Needed: An Economics for Grownups
Around 1700, a new way of speaking about commerce gave birth to the modern world.


shaffer: Many journalists wrote up the financial crisis as a failure of the science of economics, or at least of the neoclassical approach. Are they right?

McCloskey: No. As I say in the preface to Bourgeois Dignity

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

The important flaw in economics . . . is its materialist and unnecessarily mistaken theory of past growth. The Big Economic Story of our own times is that the Chinese in 1978 and then the Indians in 1991 adopted liberal ideas in the economy, and came to attribute a dignity and a liberty to the bourgeoisie formerly denied. And then China and India exploded in economic growth. . . .  

: How do you evaluate economics today and economists’ function as modern America’s preeminent public intellectuals?

McCloskey: With alarm. But non-economist intellectuals need to understand some elementary economics: There is no such thing as a free lunch; national income equals national product equals national expenditure; free trade is nice; more money causes inflation; governments are not all-wise; spontaneous order is not chaos.

My alarm comes from the economist’s tendency to reduce humans to Maximum Utility machines. We need a humanomics, of the sort that Adam Smith and John Stuart Mill and John Maynard Keynes and Friedrich Hayek and Gunnar Myrdal and Kenneth Boulding and Albert Hirschman practiced. Some current practitioners are Nancy Folbre, Arjo Klamer, and Richard Bronk. It’s an economics for grownups.


shaffer: What should Americans do to preserve bourgeois society, or is our rhetoric so naturally pro-bourgeois that we don’t need to worry?

McCloskey: We need to worry a little less than the average northern European does. Arguments about bourgeois virtue that strike most Americans as pretty obvious (“The middle class, not the clerisy or the state, is the source of good innovation”; “Making money is all right”; “We can solve environmental problems by invention”) are fighting words in the Netherlands or Sweden. Old Europe distrusts innovation. In the United States the task is to embarrass the anti-capitalist Left with facts, without arousing moralistic, anti-innovation fervor on the Right. 


shaffer: You spend a lot of time demolishing cherished lefty myths about capitalism. What do you think the Right has gotten wrong on capitalism?

McCloskey: A certain disdain for innovation, or attributing the few good parts of innovation to heroic figures, Nature’s Noblemen. A conservative suspects that innovation will result in disaster, not improvement, unless under the control of Us Aristocrats. Let us not flee to evils we know not of. He is naturally pessimistic. He hates rock music and feminism and everything else that came from the Decade of Innovation, the 1960s.   A libertarian, by contrast, is naturally optimistic about change. She sees a spontaneous order in non-hierarchical, unplanned societies. She loved the 1960s as liberating blacks, women, gays, handicapped people, colonialized people, youth.


shaffer: You say that dignity and liberty were “the greatest externalities” of our pro-bourgeois rhetoric for ordinary people. Are liberty and bourgeois dignity tethered? Many point to China, Singapore, etc., as examples of places where economic advance has not produced other kinds of liberalism.

McCloskey: They are correct. The problem is the fallacy of Right Now. In 1969 one would have said the same thing about South Korea and Taiwan, or for that matter about Spain and Portugal. Outside the low, dishonest decade of the 1930s, with preparations in the 1920s, it has always gone one way, since the cats of liberty and dignity were let out of the bag in the late 17th century. Do all the statistical analysis you want, but we “liberals” (19th-century European definition) have history on our side.

: Now that the march of classical liberalism has proceeded so far . . .

McCloskey: . . . but has miles to go before we sleep, / And miles to go before we sleep . . .  

: . . . and the world accords more dignity to the bourgeoisie than ever before, was our recent rocky passage just a blip in an overwhelmingly positive trend?

McCloskey: I and Matt Ridley (author of The Rational Optimist) and Joel Mokyr (author of The Enlightened Economy) agree, as anyone acquainted with the numbers would. We’ve had 40 of these recessions since 1800, and even a half-dozen as bad as this one. We should have acquired in two centuries a cautious faith in the trend, which is up and up and up since 1800 by about 2,000 percent per person, conservatively measured.


shaffer: You say you’re relatively unworried about rapacious public-sector unions. Doesn’t the example of Greece trouble you on this point?

McCloskey: Well, if the police and municipal workers work very hard at it they can bring a society to ruin. But the United States is not heavily unionized. (Sweden, which is heavily unionized, has rational unions, which know that Sweden must trade to live.) And Americans are not willing to leap off a cliff holding hands with the unions, as the Greeks were until this year. In Chicago the city and state just broke the power of the electricians’ union to overcharge exhibitors at our massive McCormick Place for such highly technical tasks as plugging in extension cords. The exhibitors are coming back.


shaffer: Before Bourgeois Dignity you wrote The Bourgeois Virtues. Do you think our debt-ridden culture is a manifestation of a decline in the bourgeois virtues, or is that just romantic nonsense?

McCloskey: Conservative romantic nonsense, similar to the cries in the 18th century that commerce would corrupt the Spartan virtues. Dr. Johnson, who was a conservative but no sort of romantic, said in 1778, “Depend upon it, sir, every state of society is as luxurious as it can be. Men always take the best they can get.” And the blessed David Hume had said in 1742, “Nor is a porter less greedy of money, which he spends on bacon and brandy, than a courtier, who purchases champagne and ortolans [little songbirds rated a delicacy]. Riches are valuable at all times, and to all men.” Of course. 

There’s a progressive version of the nonsense, the complaining about “consumerism.”

A more up-to-date reply is that so long as various Oriental protectionists (in the 1970s it was the Japanese, not the Chinese) are so foolish as to send Americans TV sets and hammers and so forth in exchange for IOUs and green pieces of paper engraved with American heroes, wonderful. Would you personally turn down such a deal? If your personal checks circulated as currency, and the grocer was willing to give you tons of groceries in exchange for eventually depreciated Matt-dollars, wouldn’t you go for it? I would, and drink champagne.

: Do you think bourgeois virtues can be inculcated by public institutions, including schools?

McCloskey: The merchant academies of England in the 17th and 18th centuries raised up prudent bourgeois boys (they were mostly excluded from Oxford and Cambridge because many of the merchant families were not conforming members of the Church of England). The universities in Scotland had teachers like Adam Smith, and raised up boys (they were very young in Scotland) who admired commerce. Our culture, so corrupt and so little reflecting the classical virtues in the eyes of conservatives like Allan Bloom, admires innovation extravagantly in its rock music and its movies and its ethernet. It’s innovation, not respect for hierarchy or love of military glory, that makes for a successful society.

: Traditionally, bourgeois political life is defined in precise contrast to the ancient state, as one devoted to accommodating citizens’ desires rather than inculcating virtue in them. And yet, you suggest the virtues are the precondition for a bourgeois state.

McCloskey: Not exactly precondition, because I also argue that virtues are generated by a liberal economy and state (“liberal” in the old and still European and true sense, not the sense in which progressives have used the word in the U.S.A.). Markets make us more moral.

shaffer: What should young people who want to study economics your way, your “humanistic science of economics,” do?

McCloskey: In college you got the claim that Greed is Good, and anyway people are Max U sociopaths, regardless of what all the scientific evidence gathered on the point says to the contrary. I would advise them, of course, to read my book How to Be Human*: *Though an Economist, which is advice to young economists about maintaining morale and integrity — and getting the scientific task done while retaining common sense. Beyond that, Educate thyself. Read widely, having acquired somewhere a deep knowledge of an economics of some sort. We have enough amoral idiot savants in the study of the economy. We need some fully educated humans. We need a humanomics, not more freakonomics.

: Will our intelligentsia and artists come around, and learn to love the bourgeoisie?

McCloskey: It’s hard. The temptation to fall back into schoolyard egalitarianism is great. After about age 20 or so we have often chosen our political identities, and then on emotional grounds can’t change them (though I did, come to think of it). I have a very bright graduate student here at UIC, a humanist, who tells me that rereading Marx makes him “more of a communist.” Oy vey ist mir. And he has a libertarian girlfriend. 

– Matthew Shaffer is a National Review Institute William F. Buckley Fellow.