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What can sociology teach us about the ideational origins of modernity? Comments on McCloskey's Bourgeois Dignity
The Journal of Socio-Economics 41 (2012) 772–775
Contents lists available at SciVerse ScienceDirect
The Journal of Socio-Economics journal homepage: www.elsevier.com/locate/soceco
What can sociology teach us about the ideational origins of modernity? Comments on McCloskey’s Bourgeois Dignity Joshua T. McCabe Department of Sociology, University at Albany, SUNY, United States
a r t i c l e
i n f o
Article history: Received 30 July 2011 Received in revised form 12 March 2012 Accepted 9 April 2012
1. Introduction In Bourgeois Dignity: Why Economics Can’t Explain the Modern World, Deirdre McCloskey makes the bold claim that none of the usual factors used by economists to explain the rise of the modern world provide a satisfactory answer. In contrast to the majority of her colleagues in economics, McCloskey looks beyond traditional materialist explanations such as the presence of natural resources, changes in agriculture, and the rise of particular institutions. Instead, she focuses on the rise of a particular kind of rhetoric in several countries which blazed a path to the modern world. The most influential fact was the “Bourgeois Revaluation” which took place in Holland, Britain, France, and the United States. She argues: “An old class of town dwellers, formerly despised by the clergy and the aristocracy and the peasantry, began to acquire a more dignified standing, in the way people thought and talked about it, in European rhetoric about middle-class activities. And along with a new dignity the bourgeoisie began to acquire a new liberty. Both were rhetorical events” (McCloskey, 2010, p. 10). In many ways, McCloskey’s work parallels that of one of history’s most famous sociologists, Max Weber. Both Weber and McCloskey work in the “grand narrative” tradition and seek to explain the rise of the modern world. In The Protestant Ethic and the Spirit of Capitalism (1905, p. 88), Weber argues that the rise of Calvinist theology and its concomitant “valuation of the fulfillment of duty in worldly affairs as the highest form of moral activity which the individual could assume” helped usher in an era of what sociologists call “instrumental-rationality” or what economists would call rational self-interest which led to the rise of capitalism. As it turns out, Weber was largely wrong about the relationship between Calvinism and capitalism (as McCloskey points out) but this misses the larger point of his work. Weber’s real contribution in
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The Protestant Ethic was challenging the materialist conceptions of the rise of capitalism popular among economists and historians of his day. In Weber’s view, culture and ideas matter. While Weber took aim at Karl Marx, McCloskey sets her sights on Douglas North among others. In this volume (only the second of six planned), McCloskey makes the negative case that it was not material factors which led to the high living standards we take for granted today. She employs Mill’s method of residues: “The idea is, after getting rid of everything else that is measurable, the residuals can be taken as the real cause–in this case it is rhetoric (McCloskey, 2010, p. 33).” She makes a good case that none of the material factors she covers are responsible for the modern world in any significant way; therefore rhetoric matters. If showing that rhetoric matters is her only task then Bourgeois Dignity makes that point but does little else. As Skocpol (1992, p. 22) famously asks of ideational-centered approaches, “Whose ideas and values? And ideas and values about what more precisely?” In order to make a significant contribution to this area, McCloskey must show us exactly how and when rhetoric matters. With this in mind, this paper will explore the possible directions McCloskey could take her argument as she continues writing the next volume in the series. I am a historical-comparative sociologist by training; therefore I will limit my discussion to work in this subfield. The first part of the discussion will examine several theories from political sociology and political science in which ideas play a central role in shaping institutions (and vice versa). Ideas are defined here to include both cognitive (beliefs/perceptions) and normative (values/morals) elements of human action. The attempt will be to rehabilitate the view of institutions so that they move beyond the prescribed role of “merely” providing constraints on actors. Political sociology, for all the stereotypes that perceive it as still mired in Marxist class analysis, long ago moved beyond simple interest-based explanations of historical change. The last two decades can largely be characterized as a debate on the relationship between institutions and ideas. I will focus on new work that seeks to dispel the notion that this
J.T. McCabe / The Journal of Socio-Economics 41 (2012) 772–775
is an either/or explanation by looking at the interaction between ideas and institutions at the macro level. The second part will examine the role of ideas in influencing actors on the micro level within the market. Economic sociology has much to offer McCloskey here. I will use examples from McCloskey’s work throughout in order to shed some light on the rise of capitalism, modernity, and Bourgeois Dignity.
2. The macro level: ideas and institutions Economists have long known that institutions, broadly construed, matter for economic development. Baumol (1990) makes the distinction between two kinds of entrepreneurship as they relate to institutions. Productive entrepreneurship includes trade and innovation which creates economic value. Unproductive entrepreneurship includes rent-seeking and war-making which simply redistributes economic value or even destroys it. He argues that different institutions encourage different kinds of entrepreneurship from the same people. The early work of North (1990) makes arguments along these same lines. Institutional change, on the other hand, remains undertheorized by economists. More recent work by North (2005) integrates the concept of cognitive ideas into a theory of institutional change that purports to account for the rise of capitalism in Europe but as Wilkinson (2005, p. 175) points out in a review, “North’s discussion is merely suggestive, and does not dwell on the possible mechanisms hinted at in early chapters by which belief systems, preferences, institutional structures, technologies, and cognitive processes might interdependently evolve.” Blyth (2002), in his study of the resurgence of neoliberalism in Sweden and the United States, makes similar efforts but suffers from the same limitations. He gives us the famous dictum: “Structures do not come with an instruction sheet.” In other words, actors aren’t always aware of what is in their best interest as many new institutionalist models assume. He lays out an alternative theory of the causal power of ideas: (1) “In periods of economic crisis, ideas (not institutions) reduce uncertainty.” (2) “Following uncertainty reduction, ideas make collective action and coalition-building possible.” (3) “In the struggle of existing institutions, ideas are weapons.” (4) “Following delegitimation of existing institutions, new ideas act as institutional blueprints.” (5) “Following institutional construction, ideas make institutional stability possible (Blyth, 2002, pp. 34–44).” Like North, Blyth’s emphasis on the cognitive aspect of ideas stems from the belief that ideas serve as important tools for overcoming Knightian uncertainty. Thus ideas, as powerful as they are in times of crisis, are only causally powerful for those very limited periods. This leaves little room for ideas in “normal” times except as reinforcing institutions via expectations. The problem, as McCloskey (2010, p. 296) aptly notes, is that “institutions cannot be viewed merely as incentive-providing constraints.” North and Blyth fall short because they simply expand the concept of institutions to include cognitive ideas. McCloskey’s objection echoes critics of rational choice and historical institutionalism. For rational choice institutionalists like North (1990, 2005) culture is mainly a set of norms which constrain the behavior of actors to a set of socially acceptable actions. Much like the Ten Commandments, culture is given from up high and remains outside of the actors themselves. Similarly, historical institutionalists like Dobbin (1994) rely too much on path dependency arguments which leave little room for social change once certain feedback mechanism have been put in place. Instead of a theory of institutional change, we get a series of punctuated equilibriums where social change is always exogenous to the model, set off by some outside force. Often times, the task is left to an amorphous “institutional entrepreneur” who swoops in to magically change everyone’s
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collective minds (see Aldrich, 2011 for a critique of the concept). While this makes for a good story, it is not what drives historical change. Informal constraints, in McCloskey’s (2010, p. 303) view are “continually renegotiated” so we need a framework which enables us to account for dynamic change. In other words, McCloskey must be able to endogenize social change. Recent work on “discursive institutionalism” may provide the answer for which we are looking. Schmidt (2008, 2010) is at the forefront of developing this approach by synthesizing and extending several strands of new institutionalisms under the banner of discursive institutionalism. This approach takes account of the “substantive content of ideas and the interactive processes by which ideas are conveyed and exchanged through discourse (Schmidt, 2010, p. 3).” Schmidt, a political scientist, aims her analysis at political institutions but we can also apply her framework to the informal institutions of the economy. She breaks down ideas in terms of their “levels of generality (policies, programs, and philosophies) and type of content (cognitive and normative)” as well as “two basic forms of discourse: the coordinative discourse among policy actors and the communicative discourse between political actors and the public (Schmidt, 2008, p. 305).” What does this mean for McCloskey? McCloskey would need to demonstrate how the normative philosophy of Dutch and British elites transformed views of the bourgeois through communicative discourse. The focus on elites is important because they possess what Schmidt calls “foreground discursive abilities.” These foreground discursive abilities are essential to explaining institutional change because they refer to peoples’ ability to think outside the institutions in which they continue to act, to talk about such institutions in a critical way, to communicate and deliberate about them, to persuade themselves as well as others to change their minds about their institutions, and then to take action to change them, whether by building ‘discursive coalitions’ for reform against entrenched interests in the coordinative policy sphere or informing and orienting the public in the communicative political sphere (Schmidt, 2010). It is not enough for McCloskey to show that attitudes toward the bourgeoisie changed in Holland and England during the 17th and 18th century. She must show us exactly how this happened through a thorough process tracing (a great method for picking up on those mechanisms missed by North) of the events in question (George and Bennett, 2005, pp. 205–224). At any given point in time, there are almost an infinite number of ideas floating around about an infinite number of subjects. What made Bourgeois Dignity so special? A number of questions spring to mind. Where did these ideas come from and how did they gain such broad acceptance? Why did it begin in Holland and Britain? Hirschman (1977) argues that the rise of what he calls commercial liberalism was a rational response to desires to repress man’s dangerous passions. Somers (1993), looking at the rise of citizenship rights in England (something akin to McCloskey’s concept of Bourgeois Dignity), finds that the connection between political culture and citizenship rights was highly contingent on a number of other factors including law, the constellation of elite social networks, and the structure of agriculture in rural areas. Which actors are responsible for the changes in attitude? What other factors explain their timing? Popp Berman (2012), looking at the rise of market logic in university science, finds that changes were closely tied to discussions about innovation among dispersed political, academic, and business elites in response to international economic competition from Japan and Europe and took place over several decades. These are the important questions which must be answered for McCloskey to include ideas and rhetoric in a convincing explanation for the rapid rise in living standard which led to the modern world.
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J.T. McCabe / The Journal of Socio-Economics 41 (2012) 772–775
3. The micro level: moralizing markets Another issue with North’s conception of the growth of the institutions is that he sees their evolution as a form of “adaptive efficiency” (North, 2005). People are rational and, given the right kind of institutional feedback mechanisms, their actions will result in efficient institutions. This leads to a naturalistic view of markets as institutions which will arise because of elements inherent to our human nature. Polanyi (1944) challenges this idea of human nature and the naturalness of the market in The Great Transformation. He argues that commodification, the process in which objects are produced for sale on the markets, is far from natural. It had to be imposed on people through changes in the law such as the creation of labor markets in England under the 1795 Speenhamland system. McCloskey, despite different normative evaluations than Polanyi, takes the same view of the malleability of “human nature.” If markets are so natural, why is the handle on McCloskey’s hockey stick of material living standards so long? Smith (1776) famously begins chapter two of An Inquiry Into the Nature and Causes of the Wealth of Nations by discussing how the division of labor gives rise to trade. He says, This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another. Many economists take this passage as evidence that Smith believes homo economicus is in the nature of man, but critics question this particular reading of Smith (Polanyi, 1944; Kennedy, 2005). There is good reason for this. In the next passage, Smith goes on to question his own assertion: Whether this propensity be one of those original principles in human nature, of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to enquire [emphasis added]. It is no wonder Smith attributed this propensity to human nature as he was writing at a time when the industrial revolution was already well underway in England and the men all around him were involved in a vigorous commercial life where they trucked, bartered, and exchanged on a daily basis. But why hadn’t these industrious men figured this out earlier? When most economists see the metaphorical “big bills left on the sidewalk,” as was the case with England 100 years earlier, they attribute this problem to improper or counterproductive institutions (Olson, 1996). According to McCloskey (2010, pp. 296–345), the usual suspects do not pan out. Institutions thought to be counterproductive were present while many of the most “necessary” institutions did not appear until later. Such institutions assume homo economicus, or “Max U” as McCloskey calls him, so maybe it is best we reexamine this assumption. Viviana Zelizer is a sociologist who does exactly this. For the past 30 years, she has looked at the relationship between markets and society. Zelizer (2010, p. 72) is most critical of what she calls “hostile world” and “market work” approaches to the economy. The former argues that rational economic action is poisoned by emotions and sentiments and poisons social life in turn. The latter argues that it only counts as economic if there is monetary calculation involved. In each case, there is a strict separation of economy from society. In both cases, each particular view of the market is an assumption rather than an empirical fact. Zelizer finds that the interesting questions lay in exploring the reality behind the assumptions made by
economists and some earlier sociologists. She does this by looking at the areas of social life thought to be most at risk for cooptation by market logic – sex, children, care giving, death – and the areas thought to be purely economic – money and firms. Most importantly, she explores the process through which economic logic gains legitimacy in new areas of social life. According to Zelizer (2010), there is nothing “natural” about markets. The best example is the case of life insurance in 19th century America. She finds that life insurance was at odds with cultural values that held life as sacred. The idea was that life insurance was a commercial form of betting on death and thus highly immoral. Actors had to work to legitimize life insurance. Attempts to convince the public based on what McCloskey would call a “prudence only” argument were tried and failed miserably because this would have changed something sacred, the death of a loved one, into something profane. Instead they began to bring in other virtues, such as love and justice, with more success. Life insurance became a sacred symbol of caring for your loved ones after you died. She finds the similar stories for adoption markets and care giving. Quinn (2008) looks at the secondary market for life insurance and finds similar results. In this case, anonymous investors are betting on the fact that the person will die sooner rather than later. Although it was been legal for almost a century, moral aversion to trading life insurance policies has left the practice almost unused until recently despite widespread profit opportunities. Whereas earlier rhetorical efforts aiming to legitimize life insurance spoke about providing for loved ones after you died, rhetoric aiming to legitimize the secondary market focuses on having the financial means to “die with dignity.” Each of these may be characterized as part of the continuation of the modern bourgeois revaluation. In contrast to what some see as the feared rationalization of social life, Zelizer (2010, p. 41) sees a “sacralization” of economic life where profane economic exchanges are given moral or religious meaning. Just as we take for granted the idea that life insurance is a dignified endeavor today, we also take for granted the ideas that trucking, bartering, and consuming was seen as a dignified endeavor in the 16th century. Moreover, these market exchanges were all legal during the periods in question. Despite all the requisite legal institutions in place, people had a moral aversion to these kinds of transactions. Economists such as Roth (2007) have begun to pay attention to the role of ideas such as repugnance in constraining markets but like North, the focus on their role as constraints avoids the question of social change. In contrast, Zelizer and Quinn use newspapers trade journals, interviews, and other media sources to examine changes in discourse over time. The difference is important because economists are often unfamiliar with textual and content analysis which offers a superior way to empirically explore the effects of changes in discourse and rhetoric on other political and socioeconomic outcomes. Alongside elite discourse, McCloskey must also examine popular discourse. This will prove especially challenging given the dearth of popular media sources from earlier centuries which have survived today for proper analysis.
4. Conclusion Having spent the bulk of this paper discussing theoretical and methodological insights from sociology which can help McCloskey establish that it was indeed ideas and rhetoric which led to the rise of the modern world, I want to take some time to touch upon her larger point about markets and morals. Fourcade and Healy (2007) break the literature on “moral views of market society” down into three camps building on Hirschman’s (1982) rival interpretations of market society. In the vision of capitalism as a “commodifying nightmare” put forth by Marxist and Polanyi-inspired economists, markets destroy community through
J.T. McCabe / The Journal of Socio-Economics 41 (2012) 772–775
a process of commodification while in the feeble version, markets are overpowered by culture and institutional legacies. Fourcade and Healy put McCloskey’s earlier work on The Bourgeois Values into a third category they call the “liberal dream” which sees markets as exerting positive forces on civil society. As they point out, in the commodifying nightmare and liberal dream models of markets, the causal arrow points one way from markets to morality (Fourcade and Healy, 2007, p. 299). Either market society makes us moral or immoral. In light of Bourgeois Dignity, Fourcade and Healy’s assessment of McCloskey needs to be reclassified into their fourth category as an example of the “moralized markets” approach where the arrow goes both ways. Throughout Bourgeois Dignity, McCloskey (2010, p. 11) repeatedly reminds us that liberty (markets) and dignity (morals) are intertwined “and both were necessary” for the rise of the modern world. Beyond its normative implications about the uses and limits of markets, it opens up a number of new research questions for McCloskey and other scholars interested in the relationship between markets and morals. Under what circumstances does market logic lead to human dignity and under what circumstances is human dignity a requisite for properly functioning markets? While sociologists such as Healy (2006), Zelizer (2010), and Almeling (2011) have been at the forefront of answering these questions, economists have shown almost no interest in such issues. Without speculating on the reasons for this, I will end on the hope the McCloskey’s future contributions rejuvenate economists’ interest in morals and ethics. References Aldrich, H.E., 2011. Heroes, villains, and fools: institutional entrepreneurship, NOT institutional entrepreneurs. Entrepreneurship Research Journal 1 (2), 1–4. Almeling, R., 2011. Sex Cells: The Medical Market for Eggs and Sperm. University of California Press, Los Angeles. Baumol, W.J., 1990. Entrepreneurship: productive, unproductive, and destructive. Journal of Political Economy 98 (5), 893–921. Blyth, M., 2002. Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century. Cambridge University Press, Cambridge.
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Dobbin, F., 1994. Forging Industrial Policy: The United States, Britain and France in the Railway Age. Cambridge University Press, Cambridge. Fourcade, M., Healy, K., 2007. Moral views of market society. Annual Review of Sociology 33, 285–311. George, A.L., Bennett, A., 2005. Case Studies and Theory Development in the Social Sciences. The MIT Press, Cambridge. Healy, K., 2006. Last Best Gifts: Altruism and the Market for Human Blood and Organs. University of Chicago Press, Chicago. Hirschman, A.O., 1977. The Passions and the Interests: Political Arguments for Capitalism before its Triumph. Princeton University Press. Hirschman, A.O., 1982. Rival interpretations of market society: civilizing, destructive, or feeble? Journal of Economic Literature 20 (4), 1463–1484. Kennedy, G., 2005. Adam Smith’s Lost Legacy. Palgrave Macmillan, New York. McCloskey, D.N., 2010. Bourgeois Dignity: Why Economics Can’t Explain the Modern World. University of Chicago Press, Chicago. North, D.C., 1990. Institutions, Institutional Change and Economic Performance. Cambridge University Press, Cambridge. North, D.C., 2005. Understanding the Process of Economic Change. Princeton University Press, Princeton. Olson, M., 1996. Big bills left on the sidewalk: why some nations are rich, and others poor. Journal of Economic Perspectives 10 (2), 3–24. Polanyi, K., 1944. The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press, Boston. Popp Berman, E., 2012. Creating the Market University: How Academic Science Became an Economic Engine. Princeton University Press, Princeton. Quinn, S., 2008. The transformation of morals in markets: death, benefits, and the exchange of life insurance policies. American Journal of Sociology 114 (3), 738–780. Roth, A.E., 2007. Repugnance as a constraint on markets. Journal of Economic Perspectives 21 (3), 37–58. Schmidt, V., 2008. Discursive institutionalism: the explanatory power of ideas and discourse. Annual Review of Political Science 11, 303–326. Schmidt, V., 2010. Taking ideas and discourse seriously: explaining change through discursive institutionalism as the fourth ‘new institutionalism’. European Political Science Review 2 (1), 1–25. Skocpol, T., 1992. Protecting Soldiers and Mothers: The Political Origins of Social Policy in United States. Harvard University Press, Cambridge. Smith, A., 1991 [1776]. An Inquiry into the Nature and Causes of the Wealth of Nations. Prometheus Books, Amherst, NY. Somers, M.R., 1993. Citizenship and the place of the public sphere: law, community, and political culture in the transition to democracy. American Sociological Review 58 (5), 587–620. Weber, M., 2003 [1905]. The Protestant Ethic and the Spirit of Capitalism. Dover Books, New York. Zelizer, V.A., 2010. Economic Lives: How Culture Shapes the Economy. Princeton University Press, Princeton. Wilkinson, W., 2005. Review of understanding the process of economic change by Douglas North. Cato Journal 25 (1), 172–176.
Contents lists available at SciVerse ScienceDirect
The Journal of Socio-Economics journal homepage: www.elsevier.com/locate/soceco
What can sociology teach us about the ideational origins of modernity? Comments on McCloskey’s Bourgeois Dignity Joshua T. McCabe Department of Sociology, University at Albany, SUNY, United States
a r t i c l e
i n f o
Article history: Received 30 July 2011 Received in revised form 12 March 2012 Accepted 9 April 2012
1. Introduction In Bourgeois Dignity: Why Economics Can’t Explain the Modern World, Deirdre McCloskey makes the bold claim that none of the usual factors used by economists to explain the rise of the modern world provide a satisfactory answer. In contrast to the majority of her colleagues in economics, McCloskey looks beyond traditional materialist explanations such as the presence of natural resources, changes in agriculture, and the rise of particular institutions. Instead, she focuses on the rise of a particular kind of rhetoric in several countries which blazed a path to the modern world. The most influential fact was the “Bourgeois Revaluation” which took place in Holland, Britain, France, and the United States. She argues: “An old class of town dwellers, formerly despised by the clergy and the aristocracy and the peasantry, began to acquire a more dignified standing, in the way people thought and talked about it, in European rhetoric about middle-class activities. And along with a new dignity the bourgeoisie began to acquire a new liberty. Both were rhetorical events” (McCloskey, 2010, p. 10). In many ways, McCloskey’s work parallels that of one of history’s most famous sociologists, Max Weber. Both Weber and McCloskey work in the “grand narrative” tradition and seek to explain the rise of the modern world. In The Protestant Ethic and the Spirit of Capitalism (1905, p. 88), Weber argues that the rise of Calvinist theology and its concomitant “valuation of the fulfillment of duty in worldly affairs as the highest form of moral activity which the individual could assume” helped usher in an era of what sociologists call “instrumental-rationality” or what economists would call rational self-interest which led to the rise of capitalism. As it turns out, Weber was largely wrong about the relationship between Calvinism and capitalism (as McCloskey points out) but this misses the larger point of his work. Weber’s real contribution in
E-mail address: [email protected] 1053-5357/$ – see front matter © 2012 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.socec.2012.04.013
The Protestant Ethic was challenging the materialist conceptions of the rise of capitalism popular among economists and historians of his day. In Weber’s view, culture and ideas matter. While Weber took aim at Karl Marx, McCloskey sets her sights on Douglas North among others. In this volume (only the second of six planned), McCloskey makes the negative case that it was not material factors which led to the high living standards we take for granted today. She employs Mill’s method of residues: “The idea is, after getting rid of everything else that is measurable, the residuals can be taken as the real cause–in this case it is rhetoric (McCloskey, 2010, p. 33).” She makes a good case that none of the material factors she covers are responsible for the modern world in any significant way; therefore rhetoric matters. If showing that rhetoric matters is her only task then Bourgeois Dignity makes that point but does little else. As Skocpol (1992, p. 22) famously asks of ideational-centered approaches, “Whose ideas and values? And ideas and values about what more precisely?” In order to make a significant contribution to this area, McCloskey must show us exactly how and when rhetoric matters. With this in mind, this paper will explore the possible directions McCloskey could take her argument as she continues writing the next volume in the series. I am a historical-comparative sociologist by training; therefore I will limit my discussion to work in this subfield. The first part of the discussion will examine several theories from political sociology and political science in which ideas play a central role in shaping institutions (and vice versa). Ideas are defined here to include both cognitive (beliefs/perceptions) and normative (values/morals) elements of human action. The attempt will be to rehabilitate the view of institutions so that they move beyond the prescribed role of “merely” providing constraints on actors. Political sociology, for all the stereotypes that perceive it as still mired in Marxist class analysis, long ago moved beyond simple interest-based explanations of historical change. The last two decades can largely be characterized as a debate on the relationship between institutions and ideas. I will focus on new work that seeks to dispel the notion that this
J.T. McCabe / The Journal of Socio-Economics 41 (2012) 772–775
is an either/or explanation by looking at the interaction between ideas and institutions at the macro level. The second part will examine the role of ideas in influencing actors on the micro level within the market. Economic sociology has much to offer McCloskey here. I will use examples from McCloskey’s work throughout in order to shed some light on the rise of capitalism, modernity, and Bourgeois Dignity.
2. The macro level: ideas and institutions Economists have long known that institutions, broadly construed, matter for economic development. Baumol (1990) makes the distinction between two kinds of entrepreneurship as they relate to institutions. Productive entrepreneurship includes trade and innovation which creates economic value. Unproductive entrepreneurship includes rent-seeking and war-making which simply redistributes economic value or even destroys it. He argues that different institutions encourage different kinds of entrepreneurship from the same people. The early work of North (1990) makes arguments along these same lines. Institutional change, on the other hand, remains undertheorized by economists. More recent work by North (2005) integrates the concept of cognitive ideas into a theory of institutional change that purports to account for the rise of capitalism in Europe but as Wilkinson (2005, p. 175) points out in a review, “North’s discussion is merely suggestive, and does not dwell on the possible mechanisms hinted at in early chapters by which belief systems, preferences, institutional structures, technologies, and cognitive processes might interdependently evolve.” Blyth (2002), in his study of the resurgence of neoliberalism in Sweden and the United States, makes similar efforts but suffers from the same limitations. He gives us the famous dictum: “Structures do not come with an instruction sheet.” In other words, actors aren’t always aware of what is in their best interest as many new institutionalist models assume. He lays out an alternative theory of the causal power of ideas: (1) “In periods of economic crisis, ideas (not institutions) reduce uncertainty.” (2) “Following uncertainty reduction, ideas make collective action and coalition-building possible.” (3) “In the struggle of existing institutions, ideas are weapons.” (4) “Following delegitimation of existing institutions, new ideas act as institutional blueprints.” (5) “Following institutional construction, ideas make institutional stability possible (Blyth, 2002, pp. 34–44).” Like North, Blyth’s emphasis on the cognitive aspect of ideas stems from the belief that ideas serve as important tools for overcoming Knightian uncertainty. Thus ideas, as powerful as they are in times of crisis, are only causally powerful for those very limited periods. This leaves little room for ideas in “normal” times except as reinforcing institutions via expectations. The problem, as McCloskey (2010, p. 296) aptly notes, is that “institutions cannot be viewed merely as incentive-providing constraints.” North and Blyth fall short because they simply expand the concept of institutions to include cognitive ideas. McCloskey’s objection echoes critics of rational choice and historical institutionalism. For rational choice institutionalists like North (1990, 2005) culture is mainly a set of norms which constrain the behavior of actors to a set of socially acceptable actions. Much like the Ten Commandments, culture is given from up high and remains outside of the actors themselves. Similarly, historical institutionalists like Dobbin (1994) rely too much on path dependency arguments which leave little room for social change once certain feedback mechanism have been put in place. Instead of a theory of institutional change, we get a series of punctuated equilibriums where social change is always exogenous to the model, set off by some outside force. Often times, the task is left to an amorphous “institutional entrepreneur” who swoops in to magically change everyone’s
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collective minds (see Aldrich, 2011 for a critique of the concept). While this makes for a good story, it is not what drives historical change. Informal constraints, in McCloskey’s (2010, p. 303) view are “continually renegotiated” so we need a framework which enables us to account for dynamic change. In other words, McCloskey must be able to endogenize social change. Recent work on “discursive institutionalism” may provide the answer for which we are looking. Schmidt (2008, 2010) is at the forefront of developing this approach by synthesizing and extending several strands of new institutionalisms under the banner of discursive institutionalism. This approach takes account of the “substantive content of ideas and the interactive processes by which ideas are conveyed and exchanged through discourse (Schmidt, 2010, p. 3).” Schmidt, a political scientist, aims her analysis at political institutions but we can also apply her framework to the informal institutions of the economy. She breaks down ideas in terms of their “levels of generality (policies, programs, and philosophies) and type of content (cognitive and normative)” as well as “two basic forms of discourse: the coordinative discourse among policy actors and the communicative discourse between political actors and the public (Schmidt, 2008, p. 305).” What does this mean for McCloskey? McCloskey would need to demonstrate how the normative philosophy of Dutch and British elites transformed views of the bourgeois through communicative discourse. The focus on elites is important because they possess what Schmidt calls “foreground discursive abilities.” These foreground discursive abilities are essential to explaining institutional change because they refer to peoples’ ability to think outside the institutions in which they continue to act, to talk about such institutions in a critical way, to communicate and deliberate about them, to persuade themselves as well as others to change their minds about their institutions, and then to take action to change them, whether by building ‘discursive coalitions’ for reform against entrenched interests in the coordinative policy sphere or informing and orienting the public in the communicative political sphere (Schmidt, 2010). It is not enough for McCloskey to show that attitudes toward the bourgeoisie changed in Holland and England during the 17th and 18th century. She must show us exactly how this happened through a thorough process tracing (a great method for picking up on those mechanisms missed by North) of the events in question (George and Bennett, 2005, pp. 205–224). At any given point in time, there are almost an infinite number of ideas floating around about an infinite number of subjects. What made Bourgeois Dignity so special? A number of questions spring to mind. Where did these ideas come from and how did they gain such broad acceptance? Why did it begin in Holland and Britain? Hirschman (1977) argues that the rise of what he calls commercial liberalism was a rational response to desires to repress man’s dangerous passions. Somers (1993), looking at the rise of citizenship rights in England (something akin to McCloskey’s concept of Bourgeois Dignity), finds that the connection between political culture and citizenship rights was highly contingent on a number of other factors including law, the constellation of elite social networks, and the structure of agriculture in rural areas. Which actors are responsible for the changes in attitude? What other factors explain their timing? Popp Berman (2012), looking at the rise of market logic in university science, finds that changes were closely tied to discussions about innovation among dispersed political, academic, and business elites in response to international economic competition from Japan and Europe and took place over several decades. These are the important questions which must be answered for McCloskey to include ideas and rhetoric in a convincing explanation for the rapid rise in living standard which led to the modern world.
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3. The micro level: moralizing markets Another issue with North’s conception of the growth of the institutions is that he sees their evolution as a form of “adaptive efficiency” (North, 2005). People are rational and, given the right kind of institutional feedback mechanisms, their actions will result in efficient institutions. This leads to a naturalistic view of markets as institutions which will arise because of elements inherent to our human nature. Polanyi (1944) challenges this idea of human nature and the naturalness of the market in The Great Transformation. He argues that commodification, the process in which objects are produced for sale on the markets, is far from natural. It had to be imposed on people through changes in the law such as the creation of labor markets in England under the 1795 Speenhamland system. McCloskey, despite different normative evaluations than Polanyi, takes the same view of the malleability of “human nature.” If markets are so natural, why is the handle on McCloskey’s hockey stick of material living standards so long? Smith (1776) famously begins chapter two of An Inquiry Into the Nature and Causes of the Wealth of Nations by discussing how the division of labor gives rise to trade. He says, This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another. Many economists take this passage as evidence that Smith believes homo economicus is in the nature of man, but critics question this particular reading of Smith (Polanyi, 1944; Kennedy, 2005). There is good reason for this. In the next passage, Smith goes on to question his own assertion: Whether this propensity be one of those original principles in human nature, of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to enquire [emphasis added]. It is no wonder Smith attributed this propensity to human nature as he was writing at a time when the industrial revolution was already well underway in England and the men all around him were involved in a vigorous commercial life where they trucked, bartered, and exchanged on a daily basis. But why hadn’t these industrious men figured this out earlier? When most economists see the metaphorical “big bills left on the sidewalk,” as was the case with England 100 years earlier, they attribute this problem to improper or counterproductive institutions (Olson, 1996). According to McCloskey (2010, pp. 296–345), the usual suspects do not pan out. Institutions thought to be counterproductive were present while many of the most “necessary” institutions did not appear until later. Such institutions assume homo economicus, or “Max U” as McCloskey calls him, so maybe it is best we reexamine this assumption. Viviana Zelizer is a sociologist who does exactly this. For the past 30 years, she has looked at the relationship between markets and society. Zelizer (2010, p. 72) is most critical of what she calls “hostile world” and “market work” approaches to the economy. The former argues that rational economic action is poisoned by emotions and sentiments and poisons social life in turn. The latter argues that it only counts as economic if there is monetary calculation involved. In each case, there is a strict separation of economy from society. In both cases, each particular view of the market is an assumption rather than an empirical fact. Zelizer finds that the interesting questions lay in exploring the reality behind the assumptions made by
economists and some earlier sociologists. She does this by looking at the areas of social life thought to be most at risk for cooptation by market logic – sex, children, care giving, death – and the areas thought to be purely economic – money and firms. Most importantly, she explores the process through which economic logic gains legitimacy in new areas of social life. According to Zelizer (2010), there is nothing “natural” about markets. The best example is the case of life insurance in 19th century America. She finds that life insurance was at odds with cultural values that held life as sacred. The idea was that life insurance was a commercial form of betting on death and thus highly immoral. Actors had to work to legitimize life insurance. Attempts to convince the public based on what McCloskey would call a “prudence only” argument were tried and failed miserably because this would have changed something sacred, the death of a loved one, into something profane. Instead they began to bring in other virtues, such as love and justice, with more success. Life insurance became a sacred symbol of caring for your loved ones after you died. She finds the similar stories for adoption markets and care giving. Quinn (2008) looks at the secondary market for life insurance and finds similar results. In this case, anonymous investors are betting on the fact that the person will die sooner rather than later. Although it was been legal for almost a century, moral aversion to trading life insurance policies has left the practice almost unused until recently despite widespread profit opportunities. Whereas earlier rhetorical efforts aiming to legitimize life insurance spoke about providing for loved ones after you died, rhetoric aiming to legitimize the secondary market focuses on having the financial means to “die with dignity.” Each of these may be characterized as part of the continuation of the modern bourgeois revaluation. In contrast to what some see as the feared rationalization of social life, Zelizer (2010, p. 41) sees a “sacralization” of economic life where profane economic exchanges are given moral or religious meaning. Just as we take for granted the idea that life insurance is a dignified endeavor today, we also take for granted the ideas that trucking, bartering, and consuming was seen as a dignified endeavor in the 16th century. Moreover, these market exchanges were all legal during the periods in question. Despite all the requisite legal institutions in place, people had a moral aversion to these kinds of transactions. Economists such as Roth (2007) have begun to pay attention to the role of ideas such as repugnance in constraining markets but like North, the focus on their role as constraints avoids the question of social change. In contrast, Zelizer and Quinn use newspapers trade journals, interviews, and other media sources to examine changes in discourse over time. The difference is important because economists are often unfamiliar with textual and content analysis which offers a superior way to empirically explore the effects of changes in discourse and rhetoric on other political and socioeconomic outcomes. Alongside elite discourse, McCloskey must also examine popular discourse. This will prove especially challenging given the dearth of popular media sources from earlier centuries which have survived today for proper analysis.
4. Conclusion Having spent the bulk of this paper discussing theoretical and methodological insights from sociology which can help McCloskey establish that it was indeed ideas and rhetoric which led to the rise of the modern world, I want to take some time to touch upon her larger point about markets and morals. Fourcade and Healy (2007) break the literature on “moral views of market society” down into three camps building on Hirschman’s (1982) rival interpretations of market society. In the vision of capitalism as a “commodifying nightmare” put forth by Marxist and Polanyi-inspired economists, markets destroy community through
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a process of commodification while in the feeble version, markets are overpowered by culture and institutional legacies. Fourcade and Healy put McCloskey’s earlier work on The Bourgeois Values into a third category they call the “liberal dream” which sees markets as exerting positive forces on civil society. As they point out, in the commodifying nightmare and liberal dream models of markets, the causal arrow points one way from markets to morality (Fourcade and Healy, 2007, p. 299). Either market society makes us moral or immoral. In light of Bourgeois Dignity, Fourcade and Healy’s assessment of McCloskey needs to be reclassified into their fourth category as an example of the “moralized markets” approach where the arrow goes both ways. Throughout Bourgeois Dignity, McCloskey (2010, p. 11) repeatedly reminds us that liberty (markets) and dignity (morals) are intertwined “and both were necessary” for the rise of the modern world. Beyond its normative implications about the uses and limits of markets, it opens up a number of new research questions for McCloskey and other scholars interested in the relationship between markets and morals. Under what circumstances does market logic lead to human dignity and under what circumstances is human dignity a requisite for properly functioning markets? While sociologists such as Healy (2006), Zelizer (2010), and Almeling (2011) have been at the forefront of answering these questions, economists have shown almost no interest in such issues. Without speculating on the reasons for this, I will end on the hope the McCloskey’s future contributions rejuvenate economists’ interest in morals and ethics. References Aldrich, H.E., 2011. Heroes, villains, and fools: institutional entrepreneurship, NOT institutional entrepreneurs. Entrepreneurship Research Journal 1 (2), 1–4. Almeling, R., 2011. Sex Cells: The Medical Market for Eggs and Sperm. University of California Press, Los Angeles. Baumol, W.J., 1990. Entrepreneurship: productive, unproductive, and destructive. Journal of Political Economy 98 (5), 893–921. Blyth, M., 2002. Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century. Cambridge University Press, Cambridge.
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