How Do Ideas Matter?

     

Don Boudreaux writes that reading McCloskey’s Bourgeois Dignity – the second volume in a proposed tetralogy that rumor suggests might even blossom into a series of five or six books – proved to be a humbling experience.  I know whereof he speaks.  As a young graduate student with dreams of becoming a professional economic historian many decades ago, I was mightily impressed by McCloskey’s earliest writings – at that time, in the form of journal articles, not books.  No other journal articles managed to combine Deirdre McCloskey’s rigor of argument and historical erudition with such elegant prose.  That body of work served as an inspiration and a challenge to me as I began my career.

The book under discussion – a substantial part of her magnum opus – makes a profound and important point that is too often neglected by those who hold to overly simplistic versions of political, technological, and institutional explanations of modern economic growth.  Modern economic growth, as the most significant event in world economic development, is a profound phenomenon that subsumes the British Industrial Revolution and covers the rise of a handful of countries to world dominance and the elevation of an unheard of share of the people of the globe to standards of living not attained by even the richest nobles of empires past.

McCloskey’s deep insight is to argue that attitudes towards the bourgeoisie and support for their striving is more appropriately seen as growth’s cause and central motor than the more obvious candidates that others in the profession have promoted.  And the neglect of these ideas and of the rhetoric that made possible those changes accounts for the economics profession’s blind spot in this one area.  This is all to the good, and McCloskey makes her point vigorously and wittily while pushing aside all friend and foe who stand in her way.

But at this point I hope I will not sound ungracious if I register a few concerns that pick at the limits of McCloskey’s thesis and that I hope will push her and her supporters to amplify and expand on these views.

McCloskey had long impressed me by promoting a viewpoint I had first heard from the great physicist Richard Feynman:  It matters not how good a theory sounds or how carefully you have constructed it; what matters is that one make every effort to refute said thesis and, only upon failing to do so, might you suspect that said theory is true.  I fear however, that the thesis of Bourgeois Dignity still needs more stress testing before we should pronounce ourselves convinced.

McCloskey herself used to claim that good work must answer the questions: So what? (Why is it important?) and How big is big? (How large are the observable effects of a cause?)  There is no doubt that the role of ideas and their significance in igniting the escape of humanity from the clutches of inevitable poverty is a Big Idea deserving attention. But how big was this effect, and exactly how it functioned, are less clear to me even having read this book and other work of McCloskey on what Boudreaux calls the decline of the dishonor tax in history.

Consider the general issue of attitudes.  Does McCloskey mean by this the attitudes of the general population?  Of the elites or the King? The clerisy or the chattering classes?  Whose opinions matter to unleashing the power of the market?

To take a simplistic measure first:  A recent survey of international attitudes towards the market[14] showed that while people in the United States are more likely to believe that the free market is the best means to achieve prosperity than people in most of the countries surveyed, the pro-market attitudes of the American public were not as favorable as those from the Philippines or the People’s Republic of China. China in fact topped the survey handily.  In contrast, the French were amongst the most anti-market in the sample.  While the differences between U.S. and French political economy might be explained by differences in attitudes towards market production, how is one to explain how the Philippines with its massively protectionist regulations or China with its attempt to promote growth through centralized party direction and nationalist ambition exhibit much greater superficial support for market economies? More significant perhaps is that, for all of the French people’s disdain for the market, there is no doubt in most people’s minds, nor in the rankings by those who score economic freedom, that China and the Philippines do worse than both the United States and France on any aggregate measure of market liberalism.

 And exactly how does the transformation from illiberal mercantile nation to liberal modern state occur?  Do ideas change first and then the economy or its laws?  Do only some of the elites have to change first?  Or do norms and attitudes change to accommodate the realities of successful growth rather than the other way around?  Can we even believe it when scholars and politicians proclaim that a nation is pro-market?

My own research on Britain in the 18th and 19th centuries[15] showed that Britain -- although quick to proclaim itself a free-trade nation in the early 1800s – was in fact more heavily protectionist and more reluctant to remove its most important long-standing trade restrictions than its rival France.  France, in contrast, moved to lower tariffs and to reduce effective restrictions on trade more quickly than Britain, while its leaders publicly proclaimed their antipathy to unrestricted free trade and downplayed their dramatic liberalizations so well that generations of historians simply took the leaders at face value.

Moreover, other work[16] (including Mokyr and Nye, 2007) suggests that the British in the 18th century helped promote liberalism at first because members of Parliament wished to grab power from the landed aristocracy and enrich themselves through crony capitalism, all the while undermining property rights that upheld illiberal feudal restrictions.  Is what matters attitudes towards the rising bourgeoisie or the collusion of high-minded thinkers with venal operators eager to profit from changing rules and norms?  Is it the level of general support for the bourgeoisie or is it critical support for a few important legal changes that makes the big difference?  Or is it legal change with technological innovation that does it?  Or trade? Or education?

As McCloskey herself notes, the Dutch were first in creating a society that honored and promoted bourgeois values – certainly more than the English in the 17th century. Yet the Dutch were also-rans in the story of modern economic growth – a prosperous, happy people that for the most part relied on the innovations and financial transformations of other nations after the 1800s.  France and Germany seem to have played a bigger role in modern economic growth than they did, despite Holland’s never being plagued with nasty dictators, long-term invasion, or unusual levels of corruption over the last few hundred years.

Must one honor and support the bourgeoisie? Or is it enough, as in China’s case, to speak of promoting socialism with Chinese characteristics? After all, when the early sprouts of agricultural reform began in China, they started from the bottom up, with mere tolerance of early experiments rather than full-throated acceptance.  Can the bourgeoisie thrive if the overall rhetorical environment is hostile but the legal one permissive?  Or is general approval more important in transforming an otherwise oppressive legal and institutional regime? And what of cases where bourgeois approval is granted, but rules are held back for fear of ethnic clashes due to asymmetric success of visibly different minority groups?

If I have seem somewhat critical of McCloskey’s work, it is not because I doubt her thesis. Ideas can and do matter.  But exactly how and under what circumstances is still unclear.  In particular, how do new ideas interact with the matrix of institutions, legal rules, and political bargaining that might constrain development or allow for its flourishing?  It is high time for us to understand the role that ideas and culture play in shaping a nation’s economy.  But for that very reason it would behoove us to dig more deeply into the hows and whys of any such claims.  We have seen enough examples in history, for example, where disdain for Confucian values that were first blamed for holding back China’s development changed to uncritical belief in some quarters that those selfsame Confucian attitudes were now the engines of Asian success.  The importance of promoting liberal, bourgeois-friendly reform for the vast portion of the globe that still suffers from poverty and want, and for not allowing existing institutions to crumble in the globe’s leading economies, demands that we investigate as rigorously and thoroughly as possible the actual mechanisms by which growth is promoted and the life of a bourgeois nation sustained.  McCloskey has given us a great work.  Let us all see how much more there is to be learned about this transformative vision that Don Boudreaux has so rightly praised.

[14.] Catherine Rampell, “Chinese Love Free Markets as Much as Americans Do,” New York Times, July 13, 2012; online at: <http://economix.blogs.nytimes.com/2012/07/13/chinese-love-free-markets-as-much-as-americans-do/?_php=true&_type=blogs&_r=0>.

[15.] J.V.C. Nye, War, Wine, and Taxes:  The Political Economy of Anglo-French Trade 1689-1900 (Princeton, N.J.: Princeton University Press, 2007).

[16.] J.V.C. Nye and J. Mokyr, “Distributional Coalitions, the Industrial Revolution, and the Origins of Economic Growth in Britain,” Southern Economic Journal, July 2007, vol. 74, 1, pp. 50-70.