Capitalism was built on ideas, not capital

The Great Enrichment Was Built on Ideas, Not Capital - Foundation for Economic Education - Working for a free and prosperous world - Deirdre N. McCloskey:

November 22, 2017 - "The ... modern world was made not by material causes, such as coal or thrift or capital or exports or exploitation or imperialism or good property rights or even good science, all of which have been widespread in other cultures and other times. It was made by ideas from and about the bourgeoisie — by an explosion after 1800 in technical ideas and a few institutional concepts, backed by a massive ideological shift toward market-tested betterment, on a large scale at first peculiar to northwestern Europe.

"What made us rich are the ideas backing the system — usually but misleadingly called modern 'capitalism' — in place since the year of European political revolutions, 1848. We should call the system  'trade-tested progress.' Or maybe 'innovationism'?...

"The upshot of the new ideas has been a gigantic improvement since 1848 for the poor.... The greatly enriched world cannot be explained in any deep way by the accumulation of capital, despite what economists from the blessed Adam Smith through Karl Marx to Thomas Piketty have believed, and as the very word 'capitalism' seems to imply. The word embodies a scientific mistake.

"Our riches did not come from piling brick on brick, or bachelor’s degree on bachelor’s degree, or bank balance on bank balance, but from piling idea on idea. The bricks, B.A.s, and bank balances — the 'capital' accumulations — were of course necessary. But ... [s]uch materialist ways and means are too common in world history and, as explanation, too feeble....

"The bettering ideas arose in northwestern Europe from a novel liberty and dignity that was slowly extended to all commoners (though admittedly we are still working on the project), among them the bourgeoisie. The new liberty and dignity resulted in a startling revaluation by the society as a whole of the trading and betterment in which the bourgeoisie specialized. 

"The revaluation was derived not from some ancient superiority of the Europeans but from egalitarian accidents in their politics between Luther’s Reformation in 1517 and the American Constitution and the French Revolution in 1789. The Leveller Richard Rumbold, facing his execution in 1685, declared, 'I am sure there was no man born marked of God above another; for none comes into the world with a saddle on his back, neither any booted and spurred to ride him.' Few in the crowd gathered to mock him would have agreed. A century later, many would have. By now, almost everyone.

"Along with the new equality came another leveling idea, countering the rule of aristocrat or central planner: a 'Bourgeois Deal.' In the first act, let a bourgeoise try out in the marketplace her proposed betterment, such as window screens or alternating-current electricity or the little black dress.... [C]ompetitors will imitate her success, driving down the price of screens, electricity, and dresses. But if the society lets her in the first act have a go, enriching her for a while, then, by the third act, the payoff from the deal is that she will make you all rich....

 "In other words, what mattered were two levels of ideas: the ideas for the betterments themselves (the electric motor, the airplane, the stock market), dreamed up in the heads of the new entrepreneurs drawn from the ranks of ordinary people; and the ideas in the society at large about such people and their betterments — in a word, liberalism, in all but the modern American sense."

Read more: https://fee.org/articles/the-great-enrichment-was-built-on-ideas-not-capital/
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One great idea and two bad ones

Nationalism and Socialism Are Very Bad Ideas - Reason.com - Deirdre Nansen McCloskey, Reason:

February 2017 - "Between the Great Lisbon Earthquake [1755] and the revolutionary year of 1848 the European chattering classes had three big ideas. One was very, very good. The other two were very, very bad. We're still paying.

"The good one, flowing from the pens of such members of the clerisy as Voltaire, Thomas Paine, Mary Wollstonecraft, and above all the Blessed Adam Smith, is what Smith described in 1776 as the shocking idea of 'allowing every man [or woman, dear] to pursue his own interest in his own way, upon the liberal plan of equality, liberty, and justice'....

"The boldness of commoners pursuing their own interests resulted in a Great Enrichment — a rise in Europe and the Anglosphere of real, inflation-corrected incomes per head, from 1800 to the present, by a factor, conservatively measured, of about 30. That is, class, about 3,000 percent.... And now, despite the best efforts of governments and international agencies to bungle the job, liberalism is spreading to the world, from Hong Kong to Botswana....

"The two bad ideas of 1755–1848 were nationalism and socialism.... Nationalism, when first theorized in the early 19th century, was entwined with the Romantic movement, though of course in England it was already hundreds of years old.

"What is bad about nationalism, aside from its intrinsic collective coercion, is that it inspires conflict. The 800 U.S. military bases around the world keep the peace by waging endless war, bombing civilians to protect Americans from non-threats on the other side of the world. In July 2016, we of the Anglosphere 'celebrated,' if that is quite the word, the centenary of the Battle of the Somme, a fruit of nationalism, which by its conclusion three and a half months later had cost the Allies and the Central Powers combined over a million casualties, most of them dismembered by artillery....

"The other bad idea of the era was socialism, which can also be linked to Romanticism, and to a secularized Christianity.... What's bad about socialism, aside from its own intrinsic collective coercion, is that it leads to poverty. Even in its purest forms — within the confines of a sweet family, say — it kills initiative and encourages free riding.... The not-so-sweet forms of socialism, especially those paired with nationalism, are a lot worse. Thus North Korea, Cuba, and other workers' paradises. As the joke goes, 'Under capitalism man exploits man; under socialism it's the other way around.'

"What to do? Revive liberalism, as the astonishing successes of China and India have. Take back the word from our friends on the American left. They can keep progressive, if they don't mind being associated with the Progressive movement of the early 20th century, and its eugenic enthusiasms for forced sterilization and for using the minimum wage to drive immigrants, blacks, and women out of the labor force.....

"Read Adam Smith, slowly — not just the prudential Wealth of Nations, but its temperate sister The Theory of Moral Sentiments. And return in spirit to the dawn of 1776, when the radical idea was not nationalism or socialism or national socialism, but 'the obvious and simple system of natural liberty' that allows all men and women to pursue their interests in their own ways."

Read more: http://reason.com/archives/2017/01/26/three-big-ideas
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5 great books on politics and policy from 2016

5 Great Books on Politics and Public Policy from 2016 | Competitive Enterprise Institute - Richard Morrison:

December 21, 2016 - "A lot of interesting books on politics, economics, and public policy were published over the last twelve months. It can be difficult, though, finding the gems among the extremely large number of books about public affairs that hit bookstore (and Amazon warehouse) shelves each year. For every volume as eagerly anticipated as Deirdre McCloskey’s Bourgeois Equality, engaged readers must sift past a dozen volumes of hot-take pop commentary like Thomas Friedman’s Thank You for Being Late. That said, here are a few new titles that caught our attention at CEI in 2016.

"The Intimidation Game: How the Left Is Silencing Free Speech by Kimberley Strassel. Reviewed ... by Fred L. Smith, Jr.... 'A skilled investigative journalist, Strassel documents the extensive efforts to suppress political opposition, intimidate dissidents, and weaken the First Amendment. Strassel notes that attacks on speech — and defenders of it — have come from both parties.... Readers will gain clarity, but little comfort, from her chronicle of culture and politics conspiring to weaken free speech.'

"Progress: Ten Reasons to Look Forward to the Future by Johan Norberg, summarized here by Ryan Young.... 'Norberg is a Swedish economist and political commentator who ... updates CEI hero Julian Simon’s work showing why the world is getting better, not worse.... Norberg remains pessimistic about a scare-obsessed media’s ability to accurately report on the human condition. But the facts on the ground give him no choice but to be optimistic about humanity’s future, from declining disease rates to rising life expectancies to mass prosperity finally reaching the developing world'....

"Real Heroes: Inspiring True Stories of Courage, Character, and Conviction by Lawrence W. Reed. Reviewed by Kent Lassman.... 'Reed brings to life dozens of stories where high character animates courage and triumph. Reed has mastered the maxim that people think analytically but learn analogically. He carefully makes the case that we need real heroes and they can be found all around, if we are willing to see them.'

"Rivalry and Central Planning by Don Lavoie. Summarized here by Ryan Young.... 'Lavoie played a major role in building up George Mason University’s economics department before he passed away in 2001. The Mercatus Center’s new reissue of his 1985 book ... remains relevant to today’s debate between spontaneous orders versus central planning....

"I also include my own review, for Cato Journal, of Markets without Limits: Moral Virtues and Commercial Interests by Jason Brennan and Peter M. Jaworski ... released in 2015, but the review was published this year.... 'The authors do a good job of separating incidental objections from the fundamental moral questions at the heart of the anticommodification debate.... Their primary question is whether there are things that categorically cannot be legitimately bought and sold.... For example, Brennan and Jaworski engage in fascinating discussions on whether public betting on the likelihood of future terrorist attacks should be legal, as well as on more well-trod debate topics like legalizing sex work and the moral status of surrogate motherhood.'"

Read more: https://cei.org/blog/5-great-books-politics-and-public-policy-2016
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The Bourgeois Revaluation: Ideas that changed the world

Bourgeois Equality: How Ideas, Not Capital, Enriched the World - Deirdre McCloskey, Legatum Institute:

September 16, 2015 - "Why are we so rich? Who are 'we'? Have our riches corrupted us?

"There is a long answer to this question that can be found in my trilogy, The Bourgeois Era. In this trilogy, I explain three things.

"Firstly, how the commercial bourgeoisie — the middle class of traders, dealers, inventors, and managers — is good, not bad.

"Secondly, that the modern world was not made by the usual material causes, all of which have been widespread in other cultures and at other times. It was caused by both technical and institutional ideas among a uniquely revalued bourgeoisie, at first peculiar to northwestern Europe.

"Thirdly, that a new way of looking at the virtues and bettering ideas in this area sprang from a novel liberty and dignity enjoyed by all commoners, and from a startling revaluation by society as a whole of the trading and betterment in which the bourgeoisie specialized.

"The revaluation, called ‘liberalism’, in turn derived, not from some ancient superiority of the Europeans, but from egalitarian accidents in their politics. What mattered were two levels of ideas: the ideas in the heads of entrepreneurs for the betterments themselves (the electric motor, the airplane, the stock market); and the ideas in society at large about the business people and their betterments (this liberalism). What were not causal were the conventional factors of accumulated capital and institutional change. They happened, but they were largely dependent on betterment and liberalism.

"The upshot since 1800 has been a gigantic improvement for the poor, yielding equality of real comfort in health and housing, such as for many of your ancestors and mine; a promise now being fulfilled with the same result worldwide — a Great Enrichment for even the poorest among us.

"These are controversial claims. They are, you see, optimistic....

"For reasons I do not entirely understand, the clerisy after 1848 turned towards nationalism and socialism, and against liberalism. It came also to delight in an ever-expanding list of pessimisms about the way we live now in our approximately liberal societies: from the lack of temperance among the poor to an excess of carbon dioxide in the atmosphere. Anti-liberal utopias believed to offset these pessimisms have been popular among the clerisy. Its pessimistic and utopian books have sold millions.

"But the twentieth-century experiments of nationalism and socialism; of syndicalism in factories and central planning for investment, of proliferating regulation for imagined but not factually documented imperfections in the market, did not work. Most of the pessimisms about how we live now have proven to be mistaken. It is a puzzle. Perhaps you yourself still believe in nationalism or socialism or proliferating regulation. Perhaps you are in the grip of pessimism about growth or consumerism or the environment or inequality.

"Please, for the good of the wretched of the earth, reconsider."

Read more: https://lif.blob.core.windows.net/lif/docs/default-source/publications/bourgeois-equality-how-ideas-not-capital-enriched-the-world-with-deirdre-mccloskey-lecture-transcript-16-september-2015-pdf.pdf?sfvrsn=2
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Conservative baffled that libertarians would honor transgender economist

Conservative So Baffled That Libertarians Would Honor Transgender Economist, He Wrote Column About It (UPDATED W/ Apology) | Mediaite:

May 16, 2013 - "Late this afternoon, Washington Examiner senior editorial writer Sean Higgins posted a column with the blaring headline, “Competitive Enterprise Institute to honor transgender woman at annual dinner,” expressing bewilderment at the libertarian think-tank’s decision to honor transgender economist Deirdre McCloskey with an award....

"CEI is well-known for its libertarian politics, taking a hardline stance in favor of legalizing online gambling and seeking more classically-liberal reforms to our immigration system, as opposed to the restrictive desires of conservative think-tanks. Part of that libertarian ideology also includes an apathy towards the things at which social conservatives — a group which presumably includes Higgins — frequently wring their hands.

"McCloskey’s transgender identity does nothing [to] discredit her work or make her any less an accomplished and worthy economist; and to breathlessly bring negative attention to it would seem rather strange. "

Read more: http://www.mediaite.com/online/conservative-so-baffled-that-libertarians-would-honor-transgender-economist-he-wrote-column-about-it/
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