The Secret Sins Of Economics
The Secret Sins
of Economics
Deirdre McCloskey
PRICKLY PARADIGM PRESS
CHICAGO
1
What’s sinful about economics is not what the average
anthropologist or historian or journalist thinks. From
Copyright © 2002 Prickly Paradigm Press, LLC
the outside the dismal science seems obviously sinful, if
All rights reserved.
irritatingly influential. But the obvious sins are not all
that terrible; or, if terrible, they are committed anyway
Prickly Paradigm Press, LLC
by everybody else. It is actually two particular, non-
5629 South University Avenue
obvious, and unusual sins, two secret ones, that cripple
Chicago, Il 60637
the scientific enterprise—in economics and in a few
other fields nowadays (like psychology and political
www.prickly-paradigm.com
science and medical science and population biology).
ISBN: 0-9717575-3-4
Yet a sympathetic critic who says these things and
LCCN: 2002 102650
wishes that her own beloved economics would grow up
and start focusing all its energies on doing proper
science (the way physics or geology or anthropology or
history or certain parts of literary criticism do it) finds
2
3
herself sadly misunderstood. The commonplace and
we call English, certain Dutchmen) wanted most to
venial sins block scrutiny of the bizarre and mortal
know How Much. It was an entirely novel obsession.
ones. Pity the poor sympathetic critic, construed regu-
You might call it bourgeois. How Much will it cost to
larly to be making this or that Idiot’s Critique: “Oh, I
drain the Somerset Levels? How Much does England’s
see. You’re one of those airy humanists who just can’t
treasure by foreign trade depend on possessing
stand to think of numbers or mathematics.” Or, “Oh, I
colonies? How Much is this and How Much that?
see. When you say economics is ‘rhetorical’ you want
The blessed Adam Smith a century later kept
economists to write more warmly.”
wondering How Much wages in Edinburgh differed
from those in London (too much), and How Much the
I tell you it’s maddening. The sympathetic critic,
colonies by then acquired in England’s incessant eigh-
herself an economist, even a Chicago-School econo-
teenth-century wars against France were worth to the
mist, slowly during twenty years of groping came to
home country (not much). By the late eighteenth
recognize the ubiquity of the Two Secret Sins of
century, it is surprising to note, the statistical chart had
Economics (in the end they are one, deriving from
been invented; what isn’t surprising is that it hadn’t
pride, as all sins do). She has developed helpful sugges-
been invented before—another sign that quantitative
tions for redeeming economics from sin. And yet no
thinking was novel, at least in the West (the Chinese
one—not the anthropologist or English professor or
had been collecting statistics on population and prices
others from the outside certainly, but least of all the
for centuries). European states from Sweden to Naples
economist or medical scientist—grasps her point, or
began in the eighteenth century collecting statistics to
acts on it.
worry about: prices, population, balances of trade, flows
of gold. The word “statistics” was a coinage of
German and Italian enthusiasts for state action in the
early eighteenth century, pointing to a story of the state
VIRTUES MISIDENTIFIED AS SINS
use of numbering. Then dawned the age of statistics,
and everything from drug incarcerations and smoking
Quantification
deaths to the value of a life and the credit rating of Jane
Q. Public are numbered.
Quantification, though, is not a sin. Numbers came
It became a sort of insanity, of course. Tour guides
with social science at its birth. The English political
observe that American men want to know how tall
arithmeticians William Petty and Gregory King and
every tower is, how many bricks there are in every
the rest in the late seventeenth century (anticipated in
notable wall, how many died here, how many lived.
the early seventeenth century by, like so much of what
4
5
Samuel Johnson was in 1775 typical of his age and his
it is no compliment to you to say, that you know
gender in reporting the size of everything he encoun-
better. Now, what are the Facts of this case? You
are, we will say in round numbers, twenty years of
tered in his tour of the West of Scotland (he used his
age; Mr. Bounderby is, we will say in round
walking stick as a measuring rod). By the 1850s the
numbers, fifty....[T]he question arises, Is this one
conservative critics of capitalism, such as Charles
disparity sufficient to operate as a bar to such a
Dickens, were becoming very cross about statistics:
marriage? In considering this question, it is not
unimportant to take into account the statistics of
Thomas Gradgrind, sir—peremptorily
marriage, so far as they have yet been obtained, in
Thomas—Thomas Gradgrind. With a rule and a
England and Wales. I find, on reference to the
pair of scales, and the multiplication table always in
figures, that a large proportion of these marriages
his pocket, sir, ready to weigh and measure any
are contracted between parties of very unequal ages,
parcel of human nature, and tell you exactly what it
and that the elder of these contracting parties is, in
comes to. It is a mere question of figures, a case of
rather more than three-fourths of these instances,
simple arithmetic...
the bridegroom. It is remarkable as showing the
“Father,” she still pursued, “does Mr Bounderby
wide prevalence of this law, that among the natives
ask me to love him?”
of the British possessions in India, also in a consid-
“...[T]he reply depends so materially, Louisa, on
erable part of China, and among the Calmucks of
the sense in which we use the expression. Now, Mr
Tartary, the best means of computation yet furnished
Bounderby does not do you the injustice, and does
us by travelers, yield similar results.”
not do himself the injustice, of pretending to
anything fanciful, fantastic, or (I am using synony-
Counting can surely be a nitwit’s, or the Devil’s, tool.
mous terms) sentimental....Therefore, perhaps the
Among the more unnerving exhibits in the extermina-
expression itself—I merely suggest this to you, my
tion camp at Auschwitz are the books in which Hitler’s
dear—may be a little misplaced.”
willing executioners kept records on every person they
“What would you advise me to use in its stead,
father?”
killed.
“Why, my dear Louisa,” said Mr. Gradgrind,
completely recovered by this time, “I would advise
The formal and mathematical theory of statistics was
you (since you ask me) to consider this question, as
largely invented in the 1880s by eugenicists (those
you have been accustomed to consider every other
clever racists at the origin of so much in the social
question, simply as one of tangible Fact. The igno-
sciences) and perfected in the twentieth century by
rant and the giddy may embarrass such subjects with
agronomists (yes, agronomists, at places like the
irrelevant fancies, and other absurdities that have no
Rothamsted agricultural experiment station in England
existence, properly viewed—really no existence—but
or at Iowa State University). The newly mathematized
6
7
statistics became a fetish in wannabe sciences. During
It is a mere question of figures, a case of simple arith-
the 1920s, when sociology was a young science, quan-
metic.
tification was a way of claiming status, as it became also
in economics, fresh from putting aside its old name of
Refutatio: But after all, think about it. When you want
political economy, and in psychology, fresh from a
to count your coconuts, or the cash value of your
separation from philosophy. In the 1920s and 1930s
Christmas gifts, it makes sense to do the job right.
even the social anthropologists, those men and women
Many of the things we wish to know come in quantita-
of the fanciful, fantastic, or (I am using synonymous
tive form. It matters—not absolutely, in God’s eyes,
terms) sentimental, counted coconuts.
but for particular human purposes—how much it will
rain tomorrow and how much it rained yesterday. For
And the economists, oh, the economists, how they
sound practical and spiritual reasons we wish some-
counted, and still count. Take any copy of The
times to know How Much. How many slaves were
American Economic Review to hand (surely you
driven from Africa? Perhaps 29 million (the population
subscribe?) and open it at random. To perhaps Joel
of Britain at the height of the slave trade was about 8
Waldfogel, “The Deadweight Loss of Christmas” (no
million), more than half going east, not west, across the
kidding: December 1993; Waldfogel is arguing that
Sahara or the Indian Ocean, not the Atlantic. How has
since a gift is not chosen by the recipient it is not worth
Cuba fared under Communism and the American
what the giver spent, which leads to a loss compared
embargo? Income per head in Cuba has fallen by a
with merely sending cash. Who could not love such a
third since 1959, while in the Dominican Republic,
science of Prudence?). On p. 1331 you will find the
Chile, Mexico, Brazil, and indeed in Latin America and
following Table 1:
the Caribbean generally it has more than doubled.
How big is immigration to the United States now?
Average Amounts Paid
Smaller in proportion to population than it was in
and Values of Gifts
1910. And on and on and on.
Variable
Survey 1
Survey 2
(You can see from the examples that no claim is being
Amount paid ($)
438.2
508.9
made here that numbers are by nature peculiarly “objec-
Value ($)
313.4
462.1
tive,” whatever that pop-philosophical term might
Percentage ratio of
exactly mean, or “non-political,” or “scientific.”
average value to
71.5
90.8
Numbers are rhetoric, which is to say humanly persua-
average paid
Number of recipients
86
58
sive. We agree in a persuasive culture to assign
meaning to this or that number, and then can be
8
9
persuaded to this or that view of the matter. Pebbles lie
Mathematics
around, as Richard Rorty has put it; facts of the matter
do not. It is our human decision to count or weigh or
Nor is mathematics a sin. Mathematics is not identical
mix the pebbles in constituting the pebbly facts.)
to counting or statistics. The newspapers chortle
when they find a mathematician who cannot balance
Economists are selected for their great love of numbers.
his checkbook, but that’s just a misunderstanding of
The joke is, “I’m an economist because I didn’t have
what mathematicians do. There have been some
enough personality to become an accountant.” A statis-
famously good calculators among mathematicians, the
tical argument is always honored in the Department of
eighteenth-century Swiss mathematician Leonhard
Economics. Many non-economists on the contrary fear
Euler being an instance (he also knew the entire Aeneid
numbers, dislike them, dishonor them, are confused and
by heart; in Latin, I need hardly add). But odd as it
irritated by them. But some important questions can
sounds, most of mathematics has nothing to do with
only be answered numerically. A great many other
actual numbers. Euler used calculation in the same way
questions are at least helpfully illuminated by numbers.
that mathematicians nowadays use computers, for
Your age number is not the only important fact about
back-of-the-envelope tests of hunches on the way to
you, and is certainly nothing like your full Meaning
developing what the mathematicians are pleased to call
(“You are, we will say in round numbers, twenty years of
a real proof of such amazing facts as: eπi + 1 = 0 (and
age; Mr Bounderby is, we will say in round numbers,
therefore God exists). You can have a “real” proof, the
fifty”). But it is a number helpful for some purposes—
style of demonstration developed by the Greeks (with
ordinary conversation, for one thing; medical examina-
which you became acquainted in high-school geom-
tion for another; yes, even marriage. It’s humanly useful
etry, either loving or hating it), without examining a
to know that you grew up in the 1950s and came of age
single number or even a single concrete example.
in the liberating 1960s: age sixty on September 11, 2002
Thus: the Pythagorean Theorem is true for any right
(happy birthday). Temperature is not the only measure
triangle, regardless of its dimensions, and is proven not
of a good day. Wind, sunshine, human events, and
by induction from many or even zillions of numerical
human-assigned significance matter. That this is the
examples of right triangles, but universally and for all
month and this the happy morn of Christ’s nativity has
time, praise God, may her name be glorified, by
meaning beyond 30ºF. But it is worth knowing that the
deduction from premises. Accept the premises and
temperature on the blessed day was not -459.67ºF or
you have accepted the Theorem. Quod erat demon-
212ºF.
strandum.
So counting is not a sin of economics. It is a virtue.
10
11
Statistics or other quantitative methods in science (such
Much, the quantitative effect, the magnitude, the mass,
as accounting or experiment or simulation) answer
the oomph.
inductively How Much. Mathematics by contrast
answers deductively Why, and in a refined and philo-
Economics since its beginning has been very often
sophical version very popular among mathematicians
“mathematical” in this sense of being interested in
since the early nineteenth century, Whether. “Why
Why/Whether arguments without regard to How Much.
does a stone dropped from a tower go faster and
For example: If you buy a loaf of bread from the super-
faster?” Well, F = ma, understand? “I wonder Whether
market both you and the supermarket (its shareholders,
the mass, m, of the stone has any effect at all.” Well,
its employees, its bread suppliers) are made to some
yes, actually it does: notice that there’s a little m in the
degree better off. How do I know? Because the super-
answer to the Why question.
market offered the bread voluntarily and you accepted
the offer voluntarily. Both of you must have been made
Why/Whether is not the same question as How Much. You
better off, a little or a lot—or else you two wouldn’t
can know that forgetting your lover’s birthday will have
have done the deal.
some effect on your relationship (Whether), and even
understand that the neglect works through such-and-
Economists have long been in love with this simple
such an understandable psychological mechanism
argument. They have since the eighteenth century
(“Don’t you love me enough to know I care about birth-
taken the argument a crucial and dramatic step further:
days?”—Why). But to know How Much the neglect
that is, they have deduced something from it, namely,
will hurt the relationship you need to have in effect
Free trade is neat. If each deal between you and the
numbers, those ms and as, so to speak, and some notion
supermarket, and the supermarket and Smith, and
of their magnitudes. Even if you know the Why (the
Smith and Jones, and so forth is betterment-producing
proper theory of the channels through which forgetting
(a little or a lot: we’re not talking quantities here), then
a birthday will work; again by analogy, F = ma), the
(note the “then”: we’re talking deduction here) free
How Much will depend on exactly, numerically, quanti-
trade between the entire body of French people and the
tatively how sensitive this or that part of the Why is in
entire body of English people is betterment-producing,
fact in your actual beloved’s soul: how much in this case
too. And therefore (note the “therefore”) free trade
the m and a are. And such sensitivity in an actual
between any two groups is neat. The economist notes
world, the scientists are always saying, is an empirical
that if all trades are voluntary they all have some gain.
question, not theoretical. “All right, you jerk, that’s the
So free trade in all its forms is neat. For example, a law
last straw: I’m moving out” or “Don’t worry, dear: I
restricting who can get into the pharmacy business is a
know you love me” differ in the sensitivity, the How
bad idea, not neat at all, because free trade is good, so
13
12
non-free trade is bad. Protection of French workers is
that any individual exchange arrived at voluntarily is
bad, because free trade is good. And so forth, to liter-
good, then with a few extra assumptions (e.g., about the
ally thousands of policy conclusions.
meaning of “voluntarily”; or, e.g., about how one
person’s good depends on another’s) you can get the
Though it is among the three or four most important
conclusion that free international trade among nations
arguments in economics, it is not empirical. It contains
is good.
no statements of How Much. It says there exists a gain
from trade—remember the phrases some gain or to some
Why/Whether reasoning, which is also characteristic of
degree or a little or a lot or we’re not talking quantities
the Math Department, could be called philosophical.
here. “I wonder Whether there exists [in whatever
The Math Department and the Philosophy
quantity] a good effect of free trade.” Yes, one exists:
Department have a similar fascination with deduction,
examine this page of math; look at this diagram; listen
and a corresponding boredom with induction. They
to my charming parable about you and the super-
do not give a fig for How Much. No facts, please:
market. Don’t ask How Much. The reasoning is
we’re philosophers. No numbers, please: we’re mathe-
Why/Whether. As stated it cannot be wrong, no more
maticians. In the Philosophy Department either rela-
than the Pythagorean Theorem can be. It’s not a
tivism is or is not open to a refutation from self-contra-
matter of approximation, not a matter of How Much.
diction. It’s not a little refuted. It’s knocked down, or
It’s a chain of logic from implicit axioms (which can be
not. In the Math Department the Goldbach
and have been made explicit, in all their infinite variety)
Conjecture, that every even number is the sum of two
to a “rigorous” qualitative conclusion (in its infinite
prime numbers (e.g., 24 = 13 + 11; try it), is either true
variety). Remember those words “then,” “therefore,”
or false (or, to introduce a third possibility admitted
“so.” Under such-and-such a set of assumptions, A, the
since the 1930s, undecidable). Supposing it’s decidable,
conclusion, C, must be that people are made better off.
there’s no question of How Much. You can’t, in the
A implies C, so free trade is beneficial anywhere.
realm of Why/Whether, in the Math Department or
(Please listen, and stop asking “How Much?”: how many
the Philosophy Department or some parts of the
times must I remind you that the reasoning is qualita-
Economics Department, be a little bit pregnant.
tive, not quantitative?!)
The argument for free trade is easy to express in terms
The philosophers call this sort of thing “valid”
that anyone would call “mathematical.” Since about
reasoning, by which they do not mean “true,” but
1947 the front line and later the dominant and by now
“following from the axioms—if you believe the axioms,
the arrogantly self-satisfied and haughtily intolerant if
such as A, then C also must be true.” If you believe
remarkably unproductive scientific program in
14
15
economics has been to reformulate verbal (but still
Why/Whether arguments about economics).
philosophical/mathematical, i.e. qualitative, i.e.
Deducing sometimes surprising and anyway logically
Why/Whether) arguments into symbols and variables
valid (if not always true) conclusions from assumptions
and diagrams and fixed point theorems and the like.
about the economy is a game economists have always
The program is called “Samuelsonian,” after the Gary,
loved. And if you want to connect one thing with
Indiana native and third person to receive the Nobel
another, deduce conclusions C from assumptions A,
Memorial Prize in Economics, Paul Anthony
free trade from characterizations of an autonomous
Samuelson. He and his brother-in-law Kenneth Arrow
consumer, why not do it universally and for all time?
(who was the fifth person out of the fifty or so from
Why not, asked Samuelson and Arrow and the rest,
1969 to 2001 to receive the glittering Prize) led the
with much justice, do it right?
movement to be explicit about the math in economics,
against great opposition. They were courageous
True, for practical purposes of surveying grain fields it
pioneers (their mutual nephew Lawrence Summers, the
would work just as well as Pythogoras’ Greek proof to
crown prince of modern economics, became Secretary
have a Babylonian-style of proof-by-calculation
of the Treasury and President of Harvard). In 1947
showing that the sums of squares of the sides of zillions
Samuelson set the tone with the publication of his
of triangles seem to be pretty much equal to the sums
Ph.D. dissertation (which had been finished in 1941),
of squares of their hypotenuses. You might make a
the modestly entitled Foundations of Economic Analysis.
similar case for the free trade theorem, noting for
In 1951 Arrow carried it to still higher realms of math-
example that the great internal free-trade zone called
ematics with his Ph.D. dissertation, Social Choice and
the United States still has a much higher average
Individual Values. Their enemies, a few of whom are
income (20 to 30 percent higher) than otherwise clever
still around, said, with the humanists, “Yuk. This math
and hard working countries like Japan or Germany,
stuff is too hard, too inhuman. Give me words.
which insist on many more restrictions on internal
Sentiment. Show me some verbal argumentation or
trade, such as protection of small retailing. And, true,
some verbal history. Or even actual numbers. But
the improvement of computers is making more
none of this new x and y stuff. It gives me a headache.”
Babylonian-style “brute force calculations” (as the
mathematicians call them with distaste) cheaper than
Refutatio: But think again. There’s nothing whatever
some elegant formulas (“analytic solutions,” they say,
new about deductive reasoning in economics. It didn’t
rapturously). Economics, like many other fields—
start in 1947. More like 1747 (in fact about this time
architecture, engineering—is about to be revolution-
David Hume in Scotland and the physiocrats in France
ized by computation.
were busy inventing philosophical, entirely qualitative,
16
17
But if beyond clumsy fact or numerical approximation
usually been libertarian. Economists are freedom nuts,
there is an elegant and exact formula—F = ma or E =
which is to say that they look with suspicion on
mC2 or, to give a somewhat less elegant example from
lawyerly plans to solve problems with new state
economics, 1 + iusa = (eforward / espot) (1 + ifrance), called
compulsions and longer jail sentences. Economics at
“covered interest arbitrage”—why not use it? Of
its philosophical birth, among physiocrats in Paris and
course, any deduction depends on the validity of the
moral philosophers in Edinburgh, was in favor of free
premises. If a sufficiently high percentage of potential
markets and was suspicious of overblown states.
arbitrageurs in the markets for French and U.S. bonds
Mostly it still is. Let things be, laissez faire, has been
and currency are slothful dolts, then covered interest
the economists’ cry against intervention. Let the trades
arbitrage will not hold. But likewise any induction
begin.
depends on the validity of the data. If the sample used
to test the efficacy of mammograms in preventing
True, not all economists are free traders. The non-free
premature death is biased, then the statistical conclu-
traders, often European and disproportionately nowa-
sions will not hold. Any calculation depends on the
days French, point out that you can make other
validity of the inputs and assumptions. Garbage in,
assumptions about how trade works, A', and get other
garbage out. As the kids say, it all depends. Naturally:
conclusions, C', not so favorable to laissez faire. The
we mortals are not blessed with certitude.
free-trade theorem, which sounds so grand, is actually
pretty easy to overturn. Suppose a big part of the
So mathematics, too, is not the sin of economics, but in
economy—say the household—is, as the economists
itself a virtue. Getting deductions right is the Lord’s
put it, “distorted” (e.g., suppose people in households
work, if not the only work the Lord favors. Like all
do things for love: you can see that the economists have
virtues it can be carried too far, and be unbalanced with
a somewhat peculiar idea of “distortion”). Then it
other virtues, becoming the Devil’s work, sin. But all
follows rigorously (that is to say, mathematically) that
virtues are like that.
free trade in other sectors (e.g., manufacturing) will not
be the best thing. In fact it can make the average
person worse off than restricted, protected, tariffed
trade would.
Libertarian Politics
And of course normal people—I mean non-econo-
Nor is devotion to free markets a sin. Like quantitative
mists—are not persuaded that free trade is always and
induction and philosophical deduction, economics has
everywhere a good thing. For example most people
always had a political purpose, and the purpose has
think free trade is a bad thing for the product or service
18
19
they make. By all means, let us arrange for my baker
think, think again. There really is a serious case to be
and pharmacist to compete vigorously, nay, brutally,
made against government intervention and in favor of
with other bakers and pharmacists, so that I can get
markets. Maybe not knockdown; maybe imperfect here
donuts and also vitamin E (to offset the donuts)
or there; let’s chat about it; hmm, I see what you mean;
cheaply. But I really do think we need to blockade
but a serious case that serious people ought to take
entry into the profession of being an economist: it is, I
seriously. The case is not merely Country-Club
am sure you agree, scandalous that so many unqualified
Republicanism (which in fact is highly favorable to
quacks are bilking consumers with adulterated
government intervention, in order you see to assist the
economics, quite unlike the pure economic ideas I offer
members of the Country Club, such as its longstanding
here, at such reasonable expense.
members who managed Enron, Inc.). The case in favor
of markets is on the contrary populist and egalitarian
And very many normal people of leftish views, even
and person-respecting and bad-institution-breaking
after communism, even after numerous disastrous
libertarianism. Don’t go to government to solve prob-
experiments in central planning, even after trying to
lems, said Adam Smith. As he didn’t say, to do so is to
get a train ride from Amtrak or service from the Postal
put the fox in charge of the hen house. The golden
Service (not to mention service from the Internal
rule is, those who have the gold rule: so don’t expect a
Revenue Service or from the Immigration and
government run by men to help women, or a govern-
Naturalization Service; you see I wax indignant: I am,
ment run by Enron executives to help Enron
after all, a free-market economist), think Socialism
employees.
Deserves a Chance. They think it obvious that
socialism is after all fairer than unfettered capitalism.
Libertarianism is typical of economics, especially
They think it obvious that regulation is after all neces-
English-speaking economics, and most especially
sary to restrain monopoly. They don’t realize that free
American economics. Most Americans if they can get
markets have partially broken down inequality (for
clear of certain European errors, are radical libertarians
example, between men and women; “partially,” I said)
under the skin. Give me liberty. Sweet land of liberty.
and partially undermined monopolies (for example,
Live free or die (a New Hampshire man who decided
local monopolies in retailing) and have increased the
he didn’t want the motto on his license plate and
income of the poor over two centuries by a factor of
insisted on covering it up with masking tape was...
18. The sin of economics, the lefties think, is exactly
arrested: your friend the State in action).
its free-market bias.
But alas, no time, no time. Libraries of books have
Refutatio: But, my dearly beloved friends on the left,
been written examining the numerous and weighty
20
21
arguments for the market and against socialism. I urge
the forms filled out and visiting the right government
you to go read a few such books with care, such as
offices recently took a team of researchers working six
Thomas Friedman, The Lexus and the Olive Tree, or if
hours a day 289 days. To get the permits to build a
your tastes run more academic, anything by Milton
legal house on state-owned land (land for sale, not held
Friedman (Nobel 1976). Please, all of you, come over
for the public) took nearly seven years, with 207 admin-
to my delightful, if challenging, course at the
istrative steps and 52 government offices. In Egypt
University of Illinois - Chicago called “Economics for
getting the permits to build a legal house on agricul-
Advanced Students of the Humanities” in which I
tural land took from 6 to 11 years. In Haiti buying land
sketch the arguments. Really, that the average literary
from the government took 19 years.
person believes the first few pages of The Communist
Manifesto suffice for knowledge of economics and
Nor is such government obstruction peculiar to the
economic history, in which he professes great interest,
present-day Third World. In one decade in the eigh-
is a bit of a scandal. It’s amazing that most professors
teenth century, according to the Swedish economist
and journalists since about 1900 have not even heard of
and historian Eli Heckscher in his book of 1932,
the arguments against turning the economy over to
Mercantilism, the French government sent tens of thou-
police and jailers and bureaucrats, and are scandalized
sands of souls to the galleys and executed 16,000 (that’s
when some boorish Chicago-School economist comes
about 4.4 people a day over the ten years: you see the
along and suggests that pot should be legalized and
beauty of statistical thinking) for the hideous crime of...
national borders opened and government schools made
are you ready to hear the appalling evil these enemies
to compete with each other. I spoiled quite a few
of the State committed, fully justifying hanging them
dinner parties early in my career blurting out such
all, every damned one of their treasonable skins?
proposals. I have become cannier since then, or more
...importing printed calico cloth. States do not change
polite, or just weary.
much from age to age. Lawrence Wylie reported the
attitude of a French bureaucrat in the 1950s: “If the
But I say, as Cromwell said wearily to the General
public speaks evil of me I serenely shit on it. The
Assembly of the Church of Scotland, 3 August, 1650, “I
complaint merely goes to show the value of my office
beseech you, in the bowels of Christ, think it possible
and of my methods. The more the public is shat upon,
you may be mistaken.”
the better the State is served.”
Oh, permit me one short libertarian riff. According to
In view of How Muches and Oh, My Gods like these—
the Peruvian development economist Hernando de
the baleful oomph of governmental intrusions world-
Soto, to open a small business in Lima, Peru getting all
wide crushing harmless (indeed, beneficial) exchange,
22
23
from marijuana to printed calico—perhaps laissez faire
Paul Samuelson (b. 1915), who fully formalized the
does not seem so obviously sinful, does it now?
notion in a curious character known as Max U, and the
Consider, my dear leftist friends. Read and reflect. I
great Gary Becker (b. 1930), who went about as far as
beseech you, think it possible that, like statistics and
he could go.
mathematics, the libertarianism of economics is a
Becker (Nobel 1992), a professor of economics and
virtue.
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
VENIAL SINS, EASILY FORGIVEN
house. They yield returns over a long future, like a car.
They have a poor second-hand market, like a refriger-
I am very far from wanting to defend everything about
ator. They act as a store of value against future disas-
economics, even short of the Two Great Secret Sins.
ters, like pawnable gold or your diamond ring. So (you
But you need to realize that economists do the irritating
will sense a logical leap here; David Hume noticed the
things they do for reasons, often pretty good ones.
same leap in Mandeville and Hobbes), the number of
children that people have is a matter of cost and
For instance, among the most surprising and irritating
benefit, just like the purchase of a house or car or
features of economics (when people figure out what is
refrigerator or diamond. A prudent parent decides
going on) is its obsessive, monomaniacal focus on a
whether to invest in many children or few, extensively
Prudent model of humanity. It’s hard for outsiders to
or intensively, early or late, just like investing in a
believe. Everything, simply everything, from marriage
durable good.
to murder is supposed by the modern economist to be
explainable as a sort of Prudence. Human beings are
If you think this is funny stuff you are not alone. But
supposed to be calculating machines pursuing Prudence
think again: there’s no doubt that Prudence does affect
and Price and Profit and Property and Power—“P vari-
at least part of the decision to have children, to
ables,” you might call them. P-obsession begins with
emigrate, to attend church, to go to college, to commit
Machiavelli and Hobbes, is continued by Bernard
a murder, not to speak of buying a house or a car or a
Mandeville (the early eighteenth-century Dutch-
loaf of bread. In his obsessive study of the Prudential
English spy and pamphleteer), is systematized by
part, the economist can make some quite interesting
Jeremy Bentham (the utilitarian economist flourishing
and sometimes counter-intuitive and occasionally even
in the early nineteenth century), and is finally perfected
factually true points. For example, economists
by twentieth-century economists, including that same
“predict” (as they always put it in their child’s version
24
25
of positivism) that, surprisingly, no-fault divorce should
Only men from Machiavelli to Becker are claiming is
have no long-term effect on the prevalence of divorce.
that you can explain B with Prudence alone, the P vari-
Why is that? Well, the law affects how the spoils from
able—Prudence, Price, Profit, The Profane. Smith
a divorce are divided up, but not their total size. Since
(and Mill and Keynes and quite a few other economists,
the people on both sides have lawyers paid to collect
if not the ones who run the discipline these days) have
spoils, it is the sum of spoils, not their division, which
replied that, no, you have forgotten Love and Courage,
should in fact determine how much divorcing goes on.
Justice and Temperance, Faith and Hope, in a word,
That the wife gets half instead of one quarter is offset
Solidarity, the S variable of speech, stories, shame, The
by the necessary concomitant: the husband therefore
Sacred. Economists have specialized in P, anthropolo-
gets half instead of three-quarters. Her increasing
gists in S. But most behavior, B, is explained by both:
propensity to seek divorce (half is better than one
quarter) is offset by his decreasing propensity (a half is
B = a + ßP + yS + E.
worse than three quarters). And such a surprising
claim on the basis of Prudence alone seems to be factu-
To include both P and S is only sensible. It is not
ally true in the world.
wishy-washy or unprincipled. Of course the S vari-
ables are the conditions under which the P variables
The narrowness of the scientific concern of economists
work, and of course the P variables modify the effects
has of course a cost (which is itself an economist’s
of S variables. It is the human dance of Sacred and
point: the road not traveled is the opportunity cost).
Profane.
Prudence is the central ethical virtue of the bour-
geoisie, but not the only one. Adam Smith’s book
(Econometrically speaking, I remind my economist
about Prudence, An Inquiry into the Nature and Causes of
colleagues, if the P and S variables are not orthogonal,
the Wealth of Nations, published in 1776, should be read
which is to say if they are not entirely independent, or
as embedded in the other virtues, especially
the covariance, as we say, of P and S is not zero, by
Temperance and Justice, about which indeed Smith
God’s grace, bless her holy name, or alternatively if
wrote at great length. If Smith had been statistically
there is reason to believe that a variable such as PS
inclined then he would have put it this way. Take any
multiplied together (say) has its own influence, then an
sort of behavior you wish to understand—voting, for
estimate of the coefficients a and ß that ignores S (or
example, or the adoption of the Bessemer process in
PS) will give biased results. The bias is important if
the making of steel. Call it B. It can be put on a scale
the S variable is important. The experiment is not
and measured, or perhaps seen to be present or absent.
properly controlled, and its conclusions are nonsense.)
You want to give an account of B. What the Prudence-
26
27
It is often a mistake to rely on S alone, and to reject P,
coming by age 50 or so to realize that, after all, people
as Marshall Sahlins sometimes seems to do (shame on
are motivated by more than Prudence. Even Gary
you, Marshall; he says he doesn’t, but I say he does).
Becker shows signs of such a development.
And vice versa, which is the point here. Most
economics and most anthropology is persuasion about
To this the academic economist who has not developed
the mixture of Prudence and Solidarity, the Profane
beyond his graduate-student version of the science is
and the Sacred, that matters for any particular case.
likely to reply, following the P-Only model, “Thanks
Without being explicit enough, some economists, and
for the advice. But I make a good living specializing in
some of the best, do acknowledge S variables.
P variables.” His sin is a selfish species of Ivory-
Theodore Schultz argued in Transforming Traditional
Towerism. “Why do I need to concern myself with the
Agriculture (1964; Nobel 1979) that peasants in poor
entire argument? I do my specialty.”
countries were Prudent. He was arguing that it was a
mistake to explain their behavior anthropology-style as
Well, so what? Don’t you want to get the correct
B = a + yS + E with the S variable alone. Schultz said:
answer; or do you merely want to collect your
Even these “traditional” peasants care about P. But
paycheck? (Don’t answer that.)
Schultz did not ignore the S variables. The education
of women, he argued forcefully, was crucial in making
Prudence work, and doing it would depend on over-
NUMEROUS WEIGHTY SINS
coming patriarchal objections to literate women.
Robert Fogel (Nobel 1993) and Stanley Engerman
REQUIRING SPECIAL GRACE TO
argued in 1974 that American slavery was Prudential
FORGIVE BUT SINS NOT
and capitalistic. But they did not entirely ignore the S
variables. They measured them, by indirection,
PECULIAR TO ECONOMICS
finding that for some features of slavery, such as the
price of slaves, variables other than business Prudence
And then there are sins less easily forgiven, less easily
were quantitatively not very important. And then
put down to a prudent specialization that at least keeps
Fogel went on to write about the influence of religious
P variables in the scientific game. The sins are
belief on slavery and abolition, and Engerman to write
shameful and scientifically damaging, I admit, having
about the historical roots of coercion and freedom in
myself committed all of them at one time or another,
the labor market. Many economists go through a
sometimes for years and years. I am truly sorry and I
Bildung of this sort, starting in graduate school as
humbly repent. But, goodness, if you are going to
Prudence-Only guys (the guys more than the gals) and
28
29
damn economics for these you are going to have to line
About three-and-a-half percent.
up for damnation a considerable portion of the intelli-
gentsia, commencing probably with your own sweet
The figure was so shocking even to economists that it
self.
became part of an investigation into graduate
Economists, for example, are Institutionally Ignorant,
programs by the American Economic Association.
which is to say that they don’t have much curiosity
Reform was blocked by a member of the committee,
about the world they are trying to explain. For
also at the University of Chicago (are you seeing a
example—this will surprise you—academic economists,
pattern here?), who wants the math-with-Prudence-
especially since Samuelsonianism took over, have come
Only game to go on and on, undisturbed by scientific
to think it is simply irrelevant, a waste of time, to do
considerations.
actual field work in the businesses they talk about.
This is because (as they will explain to you patiently)
Outsiders would likewise be amazed at the Historical
people might lie, a point which is taken among econo-
Ignorance of the economist. They think that the scien-
mists to be a profound remark in proper scientific
tific evidence about economies before the past few
method. So (you will see the non sequitur) never ask a
years would surely figure in an economist’s data. It
businessperson why she does something. Just observe,
doesn’t. One graduate program after another in the
as though people were ants. The great economist
1970s and 1980s cut the requirement that students
Ronald Coase (also at the University of Chicago,
become familiar with the economic past. I myself
Nobel 1991, but taking a different approach to P and S
managed for twelve years to fend off the day of execu-
than Gary Becker does—Coase is no Samuelsonian),
tion at the University of Chicago (now do you see the
while still a student at the London School of
pattern?). The very month I left the department in
Economics, had the startling idea of actually speaking to
disgust the barbarians inside the gates sent the
businesspeople. He has been trying ever since about
economic history requirement to the guillotine, and
October 1932 to get other economists to do the same
since then Ph.D.s in economics from the University of
thing. No soap. When two economists, Arjo Klamer
Chicago have joined those at Minnesota, Princeton,
and David Colander, asked economics graduate
and Columbia in ignorance of the economic past. At
students what the skills were that made for a good
the same time almost all American graduate programs
economist, nearly two thirds named mathematical
(my own fair Harvard was proudly among the first to
ability and the ability to think up quick little models of
do so) were abandoning the study of the past of
Prudence Only. How many named knowledge of the
economics itself. People call themselves economists
economic world as important? Go ahead, guess.
who have never read a page of Adam Smith or Karl
Marx or John Maynard Keynes. It would be like being
30
31
an anthropologist who had never heard of Malinowski
ciple (economists have themselves stumbled on analo-
or an evolutionary biologist who had never heard of
gous findings in their own highly non-humanistic work,
Darwin.
such as the finding of “rational expectations” or “the
cheap talk paradox”). A famous story in linguistics
The more general Cultural Barbarism of economists is
illustrates the point. A very pompous linguist was
well illustrated by their Philosophical Naïveté. Few econ-
giving a talk at Columbia and noted that there were
omists read outside economics. It is unnerving to gaze
languages in which a double negative meant a positive
about the library of a distinguished professor of
(standard English, for example: “I am not going to not
economics and find no books at all except on applied
speak” = “I am going to speak”) and languages in which
math and statistics: these are the worldly philosophers
a double negative is a stronger negative (standard
who run our nation? Uh-oh. So naturally the profes-
French and Italian, for example; or non-standard
sors of economics have childish ideas about, say, episte-
English: “You ain’t got no class”). But, says he, articu-
mology. They think for example that early logical posi-
lating what he imagined was a universal of grammar,
tivism (c. 1920), misunderstood because received third
“There are no languages in which a double positive is a
or fourth hand, is the latest philosophical word on
negative.” Pause. Silence. Then came a loud and
meaningfulness. “Let’s see now: I think I can recall
knowing sneer from the back of the room: “Yeah,
from my high school physics course. If a Hypothesis,
yeah.”
H, does not imply materially observable Observations,
O, then it is ‘meaningless,’ right? So that means...
Their high-school version of positivism means the
‘means’? Uh... well, let it go... that all ethics, intro-
economists depend on a high-school version of the philos-
spections, accounts of mental states, metaphors, frames
ophy of science. “Well, you see: if H implies O, then it
of meaning, literature and myths—and it would seem
follows rigorously that not-O implies not-H. So I can
all of mathematics and philosophy itself, I guess; but
falsify a hypothesis simply by looking at the observable
that can’t be right—are meaningless blabber. Hmm.
implications, O. What a wonderful simplification of
There must be something wrong here. Well, good
my obligation to make scientific arguments! I can test
enough for government work.”
the hypothesis that people vote their pocketbooks, for
example, just by looking at how a party’s platform
The economists know nothing of the main finding of
would affect voter Smith or Jones in their pocketbooks.
linguistics, philosophy, and literary criticism in the
And if it’s not so falsified, it’s confirmed, right?”
twentieth century, namely, that we have ways of world
making, language games, senses of an ending that
Never mind that Pierre Duhem pointed out as long
cannot be reduced to formal grammars, even in prin-
ago as 1906 that the argument is nonsense in actual
32
33
science because every experiment or observation has
(hmm...) stick to the positive. I know it’s hard to
scientific controls (for example, S variables; or
believe, but most economists really do think that the
measuring devices and measuring errors) the truth or
positive/normative distinction lets them out of any
irrelevance of which needs to be assumed to make the
reflection on ethics. They want to believe that:
test work. (Economists call this the specification
“Economics is like astronomy in having nothing to do
problem.) So the specification is actually H and S1 and
with human affairs and therefore with the ethical
S
universe in which humans live. No, wait, that can’t be
2 and S3 and... implies not-O or not-S1 or not-S2 or not-
right: it has to do with human affairs—how else am I
S3 or ....This means that the “falsifying” observation
going to get paid for consulting or editorializing?—but
may actually be a result of some failure of experimental
the parts I deal with are Objective... like who gets hurt
control. And in fact on the frontiers of science the
by the imposition of free trade. Hmm. I’m having
most usual quarrels are about just such matters: have
trouble with this. What I’m sure is that ‘ought’ and ‘is’
you failed to control properly? Is your specification
are entirely different realms and the scientist ought to
right? Is it rational to expect people to be rational in a
ignore... uhm... well....”
voting booth when they have already shown their irra-
tionality by showing up at the polls in the first place,
And economists are tempted to arrogance in social engi-
considering that their (or rather, his or her) single vote
neering. Most humanists do not face the problem, since
is virtually certain not to change the outcome? Have
poets seldom think to ask English professors how to
you properly controlled for social solidarity and senti-
write poems—though of course “criticism” in the
ment and other S variables affecting the vote, and are
belletristic, three-star-awarding, judgments-of-
these uncorrelated with the included variable, P, the
Greatness sense does face the temptation, and normally
pocketbook effect?
yields to it; and in fact many poets have been influenced
by criticism (Poe’s criticism inspired Baudelaire;
The words “metaphysical” or “philosophical” are used
Emerson’s inspired Whitman). Anthropologists know
in economics nowadays as terms of contempt: “That’s
about the problem in their own work, and worry: am I
rather philosophical, isn’t it?” means, “What a stupid,
becoming a tool of Western imperialism?
unscientific point; only an English professor would say
such a thing!” So not surprisingly economists adhere
Since economists think themselves well informed
without criticism to, for instance, a high-school version of
about ethical philosophy if they have a muddy under-
ethical philosophy. Economists believe that scientific and
standing of positive vs. normative, you can imagine
ethical questions are distinct, the one “positive” and the
the results. I would not want to accuse my colleagues
other “normative,” and that real scientists ought to
of being engineers devising efficiently operating exter-
34
35
mination chambers. At least not often. The liber-
in this connection are: Paul Krugman (gold medal in
tarian streak in economics sometimes stays their hand.
this category), Robert Lucas (Nobel 1995), and
An economist would not view poor people as cattle to
Deirdre McCloskey (bronze). Lots of intellectual
be herded into high-rise concentration camps—as
professions are arrogant. Physicists, for example, are
architects in the 1950s, for example, demonstrably
contemptuous of chemists, whom they regard as
did; and as D. H. Lawrence and other democracy-
imperfect versions of themselves. In fact physicists are
haters earlier did. Or would they? What ethical
contemptuous of most people. But when a physicist at
consideration would stop them?
North Carolina named Robert Palmer went in 1989 to
a conference in which physicists and economists were
And economists are prone to an odd personality
to educate each other he remarked, “I used to think
defect arising from their P-Only models, candid selfish-
that physicists were the most arrogant people in the
ness. When you ask a Chicago-School economist,
world. The economists were, if anything, more arro-
“George, would you cooperate on this?” he is liable to
gant.” I’m afraid he’s right on this score. Though of
answer, “No: it’s not in my self-interest: don’t you
course in general he’s a dope: a mere physicist.
believe in economics?” When I left Chicago so long
ago one of these people came up to me and said, “I
Apologia: I have not, I realize, painted a very attractive
suppose you aren’t going to help grade the core exam-
picture of economics. But these sins are widespread, I
ination—after all, you’re out of here.” I was aston-
repeat, among non-economists, too—even that odd
ished, and replied, “No, I’m going to fulfill my
one, candid selfishness, which you can find Nature’s
remaining obligations.” He in turn was astonished. I
Economists articulating even when they aren’t trained
do not think it raised his opinion of me, that I was so
in it. But I earnestly invite you to learn by further
inconsistent in advocating a P-Only theory in
reading in the literature the offsetting merits of econo-
economic history (as I was then) but not in everyday
mists:
life. You mean you don’t cheat your employer when
you get a chance? You mean you don’t impose
Economists are for one thing serious about the public
burdens on your colleagues when it serves your
interest, and are often the only people defending it
narrow interests? Huh? What kind of an economist
with any sort of lucidity and persuasiveness against the
are you?
special interests. The model of worldly philosophy
was originated in crude form by the early pamphle-
And I have to mention finally the very widespread
teers and political arithmeticians (among them Daniel
opinion that economists are prone to the sin of
Defoe). Adam Smith a half century and more later
pride—personal arrogance. Some names that come up
brought it to perfection.
36
37
And if you like engineers you will like many econo-
THE TWO REAL SINS, ALMOST
mists. Engineers are attractive people, hard working
(you have to be hard working to absorb all that engi-
PECULIAR TO ECONOMICS
neering math), earnest and practical, bent always on
Solving the Problem. True, they are often simple-
A real science, or any intelligent inquiry into the world,
minded. But simplicity gets the job done. Lots of
whether the study of earthquakes or the study of
economists are engineering types.
poetry, economics or physics, history or anthropology,
art history or organic chemistry, a systematic inquiry
Or lawyer types. Like lawyers the economists are good
into one’s lover or a systematic inquiry into the Dutch
arguers, which is good when you need a good argu-
language, must do two things. If it only does one of
ment (“How do you want it to come out?”).
them it is not an inquiry into the world. It may be
Economists can debate each other and yet not lose
good in some other way, but not in the double way that
their tempers and not make irrelevant appeals to rank.
we associate with good science or other good inquiries
Economists like lawyers are clear-minded, profession-
into the world, such as a detective solving a case.
ally. They are used to getting to the point and staying
there. The humor of economists, unhappily, is often
I am sure you will agree: An inquiry into the world
cynical, as it is also among lawyers, seldom generous,
must think and it must look. It must theorize and must
but that’s true in many fields of the intellect.
observe. Formalize and record. Both. That’s obvious
and elementary. Not everyone involved in a collective
But, above all, economics is about important matters.
intelligent inquiry into the world need do both: the
It would be remarkable if the economics-since-Marx
detective can assign his dim-witted assistant to just
that most non-economists would rather not read had
observe. But the inquiry as a whole must reflect and
nothing worthwhile in it. After all, thousands of appar-
must listen. Both. Of course.
ently intelligent (they certainly think so) economists
have labored away at it now for a century and a half.
Pure thinking, such as mathematics or philosophy, is
not, however, to be disdained, not at all. Euler’s equa-
I beseech you, dear reader, think it possible that econo-
tion, eπi + 1 = 0, really is quite remarkable, linking “the
mists, even Chicago-School economists, even
five most important constants in the whole of analysis”
Samuelsonian economists, have some important things
(as Philip Davis and Reuben Hersh note), and would be
to say about the economy.
a remarkable cultural achievement even if it had no
worldly use. But certainly the equation is not a result
of looking at the world. So it is not science; it is a kind
38
39
of abstract art. Mathematicians are proud of the
car that passed. For many hours he kept it up, thrilled
uselessness of most of what they do, as well they might
to be at last a real observer of society. But of course
be: Mozart is “useless,” too; to what would you “apply”
when he got home and looked at the results it occurred
the Piano Sonata in A? I have a brilliant and learned
to him that the data were meaningless. They were
friend who is an intellectual historian of note. He and
brute facts unshaped by any meaningful human ques-
I were walking to lunch in Iowa City one day and I said
tion, or emotion, or interest. One wishes every scholar
offhandedly, assuming he would of course know this,
learned this at ten years old.
that mathematics was one of the great achievements of
Western culture. He was so astonished by the claim
So pure mathematics, pure philosophy, the pure writing
that he stopped short and argued with me there on the
of pure fictions, the pure painting of pictures, the pure
sidewalk by the Old Capitol Mall: “Surely math is like
composing of sonatas are all, when done well or at least
plumbing: useful, but hardly in touch with deeper
interestingly, admirable activities. I have to keep saying
things; hardly a cultural achievement!” I tried to
“pure” because of course it is entirely possible—indeed
persuade him that he felt this way only because he had
commonplace—for novelists, say, to take a scientific
no acquaintance with mathematics, but I don’t think I
view of their subjects (Balzac, Zola, and Sinclair Lewis
succeeded.
among many others are well known for their self-
conscious practice of a scientific literature; Roman
Nor is pure, untheorized observation to be disdained.
satire is another case; or Golden Age Dutch painting).
There is something in narration, for example, that is
Likewise scientists use elements of pure narration (in
untheorizable (though it is surprising to non-humanists
evolutionary biology and economic history) or
how much of it can and has recently been theorized by
elements of pure mathematics (in physics and
literary critics). At some level a story is just a story, and
economics) to make scientific arguments. I do not
artful choice of detail within the story is sheer observa-
want to get entangled in the apparently hopeless task of
tion—not brute observation, which is a hopeless ambi-
solving what is known as the Demarcation Problem,
tion to record everything, but sheer. I have another
discerning a line between science and other activities.
brilliant and learned friend, an economist, who tells the
It is doubtful such a line exists. The efforts of many
story of how as a boy in Amsterdam he decided one day
intelligent philosophers of science appear to have
to embark in all seriousness on Social Observation. He
gotten exactly nowhere in solving it. I am merely
was about ten years old when this ambition overcame
suggesting that a science like many other human practices
him, so he equipped himself with a notebook and a pen
such as knitting or making a friend should be about the
and went to a big street and started to, well, observe.
world, which means it should attend to the world. And
He decided to note down the license number of every
it should also be something other than miscellaneous
40
41
facts, such as the classification of animals in the Chinese
To which I say: Bosh. She and her colleagues, when they
Celestial Emporium of Benevolent Knowledge noted by
are being most highbrow and Science-proud, don’t really do
Borges: (a.) those that belong to the Emperor, (b.)
either theorizing or observing. Economics in its most
embalmed ones, (c.) those that are trained, (d.) suckling
prestigious and academically published versions
pigs, (e.) mermaids, and so forth, down to (n.) those
engages in two activities, qualitative theorems and statis-
that resemble flies from a distance. Not brute facts.
tical significance, which look like theorizing and
And not mere theory.
observing, and have (apparently) the same tough math
and tough statistics that actual theorizing and actual
So I am not dragging economics over to some implau-
observing would have. But neither of them is what it
sible definition of Science and then convicting it of not
claims to be. Qualitative theorems are not theorizing in
corresponding to the definition. Such a move is
a sense that would have to do with a double-virtued
common in economic methodology—for example in
inquiry into the world. In the same sense, statistical
some of the less persuasive writings of the very persua-
significance is not observing.
sive economist Marc Blaug. I am merely saying that
economists want to be involved in an intelligent inquiry
This is the double-formed and secret sin, and this the
into the world. If so, the field as a whole must theorize
moment:
and observe. Both. This is not controversial.
Eve
An economist at a leading graduate program listening to
Intent now wholly on her taste, naught else
Regarded, such delight till then, as seemed,
me will now burst out with: “Great! I entirely agree:
In fruit she never tasted, whether true
theorize and observe, though of course as you admit we
Or fancied so, through expectation high
can specialize in one or the other as long as the whole
Of knowledge, nor was godhead from her thought.
field does both. And that, Deirdre, is exactly what we
already do, on a massive scale. And we do it very well, if
It is not difficult to explain to outsiders what is so
I don’t say so myself. We do very sophisticated mathe-
dramatically, insanely, sinfully wrong with the two
matical theorizing, such as in the Mas-Collel,
leading methods in high-level economics, qualitative
Whinston, and Green textbook (1995), and then we test
theorems and statistical significance. It is very difficult
the theory in the world using very tricky econometrics,
to explain it to insiders, because the insiders cannot
such as Jeffrey M. Wooldridge, Econometric Analysis of
believe that methods in which they have been elabo-
Cross Section and Panel Data (2001). You can see the
rately trained and which are used by the people they
results in any journal of economics. Some of it is pure
admire most are simply unscientific nonsense, having
theory, some econometrics. Theorize and observe.”
42
43
literally nothing to do with whatever actual scientific
Okay, now imagine an alternative set of assumptions
contribution (and I repeat, it is considerable) that
(like the ones used earlier to “disprove” the Free Trade
economics makes to the understanding of society. So
Theorem), A'. Look at that last item closely. If you’re
they simply can’t grasp arguments that are plain to
going to venture into the wonderful world of this really
people not socialized in economics. (Bibliographical
tough, macho math we economists deal in daily you are
note to the insiders and the more adventuresome of the
going to have to train yourself to look closely at
outsiders: Chapters 10-13 in Knowledge and Persuasion
symbols: notice that the alternative assumption has a
in Economics [1994] and Chapters 7 and 8 in The
little mark just after it, not in math called a “single
Rhetoric of Economics [2nd ed. 1998]).
quotation mark” but a “prime” (it’s just a notation to
distinguish one set of things—in this case assump-
Hear, oh outsiders. I’ve told you how popular qualita-
tions—from another; it has nothing to do with prime
tive, Why Whether reasoning is in economics. It takes
numbers). A' is read “A prime.” Naturally, if you
this form: A implies C. Got it? Simple, huh? The
change assumptions (introducing households who do
crucial point is that the A and the C are indeed qualita-
not operate on P-Only motivations, say; or [I speak
tive. They are not of the form “A is ‘4.8798’.” They
now to insiders] making information a little asym-
are of the qualitative form, “A is ‘everyone is motivated
metric; or [ditto] introduce any Second Best, such as
by P-Only considerations’,” say, which implies “free
monopoly or taxation; or [ditto] nonconvexities in
trade is neat.” No numbers. You realize your lover
production) in general the conclusion is going to
will be annoyed by the neglected birthday to some
change.
degree, but we’re not talking about magnitudes.
Why/Whether. Not How Much. The economic
Natch. There’s nothing deep or surprising about this:
“theorists” focus on what mathematicians call “exis-
changing your assumptions changes your conclusions.
tence theorems.” With such and such general (or not
Call the new conclusion C' (a test of whether you’re
so general, but anyway non-quantitative) assumptions A
paying attention, class: How is it read? Answer: “C
there exists a state of the imagined world C. A typical
single prime”). So we have the old A implies C and
statement in economic “theory” is, “if information is
the fresh, publishable novelty, A' implies C'. But, as
symmetric, an equilibrium of the game exists” or, “if
the mathematicians say, we can add another prime and
people are rational in their expectations in the
proceed as before, introducing some other plausible
following sense, buzz, buzz, buzz, then there exists an
possibility for the assumptions, A'' (read it “A double
equilibrium of the economy in which government
prime”), which implies its own C''. And so forth: A'''
policy is useless.”
implies C'''. And on and on and on and on, until the
economists get tired and go home.
44
45
What has been gained by all this? It is pure thinking,
have anything to do even with playing real chess (since
philosophy. It is not disciplined by any simultaneous
the situations are often ones that could not arise in a
inquiry into How Much. It’s qualitative, not quantita-
real game). And chess itself has nothing to do with
tive, and not organized to allow quantities into the
living, except for its no doubt wonderful purity as
story. It’s like stopping with the conclusion that
thought, á la Mozart.
forgetting your lover’s birthday will have some bad
effect on one’s relationship—you still have no idea
What kind of theory would actually contribute to a
How Much, whether trivial or disastrous or some-
double-virtued inquiry into the world? Obviously, it
where in between. So the pure thinking is unbounded.
would be the kind of theory for which actual numbers
It’s a game of imagining how your lover will react
can conceivably be assigned. If Force equals Mass
endlessly. True, if you had good ideas about what were
times Acceleration then you have a potentially quantita-
plausible assumptions to make, derived from some
tive insight into the flight of cannon balls, say. But the
inquiry into the actual state of the world, the situation
qualitative theorems (explicitly advocated in
might be rescued for science and other inquiries into
Samuelson’s great work of 1947, and thenceforth
the world, such as the inquiry into the probably quan-
proliferating endlessly in the professional journals of
titative effect of missing a birthday on your lover’s
academic economics) don’t have any place for actual
future commitment to you. But if not—and I’m
numbers. So the “results” keep flip-flopping,
telling you that such is the usual practice of “theoret-
endlessly, pointlessly.
ical” pieces in economics, about half the items in any
self-respecting journal of economic science—it’s “just”
The history of economic “theory” since 1947 (and, as I
an intellectual game.
said, in non-mathematical form since 1747, too) is
replete with examples. Samuelson himself famously
I have expressed admiration for pure mathematics and
showed in the 1940s that “factor prices” (such as
for Mozart’s concertos. Fine. But economics is supposed
wages) are “equalized” by trade in steel and wheat and
to be an inquiry into the world, not pure thinking. (If it is
so forth—as a qualitative theorem, under such and
to be justified as pure thinking, just “fun,” it is not
such assumptions, A. It could be an argument against
very entertaining. No one would buy tickets to listen
free trade. But shortly afterwards it was shown (by
to a “theory” seminar in economics. Believe me on
Samuelson himself, among others) that if you make
this one: as mathematical entertainment the stuff is
alternative assumptions, A', you get very different
really crummy.) The A-prime/C-prime, existence-
conclusions. And so it went, and goes, with the limit
theorem, qualitative-only “work” that economists do is
achieved only in boredom, all over economics. Make
like chess problems. Chess problems usually do not
thus-and-such assumptions, A, about the following
46
47
game-theoretic model and you can show that a group
“But wait a minute, Deirdre,” the Insider Economist
of unsocialized individuals will form a civil society.
breaks in (he is getting very, very annoyed because, as I
Make another set of assumptions, A', and they won’t.
told you, he Just Doesn’t Get It). “You admitted that
And so on and so forth. Blah, blah, blah, blah, to no
we economists also do econometrics, that is, formal
scientific end.
testing of economic hypotheses using advanced statis-
tical theory. You, as an economist, can hardly object to
Such stuff has taken over fields near to economics, first
specialization: some people do theory, some empirical
political science and now increasingly sociology. A
work.”
typical “theoretical” paper in the American Political
Science Review shows that under assumptions A the
Yes, my dear young colleague. Since I have been to
comity of nations is broken; in the next issue someone
your house and noted that you have not a single work
will show that under A' it is preserved. This is not
on economics before your own graduate training I
theory in the sense that, say, physics uses the term.
suppose you are not aware that the argument was first
Pick up a copy of the Physical Review (it comes in four
made explicit in 1957 by Tjalling Koopmans, a Dutch-
versions; pick any). Open it at random. You will find
American economist at Yale (Nobel 1975), who in his
mind-breakingly difficult math, and physics that no
Three Essays on the State of Economic Science recom-
one except a specialist in the particular tiny field can
mended just such a specialization. He recommended
follow. But always, on every page, you will find
that “theorists” spend their time on gathering a “card
repeated, persistent attempts to answer the question How
file” of qualitative theorems attaching a sequence of
Much. Go ahead: do it. Don’t worry; it doesn’t matter
axioms A', A'', A''', etc. to a sequence of conclusions
that you can’t understand the physics. You will see
C', C', C''', etc., separated from the empirical work, “for
that the physicists use in nearly every paragraph a
the protection [note the word, students of free trade]
rhetoric of How Much. Even the theorists as against
of both.”
the experimenters in physics spend their days trying to
figure out ways of calculating magnitudes. The give-
Now this would be fine if the theorems were not qual-
away that something other than scientific is going on
itative. If they took the form that theorems do in
in “theoretical” economics (and, alas, political science)
physics (better called “derivations,” since physicists are
is that it contains not, from beginning to end of the
completely uninterested in the existence theorems that
article, a single attempt at a magnitude.
obsess mathematicians and philosophers), good. Then
the duller wits like Deirdre McCloskey the economic
So: Secret Sin Number One: qualitative theorems.
historian could be assigned to mere observation, filling
in blanks in the theory. But there are no blanks to fill in,
48
49
no How Much questions asked, in the theory that
of computation in the 1970s a plague in economics, in
economists admire the most and that has taken over
psychology, and, most alarmingly, in medical science.
half of their waking hours.
Consider the decades-long dispute over the prescribing
of routine mammograms to screen for early forms of
Still, things would not be so bad, so sunk in scientific
breast cancer. One school says, Start at age 40. The
sin, if on the lower-status empirical side of academic
other says, No, age 50. (And still another, Never
economics all was well. The empiricists like me in
routinely. But set that aside.) Why do they differ?
their dull-witted way could cobble together actual
The American nurses’ epidemiological study or the
scientific hypotheses, simply ignoring the “work” of the
Swedish studies on which the empirical arguments are
qualitative theorists. Actual players of chess could
based are quite large. But there’s a lot of what engi-
ignore the “results” from chess problems. In effect this
neers call “noise” in the data, lots of things going on.
is what happens. The “theories” proffered by the
So: although starting as early as age 40 does seem to
“theorists” are not tested. In their stead linearized
have some effect, the samples are not large enough to be
models that try crudely to control for this or that effect
conclusive. By what standard? By the standard called
are used. An empiricist could therefore try to extract
“statistical significance [at the 5%, 1%, 0.1%, or what-
the world’s information about the price sensitivity of
ever level].” The medical statisticians will be glad to
demand for housing in Britain in the 1950s, say.
explain to you (for example, the over-50 school will)
that “significance” in this narrow and technical sense of
But the sin is double. The empirical economists also have
the word tells you how likely it is the result comes just
become confused by qualitative “results.” They, too,
from the noise. A “highly” significant result is one in
have turned away from one of the two questions neces-
which the sample is large enough to overwhelm the
sary for a serious inquiry into the world (the other is
noise. That is, it’s unlikely—those 5%, 1%, etc.
Why), How Much. The sin sounds improbable, since
figures, successively more stringent—you’ll be fooled
empirical economics is drenched in numbers, but the
into thinking there’s an effect when in fact the effect in
numbers they acquire with their most sophisticated
the real world is zero.
tools (as against their most common tools, such as
simple enumeration and systems of accounting) are it
So the situation is this. The over-50 school admits that
turns out meaningless.
there is some positive effect in detecting early cancers
from starting mammograms as early as age 40; but,
The confusion and meaninglessness arises from a
they say with a sneer, it’s uncertain. You’ll be taking
particular technique in statistical studies, called “statis-
some chance of being fooled by chance. Nasty busi-
tical significance.” It has become since the cheapening
ness. Really, something to avoid.
50
51
Huh? Are you telling me, Mr. Medical Statistician,
the balance of cost and benefit, since there could be
that even though there is a life-saving effect of early
costs (such as deaths from intrusive tests resulting from
mammograms in the data on average, you are uncomfort-
false positives) that offset the admittedly slight gain
able about claiming it? I thought the purpose of medical
from starting as early as age 40. But suppose, as was
research was to save lives. Your comfort is not, as I
long believed, that the costs do not offset the gain.
understand it, what we are chiefly concerned with. You
That the net gain is slight is no comfort to the (few)
find the data noisy. I’m sorry God arranged it that way.
people who die unnecessarily at 42 or 49 on account of
She should have been more considerate. But She’s
Mr. Medical Statistician’s gross misunderstanding of
done what She’s done. Now we have to decide if the
the proper role of statistics in scientific inquiries. A
cost of the test is worth the benefit. And your data
death is a death. The over-50 people are killing
shows that a benefit is there.
patients. Maybe only slightly more than zero patients.
But more than zero is murder. [At this insult Mr.
Mr. Medical Statistician, with some indignation: “No
Medical Statistician leaps up and storms out of the
it’s not. At conventional levels of significance there is
room: I told you it was difficult to persuade the
no effect.”
insiders; I wish I had a softer rhetoric to offer which
would bring amoral idiots like Mr. Medical Statistician
Deirdre, with more indignation: Nonsense. You are
and Mr. Econometrician around gently; but as you can
trying, alas, to make a qualitative judgment of exis-
see it’s just not in me.]
tence. Compare the poor, benighted Samuelsonian
“theorist.” We always in science need How Much, not
Or consider the aspirin-and-heart-attack studies.
Whether. The effect is empirically there, whatever the
Researchers were testing the effects of administering
noise is. If someone called “Help, help!” in a faint
half an aspirin a day to men who had already suffered a
voice, in the midst of lots of noise, so that at the 1%
heart attack. To do the experiment correctly they gave
level of significance (the satisfactorily low probability
one group the aspirin and the other a placebo. But
that you will be embarrassed by a false alarm) it could
they soon discovered—well short of conventional levels
be that she’s saying “Kelp, kelp!” (which arose perhaps
of statistical significance—that the aspirin reduced
because she was in a heated argument about a word
reoccurrences of heart attacks by about a third. What
proposed in a game of Scrabble), you wouldn’t go to her
did they do? Did they go on with the study until they
rescue?
got a large enough sample of dead placebo-getters to
be sure of their finding at levels of statistical signifi-
The relevant and quantitative question about routine
cance that would make the referees of cardiology jour-
mammograms, which has recently been reopened, is
nals happy? Of course not: that would have been
52
53
shockingly (though not unprecedently) unethical.
Journal of Economic Literature, March 1996; check it out
They stopped the study, and gave everyone aspirin. (A
on JSTOR; we are writing a paper examining the same
New Yorker cartoon around the same time made the
journal in the 1990s; bad news: the sin has gotten more
point, showing a tombstone inscribed, “John Smith,
prevalent, not less).
Member, Placebo Group.”)
The problem is that a number fitted from the world’s
Or consider public opinion polls about who is going to
experiments can be important economically without
win the next presidential election. These always come
being noise-free. And it can be wonderfully noise-free
hedged about with warnings that the “margin of error is
without being important.
2% plus or minus.” So is the claim that prediction of a
presidential election six months before it happens is
On the one hand: It’s completely obvious, you will
only 2% off? Give me a break. What is being reported
agree, that a “statistically insignificant” number can be
is the sampling error (and only at conventional levels of
very significant for some human purpose. If you really,
significance, themselves arbitrary). An error caused, say,
truly want to know how the North American Free
by the revelation two months down the road that one of
Trade Agreement affected the average worker in the
the candidates is an active child molester is not reck-
United States, then it’s too bad if the data are noisy, but
oned as part of “the error.” You can see that a shell
that’s not the point. You really, truly want to know it.
game is being performed here. The statement of a
You have to go with what God has provided.
“probable error” of 2% is silly. A tiny part of all the
errors that can afflict a prediction of a far-off political
And on the other hand: It is also completely obvious
event is being elevated to the rhetorical status of The
that a “statistically significant” result can be insignificant
Error. “My under streetlight sampling theory is very
for any human purpose. When you are trying to
bright, so let’s search for the keys under the streetlight,
explain the rise and fall of the stock market it may be
even though I lost them in the dark.” Get serious.
that the fit (so-called: it means how closely the data line
up) is very “tight” for some crazy variable, say skirt
The point here is that such silliness utterly dominates
lengths (for a long while the correlation was actually
empirical economics. In a study of all the empirical
quite good). But it doesn’t matter: the variable is obvi-
articles in the American Economic Review in the 1980s it
ously crazy. Who cares how closely it fits? For a long
was discovered that fully 96% of them confused statis-
time in Britain the number of ham radio operator
tical and substantive significance (look at The Rhetoric of
licenses granted annually was very highly correlated
Economics, 2nd ed.; or at Stephen Ziliak and Deirdre
with the number of people certified insane. Very funny.
McCloskey, “The Standard Error of Regression,”
So?
54
55
In short, statistical significance is neither necessary nor
practices of economic science and a few other fields.
sufficient for a result to be scientifically significant.
Economics has fallen for qualitative “results” in
Most of the time it is irrelevant. A researcher is simply
“theory” and significant/insignificant “results” in
committing a scientific error to use it as it is used in
“empirical work.” You can see the similarity between
economics and the other social sciences and in medical
the two. Both are looking for on/off findings that do
science and (a strange one, this) population biology as
not require any tiresome inquiry into How Much, how
an all-purpose way of judging whether a number is large
big is big, what is an important variable, How Much
enough to matter. Mattering is a human matter; the
exactly is its oomph. Both are looking for machines to
numbers figure, but after collecting them the mattering
produce publishable articles. In this last they have
has to be decided finally by us; mattering does not
succeeded since Samuelson spoke out loud and bold
inhere in a number.
beyond the dreams of intellectual avarice. Bad
science—using qualitative theorems with no quantita-
The point is just common sense. It is not subtle or
tive oomph and statistical significance also with no
controversial. But thousands of scientists, and among
quantitative oomph—has driven out good.
them almost all modern economists, are utterly
confused about it.
The progress of economic science has been seriously
damaged. You can’t believe anything that comes out of
Physics and chemistry, though of course highly numer-
the Two Sins. Not a word. It is all nonsense, which
ical, hardly ever use statistical significance (check it out
future generations of economists are going to have to
for yourself: I have in the journal Science, for example).
do all over again. Most of what appears in the best
Economists and those others use it compulsively,
journals of economics is unscientific rubbish. I find
mechanically, erroneously to provide a non-controver-
this unspeakably sad. All my friends, my dear, dear
sial way of deciding whether or not a number is large.
friends in economics, have been wasting their time.
You can’t do it this way. No competent statistical theo-
You can see why I am agitated about the Two Sins.
rist has disagreed with me on this point since Neyman
They are vigorous, difficult, demanding activities, like
and Pearson in 1933. There is no mechanical procedure
hard chess problems. But they are worthless as science.
that can take over the last, crucial step of an inquiry into the
world, asking How Much in human terms that matter.
The physicist Richard Feynman called such activities
Cargo Cult Science. Certain New Guinea tribesmen
My argument is not against statistics in empirical work,
had prospered mightily during the Second World War
no more than it is against mathematics in theoretical
when the American military disgorged its cargo to fight
work. It is against certain very particular and peculiar
the Japanese. After the War the tribesmen wanted the
56
57
prosperity to come back. So they started a “cargo
ical work running on statistical significance [technical
cult.” Out of local materials they built mock airports
remark: sans loss functions], through his first Ph.D.
and mock transport planes. They did an amazingly
student, Lawrence Klein (Nobel 1980). Two sins, one
good job: the cargo-cult airports really do look like
scientist.
airports, the planes like planes. The only trouble is,
they aren’t actually. Feynman called sciences he didn’t
So it is only fair to call both the sins of modern
like “cargo cult sciences” (he was, ill-advisedly I think,
economics Samuelsonian. It is rather similar to the
going after sociology: apparently he was not acquainted
situation in linguistics: their Great MIT Leader is
with the considerable amount of good, non-statistical-
Noam Chomsky. Chomsky’s mechanical approach to
significance yet quantitative and empirical and theoreti-
grammar, fiercely denying pragmatics and therefore the
cally meaningful sociology, such as long ago that of C.
main finding of the humanities in the twentieth
Wright Mills). By “cargo cult” he meant that they
century, blocks progress. So too economics. Until
looked like science, had all that hard math and statis-
economics stops believing, contrary to its own princi-
tics, plenty of long words; but actual science, actual
ples, that an intellectual free lunch is to be gotten from
inquiry into the world, was not going on.
qualitative theorems and statistical significance it will
be stuck on the ground waiting at the cargo-cult
I am afraid that my science of economics has come to
airport, at any rate in its high-end activities uninter-
the same point. Paul Samuelson, though a splendid
ested in (Really) How Much. High-end theoretical and
man and a wonderful economist (honestly), is a symbol
econometric papers will be published. Careers will be
of the pointlessness of qualitative theorems.
made, thank you very much. Many outstanding fellows
Samuelson, actually, is more than merely a symbol—he
(and no women) will get chairs at Princeton and
made and taught and defended the Two Sins, at one
Chicago. But our understanding of the economic
time almost single-handedly. It was a brave stance.
world will continue to be crippled by the spreading,
But it had terrible outcomes. Samuelson advocated the
ramifying, hideous sins.
“scientific” program of producing qualitative theorems,
developing qualitative-theorem-generating-functions (I
Woe, woe is me. Oy vey ist mir. Pity the poor econo-
am making an insider’s statistical joke: ha, ha; such is
mists. The sins of economics come from pride in
economic humor), such as “revealed preference” and
formalization, the making of great machines and
“overlapping generations” models and above all the
monsters:
machinery of Max U. He was involved also (it turns
out somewhat surprisingly) in the early propagation of
...and called me Sin, and for a sign
significance testing, the “scientific” method of empir-
Portentous held me; but familiar grown,
58
I pleased, and with attractive graces won
The most averse.
And pity, I repeat, poor old Deirdre, who appears to be
doomed to keep making these arguments, showing
more and more plainly that the two main methods of
academic economics are nonsense, without being
believed.
Cassandra, you know, was the most beautiful of the
daughters of Priam, King of Troy. The god Apollo fell
for her and made her a prophetess. In exchange he
wanted sexual favors, which she refused. So he cursed
her, in a most malicious way. He had already given her
the power of prophecy, to know for example what
would happen to a science that refused to ask seriously
How Much. His curse was to add that though she
would continue to be correct in her prophecies, no one
would believe her.
Cassandra [to Trojan economists proposing to bring the
wooden horse into the city]: The horse is filled
with enemy soldiers! If you bring it into the
city, economics is lost! Please don’t!
Leading Trojan Economist: Uh, yeah, I see what you
mean, Cassie. Good point. Enemy soldiers.
Inside. City lost. Qualitative theorems useless
for a science. Statistical significance without a
loss function equally useless. Economics
ruined. Thanks very much for your prophecy.
Great contribution. Love your stuff. [Turning
to colleagues] Okay, guys, let’s bring that sucker
in!
Prickly Paradigm Press, LLC is the North American
successor of Prickly Pear Press, founded in Britain by
Keith Hart and Anna Grimshaw in 1993. Prickly
Paradigm aims to follow their lead in publishing chal-
lenging and sometimes outrageous pamphlets, not only on
anthropology, but on other academic disciplines, the arts,
and the contemporary world.
Prickly Paradigm is marketed and distributed by
The University of Chicago Press.
www.press.uchicago.edu
A list of current and future titles, as well as contact
addresses for all correspondence, can be found on our
website.
www.prickly-paradigm.com
Executive Publisher
Marshall Sahlins
Publishers
Peter Sahlins
Ramona Naddaff
Bernard Sahlins
Seminary Co-op Bookstore
Editor
Matthew Engelke
info@prickly-paradigm.com
Design and layout by Bellwether Manufacturing.
