American Enterprise Institute

Why liberalism works: A book event with Deirdre McCloskey

Welcome and introduction: James Pethokoukis, AEI

Discussion: Deirdre McCloskey, University of Illinois at Chicago James Pethokoukis, AEI

9:00–11:00 a.m. Tuesday, October 15, 2019

Event Page: https://www.aei.org/events/why-liberalism-works-a-book-event- with-deirdre-mccloskey/

James Pethokoukis: All right. I think we should get ready? Do I have official permission to get ready? That’s as official as it gets.

Welcome. Thank you for coming by AEI this morning, bright and early after a long, three- day weekend, at least for some of us. Thanks for coming out for this wonderful event.

Many in America today say that liberalism is in decline. And it seems that the word itself has become a dirty word on both sides of the aisle. On the left, we see a renewed interest in socialism and a greater skepticism toward free speech. And many on the right seem to have cooled on liberalism as well.

The election of Donald Trump is the most obvious political example. But even many conservative intellectuals are having second thoughts about liberalism. Patrick Deneen has written a book, a conservative intellectual, called “Why Liberalism Failed.” So a prominent example of this field.

But today we’re going to give a different perspective. We have, today, Deirdre McCloskey with us to make the opposite case, and her new book, “Why Liberalism Works,” which I happen to have a copy right here. Dr. McCloskey is a distinguished professor of economics, history, English, and communication at the University of Illinois at Chicago. She’s written many influential works of economic history, most recently including, her “Bourgeois” trilogy. This trilogy, as well as the book we’ll discuss today, argues that poverty and tyranny are the two biggest problems that face mankind. And liberalism is the only philosophy that sustainably combats both of them.

She credits the rise of liberal ideas with starting what she calls “the Great Enrichment.” This enrichment dramatically increase the living standards and personal liberties of even the poorest among us. That enrichment lead Britain and then America and then the West more broadly to unprecedented prosperity. This prosperity continues today and has even been lifting inhabitants of Asia and Africa out of extreme poverty. It is these ideas that led to this prosperity that Dr. McCloskey defends, and it’s a delight to discuss it with her today. Excellent.

Deirdre McCloskey: That’s an excellent summary, which is why I want Jim to do a book with me. He gets it.

James Pethokoukis: And as I said, it would be my honor. I’m not sure what I could contribute.

Well, let’s start definitionally for a moment. What distinguishes a liberal from a conservative or a progressive? Because these words have sort of been bandied about so much. What are the differences as you see them?

Deirdre McCloskey: Well, I think it’s very easy. A liberal is someone who believes that there shouldn’t be any masters, no tyrants. Not husbands over wives, not masters over slaves, not politicians over citizens, no hierarchies. Whereas the other two, in their own charming way, delight in coercion, in masters. On the left, it’s the masterhood of the state over everyone. On the right, it’s the masterhood of the state over everyone.

So, along the conventional left-right spectrum, we’re only arguing about how to use the massive power of the state. The idea that there shouldn’t be any massive power of the state is just off the table. Whereas we liberals, you know, starting with Adam Smith and Mary Wollstonecraft and Tom Paine and Thoreau and Mill — blah, blah, blah — Milton Friedman, we all think that the state should be small — competent but small. So we’re off of the scale. We’re not on the left-right scale.

James Pethokoukis: I mean, I thought that what American conservatives were doing at least was protecting and preserving the liberalism of Adam Smith.

Deirdre McCloskey: Well, and —

James Pethokoukis: I’m not sure it’s doing that anymore.

Deirdre McCloskey: Exactly. At 1789 Massachusetts Avenue, as George Will has argued, these American conservatives — as against the reactionaries of Europe, the Carl Schmitts and so forth — they’re protecting the Constitution, the separation of powers and so forth. And I’m fine with that. I asked George once, said, “Aren’t you really a liberal?” He said, “Yeah, I am. I have to admit it. I’m not a conservative. I’m a liberal.”

James Pethokoukis: Which is quite a saying for someone who also just wrote a book called “Conservative Sensibility.”

Deirdre McCloskey: I know.

James Pethokoukis: A rather long summation of his lifetime of work.

Deirdre McCloskey: It’s a very good book. I highly recommend it along with mine. And —

James Pethokoukis: Not in that particular order.

Deirdre McCloskey: Well, mine would make an excellent gift for your Christmas shopping. Buy the book —

James Pethokoukis: Timely.

Deirdre McCloskey: — I mean, your mom will be delighted to get a copy of my book. Whereas George’s is a little thick. But it’s a good book.

James Pethokoukis: You call your sort of brand of liberalism, humane liberalism, I think, 2.0? So how is this different or how does it build upon the previous versions? And what —

Deirdre McCloskey: I was just yesterday — and I’m going to go again this noon — over at Cato. And at Cato, there’s some of them — some of the Catoites are what you might call liberals 1.0. At least that’s how they think of themselves. And here’s how to express it. The late first century BCE, Jewish sage, Hillel of Babylon, expressed the golden rule this way: “Do not do unto others as you would not want to have done to yourself.” Shortly thereafter, in the early first century CE, another Jewish sage you may have heard of said, “Do unto others as you’d have done unto yourself.”

The first is kind of liberalism 1.0. If you add the second, as I think you should, you get a rounded male and female — if you’ll allow me that distinction — way of looking at the world. The first Hillel way is “Don’t tread on me. I’m free. Go away. Leave me alone.”

James Pethokoukis: Yes, leave me alone.

Deirdre McCloskey: “You’re not my boss,” as the teenagers say. And the second is “Don’t pass by on the other side. Be a Good Samaritan. Be nice.” And the one you can think of is kind of boyish, and the other is kind of girlish. And the two make up a — the first guards against stupid, often ignorant, busybody, interfering by the tyrants. And the second acknowledges what I think we should all acknowledge — I think everyone here should acknowledge it — that we owe something to the poor. We owe something to the wretched of the earth — namely, allowing them to have a job, allowing them to advance in life.

And that’s a liberal idea. And it was very new in the 18th century, both of those. You know, because the earlier agricultural societies were hierarchical. Everyone had a master, from the king down to the family dog. The king’s master was God herself, and then down to the family dog. By the way, dog — I’m a dog lover. Dog is God spelled backwards, think of that. Anyway, sorry, stupid. That’s how people thought things had to be. And alas, a lot of people still think so. Lots of conservatives want a society of hierarchy. Now those tend to be the other conservatives. As George says, they’re kind of European conservatives, not American. So I think you need both.

James Pethokoukis: In your previous books — we mentioned this as we were talking earlier — in a way it seems to me almost like you’re doing a running dialogue with folks on the left, other academics, and scholars. Where you’re trying to sort of explain to them that, you know, with sort of great affection, here’s why you’re wrong. You’re very humble about it, but here’s why — please, please, I beseech you, consider the possibility that you may be wrong.

Deirdre McCloskey: That you might be mistaken.

James Pethokoukis: So is this book still meant for them alone? Because it seems like now you need to make the argument to folks on the left, but you also need to make this argument to the folks on the right. So are you doing that? So why do you have to do that?

Deirdre McCloskey: I think so. I’m kind of panicked as many of us are. “Panic” wouldn’t be the word, but very worried about populism of the left and right, worldwide. You know, this, let’s try socialism, which some young people of goodwill in the United States keep saying. Every time I hear that, it hurts. As though it hasn’t been tried in the Soviet Union in 1917 or in Venezuela in 1999.

But as you’re suggesting, there’s also a populism of the right. I was in Hungary a couple of weeks before the last election, which Orbán, surprise, surprise, won. And the anti-Semitism and the crazy anti-immigrant feeling was very thick on the ground, shockingly thick. But bear in mind — I think you understand this, Jim, that for a century and a half, liberalism has been under attack. For two centuries, it was under attack by conservatives.

Early 19th century, Thomas Carlisle, a friend of John Stuart Mill’s, but didn’t approve, didn’t agree with John Stuart Mill at all, and was in favor of the hierarchy even of slavery. But for 150 years, it’s been under attack from the left, in the 1870s and especially ’80s. In Britain,

the new liberalism started to redefine the word to mean violating Hillel of Babylon. “No, in order to make you better off, we gotta interfere with you. Don’t you understand that? I’m from the government and I’m here to help you.” Was increasingly the — there’s a great book to be written explaining why that happened. I don’t know. I’ve offered some more or less casual arguments in this book, but I don’t know why it happened.

But ever since then, you get more and more to the point where liberalism starts to mean what it means in the United States, which is a kind of soft socialism. And then even more insanely, what it means in Latin America is an authoritarian government. A government that uses the army to oppress the population. That’s called liberalism in — I don’t know, in some periods in Brazil and in Chile and so forth.

So, though I’m worried by populism, I think if Individual One doesn’t get reelected, I think world populism will start to decline. But the longer, steadier doubt that free people can take care of themselves and should, though having an obligation to the poor of the world, that’ll still be there, even though populism declines.

James Pethokoukis: I wonder why you seem so confident that sort of the populist moment, at least on the right, is sort of a blip, that will sort of blip away.

Deirdre McCloskey: Well, because it’s happened before. It’s blipped before. I mean, obviously, the most extreme example was the 1920s and ’30s, where one country after another turned to fascism or communism. And those were populist, the sense that you promised the world to the people. And you say, “Well, of course, you understand the party has a leading role. And for the time being, we’re going to have this dictatorship of the proletariat, and yeah, that’ll go away eventually.”

The George Orwell, that clear thinking guy, as O’Brien the party official, in 1984, said to the hero, “If you want a picture of the future, think of a boot stamping a human face forever.” So it’s happened before and then it faded. So I think it’ll fade again. Now, maybe liberalism will fade again because we were liberal. We — I mean, I don’t know, the clerisy was liberal in 1840 and then we started to slip away.

James Pethokoukis: I wonder who will fight. Will it just be that we’ll experiment with other ways and they’ll fail and people will come back to liberalism? But I’m wondering right now, who will actively fight right now?

Deirdre McCloskey: You and I will, Jim.

James Pethokoukis: I hope there’s more.

Deirdre McCloskey: Well —

James Pethokoukis: It seems to me that the sort of broad center that accepted this and there was a broad center, left and right, democrats, that seems to be shrinking.

Deirdre McCloskey: But that’s the key. The key is ideological. In order to — as Lincoln famously said, “Without public opinion, policy doesn’t accomplish anything. With public opinion, it can accomplish anything.” And, you know, he knew, because his self-assigned task was to arouse the populace to favor the continuation of the union and then the abolition

of slavery. And it’s ideology. So, where does the rubber meet the road? It meets it in what you all do, partly. You do pamphlets and policy statements, and you write books, and you try to agitate the intellectual class to understand this.

But of course, a little bit further along on the road, it’s movies, it’s country music, it’s rock music. It’s obviously opinion in the newspaper. It’s opinion expressed on the TV; that’s where it is. You get people — this morning, ex-Governor Kasich was on “Morning Joe,” and Kasich is a liberal; he’s my guy. But there are people, fewer in the Democratic Party, who are my kind of guy.

So, as you said, ideology is thought. It’s conviction. This goes back to Hume and Smith about moral sentiments. What Hume said is that morality, ethics, the firmament, the foundation of our lives is not a product of logic. It’s a product of feeling.

We see a child about to fall down a well, everyone in this room would rush over and stop the child from falling down the well. Donald Trump wouldn’t, by the way, but that’s a separate matter. If you have the right kind of, sort of equipment in your brain, you’ll do that. And those moral sentiments can be changed with not arguments so much.

You know, all I can do is argue. I’m an economist and a historian. You know, I got all these arguments and examples and blah, blah, blah. And it’s supposed to convince people. But what matters, I’m trivial by comparison with documentary makers. If Ken Burns would do a documentary about liberalism, instead of celebrating statism, as he tends to do, that would have much more influence than anything you and I can do.

James Pethokoukis: That would be very important.

Deirdre McCloskey: Sorry, that’s a long —

James Pethokoukis: But I guess I’m wondering — you know, and I wonder this all the time, like, why isn’t the chart enough? Why isn’t the chart that shows what —

Deirdre McCloskey: Freedom.

James Pethokoukis: — what we lived, how we lived in 1800 versus today. That seems to be a very powerful illustration, that it would take an awfully powerful [inaudible] to say, whatever — that, we need to stop doing that and do something else.

Deirdre McCloskey: Exactly. The great Hans Rosling, who you must all look into, R-O-S- L-I-N-G. Hans Rosling, he died last year. A professor of public health in Sweden, does these exquisite speeches, and he’s got a famous — one of his early ones, doing exactly that, saying, “Look, at the bubbles going up. And my Lord, look at how much richer the world economy is becoming.” And you must go look at those, because here’s a man who doesn’t come from a particular ideological perspective as far as I can see. He’s a Swede, so I guess he’s kind of instinctively a statist, but he didn’t indicate that. He seemed to think that freedom was where it was at. And in any case, it’s had this immense effect.

So in all my works, in all the works of Deirdre, I keep saying to people, hoping that it’ll get through, “Do you know how much richer you are than your ancestors?” I look around in this

room, and I don’t see any, you know, descendants of the crowned heads of Europe or Asia or Africa. I see —

James Pethokoukis: Deirdre, I have some very interesting family lore on my side, I’d like to inform you about.

Deirdre McCloskey: Okay, maybe you’re a Habsburg, but most of the people here are not. And your people were unspeakably poor. How much? A factor of 30 — about 3,000 percent improvement.

People say — I gave a talk at the Department of Cultural Anthropology at Cambridge, a very famous group of anthropologists last year. And one of the anthropologists, who I won’t name, a man who’s done excellent work, stood up and said, “Well, you know, I agree with your factor of 30 business, yeah, I’m aware of that, but you know, 3,000 percent is much too big. Think about it.” And I didn’t say, “Go back to your fourth-grade arithmetic, dear, and get that straight.” But anyway, 3,000 percent redistribution, expropriating the expropriators has nothing to do — it’s just not going to come even close.

James Pethokoukis: I believe The New York Times is running a series, part of which is making a case that a big factor was indeed expropriation. Slavery goes a long way to explaining that great enrichment.

Deirdre McCloskey: I wrote an article in Reason last year, which you can consult on my website, attacking that idea. I call these people the King Cotton School of History. And they’re unscholarly, and they’re wrong. And they don’t understand economics.

Now, inscribed in the wall of the Lincoln Memorial is the great and generous sentiment of the second inaugural, in which Lincoln says, “If the wealth piled up by 200” — I forget what it was — “240 years of enslavement, if this war must go on until all that wealth is taken back, the judgments of the Lord are just indeed.” Shows how carefully Lincoln the boy had read the Bible because that’s from Psalms. It’s not a particularly famous passage. But it’s wrong as economics, makes no sense at all.

The United States is not rich because of slavery. If it were so, then other slave societies would be rich, right? African societies, African empires, which were, for the most part — I think probably all of them, certainly true of the Mediterranean — were slave societies. They’d have had a great enrichment. There’s something deeply screwy — and I can go into other arguments against this — about this idea that exploitation is what made us rich. That’s the argument of the left. I’m completely unsurprised that the parish newspaper of the heart of independent minds, called The New York Times, would have a series saying such a thing.

James Pethokoukis: And I have —

Deirdre McCloskey: Without any contrary voices.

James Pethokoukis: For sure.

Deirdre McCloskey: That’s lovely. That’s a great newspaper. God Almighty, I like The Washington Post; it’s something like a real newspaper. I was very proud when I got a

column in The New York Post, because that’s a real newspaper. And The Times, we’re the newspaper of record, we’re — oh, Jesus.

James Pethokoukis: Again, the chart, you know, showing the line going straight for whatever and then going up like this. So I think folks on the left, their critique would be, well, but inequality. Inequality that is causing — is just too severe. And then the folks on the right — I think this is part of the argument on the right, among the populace is, great, it’s causing more wealth broadly. It’s giving us iPhones, but it’s too disruptive. It’s too disruptive for our lives, for our families, just sort of go dynamism that all you liberals like. It’s bad for people, families, and communities.

Deirdre McCloskey: Both of these views don’t take account of the fact that you help the poor people if you have a dynamic economy, that the way poor people got better off is a growing economy. The families in Mississippi that James Agee and — what’s his name? The photographer — objectified in their famous and wonderfully eloquent book of 1941, I think. Let Us Now Praise Famous Men. These were unspeakably poor sharecroppers. A journalist, very interestingly, went back to that community and talked to the older people who had been the naked children in those photographs. And they much resented this objectification of them, using them for political purposes.

And their grandchildren went to college. That’s the point. How many generations back does everyone in this room have to go before your people are unspeakably poor? My case, it’s about three generations. That’s how to get people better off. And the argument that a free economy is disruptive is true enough. A terrifying phrase of — I always forget his name. It’s not Scharmuller. Who’s the guy?

James Pethokoukis: Schumpeter.

Deirdre McCloskey: No, it’s not Schumpeter, it’s —

James Pethokoukis: I thought you were going with creative destruction.

Deirdre McCloskey: I am, but it’s not Schumpeter’s phrase, he stole it from someone else. Who?

Man 1: Sombart.

Deirdre McCloskey: Sombart. For some reason, I can’t keep Sombart in mind.

James Pethokoukis: Well done.

Deirdre McCloskey: But he’s the one who invented it about 1915, creative destruction. Well, it’s creative. It really is. And its creation, not capital accumulation, that made us rich. It’s new ideas that made us rich, not piling up, brick and brick or BA on BA. That’s necessary, but so is the error of time and the existence of water, liquid at normal temperatures, and all kinds of things. The existence of a labor force.

But the spring is ideas, and the ideas I claim were allowed, permitted by the coming of liberalism in the 18th century. And a completely new idea. In 1685, Richard Rumbold, when the 1640s in England had been — was still a level up as Charles first called them. You know,

equalizing people against this hierarchy that traditional societies had. Was captured and convicted — I forget the — there wasn’t any justice in it. By James II judges — and was hanged. And under English law, you were allowed, before you got hanged or your head chopped off, to make a speech from the scaffold. So he did.

And in the speech he said, “I think there is no man born of God above another. For no man comes into the world with a saddle on his back, nor any booted and spurred to ride him.” To which the crowd gathered to watch the hanging, and it was kind of the reality TV of the day. Probably laughed because in 1685, it was a nutty idea. But by 1785, a lot of people were saying it. By 1885, tyrants were adopting it and certainly now.

And this was completely new, and it made for enrichment. It inspired people. It gave them permission. “Equality of opportunity” is a bad phrase. It doesn’t work because it suggests we’ve gotta move resources around. By the way, I’m in favor of financing of education, elementary education. I think I should be taxed to pay for it — not provided by the state, but still.

Let’s see, I lost my train of thought with all my footnotes. So this idea is so unusual in human history, and it inspired people. It gave them permission to venture. Not just —

James Pethokoukis: Have a go.

Deirdre McCloskey: Have a go, not just Edison or Rockefeller or something, but ordinary people starting a hairdressing salon, you’re permitted to. Now if you want to braid hair for a living, in many states, you have to get a license. We’re going back to the economy of permission.

My friend, Hazlett, has a wonderful book on the FCC and all that stuff, where his way of saying it is: For a long time, under the regulation of the airwaves was done on the principle of Mother May I. First, you ask your mom, may you do it. Whereas a much better principle is do it and then apologize if it doesn’t work out.

James Pethokoukis: Actually I believe that. I just read a story that in San Francisco, I think they’re going to create a new department of Mother May I for emerging technologies. That if you want to try something new in the city, for instance, scooters, you need to run it by this agency and, you know.

Deirdre McCloskey: Absolutely, and that’s what France had in the 18th century. So as I said, we’re moving back to this mercantilism, to this lack of permission in society. In France, in the 18th century, they had such — this is, of course — the French, they do it all — it’s highly centralized. In Paris, there was a committee. If you want — this is almost incredible but true. If you wanted to open a new, I don’t know, gristmill somewhere, you had to get permission from Paris. Whereas in England, it was go do something, and then there’s tort law if you screw it up and hurt people. And otherwise, no, go ahead, do it.

James Pethokoukis: So do you have no sympathy then for the anti-disruption argument, which is filled with a lot of nostalgia for sort of a pre-globalization? Here you hear a lot about — back in the 1950s, you had more stable families; you had mom at home.

Deirdre McCloskey: That was fine.

James Pethokoukis: — you had a job for 50 years and all of that.

Deirdre McCloskey: That was fine for those who had them. But there was a whole part of the economy and a very large part that didn’t have it. And now those non-havers have it.

Now, of course, I have sympathy. If somehow an AI machine is developed to write books about liberalism and economic history and I’m substituted for by this machine, I’ll be unhappy. But being a liberal, I will gracefully withdraw.

Henry David Thoreau was in business, not widely known. He took over his father’s pencil business, Thoreau and Sons. He improved the machinery, a very practical guy, and he sold for about 10 years the best pencils in the United States. Then a French company leapt over Thoreau and Son, and Thoreau, being a liberal, gracefully withdrew. And Thoreau and Son went on to supply graphite to the printing trade. That’s what they did.

This is how it goes. Look, here’s the problem. You say, “Oh, but God, we gotta help those people in Youngstown, Ohio, or the poor ex-professor who’s out of a job because of AI, takes over his job, her job.”

The problem is that every year in the United States — now hear this, 14 percent of the jobs disappear forever. The company moves from Washington to Tennessee. The company gets competed out of existence. The company decides it doesn’t need as many people as it thought before. A new industry arises that is better than that industry. In the year 2000, 130,000 people were employed in — wait for it, video stores. Where have those people gone? Are they standing on the streets? No, they’re not. They went into other occupations. And now we have much better access to films than we did before. Then we had to go down to the video store and look through all the stuff.

So if you’re going to have a progressive economy, you’re going to have disruption, and it’s not just labor that’s disrupted; it’s capital. This building is a good example. You told me, Jim, when AEI took it over, it was in terrible shape. It had been used for the Morgans, was it?

James Pethokoukis: Mellons.

Deirdre McCloskey: For the Mellons — starts with M. For the Mellons and then the Mellons passed into — got eaten or something. And it became — it’s being reused, and you had to do an investment in it. And this happens all the time in a dynamic economy.

So you can’t — if it’s 14 percent and you say, oh, the poor coal miners in West Virginia, we gotta give them money to stay in West Virginia or we gotta pay for the capital loss on the houses of people in Youngstown, Ohio. You can’t do it. It’s 14 percent. Look, the most famous example and obvious of this is agriculture. In 1800, 80 percent of the American population was on farms. Now it’s 1 percent. Those jobs disappeared forever. And they damn right, good.

James Pethokoukis: Why do we seem all of a sudden to be less accepting of that kind of — because I’ve heard people — and this is not people on the left or Bernie Sanders. I’ve heard people on the right question, you know, certainly why should we allow a company to send

jobs overseas. But why should a company just be allowed to pick up and leave a town for another place in the United States without talking to the community?

Deirdre McCloskey: It’s a change in our —

James Pethokoukis: Why should they just be able to lay people off? It’s a question that a company needs to do these things. You know, what’s the community getting?

Deirdre McCloskey: It’s a striking change in ideology. You see it also in NIMBY, not in my backyard. Whereas 100 years ago, when a mine ran out, gold mine or copper, something, people left and they said, “Well, that’s too bad.” And they — that is, the workers — accepted it ideologically.

And here’s what we need to do: We need to get people to understand they have a choice. You could have everyone do the same job tomorrow that they’re doing today. Then everyone would have a job forever. Now, this is a slight problem because people die. But I don’t know, somehow we’ll work that out. We’ll have casts. So your mom’s job becomes yours. I don’t know, maybe that’s how we’ll work it out.

This will be a completely stagnant society whose income is not increasing and everyone will be safe. But then you ask yourself, which society do you want to live in? It’s like the philosophical point that the Rawls and Nozick and lots of other philosophers back to Hobbes made, which is that behind a veil of ignorance. Which society would you choose? The society in which enterprises made decisions and people had to move to North Dakota to have a job in the oil industry temporarily? Or where they stay in Youngstown, Ohio, forever?

I find it very irritating that people think that places need subsidies. What’s this? Land love? I don’t get it. People need subsidies. I’m willing to help increase the mobility of the American labor force, which has fallen in the last 40 years. But I’m not willing to think of — I don’t know, I was just in western Massachusetts, and out of the tourist season, it’s a poor Appalachian-type place. And what, are we supposed to think of the Birchers as a place to be subsidized?

James Pethokoukis: I think there are people that, they want exactly —

Deirdre McCloskey: They talk —

James Pethokoukis: So we have this sort of web of responsibility and obligation to our communities, to our families. And what you’re suggesting is basically, it’s just you. And you can feel free to pick up and move, but moving is hard and it’s too hard —

Deirdre McCloskey: I know.

James Pethokoukis: — for too many people.

Deirdre McCloskey: I know it’s too hard. And then what I want to do is switch back to an ideology of, well, of freedom. Because look, being free is scary. You people are free to resign from AEI. I don’t recommend you do it, but you could tomorrow and walk away and go somewhere else. But it’s nerve-racking; it’s disturbing. But a free society, which you people participate in, is one in which you can take this job and shove it.

And a slave is a person who can’t take this job and shove it. And a kind of voluntary slave, as it were, is someone who is tempted by subsidies, by the state, compulsory taxes on someone else, to stay in Youngstown for Youngstown.

The French used to have a shipbuilding and repairing industry, and it moved to Finland and Japan and India, various other places. So, being the French, they subsidized the ship makers in northwestern France to stay there and to play bull and to drink aperitifs. This is not the kind of society a free person wants to be in.

But the problem is that people want — not everyone wants to be free. Take a look at the — I don’t know, take a look at the Russian people. They want a czar, and they keep getting czars, the good czar. And as you were saying earlier, that’s the kind of motive behind populism, the man on the white horse, the father of the nation.

James Pethokoukis: I think a lot of people understood the Republican Party as sort of the economic freedom, creative destruction, dynamism party. But now a bigger chunk of Republican voters seem to be those people in Youngstown, and the message seems to be changed from, “Here’s your freedom, make a better life for yourself” to “We’re going to help you stay there, and we’re going to save those jobs, and we’re going to save those factories.” And if that factory owner wants to leave, the president will tweet something to try to intimidate them into not leaving.

Deirdre McCloskey: Yeah, exactly. Well —

James Pethokoukis: So where’s the creative destruction party? Where’s the dynamism party? Where’s the economic freedom party?

Deirdre McCloskey: It’s gone. Because the Democrats more or less uniformly, Joe Biden might — of the current candidates, might be the best on the score, but I don’t know. I’m not sure. But when they’re asked, they all say, “Oh yeah, the state should come in and help them.” In fact, who is it? The senior senator I think he is from Ohio. What’s his name? He’s a protectionist. he’s a Democrat. He’s a protectionist; he’s a trade union protectionist. “Let’s have steel tariffs.” “Yeah, you bet.” So, there’s no voice for free trade.

James Pethokoukis: Let’s talk about this for a second. I don’t have these numbers exactly right. But you’ll hear these numbers saying that, you know, 30 years ago, the top 1 percent had 20 percent of the wealth. Now, they have, I don’t know, 40 percent of the wealth. And that on its face is sort of intrinsically an immoral situation. If that is what your innovation, market-driven, economic freedom is giving us, how is that sustainable?

Deirdre McCloskey: It’s completely wrong. The accounting is wrong. I’m fond of saying to my colleagues, professors of accounting, “That economics depends on your field.” If you don’t get the accounting right, you’re going to get the economics wrong.

So Piketty, I did a 50-page review of his book. It’s available on my website. And one of the technical points — and I try to be fair because, you know, when I came to the book I thought, well, it seems to be a serious book and he is a serious man. I don’t think he’s a bad man. He ignores human capital. He ignores social capital. He ignores public capital. So wealth, he

thinks, is just factories and farms. It’s physical capital. And then the claims to physical capital, in stocks and bonds. That’s it.

This is loco. This is insane. Human capital, as everyone in this room shows, is an increasing part of what produces income in the United States and other advanced economies. So it’s nuts, and it’s owned by the workers. I said, you can take this job and shove it, walk away with your human capital between your ears. And it’s not a minor matter. This is a big deal. Something on the order of, I don’t know, half of income comes from human capital, probably more. I haven’t done the calculations.

But in 1848, your ancestors and mine had their backs and their hands. That’s all they had. That’s the skill they had. Many of them couldn’t read. My Irish ancestors certainly in the 18th century couldn’t read, okay. And the bosses had the farms and the capital, the factories and the machines. And that’s the classic Marxist and indeed economic story of the world. The classical economists, that was their model. It’s wrong.

I mean, he didn’t even include physical capital in roads and the depressingly large amount of government buildings in Washington, right? So he missed most of the capital. So the inequality talk is rubbish. And that’s not the only problem it has.

James Pethokoukis: Let me ask you, but — again, some people on the face will say, “Boy, you know, Jeff Bezos is worth $100 billion down from $160 billion pre-divorce.”

Deirdre McCloskey: Good for him.

James Pethokoukis: Bill Gates, close to $100 billion. It’s just too much. It’s just on its face, too much wealth. It can influence the political system. It’s bad for democracy. Would he not have built Amazon if he could only become a five billionaire or a 10 billionaire?

Deirdre McCloskey: Yeah, but that’s the incentive argument. That’s what the left thinks we liberals believe, that the reason that Jeff Bezos is justified in having ownership rights of $100 billion is that this is an incentive. Like, you know, you pay people more to work harder. And that’s not it. That hasn’t bugger all to do with it. The economics here is that it’s a signal, Jeff Bezos — depending on whether you use European or English pronunciation — it’s a signal that, boy, this was a good idea. Let’s do more of it.

And indeed, because he’s made such a success out of Amazon. I mean, I use Amazon all the time. It’s a reinvention of Sears Roebuck of 100 years ago, the mail-order revolution in American retailing. It’s signal. And sure enough, company after company is reproducing Amazon in its own company.

So now you can order on the internet from any company and it comes. This — actually I haven’t got it on right now. But I’ve gotten very excited about a particular brand of blouse. I have about eight of them by now. I keep ordering them online. And I’m not ordering through Amazon. I’m ordering through, I don’t know, Macy’s or something. And so there’s that signaling function that profit is all about. It’s not about incentives.

And in any case, if Jeff Bezos gets money because he’s done something that we like, what’s the complaint? It goes back to the Wilt Chamberlain example in “Anarchy, State, and Utopia.” If we get pleasure out of watching Wilt Chamberlain do jump shots, basketball

jump shots. “Oh, hey, that’s fun to watch.” And we pay for it, we pay $1 or $10 or $100 to watch him do it. What’s the problem? Wilt gets rich. I don’t care. I’m not envious of him getting rich. I mean, okay, as long as I’m doing okay, and I am.

James Pethokoukis: So what doesn’t the —

Deirdre McCloskey: I mean, look —

James Pethokoukis: What don’t young socialists get? What doesn’t —

Deirdre McCloskey: They think —

James Pethokoukis: — democratic socialist, Bernie Sanders, Alexandria Ocasio-Cortez?

Deirdre McCloskey: Here’s what they think. Two things they think. They think it’s easy to run the economy. That’s the first thing they think, because they have no understanding of how a business actually works. Small business, large business, if any of you been in a small business or large business, you know that it’s bloody hard and you’re making complicated decisions all day long. But, you know, that’s true if you’re a carpenter, you’re making complicated — that’s the human capital part. The skill of a carpenter is human capital, which Piketty and the other complainers about inequality just ignore. But okay, let’s see —

James Pethokoukis: So what they don’t understand, so you’re saying [crosstalk].

Deirdre McCloskey: Okay, that’s the first thing they don’t understand. They think the economy’s easy. So it’s really easy. Here’s a startling number: The Food and Drug Administration regulates — which is to say, governs in detail — 20 percent of the American economy, food and drugs. That’s a pretty big number. And it’s ridiculous to think that a bunch of obviously very nice people — I see them walking around in DC. They’re very nice. They’re college graduates. They have nice suits on. I’m sure they’re very nice people. But to think that they can decide what cancer treatment I get is insane. Okay, that’s one thing.

The other thing they don’t understand — let’s see, what’s the other thing they don’t understand? They think the economy is easy so that Elizabeth Warren can just take it over and run it with ease from Washington.

James Pethokoukis: She has a lot of plans.

Deirdre McCloskey: She has a lot of plans and they’re all wonderful and she’s going to do it and don’t worry. It’s actually rather similar to Trump. It’s, again, the left and the so-called right getting together. What’s the other — let me see what was the other thing I was going to say? There’s this ease — well, I have to sort of drop back.

They don’t understand the invisible hand at all. They think like lawyers. It’s very much to the point that most of the candidates in the Democratic Party are lawyers. Because lawyers — some of you are lawyers — think that the way to solve a problem is to make a law. That’s pretty easy. If you want to increase the welfare of poor people, raise the minimum wage. What could be simpler? I don’t know why they don’t raise it to $500 an hour. But anyway, that seems simple.

And that’s the impulse. It’s the legal impulses against the Hayekian economists’ knowledge. It’s not really a belief. It’s not just some crazy ideology we have which doesn’t make any sense. The belief because we see it every day that the invisible hand works. When you buy a loaf of bread, miraculously, it shows up at the store. I mean, this is astounding. You didn’t have to order it six months in advance. There’s a nice joke from the old Soviet Union. A guy wants to buy — what were their terrible cars?

Man 2: Lada.

Deirdre McCloskey: Yeah, some horrible car. Yeah, a Lada. So he has to order it 10 years in advance. And he’s quite startled that he has to order it 10 years in advance because the order has to come through and then they make it and then they give it to him. And the salesman says, “Well, we have to specify the day you’re going to get the car.” The guy says, “It’s 10 years in advance. Why’s that? Okay, I’ll specify, June 3 10 years in the future.” And then the salesman says, “In the morning or the afternoon?” And the guy says, “What are you talking about?” He says, “Look, we have the plumber scheduled to come in the morning.”

And that’s the way people think the economy has to work, that it’s all planned from on high and that’s not how it works. Supply and demand is miraculously good. And people like Piketty, who is supposed to be an economist, don’t understand this at all.

James Pethokoukis: They’re also making a moral argument too. They’re not just making —

Deirdre McCloskey: Not making —

James Pethokoukis: I mean, a lot of — and this is why I’ve been perhaps focusing on to a fault. This sort of the idea that this is the way for an economy can deliver the goods. And they’re also making the case that it’s just — making a moral argument as much as —

Deirdre McCloskey: Yeah, they’re making a moral argument, and I’m making a moral argument. I’m not one of these economists that think, oh, I’m a positive scientist. I get so tired of this crap. I’ve been fighting it for 40 years. Positive economics, oh, we don’t do politics or ethics in economics, what a load of codswallop. Of course we do. We’re a social science. Even if we were a physical science, we would be doing — we’ve learned from science studies that that’s how science works, ethically. It’s an ethical question.

Okay. And I’m making an ethical point. I’m saying, I want you to be free; this is ought to be free. You’ve got to accept disturbance. You’ve got to be flexible. Look, here’s the analogy I often make, and I hope this is effective with my friends in the left or right. Would you like rock music to be run by the government? Would you like science to be run? Well, it is to some degree. But would you like painting to have a government agency running it? Well, in the Soviet Union they did. Would you like literature to be determined by the government? Well, obviously not. And somehow, we get novels that we like or don’t like. We get nonfiction books like this.

James Pethokoukis: Again.

Deirdre McCloskey: We get books that we like or don’t like. That’s how it’s done. Why not in the rest of the economy?

James Pethokoukis: I think democratic socialists would argue that —

Deirdre McCloskey: Which by the way, is a contradiction in terms.

James Pethokoukis: — that they’re that kind of economy, that kind of study creates a better kind of person. That a capitalist — even though I know you aren’t fond of that word — that that’s how it creates a selfish person. Which is sort of the point of your original book about the virtues.

Deirdre McCloskey: And the evidence is completely against that. The famous phrase in Soviet Union communism was the “nature of man under socialism.” That under socialism, under the dictatorship of the proletariat, and then ultimately the ideal communist society, human nature would change. And that people would be generous, and they’d play a cello in the morning and then go work a little bit for other people. And then they’d go back to the cello in the evening. And it’s nonsense. That’s not how the Soviet Union worked.

The Soviet Union wrecked Russian ethics. Ask anyone old enough to have experienced it. You became selfish. You became a con man and a con woman in the Soviet Union. You were constantly looking for advantage, however small. Whereas the kind of generous, liberal attitude, I’m okay, you’re okay, let’s go with it, that’s what’s encouraged by a free society.

I think in my first book of my trilogy, I made this case. It’s called “The Bourgeois Virtues.” And it said that the nature of man under what I call innovism, or liberalism, not capitalism, which is a stupid word, it improves people. This is what lots of people said in the 18th century. They expected, do commerce, sweet commerce, to soften people by their interaction.

And that’s what happens in your own life. You learn to be polite to the customer. Say you enter an American store, “How can I help you?” Whereas if you’ve ever been to Cuba, you enter a government-run store, which has nothing in it, and the person insults you. “Who are you?” So it’s simply not true that the good society is a collectivist one.

Here’s why people think that. We all come from families. Families are socialist enterprises, very appropriately. From each according to her ability, to each according to his need, and that’s how families should work and do work. Mom in the old kind of family of the 1950s, ideal alleged family, was the central planner. And anyway, the decisions of the bosses — namely, the parents — were final. And it wasn’t a vote. You might have a family council in order to fool the children. But that’s where we come from, and we love it quite appropriately, sweet family. And then we say, “Oh, gee, why can’t we run a society of 330 million people the same way?” And that’s what Bernie thinks.

Bernie and I and Jeremy — what’s his name?

James Pethokoukis: Corbyn.

Deirdre McCloskey: Corbyn, are the same age. And in 1960, we had the same opinions, overthrow capitalism [inaudible]. I was not a communist, but I was a sort of Joan Baez socialist. I sang labor songs and so forth. And anti-Vietnam and all that. And Bernie and Jeremy haven’t changed their mind in the face of the evidence at all, in 60 years. I don’t know why they can’t see that collectivism, the family-style society is not a good one.

In fact, again, it’s the left and the so-called right — it’s Donald Trump wants to run a family. The only experience that guy has ever had was a family business. He wasn’t even corporate. So he never had any board or stockholders to please. That’s why he’s such a tyrant. So he thinks that it’s going to be a family, and he’s the boss.

James Pethokoukis: I’m going to open up for questions in just a minute. So now would be the time to think about your questions. Which end in question marks. They’re not soliloquies or manifestos or anything. They are questions —

Deirdre McCloskey: I do the manifesto.

James Pethokoukis: Do you think China still makes your case?

Deirdre McCloskey: Absolutely.

James Pethokoukis: They are the case where even just a bit of a nudge toward more openness and economic freedom, you know, creates tremendous results, but yet, it’s a country — that seems a reverse course toward a more totalitarian society.

Deirdre McCloskey: That’s Xi, and Xi is a terrible man. And my friend, Steve Chung, who is a great Chinese economist, he agrees with me. But okay, there’s a claim that you’ll hear that they’ll talk about Singapore if they’re very sophisticated. They’ll talk about China, and they’ll say, “Well, you see, tyranny works. So there’s a Chinese model of tyranny and that makes us rich. Because, you know, the economy is easy so we just need someone in charge to push it around.”

James Pethokoukis: Where to build the bullet train.

Deirdre McCloskey: Where to build the bullet trains. And the bullet trains, which I’ve been on, are insane. China is a very poor country still, although it’s done very well. I admire the Chinese enterprise. But it’s still poor, and it’s got more high-speed rail than all the rest of the world combined. And that’s because the Communist Party grandees wanted it; it’s glorious. The stupid Belt and Road Initiative, to build a railway across Central Asia. One container ship holds 100 car trains, so how many trains do you have to have going across Central Asia to match one container ship at Shanghai? This is crazy.

The part of the Chinese economy that works is the part where they started to say after 1978, “Okay, okay. You can open a grocery store if you want.” And Xiàn, the so-called counties in China, that’s where the competition happened. The central planners stopped doing it, and the Xiàn competed with each other for enterprises, for factories. And that’s what made the Chinese economy work. Because then business people held the upper hand, so to speak, because every Xiàn in the country wanted them to come there.

And so you got an increase, growth rate of sometimes 10 percent per year for 10 years. That solves a lot of social problems. So it’s the liberal parts, not the industrial policy, central planning, regulation part of the economy that does well for people.

James Pethokoukis: But yet there are certainly people on the — certainly on the left but also on the right who say, “Oh boy, the industrial policy kind of does work. Maybe we don’t

have to, you know, be just like China, but maybe we should plan a little bit more whether it’s using trade policy or subsidies.” Maybe a little bit of capitalism with Chinese characteristics?

Deirdre McCloskey: It’s completely crazy because it’s the tyranny of the Chinese policies that have made them worse off. And you can see this in what’s happening under Xi. The growth rate is falling because he’s trying to make it more and more regulation. I was in central China, kind of an MIT-type engineering school, and they showed me proudly their software-hardware of facial recognition. Said, “Now we can watch every single person in China all day long.” Talk about 1984. I try to be polite. I said, “Oh, isn’t that lovely?”

So it’s the free parts that work. Because innovation comes from individuals; it doesn’t come from governments. This character [inaudible] is a menace. There are many of them around. But Xi is a particularly bad one. Actually, the person who won the Nobel Prize yesterday is another one of these people, Esther Duflo. And these people want to run your life, and they think they can do it. And I don’t see why they think they can do it. It’s very hard.

James Pethokoukis: My last question is, again, there’ll be people who say, well, that’s really great for China. But you know what, we ended up — you know, 500 million people may have left extreme poverty, but we’ve also in the process created a strategic competitor, a technologically advanced, you know, much stronger military power. And it would have been better had they just stayed like they were in 1978.

Deirdre McCloskey: That goes back to Adam Smith. Everything goes back to Adam Smith. He said famously, “It would be appalling” — he didn’t say it quite this way. He said, “Look, from a utilitarian point of view” — he didn’t use the word — “the loss of your little finger would be more painful to you, say it got chopped off or something, than the death by earthquake or something of the entire empire of China.”

But he said, “You would not be able to stand yourself if you weren’t willing to give up your little finger to save the Chinese. Your sense of justice, not just utility, would be deeply offended if you didn’t have the moral rectitude to say, ‘Oh, yeah, I’m willing to take my little finger indeed, shoot me, if it’ll save all the people in China.’” And anyone here, I’m sure would have the same feeling. This kind of, “screw you, all I care about is myself,” that’s not a human way to behave.

So to say, “Oh, well, it would have been better for the United States.” You know, in any case, this strategic disadvantage we get because the Chinese are now more prosperous than they were. I don’t care. What do I care? They can lean on Tibet, which I find appalling. And they can sort of be bossy in the South China Sea and sort of rattle sabers about Taiwan. But it’s the United States that has 800 foreign bases, not China.

China when it goes abroad, invests, that’s what it does. People say, “Oh, that’s terrible. The Chinese are coming. They’re taking over the world.” We had the same feeling about the Japanese in the 1980s. It turned out they went around buying up assets in the West, especially the United States. And then we paid them back in dollars that had fallen 50 percent compared to the yen. And they bought up Rockefeller Plaza, and it turned out to be a terrible deal.

James Pethokoukis: Golf courses and —

Deirdre McCloskey: The Chinese are doing exactly the same thing. Let them do it.

James Pethokoukis: Right. We’re going to go to questions. So if you have a question, you can raise your hand, and we will send a microphone over to you go.

Deirdre McCloskey: Where’s the microphone?

James Pethokoukis: Microphone is right back there.

Deirdre McCloskey: Okay, here —

James Pethokoukis: Oh, back on this side.

Deirdre McCloskey: Come on.

James Pethokoukis: Okay, questions over here on this side.

Deirdre McCloskey: Actually, Jim, the advice to give people is you start asking questions from the moment the speaker opens her mouth. That’s when you should be thinking, not sort of at the end and then the host says, “Well, have you any questions?” I mean, I —

James Pethokoukis: I thought I gave a solid five to seven minutes.

Deirdre McCloskey: Well, it took me years to figure this out, when I was a graduate student, you know, I didn’t know that. But as soon as the speaker starts talking, you should say, “I wonder, is that right?”

James Pethokoukis: And also, when we’re done with the questions, we’ll also have a book signing. I’m not sure that was made clear as well. But yes, your question.

Q: Good morning. Thank you for coming out here and speaking with us. I’m really interested in what you were talking about, the intersection of ethics and economics. Economics is a social science. And I think we all would agree that, like, ethically, we’re opposed to the state being involved in regulation. But I’m curious what you think about unions because they fall within the private sector and they work like on a company-to- company basis. And so there’s still that, like, interaction between individuals. I’m just curious how you think about that from like both an economic and an ethical perspective.

Deirdre McCloskey: I know more union songs than anyone in this room. I know there once was a union made and never was afraid of goons and ginks and company, thanks. I’ve been there, and I belonged to the National Maritime Union briefly when I was young. And then I joined the faculty union at UIC. They were so thrilled when — when McCloskey signed the card, my socialist friends in the English and history department.

But trade unions are monopolies. That’s how they work. Most of them don’t work in that respect very well. I was a member of the Teamsters, as a result of being in this union of faculty. And the Teamsters take their core constituency, the truck drivers, don’t increase the wages plus working conditions of truck drivers more than 1 percent or 2 percent. And it’s worth having, but it’s no big deal. It’s not through — I think you would agree, it’s not through trade unions that we’ve gotten rich.

Now, on the other hand, I sort of sympathize with your point. Okay, why not a trade union? Some of my labor economist colleagues on the left will argue that trade unions improve management, improve the efficiency of the operation. And I can see that happening.

In the kind of adversarial trade unionism that we have in English-speaking countries, I’m not so sure of that. In Britain and the United States and Australia, it tends to be the struggle between capital and labor. Whereas in Germany, as you know, the unions are company unions often — not always. And in Sweden —

James Pethokoukis: Elizabeth Warren seems to be very thrilled with the German economic model.

Deirdre McCloskey: Yeah, well, I can see why you like the trade unions in that circumstance because there’s always a union representative on the board of German companies. And that’s how they solved the conflict between capital and labor in the late 19th century. Whereas we in the Anglosphere had this adversarial sort of common law model of advocacy on both sides. I’m a student of John Dunlop, the great Harvard labor economist. I actually took his course. And John was a very important economist, became the secretary of labor.

So I’ve got very mixed feelings about unions. In a small country like Sweden, where something like 80 percent or 90 percent of the population is in a union — it’s quite extraordinary. The United States never came close to that. What the unions do is they realize that Sweden is a small open economy. So if you’re a union member in the Port of Gothenburg, you know that you’re competing with Hamburg, right? So you can’t go crazy and take away all the profits of Gothenburg, or you’re going to lose your job. Whereas there’s this kind of myth in the United States that trade unions can significantly increase the welfare of ordinary people and there’s no cost. So that’s what I gotta say about trade unions and not very insightful.

James Pethokoukis: Any other questions? Right here.

Deirdre McCloskey: You gotta go down and join the union, you gotta join it by yourself, there ain’t nobody can join it for you, you gotta go down and join. They say in Harlan County, there are no neutrals there, you neither are a union man or a scab for J. H. Blair. Godamn. If we had liberal songs like that we’d win the ideological battle. So you guys and girls who have an interest in rock music, come on, start making up liberal songs.

Q: So that’s a good lead into my question. So if Adam Smith were resurrected today and given a half an hour to catch up on current events, I think he’d be surprised by nothing that comes out of the mouths of Donald Trump regarding trade, Bernie Sanders, Elizabeth Warren, regarding trade.

Deirdre McCloskey: Exactly right.

Q: So why have we economists done such a poor job over the course of two and a half centuries at explaining what actually is a fairly straightforward proposition that free trade is beneficial. What have we done wrong? What can we do better?

Deirdre McCloskey: One thing we’ve done wrong — and there’s no way of extracting ourselves from it — is collecting foreign trade statistics. This was a terrible mistake. If we had foreign trade statistics between Maryland and Delaware, people would be up in arms that Maryland has a balance of payments deficit with Delaware. That was a stupid thing to do. Everyone in this room has a balance of payments problem with their grocery store, I take it. You don’t give consultative political advice or insights to your grocery store owner; you give her money. You have a balance of payments deficit.

I agree with you. It’s astounding that people don’t understand this. But there’s a kind of a nationalism that Jim was talking about. It’s kind of “Oh, we’re in this together.” When I make the argument that, well, if you like, protection on a national level, why not Illinois? Why not Chicago?

Actually, in the 19th century, before early 19th century, there was a tariff wall around Paris. The second act of “La bohème,” I think is the second act starts in at the tariff wall. Berlin’s tariff wall wasn’t taken down until the 1850s or so. Well, then we could have it around my neighborhood, or hey, even better, I will have a tariff wall around my house so I’ll have lots of jobs. I’ll be able to make my own accordion, grow my own wheat, develop my own economic theories. But people are unimpressed by this because they’ve got a kind of nationalism, that says, oh, well, but my [inaudible] and they go on, I don’t know.

If you can figure out some way to convince an idiot like Donald Trump, then you’ll be able to convince lots of other people, and this would be great.

James Pethokoukis: Questions, gentleman, directly as I’m really pointing my pen at.

Q: It seems that much of our polarization today stems from two separate and distinct views of history, particularly economic history that we possess in our country today. And that there’s one version that maybe it’s the Howard Zinn version, but it’s broader than that — that is, you know, the Industrial Revolution caused misery and poverty, that the robber barons exploited us.

Deirdre McCloskey: Oh they’re awful.

Q: You know, we were saved from the Great Depression by the New Deal.

Deirdre McCloskey: Absolutely, it’s all complete nonsense.

Q: Yeah, and Hayek wrote an essay history in politics —

Deirdre McCloskey: He did.

Q: — where he addressed this. And a lot of views today are shaped by a view we have of economic history, even if we’ve never read any economic history —

Deirdre McCloskey: Yeah, that’s right.

Q: — that comes from the novels, the popular culture. How do we address that? I mean, I know you’ve tried.

Deirdre McCloskey: Well, by — I did a book in 1993 Oxford Press called “Second Thoughts,” about American economic history, which challenged some of these things. And all my career as an economic historian in Britain, I’ve been trying to try to say this. And indeed, in my more recent work, I’m saying, look, the big thing is the factor of 30, the 3,000 percent. And all this talk about how terrible modern economic growth has been is just nonsense. But it’s very hard to get to people.

For example, they think that Charles Dickens is a good source for thinking about the effects of the Industrial Revolution. Charles Dickens was a very good writer, an amusing guy. He knew nothing about industrialization. He visited the north of England where it was happening once, and then he wrote a charming but silly book called “Hard Times.” Which I’ve used in economics courses because it’s such terrible economics. Charles knew nothing about poverty of a new sort. He knew nothing about — you know, that the north was the prosperous area of Britain in the 19th century. And he understood poverty and wealth as about traditional poverty of wealth in London. And, you know, it’s completely wrong to use Charles Dickens as a source for economic history.

We need novels that — I don’t know. I think every American should read “The Grapes of Wrath.” But on the other hand, understand that those people in “The Grapes of Wrath” shortly after being abused by fruit growers in California, worked in airplane factories and got a little house in Sausalito. And their daughter became a professor of economics at Berkeley. I’m not making this up; this is a friend of mine I’m talking about.

So yeah, you’re right, getting economic history right is very important, and you and I are on the same wavelength. That’s what I’ve tried all my life to do. But it’s very hard people —

James Pethokoukis: Even the most popular economic, you know, [inaudible] is an economics book, was it? It was about economics is a book like “Hillbilly Elegy” from which people have drawn the conclusion that globalization was wrong, you know, that we should have a closed economy, that’s less disruptive for people. You know, perhaps we shouldn’t have, you know, advances in automation as well because that’s also disruptive. I’m not sure there’s a, you know, a popular book that is making [crosstalk]. I hope this will be that book.

Deirdre McCloskey: No, Jim, the book you and I are going to write will be that book.

James Pethokoukis: Go to Amazon for the early preorders. We have maybe a chance for one more question. Oh, yes, right. Maybe one more.

Q: Hi, I’m a research associate here at the American Enterprise Institute. And I have a sort of complicated question which ties into this gentleman’s question and your point about Esther Duflo winning the Nobel Prize. You’ve mentioned that in previous works, that economists hide behind, you know, Nobel Prizes and other ways of signaling that they know what they’re talking about. And when you plug everything into a social welfare function, you know, the economy can make a lot of sense. But then again, you know, in your own work, you point out that, you know, we’ve grown 30 times in the last, you know, X hundred years.

Deirdre McCloskey: Two hundred.

Q: So, my question for you is: As a profession, as economists, what’s the proper role for models? How should we view models?

Deirdre McCloskey: Here’s the problem, I have a book that’s finished, but I have another book with Art Carden that has to get finished first because they’re both being published by the University of Chicago Press. So the Carden-McCloskey thing will come out next fall. Then the next spring, not this coming spring, but the following spring, this other book will — and it gets into this in some detail.

The basic problem is that allocative of economics — which is what I teach. I’ve got a book called “The Applied Theory of Price,” which is the best way to learn this stuff, way back. Supply and demand, marginal cost equals marginal benefit and everything’s cool, that’s not what the economy is really about. I became much more of an Austrian since I was at the University of Chicago, which was contemptuous of the Austrians. And I believe that what’s at stake is what Israel Kirzner calls alertness and discovery. That is, novelties are how we got rich. And you just need to look around this room, and we’ve got all these novelties.

And that’s another question, the whole question of how a society becomes creative, that’s what we should be focusing on. And I think the way a society becomes creative is not industrial policy, is not “mother, may I,” is not central planning from Washington, not regulation. The way a society becomes creative is the way it does in rock music or in novels. Let 1,000 flowers bloom and then pick the flowers. So in a way, that stuff that I teach on price theory — and if you want to learn price theory, learn it from me. But it’s not wrong exactly, but efficiency is not the issue.

James Pethokoukis: I think we have one more question and then Professor McCloskey is going to be sitting over there signing books. You can also purchase books out in the hallway if you didn’t bring a handy one as well with you right here. Do you have a mic?

Q: Hi, Jacob Bridge from Reason Foundation. How is John Kasich a liberal?

Deirdre McCloskey: Well, in the sense that he’s for free trade, I think. He’s not a Trumpy, that’s all I mean. He’s a conservative Republican on abortion and all kinds of other things. And God bless him, he’s wrong. As George Orwell said once, “The times are so bad that it’s the responsibility of every sensible person to say the obvious.” And the obvious is that Kasich is better than Trump. Yeah, I agree he’s conservative. But boy, imagine a Kasich- Biden ticket, that’s my idea. I know, but these are electable people. And they’re not socialists, they’re not rampant socialists, and they’re not fascists. And the times are so charged that we need —

James Pethokoukis: The bar is pretty low. We don’t want rampant fascists or socialists.

Deirdre McCloskey: I know, we don’t want rampant fascism or rampant socialism. That’s the situation we’re in. So, you know, I’d prefer that Bill Weld became the president, and you and I can work to make Bill the president. But at last, under the stupid first [inaudible] post stuff we have, it’s not going to happen.

James Pethokoukis: I think we’ll wrap this part up. Thank you again, Professor McCloskey, for coming. Again, we’ll be over there, books in the hallway. And also we’ll be giving, I think, future political advice, possible tickets, if you have questions on that as well. Thank you, again.

Deirdre McCloskey: Thank you.

James Pethokoukis: And again “Why Liberalism Works.”

Deirdre McCloskey: It’s on sale in Amazon right now. Enrich Jeff Bezos, that’s my whole purpose in life.

James Pethokoukis: Now we see it. Excellent.