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Austrian Review of Bourgeois Dignity

Austrian Review of Bourgeois Dignity

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Published by Anders Mikkelsen
Dierdre McCloskey's explains in her book "Bourgeois Dignity," a book Gary North calls profound, that we live in an increasingly wealthy middle class world and how there has been a vast increase in wealth since 1800.
Given the importance of the topic, people who don’t have time to read McCloskey’s 592 page book Bourgeois Dignity, might like to know: What is this book about? How does McCloskey’s claim that economics can’t explain the modern world relate to the Austrian school? What are potential problems or opportunities for more research?
[This is a draft and thoughtful comments are encouraged. You can contact Anders Mikkelsen on facebook or via e-mail - amikkelsen at yahoo ]
Dierdre McCloskey's explains in her book "Bourgeois Dignity," a book Gary North calls profound, that we live in an increasingly wealthy middle class world and how there has been a vast increase in wealth since 1800.
Given the importance of the topic, people who don’t have time to read McCloskey’s 592 page book Bourgeois Dignity, might like to know: What is this book about? How does McCloskey’s claim that economics can’t explain the modern world relate to the Austrian school? What are potential problems or opportunities for more research?
[This is a draft and thoughtful comments are encouraged. You can contact Anders Mikkelsen on facebook or via e-mail - amikkelsen at yahoo ]

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Published by: Anders Mikkelsen on Jun 16, 2013
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09/02/2013

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Austrian
Review of Dierdre McCloskey’s
 Bourgeois Dignity: Why Economics
Can’t Explain the Modern World
 
[DRAFT
 –
open for comments]
Introduction
As Gary North pointed out
in his talk “How Come We’re So Rich?
,
[https://www.youtube.com/watch?feature=player_embedded&v=wqmZXvDjEBA ] probably the mostimportant historical question is: Why did the world only recently, starting at some time between 1750and 1800, steadily become richer and richer? Why is 1950 radically different from 1800, but 1600 isfairly similar to 1800?Dierdre McCloskey's wrote "Bourgeois Dignity" to answer these questions. Gary North calls the bookprofound. The books shows how we live in an increasingly wealthy middle class world and how there hasbeen a vast increase in wealth since 1800. But why did this occur only since 1800, and why did it start in
‘the West
?
 
Dierdre McCloskey’s book demolishes other explanations
, showing
Why Economics
Can’t
Explain the Modern World,
and substitutes a compelling explanation of Bourgeois Dignity and Libertythan enables innovation.Given the importance of the topic, people
who don’t have time to read McCloskey’s
592 pages, mightlike to know: What is this book about?
How does McCloskey’s claim that economics can’t explain the
modern world relate to the Austrian school? What are potential problems or opportunities for moreresearch?
Overview
McCloskey’s book
work deserves, and is getting, serious attention. It is an excellent, though partial,explanation for the mystery of why the world only recently, starting at some time between 1750 and1800, steadily became richer and richer. The answer is in the title,
Bourgeois Dignity
 
 –
being Bourgeoisbecame perceived as dignified, respectable, worthy, elevated, and virtuous. This enabled people toinnovate, which created wealth, transcending diminishing marginal returns. McCloskey uses the
volume’s
592 pages to explain the title
“Bourgeois Dignity: Why Economics Can’t Explain the Modern
World.
(The next book is supposed to explain the actual transformation.) While the book does seem abit wordy, it was easy to quickly read and understand.What is of particular interest is the subtitle
, “Why Economics Can’t Explain the Modern World.”
 
McCloskey’
s work is an attack upon the current dead materialism of typical economic explanations. Herapproach and terminology is not Austrian, but it corresponds with the centrality in the Austrian Schoolof the living humanity of the human actor. McCloskey emphasizes the importance of language,innovation, and implicitly imagination in economics, and the failings of scientistic economics or
‘economistics’
emphasis on the quantitative and exclusion of the qualitative.
 
 
McCloskey’s Purpose
 
Her goal is to show that th
ere exists a ‘great fact,’ that in the last 200 plus years vast numbers
of peopleare 16 to 100 times richer than their peasant ancestors, and that typical economic explanations for the
‘great fact’
are insufficient to explain the recent appearance in history of compound growth. She tackleseach of the primary explanations in turn and shows that they cannot explain continual improvement.The typical arguments involve re-distribution or re-shuffling, not a hundred fold wealth creation.Accumulation on its own does not explain it, because of diminishing marginal returns. Foreign trade wasnot big enough to explain it. Race does not explain it. The common arguments that the west grew richthrough exploiting and looting the peasants, workers, and third world, is disposed of by explaining atlength that the real and imagined victims never had enough wealth in the first place to enrich the everlarger, ever spreading, ever wealthier middle class. They got rich through internal trade and increasinginnovation in productivity and better products that enable capital accumulation.The big change enabling innovation was: Dignity of going in to trade and invention combined with libertyto innovate and trade freely. The paths to respectability lead not just narrowly to Throne and Altar. Thegreat engineer Brunel, son of French immigrants to England illustrate this. In 2002 Brunel came insecond in a BBC public poll of "100 Greatest Britons." This explosion of applied innovation, often merelyin small mundane details, created wealth. McCloskey stresses that our continued and spreadingprosperity depends on sustaining the Bourgeois Dignity and the innovation it enables.
How do we know we’re so rich?
 While the reader may be well aware that ordinary people are wealthier, it may be good to contemplatethe difference between 1800 and 1950. Imagine no electricity, airplanes, cars, dishwashers, washingmachines, refrigerators, or gas stoves. Then imagine no steam powered factories, railroad, or ships, andno telegraphs. Then imagine the difference between 1800 and 1600, whatever the improvements it ishard to imagine that change was as drastic.
Compared to 1800, McCloskey says we’re 10 to 50 times richer. The world supports 6.5 times as many
people. Yet less people are starving. In 1800 most people were desperately poor, consuming about $3 aday, and dying young. There was little clothing, or food besides starches.People in Western Europe and the USA are unarguably wealthier compared to 1800. Statistics onpoverty in the USA show even poor people have cars, appliances, and plenty of food. Even houses aregetting substantially larger.However today, despite population growth, the absolute numbers of poor people in the world areshrinking. Middle class life is becoming a reality for many as developing countries really are developing.
 
This change has been going on for some time, since about 1750 or 1800. The historian ThomasBabington Macaulay wrote a great essay in 1829 attacking Southey's Colloquies on Society. Southeyimagined Sir Thomas Moore would bemoan the state of England. For Macaulay even in 1829 there wasobvious progress in England itself, though few others noticed it. In Scandinavia the poor mixed bark in totheir bread. Some French peasants had no bread. Despite earlier history of famine, English thought
themselves oppressed if they couldn’t buy wheat bread. In the days of Queen Elizabeth “
pooreneighbours in some shires are inforced to content themselves with rye or barleie; yea, and in time of dearth, many with bread made eyther of beanes, peason, or otes, or of altogether, and some acornesamong.
He goes on for some length in the essay and in his History of England about the improvementsin roads, medicine, houses, population density, towns, agricultural lands, etc. Yet England and world wasabout to an even greater change as the industrial revolution broke out.
The bottom line is that we’ve seen steady 2 % growth
. It is initially imperceptible, few even noticed itseffect in 1829. 50 Years means 270% growth, but 5200% growth over the last 200. The change isenormous.
Why McCloskey thinks the standard explanations are insufficient
McCloskey summarized her views follows:
“Foreign trade was too small and too prevalent worldwide to explain the rising tide in northwestern
Europe. Capital accumulation was not crucial, since it is pretty easily supplied. [* Given a socialenvironment of Bourgeois liberty and dignity.] Coal can be and was moved. Empires did not enrich theimperial countries, despite what you may think, and anyway the chronology is wrong, and anywayimperialism was commonplace in earlier times. Likewise, the institutions of property rights were
established many centuries before industrialization. Greed didn’t increase in the West. In bourgeois
countries during the Industrial Revolution the Catholics did just as well as did the Protestants. TheMuslims and the Hindus and the Buddhists, or for that matter the Confucians and most of the animists,thought as rationally about profit and loss as did the Christians. Populations had grown in earlier timesand other places. Until the eighteenth century many parts of the Far and Near and Southern East wereas rich, and appeared to be as ready for innovation, as parts of the West
except at length in thecrucial matters of the dignity and liberty of the bourgeoisie. Until the seventeenth century the Chineseand the Arabs practiced a science more sophisticated than the one the Europeans practiced. The scienceof the Scientific Revolution was in any case mostly about prisms and planets, and before the latenineteenth century even its other branches did not much help in worldly pursuits (European science,though, was in its non-normal, revolutionary episodes an interesting parallel in the realm of ideas to theacceptance of crea
tive destruction).”
 [This could be made in a list of bullet points. Maybe some short additional explanations if needed for any items.]

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