Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 

How did we become wealthy?

How did we become wealthy?

Hugh Pavletich
Performance Urban Planning

16 December 2010

Within this fascinating interview Needed: An Economics for Grownups - National Review Online (via Arts & Letters Daily – note founder and editor Professor Denis Dutton honoured yesterday) , Professor Deidre McCloskey , Distinguished Professor of Economics, History, English and Communication of the University of Illinois at Chicago, discusses how the birth of the Industrial Revolution came about.

It started with the British and the Dutch some 300 years ago.

Professor McClosky’s latest book Bourgeois Dignity: Why Economics Can't Explain the Modern World has just been released – the second of likely six installments.

Solving the mysteries of the birth of the Industrial Revolution, has been the primary task and test of economic history. According to Professor McCloskey, modern economics to date has failed to explain this adequately – and because of this – economics has largely failed.

In her view, the major driver of the birth of the Industrial Revolution is speech. By extension – community attitudes.

At the beginning of the 18th century, people in the Netherland’s and Britain began talking about commerce as a good thing – a novelty at the time. They gave dignity to the bourgeoisie. And that drove capitalism, giving birth to the modern world.

The economist Angus Maddison, Historical GDP per capita statistics (XLS file – slow download) illustrate how human prosperity (for increasing numbers of the world’s population) has been like a hockey stick for 300 years over the span of the past 2000 years. A remarkable human achievement, over a short stretch of human history (about 12 generations).

As Professor McClosky notes, if this had not occurred, we would all still be on about $3 a day. She states –

“What changed was the sociology. That is what changed the attitude of the rest of society toward businesspeople, and with that new attitude came a change in government policy. It was suddenly all right – most clearly in the most bourgeois country on earth, the USA – to get rich and to innovate.”

Professor McCloskey makes it clear that the Global Financial Crisis is not the big issue of our time - but that the seismic changes in attitudes in China in 1978 and India in 1991 are the major modern events.

When asked her views on modern economics, Professor McCloskey responded –

“With alarm. But non economist intellectuals need to understand some elementary economics. There is no such thing as a free lunch, national income equals national product equals national expenditure, free trade is nice, more money causes inflation, governments are not all wise, spontaneous order is not chaos.”

“My alarm comes from the economists tendency to reduce humans to Maximum Utility machines. We need a humanomics, of the sort that Adam Smith and John Stuart Mills and John Maynard Keynes and Frederick Hayek and Gunnar Myrdal and Kenneth Boulding and Albert Hirshman practiced. Some current practitioners are Nancy Folbre, Arjo Klamer and Richard Brook. It is an economics for grown ups.”

The glaring inadequacies of modern economics were highlighted however with the Housing Bubbles induced Global Financial Crisis, as the writer explained within an article Housing Bubbles And Market Sense some two years ago, more recently within Sound Housing Market Measures Required and on a lighter note Australia is different.

It is pleasing however to see these hugely constructive conversations occurring within and outside the economics profession, as this profession has a huge influence on the public’s understanding of “how the world works”, public policy and other professions.

If economists, policymakers and the wider public understood the significance of the “artificial scarcity triggers” being the cause of the housing bubbles, with finance simply being the “fuel” (as Mike Insulmann, CEO of the urban research group MetroStudy does), the perils of strangling urban land supply and inappropriately financing infrastructure, would have been “blindingly obvious” to them decades ago.

The Annual Demographia International Housing Affordability Surveys illustrate clearly year after year that housing should not exceed three times annual household income. Adding “financial fuel” would have simply led to over production of new housing (note Atlanta, Georgia – refer Schedule 2 Demographia Survey) – not housing bubbles – something far less damaging.

Importantly too – business and professional organizations need to act ethically and in the wider public interest, as the writer explained to the Housing Industry of Australia - The need for clarity – some years ago. Business can only prosper in an environment where it is trusted. It’s past time they realized this.

ENDS

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Budget

It may seem like Oliver to be so bold as to ask the Finance Minister for more gruel – but what the Dickens, Steven Joyce… is this Budget really as good as it gets?

Supposedly, the public was going to receive significant rewards – an election year lolly scramble no less – for the eight years of belt tightening that they’ve endured, and for the rundown of essential public services.

Well, what Budget 2017 delivered instead in Education and in Health were allocations barely sufficient to maintain the current levels of service delivery More>>

Scoop Full Coverage: of Budget Announcements & Reaction
Latest: Scoop Search

 
 

Auditor-General Stands Down For Investigation: Gordon Campbell On (Not) Taking Responsibility

So Martin Matthews, our current Auditor-General wishes he could have detected “earlier” the fraud that occurred on his watch at the Ministry of Transport. Hmmm. But he could have detected it earlier, surely? That’s the point. More>>

ALSO:

NGOs Pleased: Govt To Halt Collection Of Client Data

Brenda Pilott, the chair of ComVoices and national manager of Social Service Providers Aotearoa, congratulates the government on its decision to call a halt to the collection of individual client data until the concerns of not-for-profit service providers have been worked through. More>>

ALSO:

Gosh: Blasphemy Law Repeal Struck Down

Chris Hipkins, the MP who tabled a Supplementary Order Paper to add our Blasphemy Law to the Statutes Repeal Bill, said this was a "sad day for freedom of speech, tolerance, and leadership". More>>

ALSO:

Gordon Campbell: On The Navy’s Dealings With Fat Leonard, And Twin Peaks

At an official level, our “she’ll be right” attitude routinely spills over into a keen resentment of anyone who suggests the outcomes may be less than satisfactory… The Navy has now gone one step beyond. It won’t even ask itself whether it did a good job. More>>

ALSO:

NZDF: Fifth Rotation Of Troops Heads To Iraq

The fifth rotation of New Zealand Defence Force troops left today for a six-month mission training Iraqi soldiers. More>>

ALSO:

Gordon Campbell: On The Demonising Of Iran

Will New Zealand still be willing to pursue its recent trade overtures to Iran, now that US President Donald Trump has used his speech in Riyadh to single out Iran as the main source of terrorism and instability in the Middle East? More>>

ALSO:

 
 
 
 

Opening The Election Supporters

 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

Featured InfoPages

Opening the Election