at this event. Here are my reactions to a few things.
1. She suggested that we should replace the term “capitalism” with “market-tested innovation and supply.” I like the term market-tested innovation. I can understand why she wants to add “and supply,” but that phrase may not in fact help so much. But innovation contrasts nicely with stasis or suppression of innovation. And market-tested contrasts nicely with government as an institution.
2. She suggested that starting in about 1848, four bad ideas grew: nationalism, socialism, imperialism, and eugenics. Obviously, this is a neat way to explain the disasters of the first half of the 20th century. But what (if anything) is holding us back today? After all, nationalism, imperialism, and eugenics are all unpopular with elites, and socialism has a lot of baggage with it. Are we beset by new bad ideas? If so, what are they?
3. Her story for the Industrial Revolution is that England became exceptional by bestowing dignity on all men, most notably merchants. She used the example of the word “honest.” In the 16th century, this was a term that might be applied only to someone of an elite class, such as an aristocrat or warrior. It meant someone who lived up to the expectations of that class. By the late 18th century, anyone could be described as “honest.” It meant, as it does today, someone who keeps their commitments and whose word can be trusted.
I have just finished America 3.0, by James Bennett and Michael Lotus. Their view is that Anglo-Saxon exceptionalism goes back 1000 years, and that it consists of the elevation of the nuclear family structure. This might explain why the Industrial Revolution took place where it did. It does not explain the timing.
McCloskey would explain the timing in terms of the English adopting a more small-d democratic outlook. I guess I will have to read more of her work to get the story of how and why this adoption took place.
4. An issue that came up is why it is that so few economists take the view that ideas matter in explaining differences in living standards. Cultures that encourage innovation do well, and other cultures do not. Instead, economists have an easier time focusing on endowments, meaning available resources, which turn out to explain very little. The next fallback for economists is institutions, which McCloskey thinks are over-rated as explanatory variables. She said that trying to pour better institutions into bad economies is as futile as trying to pour in dams and other capital projects.
This is, of course, a very lively debate. The institutionalists will focus on poster-child comparisons, like North Korea vs. South Korea, or Hong Kong and Singapore vs. other Asian countries. Those who belittle institutions will point to the failed attempt to “nation-build” Iraq. Don’t look for this to be settled any time soon.
In any event, I think it is fair to say that economists are caught up in the project to do social science, meaning looking at material and quantifiable factors as explanatory variables. Also, I am starting to think that there are positive feedback loops between certain professions and politicians. In journalism and economics, the selection pressures may work against those of us whose ideas lead to skepticismm toward political power.
At another event, Art Carden introduced her.