E2.0: Deirdre McCloskey: The Morality of Capitalism

This is the 15th in a new series of weekend posts taken from the presentations at the Salk Institute’s “Beyond Belief: Enlightenment 2.0.”. I have placed an index of essays in this series in an introductory post, Enlightenment 2.0: Introduction.

The speaker for this presentation is Deirdre McCloskey from the University of Illinois at Chicago. Her topic is to defend a moral component of capitalism.

The problem that McCloskey is concerned with is the tendency of capitalist economists to simply ignore any discussion of morality. The only thing that matters is prudent. Capitalism is good because capitalism gives us ‘more’. The only form of rationality is the rationality of means – prudence. There is no rationality of ends. Capitalism provides us with a way of determining the best means for maximizing our ends whatever they may be.

McCloskey wants to insert into this view of capitalism some discussion of the value of ends. Specifically, she argues that capitalism relies upon and draws out seven main virtues; courage, temperance, justice, prudence, hope, faith, and love.

I have a serious problem with this from the start, because it uses a set of assumptions that are so common that few people ever think to question them, and yet they very much need to be questioned. One particular assumption is key to McCloskey’s enterprise. It is a false assumption, but widely assumed to be true. This false assumption cannot be easily squared with a number of issues and concerns in economics and morality. In fact, I would argue that it cannot be squared at all. Yet, people like McCloskey continue to try.

It is much like the Christian attempt to try to square the claim that there is only one God, that Jesus and God were both divine, and yet they were two separate entities. The fact is, this is a contradiction and the set of religious assumptions are to be thrown out. Still, people who do not want to throw out these assumptions want to continue to treat this like a serious problem.

The false assumption that McCloskey and economists like her are making is that there is this hard distinction between the evaluation of means and the evaluation of ends. They have figured out the rationality of means – that is what the study of economics is all about. Yet, they hold that there is absolutely no sense to be made of the idea of evaluating ends. Any claims that ends have different values are claims that intrinsic value properties exist. But, none exist, so there is no such thing as a value of ends. Ends are simply those states that our minds have, by evolution or culture, locked onto as ends.

My answer to this is to point out that every end is also a means. Our desires pick out our ends. A desire that P picks out states of affairs in which ‘P’ is true as an end – and then starts hunting for the means to bring about that end. However, one of the ways in which an agent can bring about a particular end is by altering the desires of other people. His desire that P gives him reason to promote desires in others that will tend to fulfill his desire that P, and to inhibit desires in others that will tend to thwart his desire that P.

That is to say, his desire that P gives him a perspective from which he can evaluate the values as means of the ends that people might adopt, to identify some ends as worthy of promoting, and others as worthy of inhibiting.

With this simple step we can preserve the fact that there is no rationality other than the rationality of means with the ability to determine the value of ends. We have the capacity to determine the value of ends as means and to act on those facts.

Without this, we are left with a quandary. There are no intrinsic values. There is only a rationality of means. Yet, there seems to be a sense (and, indeed, all of morality seems to depend upon the possibility) in which we can evaluate ends. How do you square the fact that all rationality is prudence with the moral requirement that we evaluate ends? The answer is that we recognize that all ends are also, at the same time, means, and that it makes sense to evaluate the means-rationality of ends.

In addition to this concern, McCloskey is interested in explaining the sudden rise in wealth starting in the late 1700s, and she does not think that Gregory Clark’s evolution explanation works. By the way, neither does Margaret Jacob, who points out that the industrial revolution took place mostly in northwestern England, and not all of England, where Clark has collected his data.

McCloskey also objects to the idea that we can find some sort of regularity to explain this event. When it comes to finding a scientific explanation, we are looking for a regularity – a reason as to why something changed in circumstances A, B, and C, but not in circumstances X, Y, and Z. To provide a scientific account of the cause of enlightenment, we need a number of circumstances in which an enlightenment occurred, a number of circumstances in which it did not, and a theory that reliably explains (and predicts) when enlightenments will spring up. However, the enlightenment is a unique event, so a theory that will explain and predict enlightenments (a scientific account of the enlightenment) is out of the question.

McCloskey’s theory for the sudden increase in wealth in the late 1700s is that it is due to a cultural change – an innovation, something that is likely to happen only once. That change was a change in ethics. For millennia, mutually beneficial exchange was seen as either impossible or unethical. If one person gained, then somebody else must have lost.

The 1700s saw the rise of the concept of mutually beneficial trade. Merchants – traders – went from being a dishonorable profession, to an honorable profession. People talked differently about trade and those who engaged in trade.

This was an innovation – like inventing the steam engine was an innovation. All of the pieces were there to be put together, and had been laying there to be put together, for hundreds to thousands of years. Millions of people had an incentive to figure out that putting these pieces together would have value. Yet, nobody thought of it. Then, suddenly, somebody had this burst of inspiration, and the industrial revolution took off.

What England actually needed was a new way of thinking that makes innovation possible – that encourages people to bring ideas together in ways that they have not been brought together before. What England needed was a system that praised and rewarded those who brought ideas together in new and unique ways, and condemned or punished (or at least failed to reward) those who did not innovate.

This cultural shift, too, was an innovation. All of the ingredients had been laying around for people to use, but nobody thought to pick them up. Suddenly, somebody in England (or Holland, actually) came up with the innovation of praising innovation and trade, and with that we get the enlightenment, and the vast accumulation of wealth of the industrial revolution.