Earlier this year, The Spectator ran a great article contrasting the worldviews of French economist Thomas Piketty and Chicago-style economist Deirdre McCloskey. “Piketty (for those who have not followed the story so far) worries about capital and, in particular, the tendency for those who already have it to get more,” the article proclaims. “…McCloskey, by contrast, has long argued that economists are far too preoccupied by capital and saving…Th[e] jump in incomes [in the 19th century] came about not through thrift, she says, but through a shift to liberal bourgeois values that put an emphasis on the business of innovation. In place of capitalism, she talks of ‘market-tested innovation and supply’ as the active ingredient of our economic system. It is incidentally a system ‘drenched’ in values and ethics overlooked by economists.” And it is this that gets to the heart of the matter: “whether capital — past accumulation of savings — gets to devour the future, or whether the future is created afresh by each generation. This argument is a struggle between those who think riches are created from riches, and those who think riches are created from rags. Are big profits best viewed as a generous return on capital, in the way that worries Piketty? Or as coming from innovation that ultimately benefits us all?”
Well, McCloskey now has a full response to Piketty’s Capital in the Twenty-First Century forthcoming in the Erasmus Journal of Philosophy and Economics and available on her website. The title? “Measured, Unmeasured, Mismeasured, and Unjustified Pessimism: A Review Essay of Thomas Piketty’s Capital in the Twenty-First Century.” From demonstrating Piketty’s misunderstanding of supply and demand curves (“He is in short not qualified to sneer at self-regulated markets…because he has no idea how they work”) to noting the strange obsession with inequality (“…and [apparently] we care ethically only about the Gini coefficient, not the condition of the working class”), McCloskey does a fine job in her 50 pages painting a very different picture of the world. However, my favorite portion has to be the following:
Righteous, if inexpensive, indignation inspired by survivor’s guilt about alleged “victims” of something called “capitalism,” and envious anger at the silly consumption by the rich, do not invariably yield betterment for the poor. Remarks such as “there are still poor people” or “some people have more power than others,” though claiming the moral high-ground for the speaker, are not deep or clever. Repeating them, or nodding wisely at their repetition, or buying Piketty’s book to display on your coffee table, does not make you a good person. You are a good person if you actually help the poor. Open a business. Arrange mortgages that poor people can afford. Invent a new battery. Vote for better schools. Adopt a Pakistani orphan. Volunteer to feed people at Grace Church on Saturday mornings. Argue for a minimum income and against a minimum wage. The offering of faux, counterproductive policies that in their actual effects reduce opportunities for employment, or the making of indignant declarations to your husband after finishing the Sunday New York Times Magazine, does not actually help the poor (pg. 34).
What she said.
McCloskey’s piece is unusual in that it actually addresses some of Piketty’s data (it is the only critique I have read where I got the impression the author read his book– see http://www.pikettyexplained for a detailed summary of the book). Now as for the actual paragraph you site, there are three things that strike me. First Piketty does not discuss a minimum income which is an interesting alternative to his proposals. Second he never argues against capitalism or says there is anything to feel guilty about so that is just a weak part of the paper. Third the call for “Vote for better schools” is not something Piketty discusses, but that is something the Finns have done but in countries like the US, neither of the sides of the aisle is proposing any income or structural models that will do that; rather they are making sure the kids going to private schools have a big advantage. Whether that is intentional is an interesting question, and again not something Piketty discusses.
The quote I highlighted was specifically about the “survivor’s guilt about alleged “victims” of something called “capitalism,” and envious anger at the silly consumption by the rich.” She sees Piketty as falling into this basic narrative.
I agree she sees Piketty as falling into that narrative, I just don’t see anything in Piketty that justifies that viewpoint. But as I said my impression is that she did read the book so perhaps I am just missing something in that long book. I think one reason Piketty is so threatening to the University of Chicago school of thinking is that he is not hostile to inequality or a market economy so their usual tropes of envy don’t play, and the author sadly succumbed to that common distraction tactic. So I am disappointed by a factually inaccurate accusation in what is for the most part an excellent essay.
Thanks for the heads up about this review article–I’m anxious to read it.
In general, my reaction to McCloskey is a worry that bourgeois (or “secular,” we might say) virtues crowd out religious/theological virtues in ways that McCloskey doesn’t sufficiently recognize or grapple with….
(I know McCloskey address the theological virtues, but I think there are some serious problems with her arguments on this front. But I need to read her stuff more carefully before I can really make a responsible argument against her in this vein. And, who knows, she might address my criticisms — I just think she comes across as being a bit too optimistic about capitalism or insufficiently worried about the direct and indirect problems of avarice than I think is warranted….)