Saturday, May 21, 2016

Ideas had sex

Adam Smith. Source: WSJ
Why are we so much better off than our ancestors? Why did this process only start where and when it did, in Western Europe, not in Rome or China?

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.
...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.


  1. I agree that ideas come from great thinkers and that realizing the potential of ideas come from good leadership and engineers and others who figure out how to scale up and market to meet or in some cases create consumer demand. This is done most efficiently under capitalism. The talk about ideas having "sex" is cute, but not a good analogy and such taglines might come from people not knowledgeable on how these things really work... so long as the establishment in power doesn't constraint, restrict and overregulate. We may be nearing a critical juncture at which we risk the establishment regulation damaging the engine driving our economies. Galileo was persecuted by the Catholic church and spent his last years in prison for his belief in heliocentrism - that the planets revolved around the sun. The establishment punished people for holding beliefs that did not confirm with their (ideological) story line.

  2. Ok. I don't get it. It's seems so f'ing obvious that the Great Enrichment came as a direct consequence of the development and early application of the scientific method in Europe circa 1700. Our economy is a direct function of our world view. Pre science, it was largely religious -- sprites, capricious gods, or an inscrutable God were responsible for all that happened. Then the scientific revolution came along, soon followed by Newton and the predictable, clockwork universe. This worldview opened up the possibility of human influence on our environment -- if the universe was predictable and rational, we could alter the future. The Enlightment was born, and soon after the industrial revolution. Newtonian science fueled the machine age, the steam engine, the airplane, the automobile and most of the economy until about 1940.

    It's at this point that two new theories -- relativity and quantum mechanics -- entered the mainstream. Relativity produced the (aborted or delayed?) atomic age. The standard model of quantum physics produced to the information age, including the microchip, lasers, MRIs, the Internet, and all things e. The evolving worldview implied by quantum physics -- entanglement, non-locality, indeterminism -- are still filtering across our culture.

    The real question, then, is why did the scientific method -- and with it Newton, Darwin, Einstein, Heisenberg, Bohr and Schrodinger -- emerge in Europe at the time it did. I suspect its some combination of random effects and environmental fitness, which are the drivers of all evolutionary processes, whether genetic and memetic.

    But its the scientific method that gave us the Great Enrichment. Period, full stop.

    1. "But its the scientific method that gave us the Great Enrichment. Period, full stop."

      I tend to agree with you. Rule of law and individual liberty were enabling circumstances but it was the scientific method, broadly defined, that made the difference. The scientific revolution, embodied in people like Simon Stevin, pre-dated our modern notions of rule of law and individual freedom.

  3. Is the "Marks" in text above Karl Marx?

  4. John,

    It sounds like you haven't read Ridley's book, The Rational Optimist, where he develops the ideas-having-sex metaphor. If not, you should read it. It's a great libertarian view of history: society develops thru specialization and exchange.

    Ridley is one of my favorite thinkers and authors, and has done much to shape my worldview. Some of his other books that you might like include:

    The Evolution of Everything (on why bottom up emergent processes are more robust, and why top-down command-and-control systems so often fail)

    The Origins of Virtue (on how cooperation evolved from self interest)

    The Red Queen (on how evolution shaped human psychology), a great companion book to Dawkins' The Selfish Gene (which will profoundly change your view of our existence).

    Also, check out his blog for his review of McCloskey's book:

  5. I believe that when she says that economists and historians can't explain it she means that you need sociology. And by that she means that the way people talk about profits and business, when paired with liberal economic institutions, is what allowed growth to take off. She claims elsewhere that at points in history prior to the 19th century, property rights were protected but people thought of what we now call progress to be wrong and dangerous.

  6. it's a shame she doesnt understand basic genetics.

  7. I agree with the idea of "sex" as the term for collaboration when it comes to inventions that produced economic growth. And she is right when it comes to the market itself produced many innovations for growth. Allowing the market to work itself out is defiantly one of the ways for economic growth.

  8. just read the "Exordium" of her "Bourgeois Equality" where she touches on these very themes at a greater length and depth (but only as an intro to the third of her "Bourgeois" trilogy which, naturally, covers these topics at vastly greater length and depth) - she has read Acemoglu and many many others - (1) read her books, not just an op-ed piece, before claiming she's somehow ignorant - (2) she's making a "both-and" argument, so an "either-or" criticism is ... misplaced at best

  9. Ridley and Don McCloskey are simply plagiarizing the ideas of Martin Weitzman, Hybridizing Growth Theory, AER 1996

  10. I'm not 100% sure, by by reading of the literature in growth and institutions is not one of quantified macroeconomic models spitting out predictions.

    North's, Acemoglu's, and Robinson's big ideas have not been sold by operationalizing institutions as mathematical objects, provide reasonable calibrations for expropriation as well as elasticity of innovation with respect to these costs, and show that the model predictions fit the historical record.

    Rather, there have been mathematical models highlighting the basic mechanisms of institutions and growth, and more reduced form empirical work showing that natural experiments bear out some conclusions in that theoretical work. Much of the legwork in connecting the data, the mathematical theory, and the understanding of the issue which you and McCloskey formulate has been done with words. Without our common-sense understanding of words such as property rights, liberty, inclusivity, open-access, etc it's not clear we would have gotten that far.


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