois to show that social acceptance of bourgeois dignity and
liberty was 'slow in coming'.
She also notes that, "Such dignity for innovation and liberty for
enterprise are sometimes still opposed, which along with a bad climate and a
bad start is why some countries remain poor."
But she claims here and repeatedly that prior to 1800 people lived on $3.00 a
day. If she means an average per capita on a world- wide basis this may be
true. But already between 1600 and 1800, I believe, the Dutch and British
including their colonies were living at a larger daily income than that .
Chapter 3 - And a New Rhetoric, Protected the Ideas
There are several topics discussed in this chapter. The author begins with
Frederic Bastiat's views on a proposed new French railroad. His point was that
politics was purposely making things less efficient and more costly by
increasing labor costs rather than seeking lowest costs. Her point is that the
politically powerful (including the intelligentsia) then did not care. And that
they disdained both work and commerce. She claims it was a revolution on
thought - ideas - in Holland and Britain that enabled the economic expansion.
And for a while some of the clerisy (intelligentsia) accepted the change.
She writes: "The idea of progress through bourgeois dignity and liberty
took hold of the social imaginary of the West." And further: "I am
claiming, in other words, that the historically unique economic growth on the
order of a factor of ten or sixteen or higher, and its political and spiritual
correlates, depended on ideas more than on economics."
Well, yes, but economics is just putting ideas into practice. So what she
really means is that it was a change in widespread social ideas that enabled
the economic expansion.
She, continues, "But ideas, not mere trade or investment or exploitation,
did the creating and the releasing. The leading ideas were two; that the
liberty to hope was a good idea and that a faithful economic life should give
dignity and even honor to ordinary people..."
Dr. McCloskey then turns to justice to show the differences between
'commutative' justice and 'distributive' justice. She also turns to Jane Austen
again for an example of the change in common meaning of 'honest'.
Then in another shift she discusses the growing disuse of the medieval concept
'great chain of being' She favors this change. I believe it was largely
abandoned already in the 16th century rather than 19th. And it was replaced as
the legitimizing concept for justifying government authority by the concept of
'state'. Not necessarily a good thing. Finally she insists that many economists
today are misunderstanding causation for economic 'betterment' by ignoring or
dismissing the role of ideas as expressed in rhetoric.
Chapter 4 - Many Other Plausible Stories Don't Work Very Well
Dr. McCloskey throws down her gauntlet. "Quite a few of my social
scientific and even many of my humanistic colleagues will be strongly inclined
to disagree, and not merely about my praise for the bourgeoisie. They have the
idea, held with passionate idealism, that ideas about ideas are
unscientific." She singles out positivism and behaviorism and economism as
preached in academic graduate schools. "Economists and historians who
believe themselves to be quite exempt from any philosophical influences are
usually the slaves of some defunct philosopher or science...." "Their
faith is admirable." But they mistakenly rely on Prudence Only in spite of
the influence of Thomas Kuhn. She continues at length with biting criticism.
She writes: "To explain the new dignity of the middle class in
northwestern Europe, and to explain the success it brought to the modern world,
the social scientists need to moderate their fervent ideology of materialism -
though of course without denying material forces." She brings some
potential allies into the field, such as Rodney Stark and Rakesh Khurana and
even J.S. Mill. She denies throwing materialist economists into the 8th Circle
of Hell. Well, almost. But Prudence Only explanations should be thrown at least
that far (deep). Many such explanations follow out the window. There is much
more in this section.
Moving on, she writes: " ' Teach the conflicts' she was advised. So she
continues along that line throwing one and all aside. She provides her example
of this technique "My honored if misled friends in economics, history and
economic history say that the modern world came from trade or exploitation or
legal change. They say that, I say, no, it didn't. It came from a change in the
rhetoric about the common economic life, which lead to the Franklin stove and
the Besemer process and peaceful transitions of political power and all our
joy." So she provides examples going back to Plato of argumentation by
discarding all possible alternatives to accept the remaining one as valid.
The result is, "I assemble here a catholic sample of the scientific and
philosophical work bearing on the hypothesis." She provides sample of the
method as used in a variety of scientific disciplines.
Chapter 5 - The Correct Story Praises "Capitalism"
Dr. McCloskey states that the present book is one of a series to defend 'our
modern form of innovation - universally if misleadingly called
'capitalism'". When writing this one, she planned on a set of six,
however, it appears for now that three will suffice.
She cites several types of individuals for whom such defense (from their
preconceptions) is required. She explains: "Together the books make one
big argument. The argument is: Markets and innovation, which are ancient but
recently have grown dignified and free, are consistent with an ethical life. An
ethical and rhetorical change in favor of such formerly dishonorable activities
of the bourgeoise - innovation and fulling mill for woolens or innovating a
bank for paying florins in England easily, happened ....." And the
rhetoric - words - mattered. "
"Yet in the late nineteenth century the artists and the intellectuals -
the 'clerisy'" (intelligentsia) as Samuel T. Coleridge and I call it -
turned against liberal innovation. The treason of the clerisy led in the
twentieth century to the pathologies of nationalism and socialism and national
socialism and in the twenty-first century to the pieties of radical
environmentalism, and to the dismal pessimism of the union left and the
traditional right..... The scientific schemes reasserted an elite control over
the newly liberated poor people."
This is the key point. It is unfortunate but true that it takes three large and
important books to drive this home. And still no doubt so many of the
intelligentsia will deny it. Of course they will because to admit it would be
to surrender their claim to power.
She continues: "The clerisy's anti-innovation and antimarket and
antiliberty rhetoric in the years since 1848, though repeated down to
yesterday, misapprehends the scientific history." Many examples follow,
from left and right, but mostly left. Then she offers a discussion of her
efforts in volume I. From this she leads to a philosophical discussion of
'objectivity' and 'subjectivity', writing that neither can result in knowledge.
Rather she opts for being a 'conjectivist'.
She describes her plan for a third volume to be titled The Bourgeois
Revaluation: How Innovation Became Virtuous - and a fourth volume titled,
Bourgeois Rhetoric: Interest and Conversation during the Industrial
Revolution - and a fifth volume titled Bourgeois Enemies: The Treason of
the Clerisy, 1848 to the Present. - and a sixth titled Bourgeois Times:
Defending the Defensible. Instead we have Bourgeois Equality.
She explains why she believes 6 volumes are necessary with a very long list of
modern authors whom she found attractive and even valuable until becoming more
discerning. I read most of these authors some years before she did and found
many of them decidedly wanting, and the rest I learned enough about to realize
they are a waste of time. But I did read and study many authors she does not
mention from Plato and Aristotle and Indian and Chinese classics to the
She adds further: "The sextet of the Bourgeois Era can perhaps persuade
you whether progressive or conservative or standing in between, that your
belief that innovation is especially greedy, and the bourgeoise sadly ignoble
and unspiritual, might - just might- be mistaken." Pardon me, but I could
never believe anything of the sort. I did not believe any of that 70 years ago
nor any time since.
Chapter 6 - Modern Growth Was a Factor of at Least Sixteen
No argument with her here. No question her estimate is reasonable or
understated - indeed the average person in US or UK now consumes at least 16-
30 times as much in assets per day or year and did out ancestors circa 1700 -
1800. And this does not even count non-material assets. Nor does it count the
greatest increase of all - the fundamental personal asset - a day of life of
which people in advanced societies now have so many more. She takes pains to
address the doubters or critics but why bother? She addresses these increases
as well later in the chapter. She does get a bit into the question of properly
measuring the prices of things. But prices are not a valid measure of 'value'.
She mentions Nordhaus for his efforts to establish physical measures for
comparisons. He records that the real wage for Americans has increased not by a
factor of 13 but rather by 40 to 190 times.
Chapter 7 - Increasing Scope, Not Pot-of-Pleasure
"Happiness." Is What Mattered
Dr. McCloskey explains what she means. Possessing a dozen chairs is not much
greater in itself than having 10. One can only sit in one chair at a time, but
having more increases the 'scope', the choices and opportunities, to enjoy more
variety of chairs. She discusses 'diminishing returns' or 'marginal utility' -
the concept that adding one more to a larger total (say 100) than adding one
more to a small number (like 4) Of course this applies to everything. Although
we must wonder about a famous lady who apparently did have increased pleasure
from owning hundreds of shoes. This chapter is directly related to Frank
Trentmann's book "Empire of Things.
She references Richard Easterlin, who began the field of 'happiness' studies.
He concluded, "'how people feel they ought to live ... rises
commersurately with income.'" And she disagrees with his conclusions and
She disagrees with the intelligentsia's mantra that follows from this that
'consumerism' is bad and that the unknowing masses are 'enslaved' on this
treadmill of wanting more and more. And, further, she writes: "The
literature pays no attention to reflections on happiness that are
nonquantitative or nonmathematical." Her entire critique of this
'happiness' literature from economists is negative because as usual they stick
to 'measuring" via surveys and skipping the whole human history of
discussions of 'happiness' in literature. If it can't be manipulated
mathematically it does not count. All this is another example of her attack on
materialism in economics.
She continues: "The main problem, though, as I said, is that the insights
of poets and tale-tellers and historians and philosophers from the beginning
into what human happiness actually is have simply been bypassed."
Meanwhile today's intelligentsia critics of the results of bourgeois trade
bemoan a 'golden past' that never existed. By real measures people today are
enjoying much better living conditions. She produces much historical evidence.
Chapter 8 -And the Poor Won
The claims of critics that the 'poor' are worse off are false. She writes,
"Nor during the Age of Innovation have the poor gotten poorer, as people
are always saying. On the contrary, the poor have been the chief beneficiaries
of modern capitalism."
She provides more historical evidence. And she notes the obvious, that in any
distribution there by definition will always be a lowest quarter and 10%. And
where they lag it is due to political measures - dictators and gangsters taking
She switches to a different topic - a discussion of 'capitalism' and what it
really is all about. She correctly links the reliance on the term 'capitalism'
with the false belief that the 'betterment' the explosion called Industrial
Revolution was enabled and caused by accumulation of large masses of 'capital'.
It was not. See Bailyn and Gordon They show that significant innovation was
achieved without much capital at all, by redeploying retained earnings. For
example, Whitney's revolutionary cotton gin was so easy for anyone to make that
he could not enforce his patent. All the other early machines - and the
harnessing of water power were easily made (once their idea was created). It
was only with the first canals and larger railroads that significant capital
was required and then it was contributed in small to medium amounts from many
She continues, "Nonetheless the economists since the eighteenth century
have favored the notion of piled-up capital as the maker of modernity, because
it emphasized cost, about which they are expert, and because it is easy to
describe statistically and mathematically." She recommends using a
different and more valid term such as 'innovation'.
Chapter 9 - Creative Destruction Can Be Justified Therefore on
Dr. McCloskey here takes up Joseph Schumpeter's famous concept and buzz word,
"creative destruction "She gives examples of extended chains of
successive destruction of previous products by succeeding better ones, with the
accompanying bankruptcy of some of the earlier producers. The process is not
'zero-sum' in which there is no net gain, but rather an expanding total
'betterment' for society. The well known larger pie. But this is only a
utilitarian concept. She cites James Buchanan and Gordon Tullock - A Calculus of Consent and John Rawls
- Theory of Justice. And also discusses the problem of envy - read
Helmut Schoeck - Envy. These authors and
Hobbes bypass the full contribution of the seven virtues to real ethics and
base ethics only on utilitarianism.
Next, she discusses 'profits' coming from buying low and selling high. That is
the essence of a successful merchant - but also a moneylender. And it is the
essence of Adam Smith's argument for trade and change from 'mercantilism".
Now we have Arnold Kling's excellent book - Specialization and Trade
Chapter 10 - British Economists Did not Recognize the Tide
The chapter is a critique of economists and a note that in the early 19th
century they did not recognize what was taking place around them. Well they
still do not. She cites of course Malthus.
She writes, "The economists then believed, as man of them do down to the
present, that they possessed a complete theory of the social laws of
motion." But the early economists were theorizing before the results were
Chapter 11 -But the Figures Tell
Dr. McCloskey disputes the authors who claim the major expansion did not occur
until after 1848. She claims it was taking place already in the 18th century. I
agree with that. The chapter is full of correct assertions about the expansion,
but one must read more detailed histories to find the specifics.
Chapter 12 - Britain's (and Europe's) Lead Was an Episode
Now we come to the mandated politically correct discussion about Europe's real
'backwardness' in comparison with the Chinese for centuries. No fair to
attribute too much if anything to Europeans themselves. The Chinese had it all
and the Europeans copied. Well, they did copy - such industries as silk by
smuggling the silk worms out of China. But seems to me that Goldstone, Pomeranz
and the 'California School' go too far. Books such as Ann Paludan's
Chronicle of the Chinese Emperors tell a vivid story of internal decay
due to the combination of highly centralized personal political power with
decay of that same personnel in weak emperors and conflicts between eunuchs and
mandarins. And Peter Frankopan's The Silk
Roads and Tonio Andrade's The
Gunpowder Age, provide much specific detail.
Chapter 13 - And Followers Could Leap over Stages
The story continues. Dr. McCloskey opens this chapter with: "At any event
the results of the compounding of ancient Chinese (and Arab and Ottoman and
Inca and African) inventions with the modern burst of European creativity lie
around you now..."
This assertion is not backed up with much evidence of these 'inventions' by
other than the Chinese.
No matter, her main point is valid - progress in various countries does not
proceed stage by stage as some authors like Walt Rostow believe because the
'late comers' simply jump over intermediate stages to adapt the latest
technology. So, as she notes, "the tree-like and stage-dependent metaphor
that characterizes modern 'growth theory' in technical economics is
misleading." Moreover, "The other popular and unhisorical metaphor is
of a footrace, in which, naturally, countries that start later must take longer
to catch up." She contrasts the correct concept of 'comparative advantage'
with the popular but incorrect concept of 'absolute advantage."
Comparative advantage is the core of the concept of specialization and trade -
free market trade. And it is continually a source of conflict among politicians
(see election 2016) (see Kling for a very clear
discussion.) So Dr. McCloskey turns to a lengthy argument with economists and
historians who dispute this basic economic theory. She takes on David Landes in
his The Wealth and Poverty of Nations,
for his refusal to read an Economic 101 text. Well, although I agree with her
on comparative advantage, I would not recommend anyone believe a lot else in a
basic academic economics text - Samuelson comes to mind. She disputes with the
well-known economist Lester Thurow as well. Nor does Lou Dobbs understand. For
six more pages she elaborates on this concept.
Returning to borrowing of ideas, she writes, "China and India, in other
words, can take off the shelf the inventions laboriously developed by the Watts
and Edisons of the past three centuries."
Yes, and they can steal new ideas that have not yet even been put into
production in the U.S.
Chapter 14 -The Tide Didn't Happen Because of Thrift
This concept is very significant. Dr. McCloskey cites several dictionary
definitions. Then she links it to the cardinal virtues - temperance and
prudence - both are needed together. She cites examples of recommendations to
be thrifty from various cultures. Next she writs: "Thrift in the sense of
spending less than one earns and thereby accumulating investments as a capital
sum is again a matter of accounting" .... and "abstaining from
consumption' in the economist's useful way of putting it, you necessarily
save." She describes the necessity of the farmer whose crop had a very low
production to save a considerable part as seed for the following year. Her
point is that she believes the opportunity to save other than to invest in the
next year's crop was limited. Innovation came first, the idea that putting some
small part of this year's production into investment to create a new product
could be profitable.
The common belief is that 'thrift' means saving by everyone, especially by
consumers. That is what the problem is that Dr. McCloskey does not address
directly. Individuals have one or both of two roles - producers and consumers.
All producers are also consumers, but most consumers are not producers.
Consumers as such do not and cannot 'save' because any money they have left in
excess of what they have spent actually came from production somewhere else.
Only producers can save because real saving is retained income. And out of that
retained income then capital can be created. Thus she is correct that the
capital used to finance the explosive increase she describes did not come from
the meager funds remaining to consumers. It came from producers and via the new
financial mechanisms created by the Dutch and copied by the English. But once
the new financial institutions wee in place, financial capital was everywhere.
Note the frenzy of even servants to invest in dubious securities such as the
South Sea fiasco.
Chapter 15 - Capital Fundamentalism is Wrong
Dr. McCloskey continues, "Innovation, not the sheer piling of productive
investments, dominates economic growth." She does not agree with the idea
that it was a large increase in the 'stock of physical capital that accounted
for a large part of the rise in output per man hour, workers were able to
produce more because they had more capital to work with''.
I believe she is right because they are wrong to consider 'capital' to mean
physical - material - things such as tools and machines. She is right to state
that the 'betterment' was not due to 'piling up' of physical capital - but that
does not mean capital was not critical. The capital was financial and it was
available in large amount on the spot, by the credit facilities of the new Bank
of England. Throughout, she stresses the fundamental importance of 'ideas'. And
I believe the most important of all the new ideas of the bourgeois was the
creation of the bank credit creation institution and mechanism under their own
control, which took the place of the sovereign as the sole source of financial
I do not see, as she writes, that "The business cycle begins in the late
eighteenth century, just when innovation becomes important. Earlier ups and
downs in the economy were dominated by wars and harvests, not by cycles of
optimism and pessimism about innovations." Seems to me rather than this
psychology it was cycles of expansion and contraction of credit.
She writes ,"The case shows in Feinstein's own splendid table of
investment as a share of gross national incomes of a dozen countries 1770-1969.
The claim is that investment was 'crucial' for innovation." Seems to me
that it is not 'savings' but retained earnings that was important.
She writes: "Rates of investment and saving rose as a result of
innovation." Well, of course, it was a circle, innovation was accompanied
by retained earnings ( earnings not consumed promptly) and the retained
earnings were what enabled more innovation plus much replication of what had
been innovated (more new spinning jennies - more cotton gins - increased
numbers of the same, new, innovation .)
She continues: "Capital fundamentalism, in short, has been rejected
scientifically, despite echoes in the minds of economists, who want it to be
true." A rather snide put down here. But what has been 'rejected', it
seems to me is a mistake in the content of the term' capital'. As she notes,
herself, "Yet when the prospect for innovation is large, the capital to
exploit the innovation is easily gotten by loan." Exactly the point,
financial capital, not piles of bricks as she calls it. Looking at the frantic
efforts of English people of all classes in the 18th century to 'invest' and
'invest' (for instance the South Seas fiasco) it is clear that capital was
available, Due to the new Bank of England, for the asking. But financial
capital was NOT so readily available and not at the disposal of the bourgeois,
in prior centuries. The Exchequer was even required to use 'Talley sticks' for
Yes, as she writes: "what chiefly mattered in causing the innovation,
unclogging the channels of ideas, was an entirely new honor and freedom for the
But, again I claim, the critical idea was for the bourgeoise to create and
control the expansion of the national money supply via bank credit. And this
was enabled because the new King William III was focused on exploiting his new
kingdom to enable expansion of his wars with the hated French. (See Kwarteng and Acemoglu) And what gave honor and freedom to the
bourgeoise was first the English Civil war and then the Glorious Revolution.
Next comes discussion of the famous Schumpeter. She writes that he,
"defined capitalism variously at various times. His definition in Business
Cycles (1939) was 'that form of private property economy in which innovations
are carried out by borrowed money.' He is thinking of the new Banks of Holland
My thought is that 'capitalism' came with the practice of producers reinvesting
their retained earnings to finance their efforts at innovation. But then
borrowed money -credit - was necessary for rapid expansion of the deployment of
the newly innovated result of the idea, much more rapidly than could be
accomplished by only re investing the increased retained earnings. So
Schumpeter noted a part of the process. But Dr. McCloskey is wrong to write
that if Schumpeter was correct we should see business cycles dating back to
late medieval times. Well we DID see waves (not cycles) of credit expansion and
collapse and bank failures.
She claims that, "Finance and saving and investment cannot have been
crucial or else Florence or Augsburg (or Athens or Beijing or Istanbul ) would
have innovated us into the modern world). Please, please, no strawmen - none of
those places had the combination of bourgeois power over the financial system
and political power on which she bases her argument. She continues, with the
claim that anyway 'the rise in savings was too modest to explain much at
She should look at the extraordinary massive increase in the British national
debt between 1700 and 1815. That debt was the counterpart to massive expansion
of credit as part of the money supply. See Acemoglu, Kwarteng,
Ingham, Morris and
Martin). and the result was huge also. See
Chapter 16 - A Rise of Greed or of a Protestant Ethic Didn't Happen
Dr. McCloskey's litany of dispatching each of the many other claims about the
origin of the 'betterment' the trade-proven innovation continues with the
popular ideas that is was 'greed' or the Protestant Ethic. She easily note the
existence of 'greed' and a central human motivation that has nothing to do with
her 'betterment' or capitalism. Still, it is stressed by leftists more and more
today. She dismisses Marx and Wallerstein and the whole of ancient philosophers
like Plato and Aristotle, plus medieval churchmen like St. Thomas Aquinas.
But she writes, "For all Marx's brilliance - anyone who does not think he
was the greatest social scientist of the nineteenth century has not read enough
Marx, or is blinded by ideology or by the appalling effects of Marxian writings
on the politics of the twentieth century - he got the history wrong."
Well,, the greatest social scientist 'got the history wrong' - not only that,
but the economics, sociology, politics, and everything especially morals wrong.
See Muller. She excuses Marx on the grounds that
he could not benefit from the great learning about history that developed after
Max Weber comes next with his 'Protestant Ethic...' Dr. McCloskey offers the
idea that "what seems to have charmed people about it is that it combines
an idealist focus on 'spirit' with a materialist and Marxist focus on
accumulation." We know that despite desperate defense from the likes of
Bradford DeLong, Weber has been debunked, but not the ammendments proposed by
Richard Tawney, whom she does not discuss (See Enterprise).
Chapter 17 - "Endless" Accumulation Does Not Typify the
Dr. McCloskey takes on another of the standard 'causes'. The claim is another
variation on greed. We can agree with her directly. But the chapter is
interesting because she shows that Weber actually read and believed the tales
told by our own Ben Franklin. She concludes: "There is no historical case,
however, for accumulate, accumulate being peculiar to modern times."
But Trentmann indicates there was a very
extensive expansion in the amount of personal property during McCloskey's
period of interest.
Chapter 18 - Nor Was the Cause Original Accumulation of a Sin of
Another typical, standard charge from anti-capitalist authors that Dr.
McCloskey deals with easily.
A choice comment here. "People seem to be mixing up financial wealth and
real wealth. Financial wealth in bank account is merely a paper claim to the
society's real wealth by this person against that person."
Great! Yet we see the false idea repeatedly in such as Forbes and Fortune
Magazine's annual listing of the 40 or 100 most wealthy. Examination of the
lists shows that most of these folks owe their place on the basis of paper- and
their assets are someone else's liabilities. She continues, "The paper
claims are merely ways of keeping track of who owns the returns to the capital.
They are not the real physical or educational capital itself."
So true, so important to get people to understand
But then she digresses into a comment about the failures of Spanish Kings
Philip II, III and IV, - 'who after all were the principal beneficiaries of the
treasure fleets the English and Dutch and French privateers and pirates preyed
upon - would have financed industrial revolutions in Bilbao and Barcelona
instead of obstructing them.".
I disagree for several reasons. First, the Spanish monarch only had claim on
20% of the silver and gold delivered at Seville. So what happened to the other
80% that was spread by merchants throughout Europe? What happened is that the
relative value of silver collapsed so much that European silver mines closed
from bankruptcy. As Adam Smith noted one could hardly get rid of the silver,
there was so much. So the Spanish kings' silver lost relative value so much
that his soldiers demanded payment in gold, and the exchange process gave the
profits to the Genoese bankers. Second, plus of course, the ideology of the
times demanded that the Spanish kings defend both Western Europe from the
Ottomans and the Catholics from the Protestants ( plus of course from the
Catholic French). And as well, the Spanish kings had very weak power over the
local governments in Spain, And third, 2/3 of the silver mined in the Americas
went to China.
However, her main point is excellent. That economic expansion does not depend
on saving (the concept of what is saving itself is questionable). And it does
not depend on stealing or capital accumulation. She lists some of the most
prominent economists who have it wrong. She continues, "Schumpeter,
though, did not fully appreciate that even in the twentieth century of wide
markets, and big laboratories a company can expand without massive loans,
rather in the way that the first innovations of the industrial Revolution
relied on retained earnings, trade credit, and modest loans from cousins and
scriveners and solicitors."
We see it every day with all the 'unicorns' sprouting around Silicon Valley and
Austin and Boston. And whose creators are found in "30 under 30" and
"40 under 40". lists
Chapter 19 - Nor Was It Accumulation of Human Capital, until Lately
Dr. McCloskey notes that modern economic historians such as Hobsbawn do not
give sufficient credit to the expansion of human capital since mid 19th
century. But still, it was not large quantity of human capital in the early
18th century that generated the innovation. The reverse was it - massive
innovation gave value to the human capital creating it. In this chapter she
digresses to comment on educational attainment in various locations.
Chapter 20 - Transport or Other Domestic Reshuffling Didn't Cause it
Another common 'cause' set to rest here. "The economic historians have not
so far discovered any single material factor essential to British
industrialization." Well, one could quibble on that word 'single' and
claim a cause was the close interaction of a whole series of material and non
material factors. She singles out transportation as a common potential cause
because it is well known that internal transportation in Great Britain did
improve significantly. But even so, not enough, she claims. The detailed
information she provides is interesting in itself. Likewise, she notes, the
agricultural enclosure movement was no cause.
She also discounts specialization and the division of labor as a cause. She
delves into 'marginal productivity theory'. Surprisingly, she does not mention
that specialization of labor was common in ancient Egypt, Greece, Rome and
Chapter 21 - Nor Geography nor Natural Resources
Dr. McCloskey tackles two more common 'causes'. and turns to Jared Diamond's
best seller, Guns, Germs, and Steel.
I have to laugh at her remark here, "Wait a minute, I'm the economic
historian here. Who's this guy?" I am sure she is kidding, but the
sentiment is all to prevalent among many economists, and historians also for
that matter. But the strengths in Diamond's analysis do not relate directly to
McCloskey's thesis except in the general way that it includes the concept that
geography and resources (Eurasia versus Western hemisphere) might be then
applied to the geography of northwestern Europe. He also discounts Jeffrey
Sachs' ideas about geographical climatic zones. But more directly, since Dr.
McCloskey claims that 'ideas' are so critical, it seems to me that geographic
location is a if not the major factor in determining what 'ideas' individuals
believe. This can be shown even on a local scale, for instance, the different
ideas of people in Western Marland versus the coastal area and between people
in Wesst Virginia and Tidewater Virginia. Surely the Dutch fighting to create
land versus the sea had different ideas than Italians living in ancient hill
Chapter 22 - Not Even Coal
Another 'cause' to the trash can. Dr. McCloskey opens with dismissal of the
insistence by Pomeranz, Allen and Jarris that coal was THE cause. Its location
and usefulness to generate energy were the essentials for industrialization.
She agrees that the use of coal was important but alone was insufficient as the
cause for the massive 'betterment'. She is kind enough not to mention that such
strivings to find this kind of 'cause' are part of the ideological effort to
explain away any credit for European achievements. But the argument is very
complex. Coal clearly did have a significant role in enabling the achievement
of rapid industrialization. She gets into the issue of relative costs of coal
and labor. But more critical was the relative cost and usefulness of coal
versus charcoal and the new method of converting coal into coke. (See Munro and
Mokyr essays in Enerprise.) One analyist
commented that the huge expansion of the population of London in the 18th
century could not have happened without the great expansion of coal production
to provide heat.
She repeats her theory, "In the event, a vastly fuller complement of
riches came from bourgeois dignity and liberty inspiring innovation in
machines, both physical and social."
I don't see 'inspiring' but rather 'enabling'. Inspiration is fine, but it has
to have something concrete to work with.
Chapter 23 - Foreign Trade Was Not the Cause, Though World Prices Were
Here Dr. McCloskey has to deal with the standard descriptions of the 'triangle
trade' as well as the details of the methods which brought such huge profits to
Dutch and then British merchants.
Dr. McCloskey dismisses the thought out of hand by noting that "After all,
trade is merely the moving of stuff from one place to another.... "Yet
shuffling stuff about for a modest productivity gain, even if a large gain in
the margin of profit, is not the same thing as revolutionizing the means of
production. Shuffling resources about is not the way to get the cautiously
estimated factor of sixteen."
But if the excess of local production to the need for it locally cannot be
'shuffled away' there will be no need for 'revolutionizing' the means of
production. For production to expand the market for it must expand as well,
either or both internally or externally. When the complex process of converting
cotton seed into shirts supplied all the shirts the British could possibly
wear, the excess had to be exported. When the sugar plantations in the West
Indies produced vastly more sugar than could be consumed there, it had to find
a profitable market some where else. After all, the purpose of production, as
Dr. McCloskey believes, is consumption, a sixteen times increase in production
must result from as well as cause a sixteen times increase in consumption - as
Trentmann describes. It is no coincidence
that the early retail products of the beginning of industrialization were
clothing, (after the prior essential expansion of agriculture) the relative
shortage of which in comparison with immediate demand would be obvious to
innovators. And much later, Henry Ford recognized that in order for him to
produce and sell orders of magnitude more of vehicles they would have to be
affordable to many consumers. But she shifts the argument into discussion about
the nature of British labor force. And she completely ignores the impact of the
relatively large influence on Brfitish commerce of its American colonies, both
North and Caribbean.
She admits a 'correlation' but finds excuses to deny the significance of trade.
She claims, without evidence, that there was more than sufficient trade in
ancient times to create industrialization. Of course, but what was lacking was
the desire or need to industrialize. Perhaps the Roman import of over 250,000
human robots a year had some influence on their thinking about
industrialization via mechanical means.
She writes various arguments denying the significance of trade, but in the
final few pages completely switches her position without noticing it. Her final
sentence is, "And relative prices, as he also observed were increasingly
an international affair." How could that be so? Because the market in
which the goods produced in one place were consumed in another due to the
mechanization of international trade.
Chapter 24 - And the Logic of Trade-as-an Engine Is Dubious
Dr. McCloskey continues her crusade against the significance of trade (she
without our noticing it, conflateing 'trade' with 'foreign trade') with complex
mixtures of examples that also mix the two. Her fundamental argument throughout
is the importance of ideas as the engine for economic expansion. Yet, when she
addresses some dominate ideas of the 18th century ruling class that disagree
with her she simply writes that they were wrong. But trade itself also was the
result of ideas, namely that assets could be exchanged profitably across oceans
of distance. Reading the contemporary accounts one senses that such ideas were
sometimes slow in developing. Or that initial efforts failed due to external,
Her repeated belief here again is. "Trade then was important as a context
for British growth (and Chinese growth and many other growths, too) "Yet
trade was not an engine of growth. Trade explains some of the patterns of
production, but not the size of production."
Here is a typical argument. "Exports to French colonies in the eighteenth
century, for example, are said to have put to work previously idle French
workers. (I repeat: why did not domestic demand for carriages and servants have
the same effect?)
Well, I would presume there was NOT that much demand from the small
aristocratic set for ever more carriages and more lazy servants. Besides, they
were already strapped for income. And according to her own economic theory
there was much more profit to be made from the international trade. Some of her
other arguments are either circular or mutually exclusive. The relationship she
ignores is between trade and production. Expanding trade comes from expanding
the market in which production can be traded, a necessary circumstance is to
enable the producer to see that he can exchange all his production, otherwise,
why produce, let alone increase production.
In another argument she dismisses is O'Rourke statement about British trade
when the sovereign " 'needed revenues to secure trading opportunities for
its merchants by force if necessary'". No, she writes, "trade is
mutually beneficial, a matter mainly of cooperation not competition".
Of course, but the 'force' O'Rourke is thinking of is not against the foreign
merchant trading with the British merchant, but against the political powers
that tried to inhibit or prevent that trade. Yet, when it comes to discussion
of the Dutch in Indonesia she is quick to agree with critics of Europeans that
the Dutch were using force to obtain the spices and all to take to Europe.
But whether or not the British or Dutch sovereign 'profited' in the long run
considering his military expenses is another issue. She summarily claims that
the bourgeois in their support of nationally based warfare were wrong. (But
they were 'right' in everything else?) But 'wrong' or not one result was that
Great Britain clearly became a world power far above what one would expect from
a small island with relatively limited resources. And it occupied large
overseas areas to which it exported not only goods and services, but also tens
of thousands of citizens, thus reducing local unemployment during a large
increase in population. I believe Drs. Findlay and O'Rourke have the better of
Chapter 25 - And Even the Dynamic Effects of Trade Were Small
Again, she means 'foreign trade'. But in contrast she repeatedly notes the
expansion of the economic world which in effect eliminates the term, 'foreign';
as she sometimes notes, trade is trade, whether down the street or across the
ocean. So much of this chapter (even more than is already typically large) is
devoted to argument with other economists over theories proposed in books one
has not read, that is, it is difficult to evaluate her claims. And even more
than in other chapters she is discussing the relative usefulness of various
I do not put any store in 'model's of any sort as applied to any academic
field. A 'model' is nothing more than a set of math equations, as she notes
herself later on. These attempt to quantify the relationship between an input
and output - and the assigned quantity for inputs depends on presumptions and
estimates - and so do the relationships presumed within the equations.
And her diagram is meaningless beyond depicting her contention that the curve
depicting the modern economy should be 16 times larger than that for 1780. By
the way, does it represent this 16 times by having the X and Y intercepts
measured for modern at 16 times the number size for that of 1780? It appears
so, making the area under the later curve much greater than 16 times that under
the 1780 curve.
As an expert in the concept of 'marginal' relationships she should not dismiss
out of hand the cascading effects from a 'small' initial cause.
Lets consider one of the best documented example of trade. English with
Russians. A chartered English merchant company secures a monopoly from the
sovereign of trade with Russia. On this basis the merchants secure credit in
pounds against future assets from local merchants and investors (including
court officials) and exchange the credit (secured by the investors) for goods
they believe will be desired in Russia. They take the goods by sea to Arkangel
or Murmansk. There they meet Russian merchants who have a charter of monopoly
for foreign trade from their sovereign. The English are prohibited from dealing
with any other Russians. The English exchange their goods for rubles. They
receive fewer rubles than the Russian merchant knows he can obtain by future
exchange of the goods in the Russian market. (Profit 1 to Russia) Then the
English exchange these rubles with Russian merchants for Russian goods
(assets). Again, they have to give more rubles than the Russian merchant needed
when he exchanged rubles on his market for the goods. ( Profit 2 to Russia). Of
course the English merchant knows all about this. But for him those rubles were
worthless themselves, merely used as the medium of exchange. They did not even
have to be represented in coin but could have been shown in an accounting
ledger. He returns to England and exchanges the Russian goods for English
pounds - if successful, he obtains enough pounds to retire the credit=debt
paper and has enough remaining to pay also for his ship and labor of the crews,
plus some profit. Since he did not have to exchange capital for the goods in
the first place, his percent profit can be significant. And this was even more
profitable for the English companies trading with Turkey and South Asia.
Let us note here another fallacy 'value ' This trade did not increase 'value'
because 'value' is not an attribute that can be attached to a material or
non-material asset, object, service, or personal condition. "Value' is a
psychological phenomena - it is created by the relative desirability of the
asset to individuals at a specific time and place and in relation to all the
other assets (material and non-material) available and desired by individuals.
Thus the 'value' of a fur coat in Russia in 1600 is relative to all other
assets desired there, while its 'value' in London is also relative to all other
assets in 1600 there. But in Arkangel or London it is the same fur coat capable
of keeping an individual equally warm in both places. And a significant part of
its 'value' may reside in the relative prestige it may confer on its owner in
each place. 'Value' includes both material and non-material considerations -
that is 'value' reflects more than economic considerations.
Chapter 26 - The Effects on Europe of the Slave Trade or British
Imperialism Were Smaller Still
Dr. McCloskey cites various specialist historians who note that the British
gained very small profits from the slave trade. I thought that was always
obvious, yet she devotes several pages to discussing it.. Then she turns to
'imperialism'. I thought that was obvious also, despite Lenin's propaganda.
More pages are devoted to this non-starter.
Chapter 27 - And Other Exploitations, External or Internal, Were
Equally Profitless to Ordinary Europeans
Dr. McCloskey cites the Dutch, British and Germans for their 'exploitation' of
colonies, and notes that these did not produce much profit nor expansion for
the ordinary people, except that it prevented increased unemployment in a
rapidly increasing population. Certainly true, in the economic sphere, but
there can be political 'profit' as well. It has seemed to me that the only
academics who claim the colonies are a cause of European economic expansion are
folks who insist on denouncing European - euro-centric hegemony.
However, she again misunderstands the problems of the Spanish and Portuguese
monarchs despite the influx of silver and gold. There were complex causes for
the continued poverty in Spain and Portugal. This section is the one in which
she shifts from chapter 24 and notes that the Dutch indeed did use force in
Indonesia. Whether the prices in the exchange were 'derisory' in local terms
there is not proven. Nor is the relative expenditures of the Dutch government
versus the total 'profits' obtained.
She writes,"Sic transit all manner of claims that Western wealth is
founded on the despoilment of the East or the South. Rich countries are rich
mainly because of what they do and did at home, not because of present or past
Unquestionably correct, as I pointed out above the profits of merchants from
international as well as local trade are created at home. But she is too
reserved to comment on the ideological basis for those who believe in European
evil. Instead she too much in degree tends to agree with the idea of
despoilment as a disaster for the non-Europeans, just that it did not result in
the European economic expansion. Of course she has to digress into a discussion
of racism and apartheid in South Africa and the plantation slavery of the
southern states in U.S.
Chapter 28 - It Was Not the Sheer Quickening of Commerce
Now we get to the arguments over the nature of money and its relation to the
real economy. De. McCloskey's explanation on this should be widely adopted by
all commentators today. The misunderstanding that she corrects is a major cause
of public and failed political beliefs and actions today. She points out a
false connection between 'commercialization' and 'monetization'. She stresses
that, "An economic historian, though, can tell you that the European
economy, like the Greek or the Chinese or the Egyptian, has always been
'monetized'". (See also Enterprise and
the authors I cited above) She notes that at all times and places in which
trade took place among at least merchants calculations were made. But the form
in which money was expressed and its origin in the given society were not
always the same.
She later on writes, "An economist will tell you, therefore, that (
somewhat surprisingly viewed from outside economics) the history of money is
not the same thing as the history of prosperity, and that money certainly did
not cause industrialization." And, "Money, the economist says, is a
But further on she writes, "Yet the amount of silver and gold money had
nothing to do with the failing ratios of money wages to money prices, which is
the falling real wage, pence to the worker per day divided by pence per loaf he
eats." In this she allows the reader to equate 'money' with currency. A
major error. She correctly mentions ONE temporary cause, relative population
growth. And she is right to disagree with Joyce Appleby's 'inflation caused by
high food prices' - first high food prices is a result, not cause, of inflation
and second, if 'relative' which Appleby does not claim it was, that isn't
inflation either. But deeper, the specialists on the nature of money cite this
theory of economists that 'money is a veil' as a major problem and cause of
misunderstanding of the social role of money.
But, as David Fischer shows in his The Great
Wave: Price Revolutions and the Rhythm of History, going back to 1200
these recurrent 'waves' not 'cycles' of dramatically increasing prices were
generated by a variety of causes and population growth versus agricultural
productivity was one and also the reverse, rapid decline in agricultural output
due to weather. And other causes as well, such as the massive increase in
quantity of silver from America after 1570's which made silver so cheap it
forced the closing of European silver mines. Adam Smith actually noted that
silver had become so 'cheap' that one could hardly give it away. And of course
that is also why the Spanish soldiers in the Netherlands demanded to be paid in
gold and not silver. David Fischer describes 5 major 'schools' of theoreticians
proposing different principal causes for price increases and decreases.
Dr. McCloskey is right to question 'the story of 'monetization'" There was
plenty of 'money' meaning a means for enabling exchange, and not only currency.
As she notes, people wanting to trade real assets find a way to do it but NOT
barter (as she hints). There is always a medium for exchange, like, for
instance 'Talley sticks'. Plus, as she notes, modern archeological discoveries
show that England (and Scandinavia) and Europe generally had much more silver
coinage than previously believed. But that does not mean that monarchs,
sovereigns, had enough money themselves to wage their wars. They were
constantly trying ways to make what money (coinage) they had pay for more, or
obtain credit. Still, she writes about 'monetized' in terms of coinage, when,
for instance the Carolingian 'pound' was used as a measure of account for
centuries without a single 'pound' being actually minted.
She is right to quote Max Weber, ''The impulse to acquisition, pursuit of gain,
of money, of the greatest possible amount of money... has been common to all
sorts and conditions of men at all times and in all countries of the earth,
whereever the objective possibility of it is or has been given'". She
credits decrease in "transaction costs" as a stimulus for increased
commercial activity. But she does no accept 'growth theory'
But througout the text and in the notes and bibliography I do not see reference
to the huge library of specialist books on the history of money and banking. To
incorporate this material here would expand the discussion too much, but I have
mentioned several leading authors.
Chapter 29 - Nor the Struggle over the Spoils
This is one of the most important chapters. In it Dr. McCloskey takes on
post-Marxian authors, and focuses much on the great French historian Fernand
Braudel. (See vol 1, vol 2, vol 3 of
his master work) She notes especially his vol 2 which she cites as "the
most full exposition of the idea by a historian that the modern world came
naturally out of the sheer expansion of commerce." Her discussion is
lengthy and demonstrates that he was still too much influenced by Marx. For
instance, she writes: "What Braudel gets wrong because of his
marxisant, rise-of-classes rhetoric is his claim that there is a
(dividing) line between normal marketers and big time capitalists." She
avers that 'all' participants in the market are 'capitalists'.
Well, maybe not all, counting out the crooks and government bureaucrats (when
there is a difference).
She is right to cite many of Braudel's anti-capitalist views. And worse for us
now, such Marxist anti-capitalist presumptions dominate the thinking of many
economists and politicians. But there are many other historians who describe
the economic history of Europe in the Middle Ages and early modern era whose
work shows the process of expansion - some even cite a 'Commercial Revolution'.
(see Spufford and Landes.
Chapter 30 - Eugenic Materialism Doesn't Work
Dr. McCloskey begins with, "An extreme materialist hypothesis explaining
the Industrial Revolution would be simply genetic." Very true, but then
she reveals her own bias by writing, "Scratch a modern member of the
right-wing clerisy and you will often uncover such flatly racist ideas." I
imagine the 'often' is meant as a cover. Anyway the chapter is about broader
examples of total materialist thinking in the excuses prepared by so many
intelligentsia members. She begins by disputing Gregory Clark for his
thoroughly materialist theories. But Clark serves as an appropriate example of
general materialist thinking today. Fundamentally, since Marx, any efforts to
claim ideas have results are met with the argument that ideas spring from
materialist sources. She comments that today even official Marxists don't
depend on such total materialism. Nevertheless, she feels it necessary to claim
that Clark is a fine economist and, "Much of Clark's book in other words,
is incontrovertibly excellent, a review for outsiders of the quantitative side
of what economic historians have learned since, say, Karl Polanyi in
She bases this comment on belief that the world could and should have
industrialized otherwise but did not. "All the economic historians whom
Clark is summarizing agree that the escape from the Malthusian trap is the most
important economic event in world history." One can agree fully with the
view that genetics not only played no part but that claiming that is did and
does is wrong without believing that the world was in a 'Malthusian trap' for
millennia prior to 1800. The rest of the chapter is a complex of both ideas.
Chapter 31 - Neo-Darwinism Doesn't Compute
Well, this chapter is an extension of the previous one - neo-Darwinism is
another example of belief in genetics. She again attacks Clark, extorsively for
a full chapter, and this time begins correctly. "Clark insists
dogmatically that the only valid evidence for a hypothesis is quantitative and
She apparently believes his book has some popularity because she devotes much
effort in explaining why it is full of error. Among others she zeros in on his
diagrammatic explanation. "On event 4, the Enrichment of All, Clark's
Quantitative evidence is better, but entirely conventional. The numbers
concerning the Enrichment of All, about which, to repeat, we post-Polanyi
economic historians all agree, and on which all of us have worked, and of which
it is most important that we persuade noneconomic intellectuals, and especially
the Polanyists among you, are nailed, Good for Clark." She continues with
more attacks, but lets stop a moment.
One hardly knows how to deal with this condescending passage. Not being an
intellectual but a simple student of history including intellectual and
economic history I (on my own reading) dismissed Polyani years ago without
knowing that at one time any academic economists could have believed his
theories. But that education also made me skeptical of claims that 'rigorous'
quantitative methods would reveal hidden secrets. So apparently Dr. McCloskey
is urging us to believe her attentively, when she approves of some things but
not of others. It seems she is all for results based on quantitative models but
not on others. Perhaps not all her models are 'materialist'.
Chapter 32 -And Inheritance Fades
More attack on Clark. His book must be a 'best seller' in her domain. I should
get it from the library (certainly not from the bookstore.) In paragraph after
paragraph she proves him wrong. Yet, in a previous chapter she admired his
work. Lets just skip this chapter.
Chapter 33 - Institutions Cannot Be Viewed Merely as
Now Dr. McCloskey switches to deal with the 'institutions matter' crowd,
starting with Douglas North (mentioned many times before.) She has much to say
about Dr. North's background and later focus on 'transaction costs' as
conceived by Ronald Coase. For North 'transaction costs' are greatly influenced
by 'institutions' that is the organizations that increase or decrease them .
She notes this and North are totally "Samuelsonian" economic
promoters of the infamous Mr. 'Max U' . That is the concept that man (generic)
is motivated exclusively by economic advancement through his efforts to
Thankfully I escaped from reliance on my economics text, yes, the famous book
by one Paul Samuelson, that is still on my shelf.
Dr. McCloskey provides a useful tutorial on what the full Samuelsonian concept
is and involves and why it misses so much of real human activities and
motivations. And she pegs North as a participant in Samuelsonian economic
theory. Then she gets into 'agency theory' and relates this to the 'Chicago
School' of economists who from her listing all fell into this presumption about
'economic man' that is the Mr. Max U who is the epitome of a prudence seeker,
but nothing else. It is quite a list of well known economists. She devotes
several pages to refuting the whole bunch. But I still wonder why she and
others do not simply ask the 'economic man' believers to name specifically ONE
real, actual figure in history who exhibited the relevant traits to the
exclusion of acting also upon some of the other virtues she well describes.
Chapter 34 - And So the Better Institutions, Such as Those Alleged for
1689, Don't Explain
More on Douglas North and Max U (whom??) he claims can explain the modern
world. - pure materialism of course. The very idea that 'man' focuses all his
energy, skill and thought on 'improve their material status' is absurd. The
ancient Greeks invested the myth of King Midas to show the ridiculous result at
a time they were first coming to intellectual grips with the new form of money
- currency. But, then she writes that, "North's main example of growth
inducing institutions is the settlement of 1689 in England". She digresses
into another discussion of Braudel's errors and then comes back to North's idea
about the Glorious Revolution and introduction of the Dutch concept of national
debt. She quotes North, 'how institutions played a necessary role in making
possible economic growth and political freedom".
Seems to me that she is side tracked by this emphasis by North on
'institution'. It was not the institution, but the concept that created it, an
idea that she would applaud as such. The idea, concept, was to link the source
of private money to the sovereign who would act as the ultimate backer in
exchange for the ability of private money to support sovereign expenditures. In
other words the concept of the modern 'central bank'. This is the very same
concept that directly linked the 16th Amendment to the U.S. Constitution to the
establishment of the Federal Reserve Bank - that is placing the financial
authority of the sovereign behind the credit issue by the private bank.
Kwarteng notes that this "Great Monetary
Settl4ment" as Martin lables it, enabled the British (King William III
initially) to finance his wars. And Martin
shows in more detail how the process developed, while
Whalen focuses on its application for United
States economic expansion. And there are many more references.
Dr. McCloskey claims that 'capital' was not a significant cause of economic
expansion, especially such rapid expansion, because it was so readily
available. (This is circular thinking. It was the fact that it was then newly,
readily available that made its availability a significant cause. But not only
available but expandable and trustworthy.) Yes it was, but the 'Great Monetary
Settlement" as Martin terms it, was the reason. King Charles II had put a
Stop on the Exchequer a few years earlier due to shortage, sovereigns were
always short of ready money to wage war, and previusly had to demand funds from
others since their own created money was insufficient. Again, discussion of
this involves the whole concept of credit.
So North sees a valid event but misconstrues its real significance, according
to McCloskey, who then objects to this misunderstanding. She notes the event -
the creation of the National Debt via the Bank of England but claims its
financial and economic success was due to luck in war and good commanders. NO.
She correctly notes that many sovereigns used what money they had without
enhancing economic expansion. YES. She writes, "the argument confuses
economic enrichment with military victory." YES, but so does she. But the
real key was that this credit=debt system was not under control of the
sovereign but of the very bourgeois whom she champions. It was private money,
no matter what Locke wrote.
She does write, "What did matter was a change in political and economic
rhetoric occurring about the same time that made the British state prudent in
the financing of its wars of imperial adventure 1690 to 1815, as the
Netherlands had earlier learned to be prudent..."
Well, seems to me that 'about' is a cop out. The two were contemporary for sure
and intimately related. Seems to me that the 'betterment' depends on (a) the
idea, (b) the will to try, (c) the fundamental belief in progress (d) the
availability and control over essential assets, including financial. So what
she sees as 'what mattered'. is correct but encompasses more than she sometimes
claims as its critical core. And expenditure was 'prudent' because it was
private money being expended.
Apparently, North makes private ownership of property a new and critical factor
and McCloskey points out that private property existed from ancient times. She
is correct, but makes too big deal out of proving it by devoting much more than
necessary effort to the issue. But she is right to note that North's incorrect
idea has its recent echo in Daron Acemoglu's'
book which is also incorrect. He and James Robinson focus on 'property rights'
as institutions rather than as concept.
Dr. McCloskey writes, "Acemoglu in short has gotten the history
embarrassingly wrong in every important detail, and his large theme is wholly
I agree. In their book (Why Nations Fail) in
general they define processes as institution; such as slavery and even more
generally as 'extractive institutions'. They write, "Institutional
differences play the critical role in explaining economic growth throughout the
ages. But if most societies in history are based on extractive political and
economic institutions does this imply that growth never takes place?"
Seems to me that using the term 'institutions' rather than 'processes' based on
concepts (ideas) creates confusion. actually, they do use the term 'process' as
Chapter 35 - And Anyway the Entire Absence of Property Is Not Relevant
to the Place or Period
In this chapter Dr. McCloskey turns to Richard Pipes (Property and
Freedom) a well noted historian of Russia, who ventured out of his subject
area to follow North into English history. She claims being 'picky' about his
errors may be justified. But she admits that. "The Glorious Revolution
surely had something to do with the Industrial Revolution indirectly, by way of
the resulting freedom of discussion that made England into a land of
conversation like Holland...". Note those well placed caveats
"something' and 'indirectly'. But it is this 'freedom of discussion' that
is central to her thesis - rhetoric after all is discussion. But she jumps in
with "But it was not property rights that the Dutch transferred to the
English." So North and Acemoglu are again wrong. Yes, they are, but lets
focus not on their error about claiming importance for 'property rights' but
rather on their error in not focusing on human rights. Lets, rather, give some
credit to the Glorious Revolution and all related to it.
She proceeds to excuse Pipes in his error because his real expertise is in the
history of Russia where, indeed, there was no private property during the reign
of the Tsars. That happens to be my main field as well. And I dispute with
Pipes that the whole problem of lack of property rights was due to the Mongols.
No, without them, anyway, Novgorod was not such a 'powerful state' and would
not 'have triumphed' against the Yaroslavichi. But Richard Hellie, whom she
quotes, was correct. She then digresses past North and Acemoglu again to
comment on various historians' description of steppe nomads. Back to Pipes, she
correctly notes the errors in his effort to extend the idea that the sovereign
was owner - that is of patrimony - of all the land and resources, including the
people. BTW the Mughal conquerors of India did NOT control all of India.
Now she returns to the point. "But all this interesting historical
assertion, whether true or false or merely memorable, is not relevant for
explaining a change in Western Europe 1600 - 1800, or 1300 - 1900, or the lack
of change in places comparable to Western Europe, such as Southern Europe, or
China, or Japan, or the Ottoman Empire."
How true, Muscovy and before it Kievan Rus were quite different in many ways
from Holland and England.
But I don't believe the places she lists were as comparable to Western Europe
as she agrees to consider. They all had significant impediments to accomplish
what happened in Holland and England. And for me, she then continues to expend
more than necessary space refuting Pipes again. She turns to a commentary on
our present 'administrative state' mentioning Richard Epstein. (Design for Liberty and
The Classical Liberal
Constitution). As I have long claimed, the modern 'state' (euphemism to
legitimize ruling bureaucrats) does exercise much more power and control over
the individual than any medieval or early modern ruler in Western Europe. She
should mention Philip Hamburger - Is
Administrative Law Unlawful? as well. Her concerted descriptions of the
huge economic, political and social problems we have stemming from this
'administrative state' are the most important consequence of study of her three
Chapter 36 - And the Chronology of Property and Incentives has Been
Dr. McCloskey again begins with, "That is to say, to return to the theme
of North and Weingast's work the political innovations alleged to lead to the
financial revolution in late seventeenth - and early eighteenth - century
Britain have no important connection to secure contracting - not even, as North
and Weingast somewhat desperately put it, as indirect "evidence that such
a necessary condition has been fulfilled':
Ok, she turns to multiple sources to describe the history of contracting. And
she provides more tellingly wrong quotes from North on various aspects of
'state' activities. So North was wrong in what he chose to see as results or
lessons from the Great Monetary Settlement. But, neverthless, this financial -
political innovation did have very significant results in subsequent history
even to today.
But Dr. McCloskey writes, "The model is of technological causation, the
technology being caused by the coming of bourgeois dignity and liberty."
I disagree and find the causation not in the history of technology but in the
history of money. So, yes, to the 'coming of bourgeois dignity and liberty, but
also, yes, to the bourgeois creating their control over private money secured
by agreement with the sovereign. She zeros in on a North idea about the ability
of the English 'state' to finance war and she claims that is not relevant. She
devotes several pages to discuss the British 'state' borrowing funds for war.
This is backwards - not borrow but create. The 'perpetuals' in which the
bourgeois invested were negotiable credit instruments -that is money - that was
used then as a means of exchange, greatly reducing the necessity of using
'Talley sticks' or even coin, and, because they paid interest, they were more
trustworthy over time than depreciating coinage.
She is correct to write, that the lowering of Dutch and British interest rates
on the assets relevant to economic growth - private bonds - is to be explained
by the abundance of loanable funds ("money') not by fresh commitments by
the government to pay its debts - which worked in the opposite direction, if
they worked at all.".
Indeed, that is the point, but from where came these 'private bonds' - well,
they were not even 'bonds' but annuities - the Bank of England. And why were
they accepted in exchange - that is trustworthy? Because in the 'Great Monetary
Settlement' they were backed by the sovereign, although not created by him. It
is this combination of private money and sovereign backing that has been the
monetary solution to the repeated problems of medieval and early modern
separation of private money-creating banks and defaulting sovereigns. Of course
it has only been a successful solution where and when the sovereign continued
to honor its commitment to that backing. And she notes repeated examples when
various sovereigns defaulted. (See multible histories of money and Reinhart
& Rogoff -This Time is
Chapter 37 - And So the Routine of Max U Doesn't Work
In this chapter Dr. McCloskey get to basics. This is a chapter of argumentation
with and between economists. She begins with Robert Allen who asserted that
'technology was invented by people in order to make money and therefor was an
A very telling quotation on two scores. One is the assertion that invention is
motivated by desire to 'make money'. And the other is that economics is all
about activities centered on making money. This is the mentality she has been
objecting to (well fighting) throughout the three volumes. It is the mentality
of the notorious Max U. Of course she is right. And her pages full of theory
and theoretical examples are right also. She references the inherent
shortcoming of Max U by citing his reliance exclusively on the virtue of
Prudence, when real people also are motivated also by virtues such as courage,
hope, temperance, justice, love and faith. (see her other volumes).
But what I want to ask is 'Has anyone actually identified a living (or
deceased) human who is or was the example of this model, Max U.' Has anyone in
history really acted in pursuit of an ultimate end motivated by the exclusive
conception of achieving this 'utility function' as described in theory? Seems
to me such individuals are rarer than dragons. I mention Cicero. The more I
read of the history of economic theory (as opposed to history including
economic events) - for instance Lawrence White's excellent The Clash of Economic Ideas, the more I recognize
theological disputations similar to those of Franciscans and Dominicans at
Universities of Paris and Cambridge in 13th century.
She writes, "I want to initiate a discussion to put the point another way,
with my numerous friends in economics and even in economic history who have
come to believe that all effects of ideas on the economy work mainly or
exclusively or necessarily or obviously through incentive ..."
I believe we can leave this disputation (discussion) to these economic
Chapter 38 - The Cause Was Not Science
Well, here we are. "We are back to what actually happened 1700-1848, and
then on to 2010 and beyond, a rise of income per person by a factor by the end,
let us say very conservatively, of sixteen." The argument in this chapter
is about the significance of 'science' that is development of scientific theory
about nature as a cause of the expansion in living standards in the late 18th
century. Dr., McCloskey says no, that the actual impact of what we might call
'pure' science came later. The ideas that resulted in the initial expansion
were relatively simple and more of the type technical and engineering
applications to solve apparent problems. Her chief disagreement is with Joel
Mokyr, with whom she also has many agreements.
Chapter 39 - But Bourgeois Dignity and Liberty Entwined with the
The chapter relies on Dr. McCloskey's development of the importance of the
'virtues' in volume 1. In a wide ranging discussion with many economists from
Goldstone and Mokyr to historians such as Landes she maintains that their
various ideas about the causation of the great 'betterment' are partial or
derivative. Everything boiled down to the enhanced status of the bourgeois
exemplified in its dignity and liberty being recognized by society at large
(and despite centuries of denial by aristocratic and clerical superiors).
She can't help throwing in a word or two about other purveyors of ideas.
"But the sheer accumulation of learning also produces Oxford dons who
almost never have an original idea and don't publish on the rare occasions that
they do". There is more along this line.
Chapter 40 - It Was Not Allocation
Here another idea about causation receives a big NOT. To begin, "The main
economic peculiarity of the explanations of the Age of Innovation examined so
far is their premise that, until 1750 and the wave of gadgets sweeping over
England, opportunities for profit were simply ignored. As I've said now
repeatedly, that's not economically reasonable." And, she continues, the
historical puzzle is why did not the events of 1750 and later in England not
occur during previous centuries in places around the world. She recapitulates
the many arguments previously addressed. She does note that the method of
proving all other potential causes faulty to leave standing the favored one has
its dangers. For one thing, she avers, there are immaterial and measurable
causes also, that are ignored by materialists.
Allocation in her chapter title means the way the various theories about
causation get 'shuffled' about like the shuffling about of the assets being
discussed. Rather than 'shuffling' assets around, she claims. "It was
instead, about discovery, and a creativity supported by novel words,. In terms
of the seven principal virtues, that routine of efficiency that Samuelsonian
economists love so passionately depends only on the virtue of Prudence. What I
am claiming here is that discovery and creativity depended also on the other
virtues, in particular on Courage and Hope.."
Chapter 41 - It Was Words
Dr. McCloskey writes: "In the beginning was the word. Free innovation led
by the bourgeoise became at long last respectable in people's words." They
soon were even called 'gentlemen'. And conversely, some of the already
'gentlemen' took up living by having jobs. And, "Surprisingly, such
ancient attitudes (that is disdain for work) changes. In its rhetoric the
northwestern European elite began to deem a bourgeois career honorable."
More pages devoted to elaboration of this theme.
Chapter 42 - Dignity and Liberty for Ordinary People, in Short, Were
the Greatest Externalities
Tis chapter is a summary of the central theory of the entire trilogy. Dr.
McCloskey quotes Friedreich Hayek "' Nowhere is freedom more important
than where our ignorance is greatest - at the boundaries of knowledge - where
no one can predict'". Very much the same idea as George Gilder. She uses
many terms of economist jargon, but the thesis is well supported. For instance
"Dignity and liberty, to express the point in economic terms, were the
Greatest Externalities.." She writes, "My theme in short is the true
liberal one of the de la Court brothers" -- there follows most of a page
filled with a list of famous economists.
Chapter 43- And the Model Can Be Formalized
Of course this would not be a reputable economics book without a model. But
reading it is much fun. She begins by providing a diagram that depicts some of
her points in visual terms. (Heavens spare us -She adds - "These could in
turn be translated into a set of equations with time subscripts, differential
terms, and so forth.') We are spared again as she writes, "In order to
avoid a hopelessly confusing mass of causal spaghetti one can as it were
subtract out two sorts of alleged causal factors (strands of spaghetti) that
did not contribute or not much, to the Great Fact."
Wait a minute, isn't that cheating? I detect an a priori judgement - to throw
out an 'alleged' causal factor. Well, any way she gives us a large Table 3
listing a page full of 'background conditions' good or bad. These are to be
Then in Table 4 she provides 'incidentals' another cheat sheet of 'actual or
supposed events after 1500 in Europe that are sometimes alleged (alleged,
horrors) to have caused the modern world but have been shown to be mostly
beside the point."
By whom and when? :) I am only kidding.
But this is the routine followed by model builders everywhere. (not counting
model airplanes of course) But she detects my insolence and demands that, if I
am indignant, I must provide 'scientific' proof for reinsertion of any of these
excluded variables. "Scissors-and-paste evidence that is irrelevant to the
economics" involved is outlawed. Says who? Turns out we skeptics have to
"do the economic thinking framing what evidence you claim would be
relevant." But according to previous argument, this cannot be Samuelsonian
economic thinking. Not that I would consider that anything but an oxymoron.
Well, all of the above is marshaled and displayed in Figure 4 - The causes of
the factor of sixteen or of one hundred. Seems a rather loose spread of
potential factors. A wide variety of 'factors' are displayed in varying size
type. But, remarkably, no inclusion of the Great Monetary Settlement and
creation of the monetary basis for modern commerce. Actually no mention of
financial aspects of what is a diagram of economic activity.
From this she argues, "My claim, in short, is that the model in figure 4,
diagrammed here across the centuries, is better than the strictly materialist
alternatives. (No argument there,) The model, I repeat, could easily be
expressed mathematically as differential equations, but the lines of influence
organized here by centuries are I think a good way to summarize the books's
argument for a diagrammatically-minded reader."
Well, I am a trained cartographer and in engineering mechanical drawing as
well, so enjoy diagrams, and I am trained in geodetic and celestial mechanics
so also enjoy a differential equation or two. (What about matrix algebra and
Venn diagrams.?) And I heartily agree that this or any other diagram Dr.
McCloskey might chose to prepare will easily be superior to any materialist
effort - a rather low bar to overcome.
Turns out we are not to be spared. She must write, "But I can satisfy a
little the thirst (thirst is it?) of my economist colleagues for something
closer to what they would consider 'a model'. The function for national product
Q=1 (D, B, R) ` F (K, sL)_
I will spare my reader with the definition of terms. And I hasten to agree with
the author who writes, "There is of course nothing profoundly mathematical
about this way of saying what I am saying."
Now I am laughing, "She continues, "The 'mathematics' is merely a
metaphorical language that economists understand, (how about geodetic
engineers?) and which allows me to chat with them about the economic and social
ideas involved without excessive confusion." (over a Bloody Mary no
doubt.) And I also skip the 'Solow residual'. And there is much more discussion
about each of those alphabetical variables, I pity the 'young economics
student' for whom she kindly provided this. But there is more, more elaborate
mathematical 'models' and even a pleasant suggestion. "If you like to
think in logarithms, you can make the same expression into a log-linear
one." I love them, had for years to use the massive tables of logarithms
compiled as make work for scholars during the depression - that was well before
Texas Instruments got the idea to include them. But I still have my slide rule,
which is based on logarithms. Seriously, I do note that in some well-known
economics texts the graphs are linear- linear when they should be log-linear.
Chapter 44 - Opposing the Bourgeoise Hurts the Poor
Now we get back and down to real cases in this relevant and important chapter.
Dr. McCloskey selects two eminent ignoramuses as guinea pigs - Immanuel
Wallerstein, Kenneth Pomeranz. They represent the Marxian intelligentsia who
deplore 'capitalism' and all its results. She gives us many specific examples
of government and special interests who passed laws to prevent innovation or
economic improvement on the grounds that it would 'injure' some existing group.
It is continuing today, as evidenced in the 2016 political campaign. She
denounces the typical leftist antibourgeois rhetoric and political pressure.
They claim to help the 'poor' but do not. But her examples of 'right wing'
opposition such as from Carlyle are mostly rather outdated by now.
Here, she zeros in and describes the adverse results. "If bourgeois
dignity and liberty are not on the whole embraced by public opinion, on the
face of the sneers by the clerisy and the machinations of special interests,
the enrichment of the poor doesn't happen, because innovation doesn't."
Another phrase to put on billboards.
But she spends the rest of the chapter giving the progressives credit for 'good
intentions' toward the poor. Somehow those 'good intentions' just keep going
wrong (by accident?) and the poor remain poor. Maybe, just maybe, the
progressives like it that way.
Chapter 45 - And the Bourgeois Era Warrants Therefore not Political or
This is an excellent chapter bringing all the economic historical proof to bear
on present reality. But Dr. McCloskey begins by citing Bryan Caplan who
enumerates four beliefs that the 'economist' holds but with which the public
disagrees. She adds a fifth. But she devotes much of all three books to show
that the economics Establishment - most economists who give politicians
legitimacy - do NOT hold the beliefs. Yes, she and a few economists (such as
Austrian School types) accept these opposing views. But the main reason the
public does not agree but accepts the reigning economic theology is that the
Establishment has been teaching them these ideas for over a generation. She,
herself, repeatedly funds fault with Samuelson, yet his text remains gospel.
She continues with the real story. "Caplan argues that an economy governed
on Citizen principles will impoverish the citizens." Quite so. She cites
some examples and continues. "Bizarrely, the Aristocratic policy and the
Citizen policy closely resemble each other in what they recommend." They
do, indeed, but it is not bizarre. It is the result of the intelligentsia
giving both their intellectual affirmation, both have to rely on intellectuals
for what to believe.
Then, "The point here is that the brief reign of the entirely new and more
genial Bourgeois Economist's Principles led to the modern world and its Great
Fact of astounding and scope-expanding economic growth. Yet in many countries,
and in some groups in all countries, the civic religion recommended by the
clerisy remains a version of the Citizen or the Aristocratic policy -
protectionist, paternalistic, antitechnological, proudly
Yes indeed. Her key word there is 'brief'. Please read
Muller for background on clerisy thought and consider what the causes are.
He focuses on only a few of these individuals but has selected excellent
representatives of type. The clear story is that (1) prior to the French
Revolution there was expanding support by clerisy (intelligentsia) leaders -
thought leaders such as Voltaire) for the bourgeois because these clerisy
believed the ascendancy of the bourgeois would support and cause the
revolution. And the result would be the enthronement of the clerisy. But (2)
the revolutions of 1830- - to 1848 showed that the result was that the
bourgeois themselves and not the new generation of clerisy were in charge. Dr.
McCloskey calls this the 'treason' of the clerisy. Yes indeed, treason based on
envy as Schoeck shows and on their desire to
dominate and hold power because only they know what is best for everyone.
She knows this and includes good examples. for instance, from France. In her
three volumes she cites dozens (or more) authors. But I didn't see Roger
Scruton's devastating analysis in Fools, Frauds
and Firebrands: Thinkers of the New Left. Here is an example of French
pedagogy - "Capitalism, according to the French instructors of the young,
is 'brutal', 'savage', and worst of all (wait for it) 'American." Is it
any wonder, then, that we have Piketty and
Philip Bobbitt's prediction of the coming conflict in his Shield of Achilles.?
Dr. McCloskey identifies the new substitute for Soviet Communism (at least
among those who now doubt it) - namely, environmentalism, (including of course
'global warming'). "The new alternative to central planning socialism is
environmentalism. It is now taught as a civic religion in American schools (and
with an even more fevered rhetoric in Germany and the Netherlands and
especially in Sweden), the way anticommunism was in the American schools of the
1950's or nationalism in the French schools of 1890's or the great chain of
being in the English schools of the 1590's?"
I again have some disagreements with her when she seeks to be 'even handed'. I
graduated high school in 1950 and attended college then and remember clearly
that it was socialism (small c, communism) that was taught in schools. And I
can't say about later dates in English schools, but 'the Great Chain of Being'
was well out of thought by around 1500 in Italy and much of Europe when it was
replaced by the abstract concept of 'state' as the source of legitimacy. Among
others Hannah Arendt identified the secular religion focused on 'the state'
years ago. Environmentalism is an offshoot to give a more concrete and
understandable target for the uneducated mentality.
Yes, as she notes. The left now worships Malthus - an example of Gramsci theory
to focus on culture.
She continues: "The economists have long tried to provide the reasoning
and evidence - to the point where convinced environmentalists have in vexation
stopped listening to them, so painful is the experience, and have stopped
trying to show that the economists are wrong scientifically or ethically."
Again, I have to question this. Seems to me that Dr. McCloskey herself has
shown that there are plenty enough economists who champion environmentalism to
give assurance to any weak hearted fans. As for 'pain' I wonder as well. And
the weak minded need no assurance.
Chapter 46 - But an Amiable, if Guarded, Optimism
Now for a finale. "If proinnovation ideas of the elite caused the
Industrial Revolution, and if the artistic and intellectual elite turned
against innovation after 1848, as it did, first in nationalism and then in
socialism, and then in national socialism and finally in radical
environmentalism, why didn't such turns bring to a halt the Industrial
In her reply she again seeks to castigate both progressives and conservatives.
She is right to describe the academic disapproval of Friedreich Hayek (not to
mention Ludwig von Mises) and the whole way of thinking of the proponents of
'Austrian School economic theory. And right again to describe the economist
establishment post WW II as leaning, less or more, toward central planning and
She is very clear and strong in support of her position: "And reverting to
full-scale, central-planning socialism or fascism of the sort that many of the
clerisy still pine for on old socialist grounds or on old nationalist grounds
or on new environmental grounds would be a catastrophe." And, "By now
you will know that I would regard a loss of bourgeois and innovative rhetoric
as a deep worry, not a hope, and that the main purpose of my hopeful seset on
the Bourgeois Era is to argue against accepting such a disastrous loss."
Fine, but then she adds, "The danger of an all-devouring state is anyway
as great nowadays from the right as from the left." How can this be when
the central guiding tenant of the conservative is to reduce the size of
government, eliminate as much government regulation and power as possible,
reestablish coherent private money, I guess this idea is a remanent of the
early education she notes she received in favor of socialism, But it is this
claim from the radical left (such as John Rawls) that provides reasonable
consideration of the very progressive agenda she insists she opposes. It is the
false idea that fascism is 'far right' when it is but another version of
leftist socialism - both of which demand large and growing 'state' organization
and power. Whereas conservatism demands small and greatly reduced 'state'
organization and power.