McCloskey on Why "Life in the Market Is Good for You" (from Accepting the Invisible Hand)
Questioning Economic Forecasting (Finally)

Bourgeois Dignity and Humanistic Economics

Jonathan B. Wight

 You don’t have to wait to get Deirdre McCloskey’s new book, Bourgeois Dignity (2010) to get a strong taste of what’s inside. 

 Found here is a short summary that McCloskey provided last month for Cato Unbound.  The key message is one Keynes would find understandable: namely, that ideas and beliefs are the most important commodities of value, and explain economic success or stagnation.

 While markets give rise to a higher material standard of living, McCloskey attacks economists for adopting a materialist viewpoint.  In the Cato Unbound post, McCloskey calls for the creation of a new science of humanistic economics:

We will need to abandon the materialist premise that reshuffling and efficiency, or an exploitation of the poor, made the modern world. And we will need to make a new science of history and the economy, a humanistic one that acknowledges number and word, interest and rhetoric, behavior and meaning.

 Deirdre’s use of “humanistic” is likely to arouse ire, since “humanistic” economics is associated with E F Schumacher’s Buddhist economics of limited wants (Small is Beautiful: Economics as if People Mattered).  It also is a title by Mark Lutz and Kenneth Lux, Challenge of Humanistic Economics (1979) that develops somewhat similar ideas to McCloskey on the role of a non-materialist approach to economics.

 I think that McCloskey has it exactly right:  to defend capitalism we need to see competitive markets as providing an opportunity for humanistic development in its broadest sense—for self expression, for personal growth, for meaning, and for community connectivity.  The fact that markets also generate higher material standards is quite amazing—but an exclusive focus on this aspect can lead to unfortunate dead ends. 

 What drives entrepreneurship—and what supports its existence among the populace—is something far grander and ennobling than economic efficiency: it is dreams of discovery and the desire for beauty in order.  Not surprisingly(!), this topic is covered by Adam Smith in TMS (IV 1). 

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