|Adam Smith. Source: WSJ|
Deirdre McCloskely has an excellent essay in the Saturday Wall Street Journal Review.
Her answer: "Ideas started having sex," a glorious sentence she attributes to Matt Ridley.
"The idea of a railroad was a coupling of high-pressure steam engines with cars running on coal-mining rails. The idea for a lawn mower coupled a miniature gasoline engine with a miniature mechanical reaper. "And so on. She is exactly right. We tend to focus on the original idea, the basic science. That's necessary, but 99% of growth comes from elaboration, implementation, and the marriage of ideas -- sex in the sense of genes combining and making new things.
What's the bar for these hookups?
The answer, in a word, is “liberty.” Liberated people, it turns out, are ingenious.Also,
...equality. ...not an equality of outcome... equality before the law and equality of social dignity.Though, as she points out at length, the social dignity, property rights, and equality of entrepreneurs has always been a dicey matter.
95% of the enrichment of the poor since 1800 has come not from charity but from a more productive economy.
It will also come from the businessperson who buys low to sell high, the hairdresser who spots an opportunity for a new shop, the oil roughneck who moves to and from North Dakota with alacrity and all the other commoners who agree to the basic bourgeois deal: Let me seize an opportunity for economic betterment, tested in trade, and I’ll make us all rich.She missteps in only one place:
Economists and historians from left, right and center cannot explain the Great Enrichment. Perhaps their sciences need revision, toward a “humanomics” that takes ideas seriously. Humanomics doesn’t abandon the economics of arbitrage or entry, or the math of elasticities of demand, or the statistics of regression analysis. But it adds the study of words and meaning and their stunning contribution to our enrichment.I'm sorry, this is just wrong. Deirdre: You are an economist and historian, and you just did it. So have others.
Alas, though an incredibly wide-ranging and deeply read public intellectual, McCloskey here has failed to keep up with her own field. "Ideas having sex," in the context of liberal institutions, is exactly the mainstream conclusion of this generation of economists. Deidre, put down the literature and history for a while and read Lucas, Romer, Jones, Acemoglu, Barro, and countless others.
Moreover, her plea for "words" misses a central fact of modern economics -- and growth. The Greeks and Romans had plenty of words, arguably better than ours. Marx and Keynes did too. If our generation had only studied words, a reader could well conclude that this is the latest fashion in economics, as ephemeral as the latest fashions in literature.
No, it is exactly the math of elasticities and of budget constraints, and the quantitative comparison of explicit models with the historical record, that gives us some hope that economics is constructive.
More generally, our growth -- the growth of engineers and accountants -- is built on quantification. Science started to be cumulative when Galileo and his generation started doing controlled experiments and measuring things.
I will pass on a lesson I learned long ago, and the hard way: Don't make fun of things you haven't read.