Deirdre and the Economists

I had a chance over the past two weeks to spend some time reading Deirdre McCloskey's How to Be Human* : *Though an Economist, a collection of her essays from the 1990s, many of which were first published in the Eastern Economics Review.  I recommend the book.  It is readable and informative, but, for reasons that will become apparent, also poses significant challenges to the reader.

The first thing to know about McCloskey is that she writes well, well enough to have authored an influential writing text for economists.  If you believe clear writing reflects clear thinking, McCloskey  is one of the clearest thinkers alive.  But, she says, this is not typical in her profession:

The main cause of bad writing in economics is that economists don't read good writing.  If economists would read Jane Austen or George Orwell, or even Adam Smith or JM Keynes or Thomas Schelling, in bulk, daily, habitually, they would improve. (p 131)

The second point to make about Deirdre is that, until 1995, she was Donald McCloskey, a prominent economist at the University of Iowa (following stints at Harvard and the University of Chicago).  The Economist, in its excellent 2004 article on her recent work, never mentions this - an impressive indication of how different that magazine is from its more sensational competitors.  But McCloskey herself thinks it is important, and chapter one of How to Be Human* describes some elements of what must have been an extraordinarily stressful period in her life.

No, I am not gay.  I am cross-gendered, and at age 53, having been a good soldier for over four decades, I am doing something about it... I'm going to become a tall and ugly but indubitably female economist.  I go full time in November 1995...  Why would anyone do such a thing?  The "why" question has the usual answer we give in economics:  stop asking it, since you might as well ask people why they like chococate ice cream.  (p 3)

McCloskey is, unsurprisingly, very alert to gender issues in economics, as this commentary on Lester Thurow's The Zero Sum Society suggests:

Thurow's football trope is not innocent.  Instead of trade as a sport in which everyone benefits, like aerobic dancing, the metaphor invites us to think of it as yardage extracted from one's trading partners.  The path is short - a path taken by England and Germany 1890-1914 - from sporting metaphor to the guns of August.  Stories matter.  (p 122)

I understand The Economist's reluctance to even mention McCloskey's gender status - it is the sort of thing that will lead many people to dismiss her arguments out of hand.  That is a major loss, because McCloskey is one of the most important critics of economics as it is practiced today.

Simply put, McCloskey thinks most modern economics has been done wrong and will have to be re-done.  She believes that economists' obsession with statistical significance (as opposed to real economic significance, or "oomph"), abstract analysis ("blackboard economics"), and social engineering have severely undermined the field's practical significance.

The late Richard Feynman, a Nobel laureate in physics, introduced a few simple theorems in matrix algebra into his first year class at California Institute of Technology with considerable embarrassment:  "What is mathematics doing in a physics lecture?... Mathematicians are mainly interested in how various mathematical facts are demonstrated...  They are not so interested in the result of what they prove."  Feynman's rhetorical question startles an economist.  In advanced economics it would be:  "What besides mathematics should be in an economics lecture? (p 216)

Her 1997 book The Vices of Economists; The Virtues of the Bourgeoisie gives a careful and detailed exposition of this argument, but How to Be Human* includes an excellent summary, entitled "Ask What the Boys in the Sandbox Will Have".  Unlike others who have been in her intellectual position, she takes little delight in what she believes are the misfortunes of economists.

The sadness is that economists, mainly men, are confident that their mechanical methods are correct and produce correct results.  The men stride about offering advice to governments and criticisms of each others' work as though they were doing real science...  They are of goodwill and have good minds.  They do not deserve to end up with a science lacking scientific findings.  No one with an ounce of human pity would be happy that such a good group of men are so wrong.

The scene is like an aunt watching her three-year-old nephew and his friends playing in a sandbox...  Yes, David, you are building a great fort in the sand.  My, how wonderful.  Yes, Gerard my dearest, yes. (pp 234-235)

Social investors, who protest that the assumptions of economic models are simplistic and incomplete, may take McCloskey to be an ally.  In this fight she certainly is.  But nothing I have read of hers suggests a left/liberal world view.  She is a self-described libertarian, and deeply suspicious of government programs that meddle in the economy.  But when she says "we have learned that one cannot solve great social questions standing at blackboard," many of us will say Amen.