Saturday, February 28, 2015

Deirdre McCloskey - Revealing The Unseen

A few days ago I posted this entry...  Superstar Theory: J.K. Rowling vs Elizabeth Warren.  In that entry I shared this picture...

The point of the picture was to try and figure out how to help convey the concept that if somebody becomes a superstar... then it's because they created a lot of value for other people.

The same day I posted that entry... there was some wonderful synchronicity because over at the EconLog blog... David Henderson shared this passage from Deirdre McCloskey...
The economist William Nordhaus has calculated that the inventors and entrepreneurs nowadays earn in profit only 2 percent of the social value of their inventions. If you are Sam Walton the 2 percent gives you personally a great deal of money from introducing bar codes into stocking of supermarket shelves. But 98 percent at the cost of 2 percent is nonetheless a pretty good deal for the rest of us. The gain from macadamized roads or vulcanized rubber, then modern universities, structural concrete, and the airplane, has enriched even the poorest among us. - Deirdre McCloskey, Measured, unmeasured, mismeasured, and unjustified pessimism: a review essay of Thomas Piketty’s Capital in the twenty-first century"
In my picture... I made the benefit (hearts) the same size.  This passage helps drive the point home that the greater than sign ">" is really the correct answer.  Psy's benefit, which is visible, is a lot smaller than society's benefit, which is invisible.

Deirdre McCloskey, like any good economist, endeavors to reveal the unseen.  Here are a few more excellent passages from her...
You have to ask what the source of the inequality is. If the source is stealing from poor people, I’m against it. But if the source is, you got there first with an innovation that everyone wants to buy, so you get paid some crazy sum, you ought to be paid so much, don’t you think? - Deirdre McCloskey, Has Thomas Piketty met his match?
If bourgeois dignity and liberty are not on the whole embraced by public opinion, the enrichment of the poor doesn’t happen. You achieve through a doctrine of compelled charity the “santification of envy,” as the Christian economist the late Paul Heyne put it. The older suppliers win. Everyone else loses. You ask God to blind your neighbor. You work at your grandfather’s job in the field or factory instead of going to university. You stick with the old ideas. You remain contentedly—or not so contentedly—at $3 a day. The poor remain unspeakably poor. - Deirdre N. McCloskey, Bourgeois Dignity: Why Economics Can’t Explain the Modern World
On the topic of builderism...
Stopping people from taking terrible jobs – through prohibitions or protections or minimums, justified by the warm if mistaken feeling over one’s second cappuccino that one is thereby being generous to the poor – takes away from the poor what the poor themselves regard as a bettering option.  It’s theft from the poor of deals the poor want to make. - Deirdre McCloskey,  The Treasured Bourgeoisie
Yet even sweet ideas have consequences, and the poor are unintentionally damaged by the left wing’s belief in “wage slavery.” A choice to work for a wage at a terrible job (rather than, say, starve) is after all nothing like slavery. Slavery, pogroms, state compulsion enforced by the army make people worse off. Naturally. By contrast, the wages paid for work, even terrible work, make people better off—at any rate in their own opinion. They line up to work for the Nike shoe company in Cambodia. The people do not choose to be compelled by the army; but they choose to work. Stopping people from taking terrible jobs—with prohibitions or protections or minimum wages—takes away from what the people themselves regard as a bettering option, however nasty the work offered. Sweat shops in the New York garment trade, such as those in which the free-market economist Milton Friedman’s parents both worked all their lives, lead on to college-educated children and grandchildren. In the short run the sweat shops of New York were better than peddling on the street or digging for food in the city dump. And in the long run the acceptance of creative destruction relieved poverty. It has in fact been the only effective relief. Wage regulations and protection and other progressive legislation, contrary to their sweet (and self-satisfying) motives, have only preserved poverty, by preserving the old jobs. Innovation made the new jobs, and financed the new college graduates, and raised the tide. - Deirdre McCloskey,  Bourgeois Dignity: Why Economics Can’t Explain the Modern World
When a stable though tyrannical country like China or a turbulent though law-governed country like India started to revalue markets and innovation, and to give a partial liberty to commerce, the food and housing and education for the average person began doubling every 10 to 7 years. In a couple of generations China and India will have Hedda’s standard of living. They have already entered Collier’s Top 5½ Billions. An internal ethical change allowed it, beginning in northwestern Europe after 1700. - Deirdre McCloskey Bourgeois Dignity: Why Economics Can’t Explain the Modern World
It's really unreasonable to expect more from McCloskey... but I can't help but wonder how much more progress we'd make if she would help push for a pubmar.

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