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Bourgeois Dignity: Why economics can’t explain the modern world

McCloskeyT

Deirdre McCloskey is a phenomenal writer, economist, and thinker. Visit her website for an explosion of academic productivity and a highly intelligent viewpoint. We share one thing in common. Both of us have had the gravest doubts that economics as it is usually practiced is capable of explaining much. My friend Oban calls it the anorexic profession: not merely starved, but self starving. Its insights are few, but powerful, but it has become wedded to asking very narrow questions and getting very narrow, if important, insights.

McCloskey breaks the mould. Here is how she begins Bourgeois Dignity: Why Economics Can’t Explain the Modern World (2010) “Sixteen. The magic number is sixteen. The world is on average sixteen times wealthier than it was in 1800.” She finds that the economic discussion fails to comprehend or explain why ‘the largest revolution in human affairs since the invention of agriculture’, as she puts it, has occurred in the past two hundred years. She looks at all the explanations proferred by the economics profession , and finds them inadequate to explain the scale of the transformation from $3 a day world average in 1800 to $48 a day world average (or $147 a day in formerly impoverished Norway).

After demolishing the usual explanations (rule of law, expansion of trade, rise of the middle class – without reference to ideas, war, slavery, imperialism, or population growth) she settles on changed ideas and social attitudes towards innovation.

Changing social ideas, in short, explain the Industrial Revolution. Material and economic factors – such as trade or investment or exploitation or population growth or the inevitable rising of classes or the protections to private property – do not. They were unchanging backgrounds, or they had already happened long before, or they didn’t actually happen at the time they are supposed to have happened, or they were weak, or they were beside the point, or they were consequences of the rhetorical change, or they required the dignity and liberty of ordinary people to have the right effect. And it seems that such material events were not in turn the main causes of the ethical and rhetorical change itself.

Most of the book consists of a careful elimination of the causes usually offered for the Industrial Revolution, and involves naturally a series of disputes with the standard materialistic explanations offered by the economics profession. Many if not most of the economists with whom she disputes  have been at various times her teachers, mentors or students, and on the whole the arguments are kept at the friendly tone with which old friends argue.

I grant that I am inclined to non-materialist explanations. Materialism is the doctrine that there is only matter and its motions, and that mind is an epiphenomenon, as a shadow is to the body for example, and not a primary cause in its own right. Yet anything we know to be important in our own lives has occurred by decisions we have made, that led to actions on our part.

McCloskey argues in this book that the standard sets of explanations for the huge rise in human wealth since 1800 are insufficient, when they are not merely wrong. Bourgeois Dignity is the second of a series of six books she has planned. The next in the series, Bourgeois Equality (2015) is already out. I have already ordered it.

McCloskey is one of those writers who are so enlightening and well argued that you need not fully agree in order to profit from them greatly.

She may think it relevant, but I do not, that she underwent a sex change from man to woman in 1995. More pertinent, in my view, was that she was an atheist and is now an Episcopalian, and was an acolyte of Milton Friedman and now entertains a broader conception of her profession.

 

Thank God Almighty, free at last: 52% vote to leave

cameron quits

 

“There were two referendums on Thursday. The first was on membership of the EU. The second was on the British establishment. Leave won both, and the world will never be the same again.”

Tim Stanley in the Telegraph

 

 

I do not know what factor would have failed to drive me to vote for UK independence: uncontrolled migration from within the EU, uncontrolled immigration of Muslims, the supremacism of the European High Court, or the basic fact that the European super-government is not responsible to the European Parliament. Imagine, if you can, a Canadian Parliament where the government answers questions in the House of Commons, but does not depend on the support of any party in the House: a permanent, irremovable executive. Now imagine that it has been governing you for thirty-five to fifty years. Now imagine that every critique of it is met by denunciations from the elite to the effect that you are a reactionary yobbo for daring to dissent, and to being sternly lectured by foreign government heads for even thinking of breaking out.

In the end, is it any wonder that the people revolted?

Imagine a Supreme Court composed of the most activist leftie judges overturning every social arrangement, all of whom are appointed to reign over your judicial system. We have a bad enough time with an out of control left-wing Court that is appointed by an elected Prime Minister, but the European Court of Justice has been particularly aggressive in knocking down national law.

Yes there will be uncertainty, but yes, there needs to be more fear in Brussels, so the rulers know they can be removed.

As far as I am concerned, Brexit means Trump, and for the parallel reasons. Periodically the upper classes need to get the boot. Not for a whim, but for persistent failure to care for the well-being of their electors, and a persistent deafness to their cries for understanding. Electorates  have experienced way too much condescension and contempt from their elites: whether of the left, right and centre. A purge is needed. It will come.

Two charts explain Trump: why the US social contract is breaking

fredgraph

 

fredgraph1

Steen Jakobsen, chief economist at Danish investment bank Saxo Bank, believes the “social contract” — the agreement between the ruled and the rulers — is now broken, and this can be seen in the rise of Donald Trump.

Jakobsen says we may have reached a nadir in terms of political ambitions, investments, capital expenditure, employment, inflation and growth. He sees this as the end of “planned economies” that were adopted after the fall of the Berlin Wall.

In a recent research note, he said the ratio between employee compensation to gross domestic product in the U.S. is the lowest in history and corporate profits are at their highest-ever point. This, he believes, is a key reason why U.S. citizens now want anything but the traditional establishment.

from: http://www.cnbc.com/2016/03/29/hillary-clinton-cannot-win-us-election-economist.html

 

 

The press:Internet::sailing ships:modern navies

My esteemed colleague Blair Atholl has made a point in his posting about the printing press that goes deeper than disaffection with the spinelessness of Canadian journalism, or its reflexive collective leftism.

Observations about the leftism of the press are accurate but do not address the major point of Blair Atholl’s, which is that the printing press, as a means of distribution of news and opinion on an industrial scale, is finished, and that as a means of delivering the advertizing that pays for the news, the press has been displaced by a technology which targets ads much more accurately to specialized tastes and interests. That technology is one you are reading now.

You will note that opinion of the kind you like to read, such as ours for instance, is delivered free by four people who among them have between 10 and 12 university degrees.

This rivals what either the Globe or the National Post could deliver on any given day.

All you have to do is show up at Barrelstrength, or any of your favourite opinion sites.

The price of a subscription to Barrelstrength, or Watts up with That, or Matt Ridley, is zero. How we make our livings is not your concern, nor should it be.

The doomist premise is that news of City Hall will not be collected in the new post-print dispensation; the likely outcome is that news will be collected and disseminated whether for free or for pay as long as anyone wants to know about the doings of City Hall. The technology whereby this is done is changing, and the mourning for the printing press and the journalism it generated is akin to the mourning for the navy of wooden sailing ships. They were magnificent in their time and they have gone. Navies persist.

What is a billion?

The NatPost today had an article on the subject of the London Inter-Bank Offered Rate, particularly the price-fixing engaged in a by bankers.

In it a certain Don Coxe, a “global portfolio strategist” for the Bank of Montreal in Chicago was quoted.

Coxe estimates that, overall, banks around the world have paid US$350-billion in fines “for all the frauds they are admitting to since 2008.”

$350 billion!

That is greater than the size of the spending of the Canadian federal government for the year 2015.

canada-government-spending_resized

I apologize for the fact that the numbers in the chart may appear illegible, but the topmost number in the left-hand column is 351000, standing for $351 billion Canadian dollars, or less than total bank fines since 2008, measured in US dollars.

As Coxe remarks, we have yet to see any bankers in jail.

If you are a defender of the capitalist order, as I am, then you ought to be appalled by this figure, and these behaviours.

“Floggings will continue until morale improves.” – traditional management technique

The market ideologists  need to be sent to their bedrooms without supper, for about a decade. Hopeful they will starve.

Maybe it is time you looked up the brilliant movie, Margin Call, and paid very close attention to the speech at the end of the movie by Jeremy Irons, who played the Chairman of the Board, who recites the list of market crashes, bubbles and scandals since the invention of stock markets in the mid-1600s.

Folly of central planning

From the minds of a Nobel Prize winner in economic planning, Paul Krugman, this advice in 1998.

The growth of the Internet will slow drastically, as the flaw in “Metcalfe’s law”–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.

As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.

As the great man himself said in 2013:

“Right-wing intellectuals and politicians live in a bubble…..

Some very clever people believe this

Jeffrey Sachs is the Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University, is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals.

Climate change is the greatest of these environmental threats (though by far not the only one). Given the current trajectory of global fossil-fuel use, the planet’s temperature is likely to rise by 4-6 degrees Celsius above its pre-industrial level, an increase that would be catastrophic for food production, human health, and biodiversity; indeed, in many parts of the world, it would threaten communities’ survival. Governments have already agreed to keep warming below 2º Celsius but have yet to take decisive action toward creating a low-carbon energy system.

To which Duggan’s Dew replied: “The cancer has reached his brain”.

Canada is doing well

An article in the New York Times shows Canadian incomes have risen relative to those in the United States, such that average annual income is now equal, though whether this remains true after our recent devaluation of the Loonie is unclear.

 

Median per capita income was $18,700 in the United States in 2010 (which translates to about $75,000 for a family of four after taxes), up 20 percent since 1980 but virtually unchanged since 2000, after adjusting for inflation. The same measure, by comparison, rose about 20 percent in Britain between 2000 and 2010 and 14 percent in the Netherlands. Median income also rose 20 percent in Canada between 2000 and 2010, to the equivalent of $18,700.

The most recent year in the LIS analysis is 2010. But other income surveys, conducted by government agencies, suggest that since 2010 pay in Canada has risen faster than pay in the United States and is now most likely higher. Pay in several European countries has also risen faster since 2010 than it has in the United States.

The article cites as reasons for this relative middle class income stagnation:

  1. declining educational attainment in youth
  2. government policies that do not favour redistribution of income
  3. corporate policies that do not distribute more income to their salaried workers

Exodus from France, exodus from Quebec

An interesting video news article on the exodus from France of the ambitious, the bright, and the monied. I observe that  Quebec has been going through the same, but that the exodus did not matter to the native population because it was composed mostly of Protestants and Jews (furriners). It took a while for the exodus to start among the ambitious, bright and monied among the French-Canadian populace, whom we can now observe in Toronto, Vancouver, and elsewhere.

If there is one thing we all hope for, for Quebec, it is that, when it separates, it will get real fast: 1) reduce its Marxist unions to impotence, and 2) adopt English as an official language. The opposite will happen at first, until the bills have to be paid. President Pierre-Karl Peladeau will smash a union or two.

BNN reports:

Montreal, home to Air Canada and Canadian National Railway Co., has seen the number of top 500 Canadian companies based in Quebec’s largest city decline to 75 in 2011 from 96 in 1990, according to the Fraser Institute, a Canadian research organization.

It would be interesting to know how many of Canada’s top 500 corporations were headquartered in Montreal in 1960. 40%? 50%? 60%?

13 words that will kill municipal liberalism in US

Following is the opinion published yesterday by U.S. Bankruptcy Judge Steven Rhodes in Detroit.

Nothing distinguishes pension debt in a municipal bankruptcy case from any other debt…

City workers and their unions have carried on over the last several years as if the pension debt was sacrosanct. That delusion is over. This ruling might be overturned, but if it is upheld then it will enforce a degree of fiscal prudence that is unimaginable to the liberals.

The municipal governments cannot print money to overcome this hurdle and their ability to sell municipal bonds is limited by their credit ratings, which in turn limits pensions funds from buying bonds with such poor ratings. For the financial conservatives, instead of rejoicing, they should reflect on the fact that this is the equivalent of dancing on the grave because it will bring a lot of financial pain. For the liberals it will be yet another chance to employ their sophistry.