Talk About the Bourgeoisie

by Don Boudreaux on April 6, 2011

in Books, Civil Society, Complexity & Emergence, Creative destruction, Curious Task, Economics, Everyday Life, Growth, History, Standard of Living

Deirdre McCloskey’s book Bourgeois Dignity inspired this most recent column of mine in the Pittsburgh Tribune-Review.

UPDATE: This January 2010 column of mine reveals my recognition that economic development depends upon culture.  What this earlier column misses is the role of rhetoric.

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{ 105 comments }

Methinks1776 April 6, 2011 at 10:10 am

McCloskey’s book is next in the queue, so I haven’t accessed her insights yet. Reading your column, I thought about how culture has been impacted by innovation in technology, religions, war, trade, etc. Culture provides powerful incentives and so, it still boils down to incentives. Maybe this is too simplistic a view? I feel like I’m missing something.

vikingvista April 6, 2011 at 12:15 pm

“Culture provides powerful incentives and so, it still boils down to incentives.”

Good point. If culture is an influence, what is the mechanism of that influence? Conditioning? Behavioral mimicry? Fear of mystical retribution?

Or is it a rational observation of personal benefits and costs? Instead of being something different than incentives, couldn’t a cultural change merely reflect the discovery of costs and benefits that were previously not realized?

Methinks1776 April 6, 2011 at 1:58 pm

I don’t know that I have a point at all. I don’t think I understand the argument well enough just from Don’s column – maybe I will after I read the book.

Emmanuel April 6, 2011 at 11:29 am

What’s Bourgeoise? Isn’t it either Bourgeois or The Bourgeoisie?

Don Boudreaux April 6, 2011 at 11:34 am

Oui. Merci.

DG Lesvic April 6, 2011 at 11:36 am

Prof Boudreaux,

You’ve gone off the rails again.

“Culture” has nothing to do with economics. Economics is a science of the constant, unchanging, universal, eternal, immutable laws of human action, and not of the changing mores of culture and sociology.

Sam Grove April 6, 2011 at 11:39 am

But DG, culture contains incentives and disincentives that affect the economic behavior of humans. Thus, culture is not so distinct from economics.

DG Lesvic April 6, 2011 at 11:51 am

Sam,

Culture changes, the laws of economics don’t.

No cultural change can change the fact that, ceteris paribus, quantity demanded goes down as price goes up.

Daniel Kuehn April 6, 2011 at 11:55 am

Except, perhaps, for a culture of conspicuous consumption where utility is a function of the price of a good.

This is one of many reasons why things like culture and institutions do matter, and why it helps to read more broadly than Mises.

vikingvista April 6, 2011 at 12:17 pm

“it helps to read more broadly than Mises”

Actually, not misreading Mises would be a good start.

DG Lesvic April 6, 2011 at 12:28 pm

Daniel,

That’s a good point. And you have made others here, so why, with your ability, do you so often reduce yourself to pettifoggery?

But this time, you’re contributing something worthwhile.

And it isn’t just conspicuous consumption, though that is part of it. Also, the higher price of, say, gold than silver, can add to the utility of gold. More value in a smaller package.

But there is an upward limit, the highest price will traffic will bear. That’s why gold at a given moment is at $1458.01 an ounce rather than $1458.02 an ounce. And since the sellers never sell for less than they could, and are always charging all the traffic would bear, that upward limit has, for every given moment in time, always been reached, and cannot be exceeded without affecting the quantity demanded.

Daniel Kuehn April 6, 2011 at 12:29 pm

touche – I’ll leave that evaluation to others, though :)

Daniel Kuehn April 6, 2011 at 12:30 pm

that last one was to vikingvista

dg – I’m not even quite sure what pettifoggery is, so I can’t say whether I’m reducing myself to it or not.

JohnK April 6, 2011 at 12:40 pm

“I’m not even quite sure what pettifoggery is”

here: http://tinyurl.com/3o84kta

Daniel Kuehn April 6, 2011 at 12:47 pm

JohnK – in the previous post you made the mistake of thinking I hadn’t already googled it.

In this post you make the mistake of thinking I’m invested enough in what DG has to say to google it.

JohnK April 6, 2011 at 12:55 pm

Take a sedative Dan. Seriously. Lighten up. Deep breaths. In…. Out… In…. Out….

Daniel Kuehn April 6, 2011 at 1:01 pm

Dude – that was a joke

Daniel Kuehn April 6, 2011 at 1:02 pm

I should follow sarcasm with an emoticon on here as a rule… every time I ought to be taken seriously I’m not, and every time I’m being sarcastic it’s taken with the utmost seriousness :)

Methinks1776 April 6, 2011 at 1:04 pm

There are times you should be taken seriously?

[place emoticon here]

Sam Grove April 6, 2011 at 4:09 pm

But culture springs from human interaction and most most certainly revolves around economics. Economics is about how humans produce and consume, something that is common to all cultures.

All cultures have traditions about feasting. Feasting about celebration of acquiring resources.

Where culture varies is often due to circumstance, thus desert nomads have different cultural attitudes to food and water (due to higher scarcity) than do tribes in verdant jungles.

Eduardo April 6, 2011 at 12:03 pm

“Culture” has nothing to do with economics. Economics is a science of the constant, unchanging, universal, eternal, immutable laws of human action, and not of the changing mores of culture and sociology.”
It is a shame that there is still people saying that. DG Lesvic, this makes you as dumb as uncultivated. Try to connect to the new century.
In only three days, I found the worst economist of this blog! (Actually, I hope you are the worst)

Don Boudreaux April 6, 2011 at 11:41 am

You do economics your way; I’ll do it mine. Clearly, I reject your crabbed vision of what economics is and isn’t. (And no amount of quotations from Mises will persuade me to your view.)

Rugby1 April 6, 2011 at 12:46 pm

“Culture” has nothing to do with economics. Economics is a science of the constant, unchanging, universal, eternal, immutable laws of human action, and not of the changing mores of culture and sociology.”

One of the silliest things I have ever seen written. Let’s utilize your assumption that the laws of economics are immutable and unchanging and once laid down are set in stone for all eternity. So for this example we agree yes?

And culture is mutable and changing in response to both internal and external group and individual pressures yes?

So with consistently changing cultures the impact of immutable economic laws would affect the culture differently given what other competing priorities exist. Thus even if the laws remain the same its impact varies dependent upon factors outside of the economic law.

Here is a quick example for someone silly, like possibly you. Let’s utilize the law of gravity. It is always in effect and never ever changes. Yet its impact on our society varies. Several hundred years ago the law of gravity prevented us from the action of flight. Yet now the law of gravity (which is constant) is combined with the laws of propulsion, drag, and lift to produce flight. Thus the same law, has an incredibly different impact.

I completely agree this is an incomplete example but I am at work doing capitalist things and this is the first quick example off the top of my head. Feel free to either take it apart or come up with better ones. DG your statement that culture has nothing to do with economics is just fundamentally flawed.

DG Lesvic April 6, 2011 at 1:10 pm

Rugby,

You wrote,

“So with consistently changing cultures the impact of immutable economic laws would affect the culture differently given what other competing priorities exist. Thus even if the laws remain the same its impact varies dependent upon factors outside of the economic law.”

It depends upon whether you’re talking about qualitative or quantitative effects. The quantitative effects may vary but not the qualitative. Violating the laws of economics will always have the same qualitative effect on rich and poor societies alike. They will always make things worse. But they will make things much worse in the poorer societies.

Rugby1 April 7, 2011 at 1:36 pm

DG,

You wrote;

“Culture” has nothing to do with economics.”

My response provided you an example of how culture interplays with the laws of econ.

You then wrote;

“Violating the laws of economics will always have the same qualitative effect on rich and poor societies alike.”

Who said anything about violating the laws of economics? I am not sure how this is not clear but let me try again in a very simple format.

What is cultures value different items or material things? What if people in the US generally want larger houses and to live in suburbs, while people in Europe want to live in apartments inside cities?

US citizens may want to purchase larger houses and live in suburbs. Companies go into action to produce items that meet consumer desires, thus you have the culture of homeownership dictating where scarce resources are utilized. Thus culture affects econ. I grant you this is an extremely basic example but how do you not see an interplay between the two?

Rugby1 April 7, 2011 at 1:37 pm

is = if, I seriously second or third all the people who have asked to bring back the edit button.

DG Lesvic April 7, 2011 at 7:47 pm

I didn’t say there was no interplay between the two. There is, but from economics to culture, not the other way around. Economics informs culture but is not informed by it.

Economics is informed by observation or experience, at the level of its basic axioms. But you weren’t talking about the observation or experience that applies to economics and is universal. You were talking about culture, which implies variation in experience, and is irrelevant to economics, whichis the science of what is universal and not individual and unique in each action.

“Praxeology (economics)…refers to what is necessary in human action. It is cognition of universals and categories.”

As Mises explained it,

“The cognition of history (culture) refers to what is unique and individual in each even or class of events. It analyzes first each object of its studies with the aid of the mental tools provided by all other sciences (such as economis). Having achieved this preliminary work, it faces its own specific problem: the elucidation of the unique and invividual (cultural) features of the case by means of the understanding (feeling, judgment, not logic and deduction).”

yet another Dave April 6, 2011 at 1:01 pm

By your definition economics is the science of human action. You also claim “Culture has nothing to do with economics.”

For culture to have nothing to do with economics, culture must have nothing to do with human action. Is this what you believe?

DG Lesvic April 6, 2011 at 1:47 pm

That is more or less what I say, though I would say that economics is but one part of the science of Human Action.

And it is not affected by culture.

kyle8 April 6, 2011 at 5:20 pm

You state that with certainty, yet offer no proof.

I will be willing to grant that human nature does not much change over cultures, but cultures do have a great effect on all human activity.

And since economics is all about human activity, forgive me If I find your viewpoint unconvincing.

yet another Dave April 6, 2011 at 6:48 pm

So, by your definition, economics is the study of the part of human action not affected by culture?

What about situations where people of very different cultures interact. Is economics the study of only the parts of the interaction that are not affected by the cultural differences?

Sam Grove April 7, 2011 at 2:39 pm

As economics is about human survival, it then follows that all human cultures, to succeed, must obey the fundamentals of economics, that consumption may not exceed production.

I don’t think anyone argues with that.

Culture matters significantly if it leads people to follow or go astray from economic fundamentals.

To be successful, culture must contain the guides that encourage people to produce more than they consume.

Of course economic fundamentals MUST form the base of any human society, the culture that forms atop the base will determine the long run success of a society.

crossofcrimson April 8, 2011 at 9:48 am

“Culture” has nothing to do with economics. Economics is a science of the constant, unchanging, universal, eternal, immutable laws of human action, and not of the changing mores of culture and sociology.”

I’m in line with a good amount of the commenters here most of the time, but I have to side with DG Lesvic on this one – I don’t think we’re giving his statement as careful consideration as we could.

To be clear, I’m referring to the above statement, and not any subsequent statements that DG has made. I think the mistake detractors are making here is conflating the observation that economic principles are immutable (and I think we can mostly agree that they are…or at least the basics) with an observation that nothing can change peoples’ preferences or values. These are completely different statements – and DC’s acknowledgment of the former does not, in any way, lead to an embracing of the latter.

An economic background can give you a good understanding of price systems and trade patterns for, say, Bibles. But when someone says culture (as it pertains to religion) does not effect economics, they aren’t saying that Christianity doesn’t have an affect on peoples’ preferences in the market-place. They’re saying that economics has little to say about how you arrive at those preferences; it’s a posterior study of the interaction of of subjectively-minded human beings in universe of scarcity.

In other words, of course culture (etc.) affects what we value – but that doesn’t effect the basic premises which economics holds. Whether we value water, diamonds, or Bibles – for WHATEVER reason that we do – the basic tenets remain the same.

jorod April 6, 2011 at 11:41 am

Perhaps it also had something to do with Christianity, the development of arithmetic, technology and the abolition of slavery. Perhaps the businessmen started paying the help instead of enslaving them. Wasn’t there a labor shortage caused by the plague?

vikingvista April 6, 2011 at 12:32 pm

Or maybe the cost/benefit ratio of voluntary trade was found more often to be less than for aggression. As profitable as your slaves are, maybe they turn out to be more profitable if given a measure of personal freedom.

DG Lesvic April 6, 2011 at 11:48 am

“Ortega y Gasset wrote a famous essay on the expulsion of man from art…we might well add a study on the expulsion of man from economics.” Wilhelm Röpke

Socialism is the expulsion of human nature, greed, and its corollaries, incentive and the profit motive. Man is a cog in a macro-economic machine pumping out society’s needs at the push of a button. And when it grinds to a halt, it is the fault not of the machine but intransigent cogs, reverting to their greedy, capitalist ways….

Public policy is an alternative to capitalism only as stupidity is an alternative to intelligence. For capitalism is a synonym for the price system, the calculation of profit and loss, and economic intelligence, and, restriction of it, of intelligence.

Socialism is beyond stupidity, the war upon greed, upon human nature and humanity itself, rationalization of lunacy and idealization of criminality, the suicide of civilization, and, Middle Way, just the same thing divided by two.

Since disregard for incentive and the profit motive is the essence of socialism, and the Middle Way shares it, the difference is not between socialism and a moderate non-socialism but consistent and inconsistent socialism. And if the moderate is but a part-time socialist, he is every bit of one when he rails against greed.

From Socialism at http://econotrashtalk.org/#Socialism_

Eduardo April 6, 2011 at 12:09 pm

What a poor text. Has somebody learned something from it?
“For capitalism is a synonym for the price system, the calculation of profit and loss, and economic intelligence, and, restriction of it, of intelligence.”
That is a (very bad) definition of free markets, not capitalism.
You obviously see no difference between free markets and capitalism. I hope that when you’ll grow up you will be able to travel and meet new peoples and cultures. I could help you (or not)

JohnK April 6, 2011 at 11:56 am

Until a couple hundred years ago if someone was wealthy it most likely was a result of plunder as opposed to trade. Thus someone with great wealth was more likely to be feared than respected.
As plunder became less socially acceptable, accumulations of wealth were more likely a result of trade.

Now it seems that plunder is becoming socially acceptable again, only this time it is institutionalized.

Scott G April 6, 2011 at 12:06 pm

Dr. Boudreaux,

I’ve not read McCloskey’s book, but I’m skeptical about the accuracy of this statement.

“Merchants, innovators and business people came to be, for the first time in human history, not only tolerated but respected.”

As Dr. Roberts so often says in Econtalk, that’s the claim, now let’s look at the data to support that claim.

It seems likely that innovators were respected even in primitive cultures. I just got back from a trip in Maui where I learned a little about the respect individuals had for people with valuable tool making skills (what I consider to be innovators).

Were merchants and business people not respected in ancient Greece? (Not a rhetorical question).

Also I’m getting confused about what matters most: incentives matter, trade matters, freedom matters and culture matters (i.e. attitudes about capitalism). How does one go about figuring out what matters most? I guess it may not be important on a practical level, but I’m curious to know what matters most, if there is something that matters most.

Economiser April 6, 2011 at 1:36 pm

I’ve also not read McCloskey’s book but I share your skepticism.

Intuitively, it seems that incentives do matter most. Incentives are what make trade, culture, and even freedom valuable from an economic standpoint.

Don may be right that incentives are not the only thing that matters, as that’s a hard statement to disprove. But I think they’re darn close.

Don Boudreaux April 6, 2011 at 1:48 pm

Deirdre does NOT say that incentives don’t matter, or that they don’t matter a lot.

I understand, though, your skepticism. But read her book. The arguments and historical evidence she marshals for her case is substantial and compelling.

Sam Grove April 6, 2011 at 4:43 pm

“Merchants, innovators and business people came to be, for the first time in human history, not only tolerated but respected.”

This refers to social incentives. Profit is a powerful incentive, but can be overwhelmed by the urge to survive.

Political management of resources (socialism) is all about replacing the profit motive with social sanction.

kyle8 April 6, 2011 at 5:26 pm

Actually merchants were NOT respected in ancient Greece. Despite the obvious wealth that Cities like Athens accumulated from trade, merchants were looked down upon, Read what Aristotle thought of them.

The same held true for historical Chinese culture Traders, merchants, and to a lesser extent, artisans were considered much lower even than peasants. The rulers held them in not only contempt, but hostility.

DG Lesvic April 6, 2011 at 12:10 pm

Leading the retreat from economic freedom is the retreat from economics. Since it is no longer economizing but spending and even squandering that is needed, the incentive for saving and investment is a barbarous relic, like the gold standard, and, the profit motive, a defect of the capitalist system. In Utopia, men are not greedy. Only capitalism has made them so. To save them from it, we must appeal to the goodness in them, not the greed, and purge not just the system itself but the carriers of the disease, the children of Mammon, the Jews, the property owners, and the educated and cosmopolitan, standing in the way of Socialist Dreamland.

From What the Left is Really All About at

http://econotrashtalk.org/#What_the_Left_Is_Really_All_About

Daniel Kuehn April 6, 2011 at 12:12 pm

Wow – you’re on a warpath today :)

Eduardo April 6, 2011 at 12:29 pm

You are the barbarous relic!

Eduardo April 6, 2011 at 12:30 pm

Sorry it was directed to DG Lesvic, of course ;)

Moggio April 6, 2011 at 2:48 pm

The question is: 200 or so years ago, why does this “cultural change” occur?

vikingvista April 6, 2011 at 3:08 pm

The difficulty of ruling a large overseas colony meant that enough people finally had something they thought worth fighting for?

kyle8 April 6, 2011 at 5:31 pm

Lot’s and lots of reasons. For the first time in history a large body of increasing knowledge came into contact with rising incomes and a Government (Great Britain) that was more interested in taxing their ever more prosperous citizens rather than squelching their rising wealth out of fear of being supplanted by a new class.

Out of that came the industrial revolution, which corresponded with widespread literacy and the first ever “information” revolution.

Richard Stands April 6, 2011 at 10:42 pm

And with that, came the time and wealth for many to do more than simply scrabble for sustenance every daylight hour of every day.

DG Lesvic April 6, 2011 at 4:53 pm

By the way, Daniel, your challenging on that point about consicuous consumption caused me to rewrite the relevant chapter in my book, and, for that, I thank you.

The reason we get so pissed off at you is because we see the ability that you squander, when you could accomplish so much with it.

You’re especially talented, and should put that talent to good use more often. You do, somewhat, but could do more, much more. That’s what bugs Methinkers and the rest of us here who really love you and want more from you.

Deirdre McCloskey April 6, 2011 at 6:29 pm

Dears,

I am so struck, as I always am on the rare occasions I dip into the blogosphere, at how vigorous the discussion is, and how many beginning authors are being encouraged by it. We are entering an age of democracy of authority, where each of us is a printing press, the Age of Blog, on the whole a very good and innovative and egalitarian age. But I am also struck by how often the blogopshere violates a principal cultural rule from the earlier Age of the Author: Know What You Are Sounding Off About. (Right there, btw, is a cultural effect, in both directions, moving those demand curves that all of us so wisely credit, as one moves in imagination or fact from one age to another.) People say here, “I haven’t read McCloskey, but. . . .” In the Age of Print such a statement was a sign of shameful ignorance. (There’s non-shameful ignorance, such as mine and yours about the mathematical physics of black holes, about which under the old rules we therefore offer no opinions.) “I know nothing about art, but . . . .” “I have never studied economics, but. . . .” Oldsters like Don and me get very uncomfortable making such remarks, remaining ignorant about something we are nonetheless claiming to have opinions about. I don’t mean you have to read everything to talk about anything. I am merely counseling a little productive modesty, a little discomfort when you hear yourself saying, “I don’t know anything about modern jazz, but. . . .” I just listened to a TED talk by my former student Paul Romer, a brilliant and persuasive case for letting chartered cities let people out of politically enforced poverty. Unfortunately, early on Paul felt he needed to talk about Chinese history, and I felt the discomfort: “Come on Paul: if you’re going to sound off about China you’d better read more, and come to realize that it had the largest cities in the world for millennia. So maybe it’s not the cities, but. . . let me see . . . bourgeois dignity and bourgeois liberty.” I reckon Paul would agree that he, and I, and Don, need to do more homework. That’s another way to put the rule from the Age of Authorship: Do a little homework. I know, I know. Irritating. But we’ll do better if we hold each other to that one rule from the Age of the Author.

Scott G April 6, 2011 at 7:33 pm

Dear Dr. McCloskey,

I concur with your comment and I’m guilty of sounding off a little bit around here myself. I’m really good about not doing this in my engineering job, so I wonder why I do it here.

I believe it has to do with incentives. Even if the reputation of Scott G is tainted by my sounding off, I’m not sure it costs me much outside the blogosphere.

If I were to use my real name, I would be very careful about what I said here. Actually I wouldn’t say much at all here if I used my real name.

Thanks for the reminder about doing one’s work before opening one’s mouth. Doing otherwise in the corporate world (which I’m familiar with) is taboo.

Richard Stands April 6, 2011 at 10:47 pm

I’m no expert on Deirdre McCloskey blog posts, but I like what I’ve read so far.

Roger McKinney April 6, 2011 at 10:50 pm

I have read your books and online drafts and think they are absolutely amazing and provide the missing link to the history and theory of economic development!

DG Lesvic April 6, 2011 at 9:07 pm

Been away from the Net for a bit so will try to catch up
I have been calling for the exclusion of “culture” from economics, but not of economics from “culture.” The economist may also be a “culturalist,” or sociologist. He may wear the two hats, so long as he doesn’t confuse them, and understands that, while his economics informs his sociology, his sociology does not inform his economics, and that if he is to apply the economics logically and systematically to the sociology, he must first grasp it by itself.

Those calling for its confusion with other field are calling for its adulteration and evisceration, and, those for its purity, not for its isolation from all other fields but preservation from them.

And Prof. McCloskey, what grade would you give me for that?

Roger McKinney April 6, 2011 at 10:54 pm

The laws of economics are nothing more than priniciples of human behavior. People will behave differently under one set of institutions than they will under another. Culture creates the institutions.

For example, without the institution of private property and the institutions to support it, no one will invest. Without investment there are no jobs and the people languish in poverty.

The institutions of the USSR and US were very different, resulting in very different outcomes. Culture created those institutions. The same economic laws applied to both.

BTW, the creator of culture is religion.

DG Lesvic April 6, 2011 at 11:16 pm

Roger,

You’re wrong, and I’m not going to tell you why, because I’m sick and tired of telling people why. So, sorry, but you’ll never know, not if you’re depending on this crew to explain it to you. OK, dears, make a liar out of me. Let’s see just one of you explain it to Roger.

Cmon Big Talkin Blow Top. And, if you can do it, I’ll retire forever from the Cafe. Now is that an offer you can refuse?

Dan April 7, 2011 at 1:04 am

Wrong about what? Is economics not about the relationship of behavior, incentives, Disincentives, exchanges of wants, etc.,……?
Culture? Eeeeehhhhh….. Command markets seem less culture and more about a directive imposed by compulsion.
Contribution to this site is about learning. I am not interested in discussing the potential of absolute failures of ideas related to communism and other centrally directed economies. Will read about or listen to how and why they are failures. But interested in learning. Interested in the realities of economics and markets as opposed to fairy tale Utopias of selfless people all completely satisfied with a predisposed products and services ordained by a committee of aristocrats.

Eduardo April 7, 2011 at 6:04 am

Absolutely right!

DG Lesvic April 6, 2011 at 9:08 pm

I meant to say preservation for them.

DG Lesvic April 6, 2011 at 11:20 pm

This referred to my statement above, that I was calling not for the isolation of economics from other fields but its preservation for (not “from”) them.

vikingvista April 6, 2011 at 10:40 pm

I’m curious about other illustrious readers are lurking at the Cafe.

Scott G April 7, 2011 at 10:29 am

Yeah, when are Thomas Sowell and James Buchanan going to comment?

Barack Obama are you reading this?

brotio April 8, 2011 at 12:41 am

Barack Obama are you reading this?

Yes.

His Delta Tau Chi name is, “muirgeo

Dan April 7, 2011 at 1:24 am

For my lesser education, how about a few examples of cultural influence in economics. I can only think of the products and services that would be demanded as example of relationship between economics and culture.

Troy Camplin April 7, 2011 at 2:14 am
DG Lesvic April 7, 2011 at 2:37 am

So, none of the Big Brains here can do it. It’s up to “the worst economist of this blog!”, as El Gaucho described me. OK, but if Keynes can be a Lord, and Kuehn a count, then I should at least be a bloomin’ baron. or a duke. I have Lionel Robbin’s autobiography before me and nowhere in it is any mention of goold old Lionel, just Lord Robbins. So how about Lord Lesvic?

Roger wrote,

“The laws of economics are nothing more than priniciples of human behavior. People will behave differently under one set of institutions than they will under another. Culture creates the institutions.”

In other words, culture creates the laws of economics, and different cultures will create different laws. Before I go any further with this, I want Roger to confirm that this is what he meant. I don’t want to go to all the bother of refuting that and then have him tell me that that was not what he meant.

So, how about it Roger?

El Gaucho April 7, 2011 at 6:16 am

Hey DJ Lesvic, thank you for this new nickname.
Of course what said Roger is true.
I would say that the first cultural agreement in an economy is its money agreement! Centuries ago, each culture had is own money (not only fractionary debt money, but also money which value is backed by wheat, or salt, etc.; hour-money, also). Money was always related with religion. (It is still related now, as capitalism is a religion –> before reacting, please see the definition of a religion) As I said in a previous post, money agreement are considered by standard theory as a neutral element. This is a big mistake. Money agreements are deeply rooted in our cultural values.

DG Lesvic April 7, 2011 at 6:56 am

Your Lordshiip, if you don’t mind.

I didn’t ask Roger if what he said was true. I asked him if my interpretation of it was accurate.

Roger McKinney April 7, 2011 at 12:44 pm

No, that’s not what I meant. The principles of human behavior remain the same under all institutions, but the results are different depending on the institutions involved. Institutions determine outcomes, not the “laws” of economics.

To use the previous example, entrepreneurs will take advantage of profit opportunities in a free market by investing in them. But in a country with no protection for private property, the very same entrepreneurs won’t invest. The laws of economics haven’t changed, but the outcomes that those laws produce have changed.

In the extreme, take the US and USSR again. The laws of economics were exactly the same for both because human nature was the same in each. But the outcomes were different because the different institutions caused the same laws to produce different results.

DG Lesvic April 7, 2011 at 1:17 pm

Roger,

You wrote,

” Institutions determine outcomes, not the “laws” of economics”

Explain then why, without any laws of economics, it would make any difference what the institutions were, whether they were capitalistic or socialistic

Roger McKinney April 7, 2011 at 1:28 pm

I don’t know what you’re asking. I don’t know what “without laws of economics” means. The laws of economics are nothing but the rational behavior of humans.

I’m guessing that “without laws of economics” would mean that people no longer act rationally. In that case, institutions would not matter and would probably change frequently.

DG Lesvic April 7, 2011 at 2:23 pm

Roger,

Sorry, but it’s just taking more effort than it’s worth to me to try to figure our what you’re saying or not saying and make any sense of it. There may be a lot of sense in it, and it just may be over my head. So it may be my fault, but I just can’t help it.

You seem like a serious person and I’d love to still discuss all this with you, but for the moment I’m just stymied.

dan April 7, 2011 at 3:05 pm

But, in the USSR, the govt worked against the ‘laws of economics’. Rather than have supply and demand set pricing, the govt set pricing based on their own judgement. Rather than allowing for the direct relationship of those three( supply,demand, and pricing) to determine ‘how much’ to produce and at what price, the govt determined what to produce, how much, and at what price, with complete lack of regard to actual demand. Their results were the ‘giant nails’ (to meet quotas), and horrendous quality of care in medical industry (specified time management of patients).

DG Lesvic April 7, 2011 at 5:03 pm

Dan,

Excellent reply.

Better than I was able to do.

Thank you.

Eduardo April 7, 2011 at 7:56 am

You are right, but I said that to introduce my idea.
By taking the example of money agreements, i was trying to show that cultural agreements are rooted in our monetary system.
Another example: the American greed culture, for example, based on this idea that individual interest can lead a society even in financial practices. This extremism produced financial new products that are fixing a timing to almost the entire population, telling the people that the appetite for gain is the highest vertue in the world, although actually it is destroying our productive fabric (and also our governments, but I am sure you don’t care).
Each cultural agreement come along with a belief system; that is where religion belongs to.

Eduardo April 7, 2011 at 7:58 am

this was for DG Lesvic April 7, 2011 at 6:56 am

Sam Grove April 7, 2011 at 2:47 pm

American greed culture

That’s a loaded phrase.
Is American greed culture different from European greed culture or South American greed culture?

What is greed?

JohnK April 7, 2011 at 3:39 pm

“Politicians never accuse you of ‘greed’ for wanting other people’s money — only for wanting to keep your own money.”
- Joseph Sobran

vikingvista April 8, 2011 at 7:13 pm

Now there’s a man who’s epiphany was a long time coming.

jjoxman April 7, 2011 at 8:30 pm

As one who immigrated to America for its greedy culture, I will say the following. America has been the engine of economic growth for the world for the past century. It is losing steam because we are forced, by our intellectual superiors (snicker), into serfdom to the Great State. This is temporary and will be reversed, I don’t know when, but it will be. And it will be reversed because of American greed culture. We are greedy to live our dreams; we are greedy to work and produce; we are greedy to find our limits. We push ever harder and the world is better for it. And this makes us, as a people, plunderable. But the plunder will end.

“Greed, for lack of a better word, is good. The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.” GG, Wall Street.

P.S. GG would’ve been a hero, but was maligned into being a criminal. Hollywood can’t make a proper movie about successful business people.

Methinks1776 April 7, 2011 at 10:37 pm

Well said! Also, I hope you’re right.

jjoxman April 8, 2011 at 9:50 am

America is the natural home of rebels. The tide will turn one day – I just hope I’m alive to see it.

John F April 7, 2011 at 8:59 am

Probably getting ahead in the discussion, but, if the difficult to define “culture” is integral to the acceptance and even praise of the “capitalist” and his success, an economist might fear open borders for a democracy. It might be that culture migrates with the migrants. Democracy, after all, is a pure numbers game.

Note, it was competing monarchies combined with aristocratic parliaments that supported such conditions of wealth creation 200+years ago. It is ever expanding franchise that has brought about the “social democracies” now a near bane to future growth.

It was Hayek that noted well that any rule of distribution is a rule of production, thus today’s entitlement-ocracy with a good dose of “cultural diversity” might be a future production of wealth problem.

Why it might even be possible that the decline of Church influence is cause for “cultural” worry, because it is not unreasonable to posit that religions’ deadly sin of “envy” was abated by tenets of faith. Today, I sometimes think it is almost perceived as virtue. So, to open the borders to a culture even more envious than our present condition mightn’t be such a good thing.

JohnK April 7, 2011 at 10:14 am

Socialism is institutionalized envy.

dan April 7, 2011 at 2:57 pm

*Like*

Eduardo April 7, 2011 at 9:57 am

“Today I sometimes think it is almost perceived as virtue”
I also think that: the difference now are the terms used. The words are very powerful, and sometimes some terms are replaced by other, giving the illusion that the underlying reality has also changed. In this way, it become possible to enounce beautiful new principles and legitimate some actions.
In retrospect, you can see that all the monotheistic religions are against usury. But since many centuries, usury is at the basis of our monetary system (this probably powered our industrial development).
I think Western cultures belief systems have evolved with more envy, and this allowed us to achieve a very fast growth.

“So, to open the borders to a culture even more envious than our present condition mightn’t be such a good thing.”
I don’t think there is an economic culture more envious than the western one.

DG Lesvic April 7, 2011 at 1:24 pm

Your Gauchness,

I believe in live and let live. If you want to live in a socialist community, that’s alright with me, so long as you don’t try to force me or anyone else into it with you.

Agreed?

DG Lesvic April 7, 2011 at 8:03 pm

This discussion is the perfect example of what’s wrong at this site. It isn’t much, and there is certainly a great deal more that is right, but that is when the economists here stick to their knitting. I have no problem with their talking about other things. My problem is confusing them with economics, as in this case, culture with economics. Digressions from economics are alright, but not in the name of economics.

It is ignorance of the teachings of Mises that permits that. That is the weakness here. It’s not a terribly big problem, for most of you here do a good to great job in economics most of the time. But it does permit so much time and energy to be wasted on fundamental ignorance of what economics is and isn’t. To correct that, Mises is indispensable.

dan April 7, 2011 at 8:59 pm

Culture influences economics, but economics does not influence culture?

DG Lesvic April 7, 2011 at 9:14 pm

I said that economics informs sociology (culture) and history, but is not informed by them.

dan April 7, 2011 at 9:19 pm

I tend to think that my question statement has truth to it. Not a ‘law’ or absolute, but a ring of truth.

DG Lesvic April 7, 2011 at 10:44 pm

OK, dears, try this on for size.

While science is the same for everyone everywhere, “culture” is not, for men do not all apply science in the same ways. The fact that some fail to employ it intelligently, or even know or care nothing about, is not the fault of science and does not invalidate it. Science is valid in every culture whether the cultures appreciate it or not.

Economics is a science, and, like any other, valid in all cultures. While, like all sciences, it is a tool of all the cultures, so far as they are intelligent enough to utilize it, they are not tools of the science. While it informs the cultures, the cultures do not inform the science. For while economics is the study of what is universal and necessary in human action, culture is variable, and you cannot learn what is universal from what is variable.

Troy Camplin April 8, 2011 at 1:04 am

Culture is variable, but it is not infinitely so. In fact, there are cultural universals:

http://evolutionandliterature.blogspot.com/2010/10/human-universals.html

These are found in all cultures. Are there variations? Absolutely. Just like there are varations in economies while there is an underlying commonality of human action, there are variations among cultures with an underlying commonality of human behavior. There are universals, and cultures can be studied scientifically.

DG Lesvic April 8, 2011 at 2:45 am

That’s where economics comes in, if you haven’t adulterated and vitiated it with “culture.”

Troy Camplin April 8, 2011 at 1:55 pm

It is unfortunate that the blank-slaters and postmodernists have created this attitude toward culture.

A culture affects the kinds of institutions in place. Which affects the direction human action takes. True, economics studies human action qua human action, but what also matters are the specific ways in which human action is realized. Thus can one understand why people act one way in one culture, and another way in another.

A culture also affects attitudes. Which affects the direction human action takes. If there is a general attitude against those who make money through business ventures, that is going to affect whether or not people go into business. Which affects the economy. If the culture looks down on physical labor, or values relaxation over physical labor, one would expect less economic activity to take place. The monetary incentives to increase the amount of work done will have to be much larger than in a culture in which work is seen as virtuous in and of itself.

If economics is about values, then understanding where those values come from is vital — meaning understanding culture is vital. It may not matter in some rarefied form of economics, but it matters for understanding what is going on at a particular time in a particular place.

DG Lesvic April 8, 2011 at 12:13 am

Thanks to you dears, I’ve just made these changes in my book.

Referring to Mises:

He excluded the economic psychologists, the “Public Choice economists,” for, “The field of our science is human action, not the psychological events which result in an action.” It is “action as such.” While economics is about the road to Hell, Public Choice is about the intentions paving it. By emphasizing those of public officials, it tacitly admits that they could make a difference, that properly motivated officials could improve upon the market. Simply denying that they could be so motivated is not economics but psychology, and a far cry from economics saying that, however motivated, they could only make things worse. It is an echo of socialist propaganda, blaming the socialists rather than socialism for its failures, and exonerating socialism itself. Even if it “extended the economic way of thinking to political issues,” it would still just be old wine in a new bottle, for economics has always been Political Economy; but it is merely a pretense of something new, of knowing more than Mises by those who don’t know half, and, far from “the economic way of thinking,” a retreat from it, and the free market cause.

He excluded the sociologists, for it is a science not of changing mores but unchanging laws. While economics informs “culture,” it is not informed by it. While it is uniform for all cultures, culture itself is variable. And you cannot learn what is invariable from what is variable, the laws of economics, which never change, from the mores of society, which constantly change.

dan April 8, 2011 at 1:33 am

I should see a doctor……. I think that I understood your last post.

Not a knock on you……….but, self-deprication.

DG Lesvic April 8, 2011 at 12:50 am

In the last sentence, I should have said

the laws of economics, which never vary, from the mores of society, which constantly vary.

DG Lesvic April 8, 2011 at 9:59 am

A slight revision.

Again, referring to Mises:

He excluded the sociologists (from economics), for it is a science not of varying cultures and changing mores but of universal and immutable laws, and you cannot learn the universal and immutable laws from the varying and changing mores.

DG Lesvic April 8, 2011 at 10:26 am

I should have put it like this:

He excluded the sociologists, for it is a science not of varying cultures and changing mores but of universal and immutable laws, and you cannot learn the universal and immutable laws from the varying and changing cultures and mores.

DG Lesvic April 8, 2011 at 10:46 am

sorry, here we go again.

He excluded the sociologists, for you cannot learn the universal and immutable laws of economics from the varying cultures and changing mores of sociology, what never varies and changes from what is always varying and changing.

DG Lesvic April 8, 2011 at 3:00 pm

Prof. Boudreaux,

Your later column was as bad the earlier one. You were still trying to shoe-horn sociology into economics.

Granted that removing political interference with the market may still leave social or cultural interference with it. But that is irrelevant to economics.

As Mises explained, “The field of our science is human action…action as such.”

The identity of the actors is irrelevant. It doesn’t matter whether they’re public officials or not any more than whether they’re Zoroastrians or not.

Market action is market action and anti-market action anti-market action regardless of who is carrying it out. The effects are no different when it is carried out by Muslims or Jews or by officials or non-officials.

What matters for economics is not who is carrying out the action but only the action itself.

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