I am pleased, if somewhat embarrassed, that Pete Boettke thinks "perhaps the best way to understand McCloskey's contribution is to see her book as the book Adam Smith would have written had he combined The Theory of Moral Sentiments and The Wealth of Nations into one book." Zowie. And I am similarly thrilled that he thinks that "Elinor [Ostrom, another of my heroines] and Deirdre are working along similar, though separate lines, of inquiry into the human condition and how we can come to live better together through social processes of communication and cooperation."
What pleases me the most is that both ideas — both the Smithianism and the Ostromism of what are laughingly called my "thoughts" — are new to me, though not too far beyond the horizon of consciousness. (Pete and I agree on so much that when I read his work I frequently have the feeling of The Next Thought. ) And he is spot on — another just-beyond-my-horizon — when he says, "This is the true behavioral approach to political economy, not the currently fashionable effort to highlight how human foibles lead to deviations from the Max U model of man." Pete recognizes that Vernon Smith and Bart Wilson, now of Chapman University, saw the point well before I did, and that Bart coined the word "humanomics" to describe it. I have come at humanomics from the humanities, Vernon and Bart from the sciences. We arrived at the same point, namely, that a fully human economics will need to acknowledge the arts and humanities as much as brain science and experiments. Not that the two are naturally hostile to each other. The dissociation of sensibilities that characterizes the two cultures never made a lot of sense. The two related forms of Kirznerian alertness — dealing and discovering — characterize the artistic world, too, in "entrepreneurial activity — both in terms of the art of the deal and the innovative impulse." Says Pete, "we have to reorient political economy and historical scholarship away from an exclusive focus on resources and ruthless efficiency and towards the humanistic science of man." Goodness, yes!
The pleasing continues: "what McCloskey has made of talk," declares Ross Emmett, "is better than what Knight did." Good Lord. My hero, the Iowa-/Chicago-economist Frank Knight! And Ostromism: "As Ostrom has shown, the 'tragedy of the commons' is a tragedy only when people don't talk. In fact, the commons provides many opportunities for discussion. And from all that talk come the means of mitigating the tragic consequences." Another light bulb goes on in my mind.
Two actually. One is that medieval open fields, as I argued long ago, do not exhibit tragedies of the commons in the simple, fisheries form. The other is also from long ago, when I criticized in my microeconomic textbook, The Applied Theory of Price (1985), in Chicago-School (Mark II) style the notion of monopolistic competition. I was something like the last undergraduate student of Edward Chamberlain, so I knew a little of what I spoke: Chamberlain attempted to combine the anonymity of competition with the noticeably downward-sloping demand curve of monopoly. I argued then that such a combination is impossible, and Ross' linking of me to Ostrom brings language in. If drycleaners or auto models are close enough to drive down prices when they overproduce, then they are close enough to have a conversation. But in conversation they stop treating each other like the vending machines that Knight referred to. They have to. It is only reasonable and human to do so. One ends up with cooperation, which is in this case merely monopoly — not monopolistic competition. Talk matters.
I have been trying for thirty years to revive the rhetorical tradition, and lately to introduce language into the economists' models in which talk is cheap and therefore of no consequence. On the contrary, sweet talk, persuasion, is one quarter of national income, earned by managers and teachers, police and lawyers. Ignoring it would be like ignoring private investment — which is is fact a smaller sector than sweet talk. Ross notes that "Smith wrote [unpublished lectures] on rhetoric" but "Knight would not hear of it. Persuasion for him was simply salesmanship — coercion by means of language. He had grown up with preachers full of rhetoric and persuasion, and he wasn't buying it." Nor has his best student, James Buchanan. I note that Knight and Buchanan contradict themselves rhetorically, the one advocating "government by discussion," the other "constitutional political economy." Both work through ethical talk (McCloskey 2011), as after all a scholar does in trying to persuade her colleagues. If my roundabout voyage from economic into the humanities and back again, 1970 to the present, bears fruit for our economic science it will come from taking speech acts and therefore ethics and stories and metaphors seriously. People are not only vending machines. They persuade.
Pete and Ross agree that I am also trying to revive the classical liberal tradition, which includes Knight and Buchanan. It is what Daniel Klein wisely wants us to call "Smithian" economics. Schumpeter and the extreme Austrians both disdain Smith, and the Samuelsonians and Chicago-School Mark II misread him. I am in an amiable debate right now with the anarcho-capitalist Walter Block, who, sure enough, scores me for not being a consistently vending-machine economist. As Ross puts it, "Smith, Knight and McCloskey can't be strict libertarians." Hmm. Light bulb.
The hard part in explaining the modern world, I claim, is innovation. But what matters is innovation for the rest of us. Ross writes, "I often define innovation as people working together to find new ways to use things to create value for others. When someone inevitably asks why I include 'for others,' I point out that it is the anti-market clerisy which made us think creating value was synonymous with profit-seeking, and equated profit-seeking with a lack of regard for others. A healthy (not utopian, just healthy) respect for the dignity of bourgeois life sees no problem in recognizing that attempts to innovate only work if they create value for others, and that, when they do, a firm will receive profit because they have improved our lives. Innovation is not merely an economic action, it is a deeply moral action, and one that encapsulated many of the virtues, chief among them, love." I would say, all the other virtues, and corresponding vices, too.
From reading Adam Martin here another bulb lights goes on: "More effective tools and more advanced ideas," he writes, "can be great boons to human welfare, instruments of tyranny and death, or expensive toys for a small elite. . . . The Great Fact is not just about more or more effective stuff in the aggregate, but more and better stuff that really improves the lives of the masses." And: "The market disciplines and channels innovative discoveries into taking mutually beneficial forms just as it channels allocational incentives toward mutual benefit .... Kealey ... documents the catallactic origins of every major innovation that constituted the Industrial Revolution." The same point was made a few years ago by Boettke in a Mercatus Institute session devoted to advising Joel Mokyr on his latest, wonderful book, The Enlightened Economy. Joel quite properly argued that what was unusual about the eighteenth century was a focus on useful innovations. Pete replied, "But what is useful depends on valuations in the market — that is, on a price system. The 'useful' changed in people's minds."
Claudia Williamson makes the point by using William Baumol, that astonishing economist, who "noted that entrepreneurs are present in all societies. The reason economic differences exist across different settings is that profit opportunities vary according to the specific institutional setting." As Baumol himself said, "the Roman reward system, although it offered wealth to those who engaged in commerce and industry, offset this gain through the attendant loss in prestige." Martin writes similarly: "The Bourgeois Revaluation can be interpreted as an ecological shift in entrepreneurial alertness. . . . . McCloskey needs to show that the change in rhetoric made innovative discoveries in markets relatively more likely than, e.g., redistributive discoveries in politics, intellectual discoveries in academic philosophy, etc." As I plan to.
But "people innovate," Claudia Williamson supposes, "or invest in human or physical capital, or trade, when they have an incentive to do so." No, they don't. To be more nuanced: they obvious do respond to incentives when they decide to open a pet store (though love of dogs is going to matter, too). When they invest they are sometimes motivated less by profit than by animal spirits (of dogs, say). Investment in human capital entwines with identity so tightly that a Prudence-Only explanation will have at best a big error term. And innovation beyond the innovation entailed in trade or physical investment or investment in human capital — the bright idea for a new machine or a new industry, the invention of the Bessemer furnace or the credit card or the personal computer — is poorly explained by routine incentives. Joel Mokyr has shown how remote the rewards were to ingenuity. William Nordhaus reckons that "only a miniscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers," 2.2 percent. It had better be so, or economic growth would be grim story of the Walt Disney Corporation's owners getting richer and richer, with no gain to us poor consumers (Nordhaus 2004, abstract).
A related idea from Martin: "If Revaluation rhetoric is internalized, innovation becomes an end in itself, imbued with transcendent meaning. One does not give up on pursuits one holds to be transcendent just because of failure. We try, try again." The social-psychological talk of "internalization" is very much to the point. As Joshua McCabe writes, "In contrast to the feared rationalization of social life, [the sociologist Viviana] Zelizer sees a 'sacralization' of economic life where profane economic exchanges are given moral or religious meaning." McCabe observes that such findings can be viewed as continuations of the Bourgeois Revaluation into the sphere of consumption. Yes: it is a change in the sociology, the habits of the lip. In offering me advice on where to go for evidence, Martin notes that "to the extent that words describing commerce are charged with normative content, they contribute to pre-deliberative framing effects. " Bingo. Talk matters.
Martin's elegant essay yields perhaps the best short summary of what I am about, "a full-fledged account of and apology for the bourgeoisie and the world they have made. " Notice that it is not an apology for pure capitalism at the abstract level, such as Walter Block would like me to make. It is an apology for an actual social system, what Schumpeter called a "business-admiring civilization. " Perhaps we have spent enough time in economics comparing an ideal form of "capitalism" with an ideal form of "socialism" or "regulated capitalism. " The comparison of ideals doesn't accomplish much, except to fill the heads of first-year students. Characteristically it is classical liberals who make this sort of practical point, Adam Smith for example acknowledging that state support for education is a good idea, and Buchanan noting that governments are not, it turns out, run by benevolent philosopher kings.
Nona Martin and Virgil Storr find the abolition of slavery to be ideationally driven, which seems to me correct. Thomas Haskell agreed in two magisterial articles in the American Historical Journal in 1985. Haskell argued that markets and innovation increased the sense of responsibility (the word was in 1807 a recent coinage). Likewise Steve Horowitz argues here that "capitalism made it possible for families to be first and foremost about Love. " (He is mistaken, by the way, to think that the initiating change was a rise of wage labor: that is a Marxist/Polanyan notion long exploded. ) But all these materially supported events worked through words, and without the words would not have worked. In part the method to prove such a proposition is the one I mainly used in Dignity: show that materialist arguments don't compute. But the direct evidence on abolition that Martin and Storr survey, and Horowitz on the birth of love, is powerful, too — stay tuned to get more of it in A Treasured Bourgeoisie, as I am now calling Volume 3.
In truth, the long reign of materialism in historiography, 1890 to 1980, looks increasingly peculiar. That the opening words of the Declaration of Independence, or Paine's Common Sense, or (for that matter) John Locke's theorizing about mixing labor with land, echoed down American history, and inspire people even now, seems obvious. Nor can one make always the materialist move of saying, "Aha! But the new rhetoric was itself a result of material causes." Sometimes it is, and sometimes it isn't. You have to find out. Only under the hermeneutics of suspicion that dominated the most advanced social thought from Marx through Freud to cultural and post-colonial studies are ideas mere evidence of felonious intent, with no power of their own.
I would claim that the New Institutionalism, represented most explicitly here by Claudia Williamson's thorough piece, is a throwback to materialism, and does not make use of what we know about human lives and words in art, theology, philosophy, literature, the humanities." "Institutions," Williamson contends, "are the formal and informal rules governing human action." No, they aren't. The central problem with North and company is that they ignore the central fact of human societies, language. Ludwig Wittgenstein, J. L. Austin, Elizabeth Anscombe, John Searle, Niklas Luhmann, and hundreds of others writing since the 1930s have reinvented rhetoric as the master discipline. The linguistic turn, though, has not been noted in economic circles. (Perhaps the contempt that we Scientists have for the humanities explains the oversight. North goes on and on about how much we should learn from "brain scientists," but has not a word for Homer or Confucius, Michelangelo or Yeats. ) "To North, institutions are created as constraints to reduce uncertainty in exchange and stabilize expectations by structuring political, economic, and social interaction." But in a footnote she provides the decisive criticism: "Instead of viewing culture as a fixed stock, it is more suitable to view it as an ongoing process of transformation. " You bet. A "process" of talk.
Williamson's idea that economic exchange led to dignity for the exchange in ideas is suggestive. The history of the metaphor of a "marketplace of ideas" needs looking into. But notice that approval for the exchange of ideas is dependent on an existing approval for economic exchange itself. That's the trouble with arguing, as she does, that trade dignifies the bourgeoisie. It hadn't for millennia, not permanently until Holland (it did so impermanently at Babylon and Tyre and Athena and Venice). On the contrary, participation in trade demeaned the bourgeoisie, relative to gentry and aristocrats, soldiers and priests, and even the ancestors of most of us, the peasants.
Kevin Vallier's brilliant paper is, I realize, a fine piece of analytic philosophy in aid of ethics and history and a liberal society, and, more to the point, in aid of my project, for which thanks. The distinction between rules and aspirations is a good one, and I will certainly take it seriously in further work. It helps one to see, for example, why North's reduction of institutions (such as churches and governments) to rules is a bad idea. People do not only have prudential constraints imposed by rules. (And anyway the rules are discussable: such a discussion is going on, for example, in Syria nowadays. ) People have aspirations (spiro: I hope) and faiths and loves and senses of courage and justice and temperance.
I agree with Vallier that I have not yet shown exactly how the ethics of people and the morals of a society relate, except to say — it is important — that the individual motivations did not change; the evaluation of them did. But Vallier shifts the grounds to: "Bourgeois Dignity lacks an account of deontological motivation. " ("Deontological" means "ought-based.") Yet I am not a Kantian, and do not believe in the Kantian deontological account. Deontology is not to the point unless it is viewed as another word for social approval — which a strict Kantian would not say. I'm not a strict Kantian, or a strict libertarian, on similar grounds.
The implication of Vallier's analysis is that those who do not practice conceptual analysis, and instead do rhetorical analysis, are merely confused. His technique is an extension of the suspicion of natural language since the seventeenth century, when rhetoric fell decisively off the intellectual agenda of the West. Thus "dignity" in my writing is supposed to have "all the following" meanings (the "all" serving in rhetoric to emphasize the absurd length of such a miscellaneous list): "standing, prestige, honor, an absence of scorn, an opinion held by others, and a virtue. " Well, what of it? That's what "dignity" usually means, all of those. It would be like doing a conceptual analysis of a book on dogs by pointing out that the word "dog" includes "all the following": Norwich terriers, schnauzers, beagles, Irish wolf hounds, chows; and so the author is evidently confused.
He performs the same analysis on the (purposely) broad word "talk" and (a word that Vallier's tradition since Plato has relentlessly attacked) "rhetoric. " He concludes: "McCloskeyan 'rhetoric' performs all [there's that rhetoric again] of the following functions: communicating news about innovation, praising the bourgeois life, restraining scorn of the practices of the bourgeoisie, ascribing dignity to bourgeois forms of life, reflecting changes in attitude, producing or communicating changes in behavior, etc. " What exactly is the problem? It would be like complaining that the word "philosophy" performs all of the following functions: epistemology, ethics, logic, metaphysics, political philosophy.
"If Baier, Strawson, Gaus, Smith, Ostrom, Boyd and Richerson and Bicchieri are correct," Vallier says, "human beings must be sufficiently motivated by the ostracism and disapproval of their community that they will sacrifice their own self-interest to comply with these rules. Rhetoric is too general a category. We're looking for linguistic practices of ostracism, blame, disgust, etc. because these practices, not mere talk, actually move people. " But "linguistic practices" are exactly rhetoric. And not all of these (not Smith — either Adam or Vernon — for example; and not Baier; and doubtfully Ostrom) depend on ethical incentives to explain ethical behavior. Beware reducing ethics to incentives: that's a theme in my book, and one, I have found, in modern social psychology and primate studies.
Note that in Vallier's world ethics consists of rules, and self-interest is viewed as unethical. The ethical philosophy that Vallier favors doesn't take prudence as a virtue. In the usual way since Kant, he views ethical behavior as specifically overriding self-interest. Such a move is going to result in a view of ethics impossible to square with ordinary behavior, especially economic behavior. Virtue ethics, by contrast, treats prudence as one among seven principal virtues. That's why it's better for understanding an economy than is Kant-derived ethical philosophy.
All the writers Vallier refers to take the modern view that ethics is exclusively about "social interaction. " That ethics (Greek "concerning human character") is also about the self and the transcendent does not figure. We live a bourgeois life internally, and we pray to God, or Hayek. That's what humans do." Gaus argues in great detail that views like McCloskey's 'Prudence Only' cannot lead us to accept the rules of social morality. In fact, attempts to reason one's self into morality from the outside inevitably fail. " That's right, as I argued in great detail in McCloskey 2006 and 2011. But that Prudence Only cannot be the basis for an ethical life or a flourishing community does not mean that Prudence, when taken with other virtues, is not an element of a fully human life. The characteristic error of ethical philosophy since Kant has been to view ethics as exclusively about how we treat others, ignoring how we treat ourselves and the transcendent. All three levels need attention. Ethical philosophers tie themselves in knots by attending only to one.
But let me not end in disagreement. I agree with most of what is said here: that talk matters, that a liberal society depends on talk, that a change in talk changed the world, that humanomics is the future of our strange little science. And whether I agree or disagree in every detail, I am pleased and thankful. A writer can expect no better than serious attention.
Haskell, Thomas L. 1985. "Capitalism and the Origins of the Humanitarian Sensibility, Part 1." American Historical Review 90 (April): 339-361. And Part 2, June.
McCloskey, Deirdre N. 2006. The Bourgeois Virtues: Ethics for an Age of Commerce. Chicago: University of Chicago Press.
McCloskey, Deirdre N. 2010. Bourgeois Dignity: Why Economics Can't Explain the Modern World. Chicago: University of Chicago Press.
McCloskey, Deirdre N. 2012 (?). A Treasured Bourgeoisie: How Innovation Became Ethical, 1600-1848. Chicago: University of Chicago Press.
McCloskey, Deirdre N. 2011. "The Rhetoric of the Economy and the Polity." Annual Reviews in Political Science 14: 181-199.
Nordhaus, William D. 2004. "Schumpeterian Profits in the American Economy: Theory and Measurement." National Bureau of Economic Research working paper no. W10433.