Thursday, May 23, 2013

Bourgeois Dignity and the Productive Arts

Diedre McCloskey identifies the industrial revolution as the most radical, unexpected and influential change in the history of man.  In "Bourgeois Dignity" she presents the argument that the proximate cause was a change in the respect accorded to science, engineering and business people and work. 

Humans seek to be better off.  The measure of well being is money available for allocation to acquire food, shelter and other goods.  For two thousand years people lived on $1 to $3 per day. Since 1700 people have gone from living on $3 per day - barely enough to survive - to 15 times that amount and 100 times that amount if you take into account the quality of the products you can buy. 

She postulates that the proximate reason is innovation.  Here she identifies innovation as both the inventions and the promulgation of their use through business innovation as the productive arts that drive changes in economic outcome and thus growth.  She notes that the economic impact is not, as might be expected due mostly to the invention, but the economic outcome is also substantially continued and delivered by organizational and business methods innovation long after the original macro invention.

She notes numerous examples of this.  Most famously, in the cotton textile business, that of the base of the industrial revolution by legend, core macro inventions occurred between 1680 and 1760.  During this period productivity in the industry grew a phenomenal 7.7% per year - doubling each decade.  But then the industry continued to enhance productivity at the same rate by innovating in organization, supply management and finance for the next century.

Sustained innovation became enabled by the "Productive Arts" - reaching back to echo Aristotle's Nicomachean Ethics and J.S.Mills' Political Economy, and "Bourgeois Dignity," defined as virtues beyond prudence, engaged in by business people and as promulgated by first Dutch, then British, French and Americans valuing innovation and innovators and business people.

She points out that this made some innovators and business people wealthy, but, perhaps more importantly, it changed the lives of the poor in all areas in which it occurred by an even greater amount dramatically changing the lives of the mass of the poor.

She moves on to dispose of the growth arguments proposed by economic theory - Protestant uniqueness and ethics, capital accumulation, original sin or expropriation of the poor, African slaves or colonial natives, transport advances, geography or natural resource advantages, mercantilism and trade, better institutions - as either being too small in effect or not isolated to the period in question.

McCloskey claims the sustained innovation, dramatic change in societal wealth labeled the "Industrial Revolution" came from respect and dignity for those engaged in the productive arts first occurring in all of history in the later 1600s in Holland and then in England.  Her arguments are persuasive, but not conclusive.  Her linking together the occurrence, the importance, the magnitude, and the importance of innovation are all well said and a great contribution to the clarity of our thinking around these issues.  Her arguments disposing of other theories are persuasive and as individual causation, conclusive.  It is harder to dispose of a cumulative outcome produced by a meeting of many of the items she disposes of; however, her arguments around why then and there lead one to conclude that her bourgeois dignity is at the very least a contributing factor.

Accurate Reality:  Policies that work against the dignity and respect of the productive community will reduce the well being of society.  Making people better off relies on innovation writ broadly.  Creation of jobs is not, as is often quoted, the province of small business, but is the province of innovators that bring new ways of doing things to the world.  A focus on doing that is what will remove drag from the American economy and make wage earners - and wage payers, unbegrudged - better off.

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