Alberto Mingardi  

Boudreaux on McCloskey

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LibertyMatters is hosting a discussion on Deirdre McCloskey, namely her notion that "economics can't explain the modern world": that is, that mass flourishing, the tremendous progress that was originated with the Industrial Revolution, is something we owe primarily to culture. McCloskey's magnificent work aims to answer to one of the most interesting questions in economic history: why did it happen here? Why did the Industrial Revolution take off in England and not in China, and why did the rest of the West followed suit? Of course, many answers have been offered over the years, but McCloskey's is among the most profound and illuminating.

The discussion is kicked off by Don Boudreaux, who contributes a most brilliant synthesis of McCloskey's ideas. Writes Boudreaux:

Until the 17th century, those who earned their living through trade were the Rodney Dangerfields of their eras: they got no respect. Merchants and other people operating on the supply side of commercial activities and transactions were tolerated. But they were viewed and spoken of with contempt. Unlike warriors who dirtied their hands honorably (namely, with blood), traders dirtied their hands dishonorably (namely, with profit). Unlike the nobility who got their riches honorably (namely, by idly collecting land rents), merchants got their riches dishonorably (namely, by actively trading). Unlike the clergy who won their rewards honorably (namely, by pondering the eternal), the bourgeoisie won their rewards dishonorably (namely, by responding to what Hayek later called "the particular circumstances of time and place").
Dishonor, you see, is a tax. (...) And like all taxes, this "dishonor tax" (let us call it) discourages the activities on which it falls while it makes alternative, untaxed activities relatively more attractive.

Explanations that build on "culture" are often dismissed on the ground that "culture" is impalpable and tends to frustrate clear definitions. It is one thing to say that "ideas have consequences", another to explain how these consequences are brought by. And indeed, it is often difficult to explain how the "transmission chain" between the world of ideas and that of institutions work.

Boudreaux explains how repealing the "dishonor tax" made mass flourishing possible:

by finally giving dignity to traders and shopkeepers, the repeal of the dishonor tax greatly expanded and made more reliable the economic institutions necessary for market-tested innovation to be a profitable pursuit. To thrive, market-tested innovation needs extensive markets. As (of course) Adam Smith taught, increasingly extensive markets are a result of expanding trade. And the freer is trade, the more it expands. The more trade expands, in turn, the more extensive grow markets. Therefore, repealing the dishonor tax makes trade freer which, by widening markets, increases the rewards for successful innovators.

Read the whole thing and follow the discussion (Joel Mokyr and John Nye will also participate).


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COMMENTS (7 to date)
Mr. Econotarian writes:

I wonder if one should also take into account the Enclosure Movement which happened in Britain before anywhere else.

One could argue that enclosure of open fields pushed more people off the land and made them ready workers for industry. Or that larger, enclosed farms with new forms of crop rotation were more productive.

JKB writes:

The 'culture' facet seems to fill a vacancy I felt in William Rosen's hypothesis in his 'The Most Power Idea in the World' on patent invention. From the time patents became available, there was a period of low usage before the Industrial Revolution took off about 80 years later. A need for an adaptation in the culture could explain this slow start.

Even simpler: Before the eighteenth century, inventions were either created by those wealthy enough to do so as a leisure activity (or to patronize artisans to do so on their behalf), or they were kept secret for as long as possible. In England, a unique combination of law and circumstance gave artisans the incentive to invent, and in return obliged them to share the knowledge of their inventions. ... Human character (or at least behavior) was changed, and changed forever, by seventeenth-century Britain's insistence that the ideas were a kind of property. This notion is as consequential as any idea in history.

If you throw in that many of the inventors of the steam engine were outcasts at their time. They were denied indoctrination at universities and would have had a 'dishonor' tax beyond that of creating for profit, i.e., selling their inventions.

"Newcomen's religion had consequences greater than absence from a local census.  Dissenters, including Baptists, Presbyterians, and others, were as a class, excluded from universities after 1660, an either apprenticed, or learned their science from dissenting academies."

"At the same time that he chartered the world's first scientific society, Charles II had created an entire generation of dissenting intellectuals uncontrolled by his kingdom's ever more technophobic universities."

p29, Rosen, Willam, 'The Most Powerful Idea in the World'

Having odd men out could have introduced enough of the 'best and brightest' to the disfavored activity simply because it was the best means to earn their way.

A synthesis of ideas protected by institutions, at least in their grand philosophy if not by crony bureaucrats, which then inform and are informed by the culture seems to be in order.

R Richard Schweitzer writes:

Having acquired and read both volumes of the bourgeois series issued so far (including a much closer rereading of Bourgeois Dignity,) as well as much else of her productive efforts (including earlier drafts) since she began this disquisition (e.g., her blog post at Bleeding Heart Libertarians) an element that remains to be dealt with is the emergence, rise and role of individuality in the particular segments of Western Civilization.

The scholarship of Alan Macfarlane on the subject of individuality (as "individualism") is touched on in the forum referred to at Liberty Matters, and has been brought down to date in his recently released Invention of the Modern World (Odd Volumes – The Fortnightly Review, Les Brouzils 2014), which carries forward from his earlier The Culture of Capitalism (1989) and The Origins of English Individualism (1988) the societal aspects and records of individuality, which supply some definitive indications of the explanations of the differentiation of Holland and England that preceded the Industrial Revolution; and which also led to the resultant conditions of the several forms of Mercantile capitalism, commercial capitalism, industrial capitalism and the following departures.

Given that other thinkers, such as Oakeshott, have noted the role of individuality and the subsequent recessions and suppressions of individuality in social orders, it will not be surprising if it becomes part of the McCloskey thesis.

Jeffrey S. writes:

I wonder if McCloskey or the other folks will address the most powerful counter-argument presented by Gregory Clark -- genetics, which helps shape culture, led to the success of England and northern Europe before anyone else in the world:

http://www.cato-unbound.org/2010/10/06/gregory-clark/why-economics-must-explain-modern-world

Don Boudreaux writes:

Jeffrey S.:

No need to wonder. In her 2010 book, Bourgeois Dignity, McCloskey devotes several chapters explicitly to Clark's argument. She finds it to be unpersuasive.

R Richard Schweitzer writes:

As a complement to McCloskey's responses, there is the scholarship of Emmanuel Todd; specifically that on the effects of forms of family organization in continental and eastern Europe.

The implications of that work also supply some clues as to the differences in development of individuality in Holland, England and parts of the Scandinavian cultures.

LD Bottorff writes:

Since Don Boudreaux is usually correct, I may not be understanding what he intended to say when he claimed that "Premodern creativity seldom involved creative destruction." The invention of the movable-type printing press (in the 15th century), and the water-mill powered paper mills were incredibly disruptive. These two developments ushered in the information age, disrupting the religious order of Europe and allowing the Renaissance to take place.

I have no doubt that the dishonor tax was real and repealing it was a significant step forward. But, since this tax was not a formal tax, its repeal reflected a gradual change in attitudes. It probably started with the idea that merchants who profited from trading with outsiders were not as dishonorable as those how profited from their neighbors and friends. As trade technologies improved, the ability to profit from trade with outsiders increased, without the dishonor tax. And the dishonor tax did not totally disappear; the Armenian Genocide was probably a result of the envy that Ottoman citizens felt towards the successful Armenian merchants. And although the official Nazi reason for oppressing the Jews was racial, I'm sure that many Germans (as well as Poles, Latvians, Estonians and Ukrainians) rationalized their barbarity based on economic envy. Even today, many of us hate the successful CEOs that we work for (but don't hate wealthy politicians, artists, and stars that we don't work for).

Cultural evolution takes time. The eventual repeal of the dishonor tax may have taken 300 years from the invention of the printing press. It is more likely that the repeal is an ongoing process.

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