In the road taken many of these authors have, or will be appearing on booktv. Watch them on our website, booktv. Org. Can i get everyones attention. I am the director here at george mason university. We have Deirdre Mccloskey here with my good friend. Deirdre came out with the third quality of her book bourgeois equality that builds on the bourgeois community. I think this collection is the most ambitious work in economics done during my career, at least in economics and just an amazing achievement for what you have done and generate the conversation in economics. Hopefully we will have a great conversation today. Lets turn it over to you, tom. Thanks, pete. When clear morgan asked if i would conduct a conversation with deirdre i immediately jumped at the opportunity. Not only is it on honor, but there are few books that one reads in a scholarly light, as fundamentally change or deeply change the way you look at the world. These books have done that for me. I am honored to be here with you. Deirdre mccloskey taught at the university of illinois chicago from 20002015 and now is a mareter. I would list all of the departments she taught but that would take us through the whole hour. One was economics. Before that, she taught at the university of iowa and university of chicago and a longtime friend of the Economics Department here at the george mason. I believe you your scholarly articles number about 400. I dont dare put a number on the other poplar blog posts and magazine articles that you have written. I also believe this is your 17th authored book . As pete noted, it is the final book in a remarkable trilogy which will consume the bulk of our time today. But before we get to the actual conversation let me quote from deirdres website, which i encourage you to visit. It is great website with access to most of her work. She protests she is not a conservative economist. Here is what she is, if you dont mind me putting your words in your mouth. In deirdres words she is quote a literary, quantitative post modern free market progressive midwestern woman from boston who was once a man. Not conservative. I am a christian libertarian end quote. Indeed, she is. If were to list her achievements it would be a monologue and not a conversation. Lets get to it. Congratulation on the publication of the third volume. I remember being in the transcript seminar and that is when i read it. I havent yet gotten through the entire it changed a lot. I remember the transcript. Tell us, for those who have not read it, what are buj virtues . Guest all they are is vir e virtues as understood in the west, east, south and north of Human Society in aer commercial context. Courage is entrepreneurship. Love would be solidarity in a business, for example. There isnt anything specifically bourgeois about the virtues specifically. I am simply taking the tradition, which was the longtime way of the people talked about being good, and saying well, you can be good and be an economy, too. That comes with news to a lot of intellectuals. That is why i wrote the books; is to bring the good news to our wonderful friends on the left, and some on the right. Let me help you with what i take to be the main thing of the three volumes. Economist, since the time of adam smith, asks what causes Material Processing is certainly no question that this has been a major increase in the rate of material progress since the 30s. You call it one of the greatest events in human history, right after the invention of agricultural. You will find every other explanation that economist offered to be wanting. Your explanation is ideas change in such a way that practitioners of bourgeois virtues, innovators, they, for the first time in history, starting 200250 years ago became dignified in the eyes of most people. Not everyone but most people. That unleashed this creative energy. Guest that is the key. It is not so much psychology changed. That is what was claimed a hundred years ago but i dont think that is plausible. It is not people got, i dont know, better. It is that the society changed the evaluation of what they did. The word innovation was a scare word until the 19th century. To innovate was to change religious beliefs or to disturb the social hierarchy. They dont want that innovation. That is the main thing that changed. In the last month or so, i decided this last volume should have been entitled i should add one more word. It is called bourgeois equality, here is how i should have said it and this will shock low how liberal ideas, not capital institutions, enrich the world. Because it is the basic liberal idea, not in the modern american sense, but the older sense, that people are equal before the law, and equal in social standing. It is that equality that inspired people. They get more and more evidence of this every day. I am reading now an extremely good biography of the National Hero after whom i am named. All through it, you are seeing these poor sweds and norwegians inventing things like the stoves that made arctic exploration easier because they are being allowed to. Host matt ridly has a wonderful review of bourgeois equality. Guest wonderful review. Guest he pushes back a little bit. He wonders, and i wonder how you would respond to this question, he asks how do you know the causal direction . It is true, you document that the change in rhetoric occurred starting about 200250 years ago, bourgeois became to be spoken of with greater dignity. He wonders if that is the cause or another interchange . That is the idea of equality not what i call french equality which is the idea that equality results in equality in income. But what i call scottish equality and namely equality of human dignity, socially and before the law, those of course were raised in prestige by the success of the formula. You see it in scotland, england, holland it all began in holland and then the United States and australia and so forth. And other scandanavian elsewhere. You see the Great Success if that increases the prestige of markettested betterment as they call it. What i would say really is that you have to look at the timing. And the comparisons. But lets look at the timing. The increase in status of economic behavior and bourgeois activity and innovation happens before any substantial economic success. Way before. Around 1700, well actually i said it starts in holland so a hundred years before, around 1600, you have this flowering of dutch commercial society. About a hundred years later, e came the dutch central bank, the dutch exchange, unfortunately a Dutch National debt. I am surprised they didnt adopt the dutch language. It became so dutch my 1700 and that is way before there was stubstantial payoff. The real payoff comes not so much with the classic and Industrial Revolution of the 18th century but in what i call the great enrichment of the 19th and 20th century which innovation, betterment, just goes completely whacko. As it is said, ideas start having sex, then the baby ideas, and the grand baby ideas of sex. You get all of this amazing innovation of mechanical inventions which you can see around us but certainly organizational and social exemptions. Do you have any idea why the ideas changed . Yes. That is what i devote much of the third volume to. Coal is a big favored. Favorite. The slave trade or exploitation of the poor, doesnt work. If you think about economics they are just not big enough to explain a factor of 30 which is what we are trying to explain. And historically speaking they dont make sense because the chinese were exploiting coal for 3,000 years. All without an Industrial Revolution. I said why did this liberal idea become so powerful and all of a sudden it was. I have i am sorry to say i havent gotten a snappy answer. Here is the simple answer. It was accidents. Starting in 17, the famous year up to 1789, in that period, hierarchy began to break down. Hierarchy is what runs a civilization. I am a lord of the manner, and too bad for you, you have to give me taxes, and that started to break down. Ordinary people were made bold. English quakers were a big part of this and even women were allowed to speak at the meeting. There was no hierarchy at all. No priest. No person appointed by the congrugration. It isnt so much the document of salvation that changed but the Church Governance made people bolt. And i give some evidence for th this. Here is why it is safe. What is the point of going accidental . I dont want people to believe there is something pecular about this. It could have happened in china, with sufficient time it could have happened in guatemala. Why it didnt happen in china earlier is a puzzle of this great enrichment. It made europeanness as obvious from the successes of liberal economic policies with concerns in china and india right now. I think without those two recent examples, women had much harder to make this argument. We have been talking before we started filming about a book you and i, most good economist love, adam smith and adam smith famously, among people who know his work, didnt say many favorable things about Business People. Guest no, he didnt. Host on the surface, that is a bit of intention of your thesis. Guest but he for one thing he didnt think much of entrepreneurship. He spoke of smith and the three forces we need to be concerned with. Smith is about efficiency. About the real cause of modern Economic Growth and stability. Smith is not a smith didnt know what his radically egalitarian ideas about equality before the law. He didnt realize he was creating a document that would sustain this move of the egalitarianism. He was a great economist but no one saw it coming. Host smith talks about Business People in the context of Business People lobbying the state for privileges. Guest yes, that is what he said. He said you think it is napoleon but adam smith spoke of british as shopkeepers and said this commercial system we have, protectionism and so on, licensing of occupation and all of the horrible features that hung over from the middle ages. He said this is a system not appropriate to a nation of shopkeepers, but appropriate to a nation whose government is influenced by shopkeepers and that is right and so true. Host one of the remarkable things about you do it in all but certainly the last two volumes just to give examples. You give examples of how much better it is astonishing. Host why do most people think it isnt a big of deal as you do, or it is doomed . Guest most people like pessimistic behavior. Why do people like to say the sky is falling . Bob gordon, an old friend of mine, wrote a book called the sky is falling, the sky is falling. Bob, i dont think so. It hasnt fallen yet. I dont see pieces of it when i look around. People feel they are sophi sophisticated if they are pes pessimistic. My mother is 93 and very int intelligent and sharp. She always said things were terrible, and i say they were worse when you were a kid. She was born in 1922. She said no, we were happy then. Her mother in the Great Depression would put pieces of cardboard in her shoes so the holes wouldnt leak. A refrigerator, a color tv, psychotropic drugs well not those kinds of drugs but things like lithium and so forth which the richest people in the world didnt have to fight illness in 1950 that we have now. I dont know how to get people out of this abyssmal mode. Host neither do i. I am pessimistic about that. In the past several years, we have seen a return of inequality. You reviewed this favorable and her book in the financial times, diane coil talks about it and wonders if you have too complacent about the future. Guest we thought we took socialism out to the cross roads by the loit of the full moon and pounded a wooden stick through its hard heart and it was dead. Socialism, since the invention in the 19th century, along with nationalism, and you have like those two try national socialism, is millennial poplar. I think people like equality and social socialism because they grow up in families and families are social enterprises. But from an ethical point of view, equality is not the problem. There is a line in shakespeares sonnet that i cannot quote but he points out look, i would like to have this mans intelligence, and this mans strength. It is a hopeless project. To enrich the poor should be our purpose and that i think is an honorable, liberal, sensible, and achievable purpose for, well Public Policy if you want tuque talk about it that way. This change in rhetoric and those who pursue the bourgeois pursuits, if that was sufficient to bring about this great and enormous enrichment, i presume as the rhetoric moves back in the other direction we can be doomed. I think we see this in the economy of europe. The treaty of rome was a wonderful document and broke down trade barriers among european nation to alter the good. And in brussels, they thought well, we have to go here again, this equality. We have to what is the phrase, we have to make the Playing Field host level the Playing Field. Guest yeah, we have to level the Playing Field. Cadbury chocolate isnt real chocolate said bureaucrats and rebels. There is not enough cocoa in it. So we will declare this chocolate not chocolate. You can imagine how this played in britain. Or when you take nonpasteurized Italian Cheese and outlaw it because, after all, the other stuff is pasteurized. Our good danish cheese is pasteurized. What is wrong with these italians. The purpose of the modern society is to make everyone equal. It is a crazy problem and a pointless one. We should be doing the improvements of the worst off. And that is not done by whining about how many yachts, the ere to the lorel fortune has. Her charitable founation has investeded one half of one percent of her wealth. Compare Andrew Carnegie with a hundred percent. That doesnt make people poor. What makes people poor is a lack of equality. Equality before the law take the drug laws, for example. I have known for years but suddenly the American Public is realizing that the drug laws are not equally enforced. I am shocked. That is what makes for a vital, entrepreneural society. I dont want to suffer the pessimistic behavior you and i fight against, but i would say the rhetoric of the past few years guest it has been terrible. Host the intellectual rhetoric and the political reticle is worse than it has been at any point in my lifetime. Is it possible we are seeing the beginning of a return to the ages of hierarchy . Guest i am still optimistic. You cannot change gender without being optimist. But i think the demonstration affect is very powerful. I think what the indians called the income per capita growing at 1 a year. They saw the chinese doing it and what we used to call the red chinese in 1978 saw hong kong doing it. Roughly, i think the world will become more liberal in my sense, in the next 50 years and i expect that to result in a gigantic worldwide enrichment. For example, in subsaharan africa, i predict a great future for. Subsaharan has more genetic variability than any other part of homo sapiens. When they start misgoverning themselves, so unlike we europeans do, who only had a first world war, Second World War and communist and fascism, we were clever by comparison. This is all ironic. But when the subsaharan africans have equality before the law and dignity and when they stop having large governments control their lives, bands of robbers, they will grow and because of the genetic variability the greatest mathematicians, musicians, artist, scientist, will have all black faces and i think that will be a wonderful irony on the racism of individuals. Host i hope you are right. Guest i know i am right. Host i dont disagree. You were trained as an economist in the 1960s. Guest if you call going to harvard being train as an economist. Host what is your assessment of the state of the economic profession today compared to when you began . Guest i dont think it has improved all that much. In some ways it is worse. Economist have become more arrogant it is almost unbelievable considering how arrogant they were in the 1960s. Host arrogant in what way . Guest thinking they are the solution, that social and english professors are stupid, that they are just the cats meow politically and intellectually. There is no bases for it. I think one of the great problems in modern economics is the lack of understanding, unlike earlier economist, that to be a good economist you need a full culture. You have to be a humanist and a quantiifier. Iohave to have both. I advocate with my friend bart wilson who coined the term huma humanics. It doesnt lose the math, and we often do, and things quanatatively when that is appropriate. But thinks intelligently about categories and that is what the humanities do. That is what the humanities are; the study of categories. Theology, does god exist or not . In philosophy, what is the category . Knowledge. What is it . Justified true belief; is that enough . That is a categorical entry. That is mathematics, but applied mathematics but existing therems is categorical talk. Once you have the categories you can measure. I think a more civilized economics that takes seriously philosophy and literature is the way to the future. Economist are rushing in the other direction. And like the proverbial lemmings are aiming for the cliff. Host this is on the same topic. I remember when i first met you in april of 1986. So 30 years ago. I was 12. Guest i was younger. Host i wish i was 12. George sullivan and i, late john blend, and john voy, had dinner here in fairfax and i was struck by something you said that day. I never heard this from an economist. Carl marx had a lot to teach us. Guest sure he did. Host what is the connection . Guest my joke is carl marx, i say to my libertarian friends, i say carl marx was the greatest social scientist of the 19th century without compare. And they get mad at me. I turn to my left wing friends and i say and he was wrong about almost everything. So they get mad which is why i dont have any friends. Host you do here. Guest thank you. What marks i suppose you could say the questions marx asked are the important ones. Is there a pattern to history . Are there stages . Are ideas independent of material conditions or is this structure a mere consequence of the material base . He asked all these questions and got all of the answers wrong but he asked the questions in a serious way. I have come to admire other people, too, but as a kid i was a marxist because i was a socialist. A joan biaz socialist i say. I know more left wing songs than most of my friends. There are no good libertarian songs so get to work. Host it was marx that coined the term Industrial Revolution . Guest no, the first prominent use in english was a follower of marx. Arnold tomby. Not his uncle or his nephew. At age 31, he gave lectures and the are the communist manifesto and that became what most people, to this day, think happened in the industrial revoluti revolution. There was a brilliant spoof of this in a great book called 1066 and they had around 1800 all of the richest men in england all of sudden realized that woman and children could work 25 hours a day without many of them dying or becoming deformed. This was known as the industrial revelation. And that idea, taking the novels of the past, especially charles dickins, as reports on the Industrial Revolution when he didnt know anything about it and he spent most of his life in london which wasnt having an Industrial Revolution. Host was there an Industrial Revolution in other words, was it slow or fast enough we can legitimately call it as we do . Guest it was fast by certain standards. Here is the history of the world in one diagram. Start here and end here. This was earlier time. This goes along at 2 00 a day. And then in 1800 it goes like this. Factor of 30. You can make a case, if you include improvements in quality, it is more like a factor of 100 per capita. Everyone in the room is the descendant of unspeakably poor and ignorant people. There was an Industrial Revolution but here is the key point. As many historians of economics say, there are been other Industrial Revolutions. The glory of greece and the grandeur of rome and the song of china. It happens a lot of times. Certain periods in mesopotania there are been Industrial Revolutions. So what was strange about this one is that it continued. And it continued and continued and continued to this day. So there has to be something else. Not just a few guys getting together and inventing water wheels. But they invent water wheels and say what can you do with these and that is turn them into airplanes and there were all kinds of other things they did. That requires a deep change in how many people there are who are allowed as the english say to have a goal. That is the key point. Having a goal. In a tradition society, that is not allowed. You are not permitted. Host playing devils advocate they would say we need something else. Better institutions. Guest i devote ridiculous space in the last two volumes to this new institutionalism that my old friend doug norris died a few months ago advocated and lots of other people. There are lots of problems with it and it has become world bank orthodoxy. My scornful description is add institutions and stir. If you want a good legal system in your style, provide all of the lawyers with wigs. The problem is there needs to be a deeper, ethical change in the society. As one changes their own behavior, but especially about other peoples behavior. About how you evaluate commercial honesty. That is a changing which it has to do with institutions but has to do with the weather, too. Has to do with lots of things. But it is not as if you can just switch an on institution and see it work. Lets take a case that is often cited; the glorius revolution of 1688 in britain. Doug nortons colleagues said now we have Good Property rights in britain after 1688. And it just aint so. Anyone who knows anything about english history, i studied it a bit, knows that english was contracted property, was established in a famous phrase before the time of ezra the first. There was antimonopoly acts of parliament 70 years before the revolution. So comparatively, china has very Good Property laws in the 16th18th century. And for hundreds of years they had security of property the emperor did not bother them. How those liberal ideas not capital or institutions you have to have capital and you put the brakes on the capital is of no use unless you had the idea for innovation before he and. Before he and i am not a big keynesian but the capital could be driven down to zero. If you dont have any new ideas of course, that will happen in the same thing holds for institutions their intermediate. You have dash Property Rights have the property is home of an organized society dame is, and succeeded because he insisted the mongols obeying Property Rights. If you steal a horse or wifi will kill you. And there were a great power. It is the spark, as you put it, is equality. Equality before the law and equality of social dignity. And thats new. T thats new and weird. By 1776 the notion that allty men and, by the way, women are created equal and endowed by their creator with certainic inalienable rights was somewhat of a common place among advanced european intellectuals. This phrase was written, alas, by an owner of slaves, but lets pass that by. But it was only about a hundred years old as a clear political program. In the 17th century, the idea that people were equal was viewed as extremely radical and dangerous and, my word, weve got to suppress these levelers and primitive communists and quakers. Weve got to stop all this stuff. I love the focus on ideas. So ie have a couple questions fr you. Well start with this one why are economists thats the group i know best. O yeah. You poor man. [laughter] i know best. Why are economists so resistant to recognizing the role of ideas . Well, because you do agree that they are oh, absolutely. I wont him a him because hes such an i wont name him because hes such an excellent scholar, he was talking about the history of books in europe [laughter] all through the paper they put the word ideas in scare quotes. Like theyre not real. Yeah. So there was some influence, people claim, from ideas in [laughter] but, okay. I dont know if this is a reason, yeah, i guess it is a reason. From about 1890 to about 1980, which is a nice way of keeping it in mind, most thinkers, intellectuals were materialists. And even people, conservative people, were materialists. And certainly marxists were. And its just the cynicism of modern intellectual life, marx and freud being early examples of it, to [inaudible] as they say. To say, oh, yeah, you claim youre dominated by ideas, but i know its because youre, you have stock in the General Motors corporation. Thats why youre talking this way. My friend wayne booth, a great professor of english, called this h attribution, this argumet motivism. Youre motivated by your selfish interests. And, of course, economists are specialists. Like journalists, theyre professionalel cynics. And theyre motivated to thinkis of material forces, prices and incomes. Hey, im an economist, i agree as important, andof i think they are too. But then they tend to say, and thats all we need. My colleague, the great economist gary becker, was an extreme example of this, or George Stigler, another great economist colleague of mine. And the trouble with this is its what the english professors call a formative contradiction because these are professors. [laughter] and journalists saying ideas expressed by professors and journalists are pointless. J interest is all that matters. And you can see that theres kind of a lunacy about that. So you named two of the most notable university of chicago professors. Yeah. Theres a third who is also a colleague of yours, Milton Friedman. He was much less this way. So what was friedmans well, i have, i have a story about that. As a young assistant professor at chicago, must have been around 1979 i mean, 69. 1970, Something Like that. I was in the coffee room of the social science building, and Milton Friedman and George Stigler who, by the way, often played i tennis, and miltn was very short, and george was very tall. It wasas one of the great comic scenes of academic life, to see them playing tennis on the quad [laughter] did one have an advantage over the other . No, no, because milton would run very fast, and george would loop through [laughter] and it was very funny to watch. [laughter] but what, heres what their conversation was, you know, these great economists. And i admire them both very much. And george said, oh, milton, youre such a preacher. Youre always telling people that we should, we should go for free trade. And i believe that people are against free trade because its in their interest to be against free trade, and theres no point in talking to them. And friedman said, well, but, george, thats the difference between us. Im a teacher, and i believe that people advocate for protection and so forth because theyre misled. In and if i can just get them to understand this stuff,io theyll be better. And george was just disdainful of this. Oh, youre crazy. Youre just a preacher. Let me ask you, if i may, to comment on another great hero of mine, also an economist who put a lot of emphasis on ideas. Kind of played some role in your books. If i have one criticism, its that this economist should play an even larger role, its julian simon. Yeah. Ri julian simon, his main idea yeah. Was that the ultimate resource is human creativity yeah, hes right. And human effort. The same creativity and effort i completely agree. Unleashed by bourgeoisor dignity. I think julian died young which was a terrible mistake. Just shy of his 66th birthday. Yeah. You mustnt die young if youre going to have sustained intellectual effect unless youre kurt girdle or something. And i completely agree with him that this talk of resources, in fact, i learned it from him, essentially. The talk of resources is kind of silly,ha that theyre not resources. Look, rare earths werent rare until we discovered they could be used for computer batteries. Then they became rare. Boxite was useless death until we discovered it could be made with electricity into aluminum. So hes absolutely correct about that. A few other economists, not too many israel exerciser in isnt another exercise kerzner is another example. Lets call it my name, because thats how it should be because its so amazing. He said it was a free lunch. And more or less had to be. Because if all twfs was a marginal investment, lets see, lets put a little more money into ships to run the slave trade, and thatll make us rich. That wouldnt have made them rich as it did. I mean, weve got a production possibility curve just leaping d up. Hes that way, and there are a few other economists who keep tending to what pete calls the [inaudible] insight. Namely shumper the himself and a few others. But mostly economists learned how to say marginal benefit equals marginal cost, and then they cant remember to say anything else. And im in favor of efficiency, ive always advocated for it. [laughter]em but its not what modern Economic Growth was. Its not imperfect propertylw rights that then you fix and then you get Economic Growth. Thats not what did it. Its, as you said and as juliano says, its this explosion of human creativity. Is the explosion. As you alluded to the production possibilities and one of the standard ways is to say that their production impossibility curve is rediscover more resources. Spirit that is the artistry way to talk about it. I imagine and those inhabitants were probably upset it wasnt a resource. Wraps in 1848 what happens in 848 . Oo what happens in 1868 aroundne europe are revolutionsings. Bourgeois h revolutions on the whole that then become often radicalized in months. This isnt something that takesu years, this immediately happens. The great german migration to the United States in the 1850s is, to a surprising extent, a direct result of the failures of revolutions in the german lands. Britain has something close to it. It has a really scary period of the irish famine and agitation, so forth. And what it becomes an important symbolic date because its when socialism was truly invented, when this terrible idea of using compulsion, violence to organize the society instead of agreement and persuasion becomes popular. And, alas, it becomes popular among the formerly liberal intellectuals. The perfect example of this, and i love him in many ways, is John Stuart Mill who is both the most eloquent, clearminded exponent of liberalism understood as im talking about it and then also one of the first of the major intellectuals to turn towards socialism. So, you see, hes a very interesting figure in and whats remarkable is that by the 1880s, essentially, all the intellectuals of europe have turned against capitalism. Why . I dont know. If i knew, id write a fourth book. [laughter] i have some gestures in this book. This is partly such a thick boone book because i was going to write six books. I was going to call it a sexology and sell a lot of books. And then i thought, now wait a second,that doesnt satisfy bourgeois virtue. So i crammed everything into the last one, and some of my speculation and, indeed, just observation about this, this amazingly quick change in the middle of the 19th century maybe its a fathers and sons thing. Because almost without exception the artists, intellectuals who turned against capitalism are the children, the sons, especially the sons that do this, of merchants, lawyers yeah. I mean, the most famous example is engels who continued to own a Cotton Textile factory while railing against the very idea of Cotton Textile factory ies. Hayeks thesis, to summarize it, is intellectuals are the gobetweens between the, you know, the researchers and the deep scholars. Right. And the general public. Right. And hayek believed that ideas matter. Yeah, right. I agree with him there. Were agreed. And so when intellectuals start changing their ideas, their changed ideas filter down, in hayeks thesis, to the general public. Right, they do. If the intellectuals began to change their ideas 160 years ago, then are we doomed . I mean, surely [laughter] well why is the great enrichment still occurring . In terms of something we talked about well, theres two ans to that question. You and i and most of the people in this room are fighting the good fight, trying to change the way intellectuals look at but were a small group. Were a small group but, look, were smart, and were hard working, and were going to do it, dammit. [laughter] i told you, i was an optimist. As to why it continues, why the great enrichment continues, again theres this demonstration effect, and theres this basic uncontrollability. I was thinking as i was driving here, i mean, through from the airport, from dulles airport, i was looking at the richness of Northern Virginia and thinking to myself, this cant be stopped. One of, you know, whats her name, the junior senator from massachusetts elizabeth warren. Yeah. Shes, im sure shes a nice person and, by the way, shes an indian. [laughter] cherokee. Yeah, cherokee. But shes, her people who think the law is the way to go and adding more and more and more regulations, they its very hard to control an economy like the United States even with this gigantic size of government that bob higgs has so eloquently discussed. Look, im going to make a confession. Ive had a lot of work done on my apartment in chicago. I have a loft apartment in chicago. Its done by nonunion workers, and i havent ever gotten a building permit. [laughter] now, i hope admitting this on national tv doesnt get me into trouble. It probably will. I mean, thats the way life is. But ive never gotten a building permit. And if you thought that laws were effective, as warren does, and that theyre obeyed just all the time, then that would be just a shocking fact. But ill bet you half the construction in chicago, of the small scale construction, Home Remodeling doesnt have building permits. So, you know, and doesnt we dont obey union monopoles. Too bad. So might it be that we intellectuals i mean, i dont want to go the full direction of stiglers view, but might it be that we intellectuals are not as influential as we sometimes think . Because if well, thats right. Intellectuals had been railing against capitalism for 160 years yeah, thats right. Youre exactly right. The idea to keep it going must be at a much granular, lower level. Thats right. And i think whats happened is that the breadth or the depth, i dont know quite how to describe it, of thinking people, people with serious political opinions, i dont mean James Buchanan and the upper levels of this, i mean just people is much bigger than it once was and that there are many, many, many people who believe in tradetested betterment and think, boy, gee, its great we have suburbs with these nice houses and, oh, boy, what a wonderful country. I love america. And even though at the heights of the intelligentsia whether in the National Review or the nation, theyre railing against each other and the society in which they live. So i have this sense that theres this momentum to capitalism which is very hard to stop. Now, i dont think its impossible to stop because weve, you know, how do i know . Its like infant baptism. Do you believe in infant baptism . Believe in it, ive seen it. [laughter] do you, do you believe that Economic Growth can be stopped by absurd, excessive regulation and overtaxation and wars and stupid policies . Yeah, hey, i believe it. Ive seen it. You mentioned bob higgs work. Yeah. Bob documents, to my satisfaction, that things pretty much came to a stop economically in the u. S. In the 1930s because of what bob calls regime uncertainty. He was [inaudible] yeah. I completely agree with bobs argument which doesnt make me popular with a lot of my leftwing friends. But the other thing that happened in the 30s was manager that alexander field, economic historian, has shown which is even though the government was screwing it up, in the background innovation was continuing. So then when they kind of got out of this threatening to move as so many countries were to socialism or fascism in the 30s, they when we got over that, kind of, we had a great boom. Now that youre done with this see, the first was published in 2006. Yeah. The second volume in 2010. Yeah. Third volume this year. Praise the lord. [laughter] los deo. What are you working on now . Well, im working on a popular version of the whole thing that im doing with art cardin. And art and i are going to, well, were kind of thinking of an airporttype book. Although these are wonderful books [laughter] theyre not exactly her reading, i have to admit summer reading, i have to admit. You know, you could try it it would take me the whole summer to read it. [laughter] put it by your i have short chapters. I learned that a long time ago. Short chapters are the way to go so you can put it by your bed, and like the bible, you can read a chapter and fall asleep. So were going to do that. And then ive got a longerterm project that you and i are involved in which is to revise a microeconomics book of mine published a long time ago, because i really want to get economists understanding simple what we call price theory. Ive got a style book called economical writing which the university of chicago is going to bring out as a third edition. Its a little, short thing. And then kind of after that im thinking of a book called god in mammon economic sermons. And im an, as you said at the beginning, im an episcopalian. I know, its shameful, but there you are. And i want my progressive episcopalian friends to realize that capitalism is not necessarily corrupting of the soul. So these will be actual sermons, a short book which will show that jesus budget wasnt a socialist. Were now going to turn it to the you, the audience, for questions directed at deirdre. Ill run the queue here, but if anyone has any questions for deirdre about our discussion or about anything that youve read or heard deirdre say more generally, nows your opportunity. Yeah. Mark. So why dont you stand up when you do it so the microphone can hear you. Sure. So i want to know recently with Donald Trumps election, theres been a lot of discussion about putting him in murrays hypothesis about the increasing class divide between the upper middle class educated elite and sort of the general population. And i was wondering given your focus on ideas, it seems there are some similarities between how they approach the problem and that certain values are transmitted in the upper class, and the lower class does not have those values, and its partially the reason for their economic maybe not decline, but their lack of economic success as the same lev of well, that particular argument is older than putnam or murray. Bob fogle, my friend and colleague, wrote a book about 15 years ago called the fourth grade enlightenment which made exactly that argument. He said that the problem in the United States, as he was focusing on it, is not poverty of a material character. Thats not what the problem is. The problem is, well, spiritual poverty, so to speak. Bob was rather explicit about it. It might be good to know that bob was a paid organizer for the communist party and was married to a black woman for all his life, his adult life way before it was at all fashionable to be a biracial couple. So its an older argument, its plausible to me that you can have Cultural Values that cripple you. Without them people say, oh, its blaming the victim. Its not blaming the victim, its just hoping the victim will see. Look, i was for a while at the university of california at riverside, there on a fellowship for a term. And i kept being told by administrators there that the large hispanic population in southern california, often working class, often didnt think of college and would be tempted by their uncles offer to join their lawn mowing firm instead of going to college. They said this was a constant problem. These bright hispanic kids wouldnt apply to college. So, you know, i worry about that. On the other hand, i worry more about the rather obvious impositions on poor people in the United States that come from the government. Im from the government, and im here to help you. And like the war on drugs, we would have much more prosperous hispanic and africanamerican neighborhoods if we didnt have, had never had a war on drugs. Question. Thank you for talking. Thank you for talking to us about your book. At some point during the conversation, you used the recent examples of india and china to support your thesis. Yes. I was wondering if, indeed, what matters is these ideas at the granular level, how is it that a change happens within such short periods of time . You know, one change of policy brings about well, you know, its the indian case that i know the best because i had a student who worked on a dissertation about it. And he showed that it did come from the bottom. Or, actually, i dont think it was the bottom. Look, heres the central planners and the top intellectuals and the government officials up here. Here are the people. And what i think matters most is not what comes from the people by itself or the government, but what goes on in between. The conversation of the society. The talk of the society. The ethical discussion. But he noticed that in Bollywood Movies after independence in the 50s and 60s the heroes were government bureaucrats, and the enemies were people in business. And then it started to change. Maybe theres some material cause of this. They finally realized that these government officials, you know, werent their friends. And it switched around until by the 70s, late 70s and 80s indian Popular Culture was sneering at the police and planners and the regulators, not at the people in enterprise. So thats one example. But i think youre right. Heres a point that i make in the book very frequently. Ideas can change very quickly. We some people say, oh, i see what youre saying, deirdre. Youre saying that culture matters. No, im not quite saying that. Im saying that rhetoric matters. That how people talk matters. And that can change quickly. Very fast in a society. Doesnt always, but it can. We used to call it the habits of the lip. The habits of the lip. Harris . Id like you to Wander Around the relationship between interest and ideas. Yeah. Im wondering how this is possible if the incentive structure and the power structure is hostile to those ideas. Have you mention africa, for instance, which is a case youre very optimistic about. Yeah, i am. How can we bring about the ideas, its such a hostile, institutional power structure . Well, thats the big historical question, or the big historical fact, more to the point. That for millennia in Agricultural Societies the power structure was hostile to new ideas about the economy. I mean, its very noticeable. Economics, like geology, is invented in the 18th century by scots people. And you can say the french were involved and so forth, but it was mainly a scottish invention. And why did that happen . Why did the system of liberalism that we call economics, at least until 1848, develop rather suddenly in a lowlevel corner of northwestern europe . And so the ideas can change, but youre right. If the powers that be work on it, they can stop them. As they successfully did for 70 years in the soviet union. Why they change is crucial because if well, for the ideas to have an effect, they have to be new ideas. And where do you get new ideas . Depends. Sometimes its internal to the logic of the idea. Id say the idea of equality as ive defined it is a shockingly novel idea that has a tendency to get bigger and bigger and bigger to apply to more and more people. Women in the United States and britain are big forces in the Antislavery Movement in the early 19th century. And then they say to themselves and to other people, men theyre called [laughter] say, how about us . And out of that came the womens movement. And then, and then gay people in the 60s, that great, wonderful time. And honestly, it was. Started to say, wait a minute. And the drag queens fought the cops at, in new york. So ideas, i think theres internal logic to ideas that makes them expand. Sometimes. But sometimes theres an internal logic that makes them collapse, i dont know. But its not just sociological forces, although in the case of europe in the 16th and 17th century, its these accidents. Before i call on pete, ill point out were taping this one day after the u. S. Treasury announced that Harriet Tubman will appear yes. Im delighted by that. Which is an inspired choice. Im simply appalled that jackson was on it for so long. I said, oh, were going to change the 10 bill. For god sakes, stop it. Go after jackson. [laughter] this racist, i mean, its not just blacks that he owned, but he, his very sweet treatment of native americans is something to remember. Pete. Yeah. I have two questions. The first one is [inaudible] probably because im not, dont have the patience to read it. The ambrose book on the lewis and clark expedition. Uhhuh. So, undaunted courage. So thats 1803, and one of the things that just struck me, im kind of in the beginning of the book. Theyre in st. Louis, theyre camping down for the winter, and theyre having a conversation. And then in the diaries they discuss meeting someone. I cant remember the name right now, but they said hes more adam smith than adam smiths book. No, really. And makes fun of him. Yeah. And thats by 1803. So thats only, like, in a short period of time. So theres something about ideas and then the clarity that was already kind of sneering at them sneering in a way that, you know, this reminds me, by the way, of a bob higgs. When i was a graduate student, i went is and saw a lecture, and he told a story about jonathan yu, and hes a great teacher. He said, bob, if you think the governments growing, you should have seen it with the colonials. Those guys wanted to interfere all the time. Theres nothing new about wanting to interfere with capitalism. Thats true. So i wanted to ask you a little bit about when can ideas sustain sneering, and when can the sneering become so great that ideas cant survive . No, no, no okay. Let me just answer that. Okay. By saying i dont know. [laughter] but weve got to take ideas seriously, thats all. It would be very strange to give a history of the United States that didnt take seriously all men are created equal, the gettysburg address, i have a dream. Come on, words matter and ideas matter. But how one part of the intellectual world that deals with this, again i say, is the humanities. And my colleagues and friends in english and history and is so fh are students of these matters, and they can tell you how the idea of equality for africanamericans developed and, to some degree, tell why it developed or was obstructed. So im fascinated by this issue of sneering, because you think about postcommunist russia yeah. You know . And that sort of, sort of popular characterizations that people have about things. Do people have to, in fact, become nonsneerers in order to be able a biewj boy society . To the best of my knowledge wow society . I think one way to interpret your ideas is theres ideas, theres institutions and theres practices, and that without the spark of the ideas, the institutions and practices dont actually go in the right way. So youre not saying that capital accumulation doesnt matter at all no, not at all. Its an intermediate thing that if you dont have the idea of a brick building [laughter] youre then not going to be able to build a brick building. But it would be crazy to say that its the bricks that caused the building the building to be built. Its the idea that caused it. So i wanted to ask this question. Is so you got in a car, you got picked up at dulles, you see all this wealth. One of the things thats happened over the last 25 years is that washington, d. C. Has become the hub of a lot of the richest counties in america. Yeah. And it wasnt because of creation of any kind of youre telling me. [laughter] i noticed that. Yeah. So on the one hand, you have an expansion which is, like you said, theres this, you know, renewed idea that we cant stop this, this Wealth Creation or, whatever, wealth consumption or whatever. But theres a line in adam smith that i wanted to ask you about. In the wealth of nations the natural effort of every individual to better his own condition is so powerful that it is alone and without assistance not only able of carrying on to society wealth and prosperity, but of surmounting [inaudible] which the folly of human laws too often encumbers its operation. So im wondering when we look around we have two things going on which is on the one hand we have this rentseeking state which is these folly of human laws, but on the other hand we have all these ways to get around the obstructions. Sure. And im wondering if theres how the role that ideas play in us being able to tip that balance in one way or the other. Well, lets take a local example. The public choice approach to thinking about the role of the government, socalled public choice. Also the virginia school. You can call it lots of things. And if we can get across the idea that the government is not composed of swedish philosopher kings, well are accomplished a great deal. I are cousins who work for the cia i have cousins who work for the cia, and theyre very nice people, but every time i come to washington im appalled that all these intelligent people like my cousins are working for the great beast. Heres a fact that i calculate in the book, for the book. Take out of the 170 ranked countries for honest city of Public Administration honesty of Public Administration, you know, they have these rankings all the time. There are about 170 countries involved. Lets take the top 30. Spain is at the margin. Well call those honest countries. And for those countries, sweden, minnesota, new zealand. You might think its not completely insane to give the government more money and power. Now, actually, i dont think so, but lets be generous to our social democratic friends. So as someone famously said, giving more money to government is like giving whiskey to a teenage boy. But lets pretend that if youre these wonderfully honest swedish bureaucrats, thatll be okay. Then ask what percentage of the worlds population is governed by these top 30. And its not a very great, High Standard. The top 30. And its 14 . It is not a High Standard of those top 30 and it is 14 . Thats my beloved italy. I mean, i love italy. But anyone i have italian friends who are kind of hopeless social democrats, and i dont get it. They know that giving more money to this government is a terrible, terrible idea. And yet it goes on. We have time for one more quick question. There was someone back here who yeah. Es on. We have. We have time for one more question. There are some of that care. I think as alumni one of the most shocking things about your second book was that downgrading the status of trade and talking about its just moving stuff around in it doesnt really help. And, im i dont know if this is the right venue i guess but im very curious about this idea of, it really is the nature of local production that matters, sorry this dory i get out a standard economics are libertarian fair would be, free trade had something to do with the Industrial Revolution, the reason for the potato mn was the british restricted trade. But in your your book you specifically say it was straightforward, so i dont know. You know trade is an extremely important context. Free trade, but you know, i ought to have labeled this concern that i have in the second book, should have called it the harbor problem. Because after mild colic al harbored her who pointed this out over and over again, the efficiency effects of trade are fine and admirable. I, lesher bought an accordion, of the lady was someone who knows how to play an accordion but doesnt. I could not have it built the accordion myself. It came from czechoslovakia and i was delighted to have it. It was a wonderful instrument. So trade is good. If you cut off trade entirely we would all be going back to 1 dollar per day or worse. But, the really big effective trade as we say in this is, dynamic. Its more about innovation, its about harnessing to stop not innovating about breakfast cereal by preventing kellogg by importing into india as they did for many years. The american automobiles were not very good until we dropped tariffs on automobiles. Suddenly, gm had to compete with toyota. Volvo. So, im not not against trade, im just saying that the conventional, static belief that yes, or the idea that a lot of people have that trade is somehow income itself, this is a point ive been making since i was very young. Trade is good but it is not the same thing as income. It is not identical. What you need is new ideas new configurations, and having more textiles exported from Great Britain is not what made the british ridge. What made them rich is widespread ingenuity. As it said im just reading a book, a biography and is very noticeable that in his travel in russia, the people who he has to rely on our german, english and scottish by origin because the russians are unreliable. They will not keep their commercial promises. So you cant buy dogs, sled dogs from them. So trade is important but the underlying ethic of saying things like, oh you made a fortune inventing a new steam engine, thats wonderful, you go to it, lets have some more that. That. That is really what made the modern world. Thank you deirdre, it has been fun, and enlightening. I encourage, and im sure you grew this idea, encourage everyone to buy several copies and read and study, this this is a remarkably importance and insightful piece of scholarship. Thank you [applause]. Thank you. There is a reception in the hyatt suite, you are are all invited to join us. Thank you. [inaudible] [inaudible conversation] [inaudible conversation] [inaudible