Empty Rhetoric: On the Work of Deirdre McCloskey

March 31st, 2017
in macroeconomics

by Philip Pilkington

Fixing the Economists Article of the Week

Yesterday I read a short pamphlet by Deirdre McCloskey entitled The Secret Sins of Economics. You can get it here for free in PDF form. A friend of mine told me a while ago that I would like McCloskey. He told me she writes very well and has a take on economics similar to my own.

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Well, he was half correct; she does write very well. I would also say that she is quite well read. But her take on economics is very far from my own. In the pamphlet she claims that the two things that economics is often attacked for by other social sciences is not its gravest sin; these two things are, of course, quantification and mathematisation.

I certainly agree on the first point. There is nothing wrong with quantification in economics. Indeed, properly handled data analysis can give us insights into what is going on in the economy. But I think the Samuelsonian tendency toward mathematisation was extremely problematic in that the form began to take over from the content in any number of ways.

She doesn’t seem to mind this much. She says that the often bizarre formal arguments concocted by economists sometimes lead to relevant insights. Rather strangely she then cites one of the most extreme manifestations of this: namely, Gary Becker.

Becker (Nobel 1992), a professor of economics and sociology at the University of Chicago, asks, for example, why people have children. Answer: because children are durable goods. They are expensive to produce and maintain, over a long period of time, like a house. They yield returns over a long future, like a car. They have a poor second-hand market, like a refrigerator. They act as a store of value against future disasters, like pawnable gold or your diamond ring. So (you will sense a logical leap here; David Hume noticed the same leap in Mandeville and Hobbes), the number of children that people have is a matter of cost and benefit, just like the purchase of a house or car or refrigerator or diamond. A prudent parent decides whether to invest in many children or few, extensively or intensively, early or late, just like investing in a durable good. (p23)

She then goes on to defend this as such,

If you think this is funny stuff you are not alone. But think again: there’s no doubt that Prudence does affect at least part of the decision to have children, to emigrate, to attend church, to go to college, to commit a murder, not to speak of buying a house or a car or a loaf of bread. (ibid)

I just don’t think that is a viable defence for the kind of muck that comes out of Chicago School micro. (McCloskey herself is a dyed-in-the-wool Chicagoite who recommends that people read Thomas Friedman [I tried to detect irony, but to no avail…]). Admitting that Prudence plays a part in peoples’ decision to have children does not lead to the conclusion that we should start thinking about children as durable goods.

Indeed, what is at issue here — and McCloskey is all too ready to point this out when it suits her case — is the transfer of a metaphor. Children = durable goods. What’s more, it’s a rather ugly metaphor. But perhaps most importantly it’s a very limiting metaphor. It dictates a research program that is emptied of any interesting content. It also has overtones of commercialism and commodification that indicate the user of the metaphor has probably absorbed it un-self-critically from the dominant discourse of the day.

There is more than a little ideology at work in attempts to compare offspring, church attendance or the act of murder with commercial activity. Just to highlight the arbitrariness of such activity I could just as easily compare commercial activity to generating offspring, attending church or the act of murdering — but the metaphor only flows in one direction because commercial activity is the ideology of our day.

This is all tied to the fact that, at one point, she paints economists as being noble warriors standing up against entrenched interests. I assume that she has been caught rather by surprise to have seen deregulated banks engage in massive fraud all under the blessing of Chicago’s own Efficient Markets Hypothesis. No, the reality is that most economists are dupes of the powers-that-be who absorb toxic metaphors into their work that are geared toward justifying nasty and sometimes criminal behavior.

She also goes on to say that economics has libertarian tendencies. Well, I’ve never seen them. Does treating children like durable goods sound libertarian to you? Well, it doesn’t to me. It sounds objectifying and gratuitous. Most of McCloskey’s type of economics is about social control — it is about viewing people as objects to be manipulated through trickery and ruse into conforming to behavior that the economist deems the fittest.

McCloskey’s rhetoric is high-flown, but on matters of substance her arguments are often thin gruel. You see, McCloskey is correct: rhetoric is important. But it is not enough. Well conceived rhetoric does not forgive sloppy argument — and this little pamphlet is full of that. Consider this little passage — one your might recognise from some time spent listening to right-wing talk radio,

And very many normal people of leftish views, even after communism, even after numerous disastrous experiments in central planning, even after trying to get a train ride from Amtrak or service from the Postal Service… think Socialism Deserves a Chance. (p18)

Yes, the vastly under-invested in Amtrak is proof that state transport infrastructure is equivalent to centrally planned socialism. Presumably the good professor has never been to, say, Germany or France. McCloskey’s writing is full of this sort of stuff. In her lectures a critical tone and a smarter-than-thou attitude will be interrupted by asides praising garbage theories like monetarism or Purchasing Power Parity.

McCloskey’s style is reminiscent of Keynes’ or Joan Robinson’s, but the substance of many of her arguments is reminiscent of a cartoon conservative — and to be clear: this is not really about politics, rather it is about accepting arguments like the Amtrak one above. These arguments are ultimately based on the ideology that is contained in all that silly micro stuff you encounter in undergraduate economics — the stuff that almost every non-heterodox economist you meet loves with all their heart, thinking as they do that it imbibes them with secrets about the social world that no one else understands.

This, I think, is why McCloskey is, for all intents and purposes, acceptable to the mainstream: she justifies the rubbish that pours out of the profession. She paints the profession in a glowing light — her references to the fake Nobel Prize invoke genuflection — and then criticises it on a few points that no one within it believe in anyway.

McCloskey’s main problem is with econometrics, specifically the use of significance tests. She correctly points out that if you do good research and show a strong correlation the ‘significance’ of this correlation is really a secondary matter altogether. Trying to become more and more certain about the ‘significance’ of the correlation is a rather silly thing to do indeed.

This then ties to McCloskey’s point that the data is non-ergodic and that this is real issue when dealing with economic data. She provides a nice example,

Or consider public opinion polls about who is going to win the next presidential election. These always come hedged about with warnings that the “margin of error is 2% plus or minus.” So is the claim that prediction of a presidential election six months before it happens is only 2% off? Give me a break. What is being reported is the sampling error (and only at conventional levels of significance, themselves arbitrary). An error caused, say, by the revelation two months down the road that one of the candidates is an active child molester is not reckoned as part of “the error.” You can see that a shell game is being performed here. The statement of a “probable error” of 2% is silly. A tiny part of all the errors that can afflict a prediction of a far-off political event is being elevated to the rhetorical status of The Error. “My under streetlight sampling theory is very bright, so let’s search for the keys under the streetlight, even though I lost them in the dark.” Get serious. (p52)

I agree entirely, of course. But the reason that this nonsense is used runs far deeper than economists not ‘getting’ what McCloskey is saying. It goes to the point that nonsense like monetarism cannot be defended without confusing causation with correlation and Purchasing Power Parity cannot be defended without somehow bulldozing over the empirics. Junk econometrics allows economists to continue making bad arguments that are not commensurate with the data and then throwing up a great deal of statistical dust so that no one can ever truly question them.

McCloskey’s style and her wit reminded me at first of Joan Robinson. But her arguments were simply not up to Robinson’s standards. The insights in McCloskey’s work are few and far apart — and those with any real bite, like the argument against significance testing, have been made elsewhere before (better, it should be added). I get the impression that this is due to McCloskey’s place in the profession.

She doesn’t really do economic theory, so far as I can see. Rather she brings some literary clout to a generally illiterate group. For that she is allowed to rail against significance testing — something that very few economists would defend with gusto anyway. It is an awful pity that McCloskey never decided to use her intelligence and wit to question some of the Chicago dogma. I think the results could have been rather interesting. But then, if she had chosen this path, she might not have been invited to the right parties.

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