It’s no secret that the glory days of the kind of economics that most readers of this journal likely learned in college are long gone.
The mighty post-war âneoclassical microphoneâ edifice came first. He disintegrated following an assault supported by the “behavioral school” of Kahneman, Thaler and Sunstein. By the turn of the millennium, he had come out with hard-line regulatory economists modeling a homo economicus, and with “boost units” targeting a bewildering array of psychological frailties.
As for the traditional and global macroeconomics – whether it is the theories of John Maynard Keynes as renovated in Berkeley and Boston “in salt water”, or the true school of the commercial cycle defended by Chicago “in fresh water” – which died out. dramatically in 2008 when, as the Queen herself remarked that she failed to predict the biggest financial crisis since the 1930s. It took a decade for policymakers to explicitly abandon old doctrines, but today the Biden administration’s MMT is decidedly more expensive than MMT – modern monetary theory – than JMK or RBC.
Yet are these revolutions really the answer to the inadequacies of Old-School Economics 101? For more than four decades, Deirdre Nansen McCloskey – professor emeritus of no less than six distinct disciplines at the University of Illinois at Chicago, and a truly unclassifiable scholar who has made major contributions to economic theory, history , methodology and statistics – argued that the problems run deeper. What economics needs to realize its unparalleled potential as the premier science of human progress, she insists, is the rediscovery of its origins as a discipline that successfully marries the methods of science and science. human.
In Improve humanomics, sparkling cameo of a book, she offers a summary, her project of a lifetime. The result is a richly allusive account of what such a combination looks like – “humanomic,” as she calls it – and why it offers a better guide to understanding where prosperity comes from and what policymakers can do about it. help him progress. .
The starting point, according to McCloskey, is a clear understanding of what distinguishes the social sciences from the natural sciences.
Human beings are conscious agents, whose behavior is governed by ethical conventions, and who spend much of their waking hours trying to persuade themselves using written and oral rhetoric. It is these unique human qualities that make the study of human society different from the study of plants, animals or physical particles, because to understand it, one must find out what are the conventions and ideas that motivate people and where they come from. Unlike the natural sciences, just observing behavior from the outside cannot really explain what is going on. To attract people, you have to get into their heads.
This is where the humanities come in. For it is the study of the humanities that gives us an understanding of values, conventions and ethics – in short, of what others think, including in other cultures and at other times. “Ideas”, as McCloskey puts it in a typically fertile metaphor, “are the dark matter of history.” The humanities are therefore the missing link, without which any understanding of economics is chronically incomplete.
However, does such a hybrid âhumanomicsâ, which mixes the objective and quantitative discoveries of positivist science and the subjective and qualitative understanding of the human sciences, really generate better and more useful economic knowledge? That is, in the end, what matters and McCloskey addresses this crucial question directly in Part Two of the book. The ground she chooses for her exhibition match – humanomics against the rest – is also not a lower league field. Indeed, it is nothing less than the eternal enigma with which Adam Smith launched the whole economic project: what is the secret of economic growth?
Classical economists saw the answer in trade and specialization. Neoclassical theorists said it was the accumulation of capital and labor; and, later, the growth of scientific and technical knowledge. A more recent generation of positivist economists has focused on institutions such as property rights and the rule of law.
True to the humanomic method, McCloskey’s answer – originally developed in an intimidating way in his three-volume treatise The bourgeois era but summed up elegantly here – is that all of these factors do indeed matter; but that no one can explain why the âgreat enrichmentâ of the globe that began in the Netherlands and England in the 18th century began exactly where and when it happened.
For that, she argues, we must turn to ideas. We find that the distinctive development has been the emergence of a revolutionary creed – that the hierarchy is often counterproductive; that ordinary men and women do not need to be led from above; that trade should not be despised – in short, that the bourgeoisie deserves political freedom and social respect. It was the blossoming of this new set of ideas – liberalism, in short – that made possible all subsequent institutional changes, technological discoveries, and capital accumulation.
âIdeas were the driving force behind the Great Enrichment,â McCloskey writes. It might seem like a harmless verdict – but its ramifications, when considered, run deep. And it indeed demonstrates why an economy that ignores what people believe, and the stories they tell themselves, cannot explain the past – and will fail to guide us to a more prosperous and happy future.
Improve humanomics: A new and old approach to economics, by Deirdre Nansen McCloskey, University of Chicago Press, MSRP $ 30, 144 pages
Felix Martin is the author of ‘Money: The unauthorized biography ‘
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