Deirdre McCloskey: Are Markets Moral?
Economist and philosopher Deirdre McCloskey has some thought-provoking and highly nuanced takes on innovation and ethics in the commercial arena.
How about this for starters: capitalism is innovation, in her estimation. And she contends that capitalism/innovation backed by liberal economic ideas “has made billions of poor people pretty well off, without hurting other people.” Did I mention she is also controversial?
Over her long career she has done some deep thinking on the intersection of economics, markets and morality, as might be expected from her list of titles: Distinguished Professor of Economics, History, English, and Communication at the University of Illinois at Chicago. She is also adjunct professor of Philosophy and Classics there, and for five years was a visiting Professor of philosophy at Erasmus University, Rotterdam.
McCloskey laid out the essence of her thinking in this video in which she discusses three of her books that come under the overall theme she calls the Bourgeois Era: The Bourgeois Virtues: Ethics for an Age of Commerce (2006); Bourgeois Dignity: Why Economics Can’t Explain the Modern World (2010); and the upcoming (this year) The Treasured Bourgeoisie.
The motivation of the trilogy, she says, is to persuade what she calls the “clerisy”—the intelligentsia, communicators, shapers of minds, etc.—that “capitalism can be ethical; it can be unethical, and that is a choice we face—it’s not built into the nature of the system.” McCloskey’s central point is that individuals and organizations “can live an ethical life in a commercial society.”
The modern way to do that, she continues, is to balance life in commerce with the virtues of love, courage, temperance, justice, faith, hope and prudence. Did I mention she’s a maverick in a multitude of ways?
Where most of today’s economists fall short lies in their “conception that economics is only about prudence…prudence only is not sufficient for a truly scientific economics.” She argues for “humanomics” instead. Because the economy “depends massively on cooperation, economists need to stop telling people that all that matters is prudence.” The other virtues need to be included.
McCloskey also insists that unlike what most economists preach, capital accumulation is not what made the modern world—“this is rubbish!” It’s ideas that matter and “how we think of each other…it’s about sociology, not psychology.”
She argues that the important flaw in economics “is not its mathematical and necessarily mistaken theory of future business cycles, but its materialist and unnecessarily mistaken theory of past growth.” The ‘Big Economic Story’ of present times is not the Great Recession of 2007-2009, it 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.”
McCloskey’s moral is that in achieving a pretty good life for the mass of humankind, and a chance at a fully human existence, “ideas have mattered more than the usual material causes.”
Simply put: we become rich by “gigantically increasing the size of the pie.”
There you go! This is highly Vested: the idea is that creating, sharing and expanding value through collaboration and adhering to basic guiding principles will transform our business relationships—creating the long-term win-win.
Agree with all she says or not, McCloskey makes a definite point that we need to “abandon the materialist premise that reshuffling and efficiency, or an exploitation of the poor, made the modern world.” Rather a new science of history and the economy is needed, “a humanistic one that acknowledges number and word, interest and rhetoric, behavior and meaning.”