Economists Deirdre McCloskey and Art Carden on the Bourgeois Deal

Hello everyone today is March 31st 20-20 and welcome to another edition of the Well-Read Investor, the podcast that profits your mind and your money. I’m your host Mike Hanson.

This week we’re discussing Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World, with authors and professors Deirdre McCloskey and Art Carden.

Since we started the podcast now more than a year ago, we’ve had esteemed guests from a variety of fields, but having Diedre McCloskey on is special. In my humble opinion, she’s one of the best living economic historians, and a tremendous writer whose led a fascinating life. The book we’re discussing today is an accessible, highly literary, and often humorous entry into her perspectives—a sort of cheat sheet version of her essential work she calls the Bourgeois Trilogy, a magisterial and highly literary set of three books aiming to explain human freedom as the driving catalyst for accelerating world prosperity in the era commencing with the Enlightenment, the industrial revolution, and beyond.

Professor McCloskey is a distinguished Professor Emerita of Economics and of History, and Professor Emerita of English and of Communication, adjunct in classics and philosophy, at the University of Illinois at Chicago. She has written twenty-four books and some four hundred academic and popular articles on economic history, rhetoric, philosophy, statistical theory, economic theory, feminism, queer studies, liberalism, ethics, and law. She taught from the late 60s through the 70s at the University of Chicago in the Economics Department during its glory days.

Indeed, she should be known as much for her work as a writer as an economist and historian. Here’s a little known fact, we use McCloskley’s “Economical Writing”, which is a pithy little book about writing well, as a learning tool for aspiring writers at my firm. Some of her older works such as The Rhetoric of Economics (1985), The Cult of Statistical Significance (2008) remain in my view essential reading for investors, as they certainly were for me.

And the addition of Professor Art Carden to this mix is also a treat—both are witty, amazingly well read, and forceful in their views, which can be at times controversial but always inviting of other perspectives.

And on that note, if you like what you’re hearing make sure to follow us on social media. We’re on Twitter @wellreadpod and Instagram at @wellreadinvestorpod or just google the Well Read Investor to see what I’m reading, reviewing, and talking about week in and out.

Now, here is our talk with Professors Diedre McCloskey and Art Carden.

-Interview-

Mike Hanson:

Deidre and Art, thank you so much for taking the time to do this. It's really a pleasure and honor to have you on the program.

 Art Carden:

It's great to be here.

Deirdre McCloskey:

Good to be here, dear.

 Mike Hanson

So let's talk about this book, Leave Me Alone and I'll Make You Rich. But Deidre I'd like to ask you first, the premise of this book is it's really a summation of a large body of work that you've done over many years, really magisterial what I'll call the whole Bourgeois trilogy. Would you tell us a little bit about the premise of that, how it came to be? Why write those books?

Deirdre McCloskey

Well, it came to be because I, although I was once a Marxist or at least a Socialist myself, when I was a kid, I've gradually become what I define, and I think we should define as a liberal in the European sense, 19th century, classical John Stuart Mill, the blessing of Adam Smith. I always crossed myself, when I mentioned Adam Smith. I've had this long standing feeling that the contempt for the middle-class Bourgeois being French for middle-class, the common word on the left, especially is crazy because the middle class, like my grandfather, who was an electrical contractor, is the group like many of your auditors who make the economy work. So that's what I started with. And the first book was called The Bourgeois  Virtues, which strikes people on the left is crazy. What do you mean virtues these terrible bosses with the blood of the workers, running from their mouth and so forth.

Deirdre McCloskey (04:28):

And then having done that one, which came out 2006, then I started to think now, wait a second. I'm an economic historian, as is Art by trade. And the big question in economics after all is as Adam Smith said the nature and causes of the wealth of nations. And then it started to occur to me. Now, I didn't know this before I started, that the Bourgeois deal as Art and I call it is what made us rich. And I mean, varying rich by comparison with our ancestors. The ancestors of everyone here is pathetically, brutally, poor. Art compared our ancestors to one of the characteristics in Le Mis who's just unspeakably poor. And now we're, you know, we're zooming and where we have houses, hot water and so forth. So it occurred to me that the ethical change that resulted in people, at least tolerating, the middle-class tolerating, the merchants and manufacturers, and then even sometimes admiring them, was really crucial to the coming of the modern world and as Art and I argued in the book unique to 18th century, Northwestern Europe, and then wider and wider Hong Kong, and even mainland China for a while and India and so forth.

Deirdre McCloskey (05:52):

So you see, I went from an indignation against the people who sneer at investors and the stock market and so forth on the one hand to a more, as it were, scientific conclusion that it's not trade or, or law or something else, it's this ethical change that caused the modern world.

Mike Hanson (06:16):

Yeah. And I want to talk a lot about this idea of ethics being the basis for it, but Art, how did you get involved? How did you come to help write this book and really create this great summation of this large magisterial work?

Art Carden (06:28):

So this is actually an object lesson in being an alert intellectual entrepreneur and putting yourself in the right place at the right time. I met Deirdre when I was a graduate student at Washington University in St. Louis economic history association meeting was in St. Louis my second year of grad school. So I got to meet Dierdre there. That was a semester. I was actually taking American economic history and writing a truly atrocious, just horrific paper that I keep a PDF of it as one of the, I call them my hubris inhibitors, my graduate American economic history paper, and my undergrad principles of macroeconomics paper, both of which were just, just shockingly bad. So whenever I want to get mad at my students, I look at these,

Deirdre McCloskey (07:06):

I have the same experience, Art. My senior thesis, I'm going to pass them to as a sleep aid.

Art Carden (07:15):

But a couple years after that in 2005, I was getting ready to give my dissertation proposal. And Deirdre McCloskey was getting ready to come and speak at Wash U. And my advisor said, would you be willing to go pick up professor McCloskey from the airport? And I tell graduate students that I work with, I tell my undergraduates, if someone says, Hey, will you go pick up a big fancy scholar at the airport? The answer is always, yes, no matter what you have, what else you have going on? So we got a PDF of the early version of Bourgeois Virtues, and I read the whole thing like the week before she showed up. And I remember picking her up at the airport and mentioning this. And she said, wow, you are ambitious. And that's been planted some seeds in 2009. When I was teaching at Rhodes College, she visited Memphis, spoke at roads.

Art Carden (07:59):

We went down and one of the best intellectual experiences of my life actually was a seminar at University of Mississippi, which went on for like three hours before we went to dinner. And then finally in 2012, we met up for lunch because we were both filming some stuff with the competitive enterprise Institute. And I'd been doing a lot of economic journalism for forbes.com and various other places for a while. And she asked if I wanted to come on board for this project. And, again, if a scholar of  professor McCloskey stature says, Hey, do you want to coauthor a thing? The answer is always, yes, that's how I became. In some sense, the,  Steven Dubner to her, Steve Levitt.

Mike Hanson (08:35):

Well, the final product is really quite erudite and it's very pithy and it really works well. One of the first things that just strikes you is that there's this idea that nostalgia and pessimism worsened poverty first, what does that mean? And secondly, what is the obsession with nostalgia?

Deirdre McCloskey (08:49):

That's one of the things that your people investors can get from the book besides a correct economic history of the world, which is a good deal of optimism about the future, because pessimism is idea that, well, we're stuck with the income we've got, we can't increase it. Investment is kind of stupid. And it's just a way of stealing money from poor people, all that kind of talk. I mean, you know, my friends on the left want the poor to be better off, but Art and I, and other liberals who aren't really on the right, we aren't conservatives in that sense, but we know actually how to help the poor, which is to allow the economy to innovate. It's kind of cool to be pessimistic. So there is a temptation to be cool, instead of correct.

Art Carden (09:36):

I think here are a lot of quick, easy, pithy, emotionally satisfying responses to optimism. People said about Julian Simon for example says, Oh, well, it's like the person who jumps off a building and around the 10th floor says, well, everything's going okay. Yeah. That's what you optimist are doing because you're, you don't realize you're about to hit the ground. And then further with nostalgia. My kind of back of the envelope theory of nostalgia is that we see how it all worked out. Like life is fine right now. It was okay. So on one hand we have the certainty that things in 1995 led to a 2021 that's sort of okay. That combined with, I've heard people say, you know, I remember when I was much younger, I didn't hear about teen pregnancy or drug use or things like that. And I said, cause you were eight years old and you know, grownups, don't talk about teen pregnancy and drug use in front of their eight year old’s. So this stuff has always been going on. And I think that you're exactly right, that nostalgia is bad for the economy and bad for the poor.

Mike Hanson (10:32):

So that's very interesting. Let's flip that around and you know, Deidre, it's interesting, you say all this because I actually keep a motto just above my monitor, which is that the Optimist's triumph and it's kind of an old saying, in fact, in our world, your books are more about optimism and what you're going to call innovism. What is innovism? And let's talk about that.

Deirdre McCloskey (10:52):

It's a much better word than capitalism. The word capitalism, it's a lousy word. It sounds very nice. I mean, why wouldn't we want to be sociable, but capitalism was a word invented by the enemies of innovation. People who didn't want the world to change. They wanted to decide how it was going to change. It makes people of all politics think that the heart of enrichment is investment. Now I don't want to insult your people here, but investment is necessary. Of course, but the spring in the watch, the mechanical watch is creativity is ideas. Well, you need water. That's liquid at normal temperatures. You need a labor force. You need sunlight. And so you need investment too, but nothing happens unless there's a good idea, such as take an old one containerization that's key point. So that's why we should call what we're engaged in all of us as innovisim, not capitalism.

Mike Hanson (11:59):

Yeah. And so what are the conditions necessary then? What is this change that happened in order to have the possibility for across many strata, having this creativity?

Deirdre McCloskey (12:09):

Well, we claim that it's not what a lot of other people have said, a rise in the savings rate, which by the way, didn't happen in the 18th century or canals or international trade. We point out that the trade across the Indian ocean was much larger than across the Atlantic until quite late. And yet it didn't cause the great enrichment as we call it. So our claim is, we have a lot of evidence for it is that it's liberalism in the classical sense, coming to the minds of advanced intellectuals, John Locke, Voltaire, Thomas Paine, Mary Wollstonecraft in the 18th century, that then becomes a political idea in the famous words of the slave owner, Thomas Jefferson, that all men are created equal is sort of the short form of what was asserted in the 18th century against millennia of hierarchy, against the idea that if you're a commoner, you're a jerk. Only the Nobles and Kings in Shakespeare are admired. Everyone else is treated as a comic interlude. That basic liberal idea, which of course wasn't followed until slowly, slowly, we Americans had slaves for example, and women were the property of their husbands. All that was gradually changed. People got freer and freer. And then as the English say, and we use this phrase in the book, it permitted people to have a go and permitting people, instead of saying you're a, milkmaid born a milkmaid stay a milkmaid. Instead of that, you're given your accorded opportunity.

Art Carden (13:53):

Thinking about the investment space, thinking about mutual funds, the idea of a diversified portfolio of stocks and things like that. I do a lot of webinars and things on personal finance for the foundation for economic education. And I always tell students, go put your money in mutual funds, Roth, IRA, diversify SP 500, et cetera, et cetera, et cetera, Adam Theror at, I think he's at the Makeda center still, has this great phrase, permission less innovation. The fact that for the most part, if you want to come up with the idea of a small cap mutual fund or an S and P 500 index fund, for the most part, you don't have anybody to say, well, who do you think you are to do this? It's something that is at least accessible and there's not too much standing in the way.

Deirdre McCloskey (14:35):

Whereas in earlier times, and up to the present in, in many, many countries, that's not the case,

Mike Hanson (14:43):

Deirdre, this all sort of makes me think everyone with Adam Smith tends to talk about The Wealth of Nations. But to my view, I think The Theory of Moral Sentiments has a lot more to offer. Would you agree that that book offers a lot of this type of perspective and observation?

Deirdre McCloskey (14:58):

Absolutely. I love that book. Every one of your peers should buy the book cheap from Liberty fund in a scholarly edition and read it. It's actually funny, you know, it seems, seems odd to say that it would be funny, but it is. I didn't even know of its existence until I was about 50 years old. Wow. I'm an economist like Art. I have a PhD in economics from an excellent economics program. What we didn't study the history of economic thought when a serious way. So I didn't ever read this book. Then I started to read it and then teach it, especially in Holland at a department of philosophy. And it blew my mind because it's in the way that Adam Smith's other book, The Wealth of Nations is the beginning of the economics. This book is the beginning of what you might call social psychology. And it's really smart. And it's about equality. It's about us being all the same kind of people instead of the Lords and the commoners. It's a basis for The Wealth of Nations.

Mike Hanson (16:11):

It also reminds me, there's a really wonderful chapter in your book about the changing nature of happiness. And so Art, what does that mean? How has happiness changed as a conception? So in a lot of ways

Art Carden (16:21):

Changed our theology of happiness. So one of my favorite lines, it was an early version of the book that ended up not making it, but in the first star Wars movie, C3 PO and R2D2 are going through the desert of tattooing. And C3 PO says to R2D2 about drawings. He says, we seem to be made to suffer. It's our lot in life. And this is George Lucas lifting the line directly from, I think it was Hidden Fortress, Akira Kurosawa’s film. I believe that's where, yeah, there's actually a really interesting, hidden fortress Easter egg in the first star Wars movie, but I won't go down that road. But yeah, one of the peasants says to the other we're peasants, we seem to be made to suffer. It's our lot in life, people embrace what we call the blue-blood deal in this book and what Deirdre calls, the aristocratic deal, which is bound curtsy with Henry.

Art Carden (17:03):

The fifth tells you to bow and curtsy, go fight and kill and die in the name of God, Harry and St. George. And if you're lucky to maybe I want to slaughtered you by the time all is said and done. If you fulfill your proper office of obedience, then God will reward you, but changes in church governance kind of help people see that. Well, you know, things can be kind of okay here too. Why should we suffer and scratch the ground while you know, Nobles? And all of these other people are living high on the proverbial hog. People came to appreciate and came to understand we can have our pie in the sky, but we can also have pie here too. Yeah.

Deirdre McCloskey (17:38):

You can see why art was a terrific co-author of this book, all this clarity and humor, that's art. Whereas, you know, I tend to like footnotes quite a lot.

Mike Hanson (17:53):

Well, not only do I support a star Wars reference, but all right, I'm going to tell you that I also occasionally support a viewing of pro wrestling as well…

Deirdre McCloskey(18:01):

Oh, I'm appalled.

Mike Hanson (18:06):

All the American archetypes are on display at any given time when you watch wrestling. Absolutely. Absolutely. I want to stay on this philosophical bent though, for a moment. There's a very interesting term that you both coin called the congestive heart, which I find it to be very explanatory in terms of some of the problems that I see today, just in terms of people with their own subjective points of view of the world, viewing that as a reality versus things that are just flatly, more objective about the world. What does that idea? What does it mean?

Deirdre McCloskey (18:36):

The idea is that there's the subjective that you have that I can't ever find out about. You can talk to me, but I don't know if that's really what's in your heart. And then there's objective in the sense that it's, God's view of the world where the stone falls and God knows it, and it's just objective. But in fact, most of our lives operate in this kind of middle ground. And it's about speech, about how we talk to each other. And that's the contract of it means in laughing, thrown together, because that's what we are. We heard isolated brains in a VAT having a subjective experience and we aren't God, but we're in this rhetorical space, this space of talking to each other. And I think it would help a lot if we understood this word and then started talking to each other, because those are the practical things, the practical things about investments. It's the old story in modern finance, there are fundamentals, but there's also opinion it's the processing of the fundamentals and other things that makes for the value of an investment.

Art Carden (19:46)

Like thinking about conductivity. And again, that's Deirdre’s term. As far as I understand it, I have nothing to do with coining that, but it's a concept that makes a lot of sense of the world to me because I'm thinking back to like reaching really, really deep to high school chemistry and physics, like a lot of the constants and Avogadro's number and all this other stuff that I've learned in chemistry and physics labs. Like these are objective, but conductivity refers to trillions of cognitive handshakes are what produce, what we call the rules of football. Okay. Well, the rules of football means something very, very different when you are talking about the college game in the United States versus the professional game in the United States versus the professional game in Canada versus what the rest of the world refers to as football. Through a series of cognitive handshakes, the rules of football changed a little bit.

Mike Hanson (20:31):

One of the interesting things, and it's like right in the first page of the book is that classical liberals and the different ways that you define it. But at one place you say there may be an exceptions, particularly for government is with plagues.

Deirdre McCloskey (20:42):

Well early in the plague to your views.

Mike Hanson (20:46):

How does the last year fit into that context?

Deirdre McCloskey (20:49):

Well, how can I say, I have doubts with my other libertarian friends who are just outraged by lockdowns and so forth. And I say to them, well, yeah, okay. I kind of understand what you're saying and it's very arbitrary and very socialist, but it does seem to me that if a forest fire is just starting, it might be a good idea to compel people to come and pour water on it. Or, if the Canadians invade the United States and I'm really, I can hardly sleep. And if they invade the state of Maine, I think the smart thing to do is to send me an American military there quickly, not to kind of wait until they get to Connecticut. So the same thing holds for the plague. Look, I'm trying to get my second. COVID shot in Chicago, I'm telling you it's worth your life. And it would have been so much better to do it commercially. CVS and independent pharmacies and so on, have the stuff and sell it to people like you and me and give vouchers to poor people so that they could do it. They're on an equal standing with us and then I'd pay a hundred bucks or something for a shot.

Art Carden (22:05):

The response to COVID I was thinking the other day has been, I really can't think of anything in my lifetime. And I'll be 42 in a few weeks. That has been a bigger policy disaster. This is the biggest failure of Blackboard economics and sort of Blackboard political science that I've ever seen in my entire life. Because if there's ever a case for the government to get involved in the market, it's exactly this one where you have clear spillovers. You have, we talked about it a little bit in the book. Maybe some stuff has to bend at the very, very beginning of the plague, but at every step, the government to whom we look as being the ones who are going to step in and fix the market failure has made things worse. It actively made things worse than a Coronavirus pandemic. Just the way they've messed it up, leads me to think that we all need to go back again and reread Theory of Moral Sentiments. So Deirdre mentioned that Smith is funny in wealth of nations. He has this amazing passage on the statesman who should direct private people and how to employ their capitals. He says he loads himself with the most unnecessary attention and is nowhere more dangerous than in the hands of a man with folly and presumption enough to think himself fit to exercise. And that's the story of 2020 and 2021.

Mike Hanson (23:19):

So this book is just chock-full of literary reference. Really it's sort of a master course in Western literature sort of senses particularly appreciate the call-out to the Branna productions of the Henry fourth plays. But if you could only choose two or three books for someone who's interested in the ideas and wants to just go further, what would the two of you say to that?

Deirdre McCloskey (23:42):

Well, we've been The Theory of Moral Sentiments and The Wealth of Nations. I mean, everyone should read these books. And as I said, shamefully, I didn't read them until I was rather advanced. Whereas art, he got onto this 20 years before I did.

Art Carden (24:01):

But I'd still never read Wealth of Nations until I had a PhD.

Deirdre McCloskey (24:04):

Yeah. Theory of Moral Sentiments, as I said, I never heard of much less read and The Wealth of Nations, I only read when I taught it.

Mike Hanson (24:12):

So Deidra, I'd like to, as we look to wrap this up, I'd like to ask you a little bit more of a personal question if you're willing to entertain it, which is you're an economic historian, but you're also a communicator and a professor of English. That's true. Yes I am. and yet you've dealt your whole life with a stutter and I've seen it many times online. If you would just say a few words about how you've surmounted those challenges. I've known several people like that, including my own boss.

Deirdre McCloskey (24:39):

I'm so pleased at the behavior of Joe Biden on this matter because Joe liked me as a lifelong stutterer, which explains by the way, some of his somewhat strange speech patterns. Once I knew he was a starter and I only knew this about two years ago, I then watched him talk and I could see when he was avoiding a word, trying to avoid a block, 2% of the born males in every culture in the world. It's not culturally specific, stutters. And one half percent of the born females. And I was a born male. I should point out, until 1995, I was called Donald and I was married for 30 years to the love of my life and have a couple of grown children and three grandchildren. So it's about four times more common in men. But frequently, as in, as in Biden's case, it gets better as you get older.

Deirdre McCloskey (25:35):

Now I'm nerveless about interviews like this or speaking to a thousand people or so on, maybe too nerveless, the arrogance of competence. It aids in the great Christian virtue of humility, and only a fool thinks that she is perfect, that her opinions are the only ones that anyone should pay any attention to. So I think from an ethical point of view, having handicaps, like this is a good thing. In fact, it's odd. I would not. It's strange. I sometimes think about this. I wouldn't not have not stuttered because it wouldn't be me. It wouldn't be Dierdre.

Mike Hanson (26:20):

Yeah. So to round things out, what's next for the both of you, what are you both working on? What do we expect to see next?

Art Carden (26:26):

I do a lot of writing for the American Institute for economic research and other places. They tell me that next month, my book Strangers with Candy observations from the ordinary business of life will appear under their imprint. It's a collection of edited essays of that, that I've written for them. Yeah. So that's coming out. I've decided that I want to sort of devote the rest of my life to the study of this relationship between slavery and capitalism, because this is a common claim on the left that we are rich because of slavery. And in the process, I've done a lot of deeper reading into the work of the British economist, William Harold Hut, who spent most of his career in South Africa in fact was such a vicious critic of apartheid that he, at one point lost his passport. Like the South African government stripped him of his passport. He retired in the mid 1960s and went to spend two years at the university of Virginia. But before he did so he dropped a bomb on South Africa, basically with a devastating economic critique of apartheid. And a little bit of investigation turned into a series of papers. And now next summer I'll be working on a book about William Harold Hut and his criticisms of apartheid. And what exactly economics in this broad Smithian tradition can say.

Deirdre McCloskey (27:36):

Well,  I'm certainly very here to see the results of that project. I've actually taught in South Africa after apartheid. But my own obsession this year is to write the book on English, agricultural history, a subject that I worked on a good God, is at half a century ago. And that I want to make into a book because books last longer than articles. And I'm going to bring up to date my thinking about what was called in England, open fields, open field agriculture. And then in the 18th century, specially enclosure. It's. meant to be an essay in human economics, namely and economics that has the math, has the statistics, has the objectivity, but then also has the conductivity of ethics and faith and human talk. It's a kind of rounding out of my scholarly life.

Mike Hanson (28:35):

Well, I personally look forward to both of those things. I want to say Art, Deidre. Thank you so much for being guests on our program. A real delight to have you.

Art Carden (28:43):

Thank you for having us.

 Deirdre McCloskey (28:45):

I've enjoyed it.

 -Outro-

 That was our conversation with Diedre McCloskey and Art Carden. Fun all the way around, and so much to think about. My favorite part of this conversation is that Diedre and Art aren’t not opposed to having a little fun with their subject. There’s a willingness to engage with a kind of jocular humility that’s rare today, and I so wish for more of it.

Come back in two weeks on April 14th as we sit down with Arnold Kling to discuss his book the Three Languages of Politics: Talking Across the Political Divides. This should be a useful conversation: Kling presents a clear and simple set of ideas to help us each understand differing political points of view, and to get along with them better. I found it a helpful book and I think you might too.

Until then from all of us at the Well Read Investor, may all your reading profit your mind and your money. Take care.