Bettering Humanomics: A New, and Old, Approach to Economic Science

by Deirdre Nansen McCloskey

Economic historian Deirdre Nansen McCloskey has distinguished herself through her writing on the Great Enrichment and the betterment of the poor—not just materially but spiritually. In Bettering Humanomics she continues her intellectually playful yet rigorous analysis with a focus on humans rather than the institutions. Going against the grain of contemporary neo-institutional and behavioral economics which privilege observation over understanding, she asserts her vision of “humanomics,” which draws on the work of Bart Wilson, Vernon Smith, and most prominently, Adam Smith. She argues for an economics that uses a comprehensive understanding of human action beyond behaviorism.
 
McCloskey clearly articulates her points of contention with believers in “imperfections,” from Samuelson to Stiglitz, claiming that they have neglected scientific analysis in their haste to diagnose the ills of the system. In an engaging and erudite manner, she reaffirms the global successes of market-tested betterment and calls for empirical investigation that advances from material incentives to an awareness of the human within historical and ethical frameworks. Bettering Humanomics offers a critique of contemporary economics and a proposal for an economics as a better human science.

Genres: Economics, Nonfiction, History

144 pages, Paperback

Published June 5, 2023

About the author

Deirdre Nansen McCloskey has been distinguished professor of economics and history and professor of English and communications at the University of Illinois at Chicago. She is the author of numerous books, including Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World.

Reviews

[faith · Rating 3 out of 5]

in short; economics should not be limited to merely the mathematical theoretical or behavoiral incentive models of today, but should also include a serious contemplation of other aspects of humanities. aka humanomics. the whole book kind of just unpacks that one idea but it is mercifully short. a number of fancy words (a bunch of isms though not that many posts) but surprisingly on the whole still quite readable (though id say definitely a book for academics).

not very coherent chapter round-up for my own benefit:
part 1
1: moving beyond mathematical orthodoxy and “ant-like prediction and control”
2: adam smith and his ideas of the (significant) role of language and speech
3: economic history requires both meaningful quantitative testing (need to challenge ideas of historical neoinstitutionalism) but also going beyond econometrics
4: redefining (defining?) science as “systematic inquiry”; humanities as dealing with “categorical qualia” —> economic history important in showing what’s permanently important in the study of nature and causes of wealth of nations
5: need for interdisciplinary economists
6: a quantitative analysis of the economic impacts of “sweet talk” (persuation rhetoric)
7: need for both economic analysis + humanities (i.e. ethics, rhetoric). challenging neoinstitutionalism (1. it posits that institutions are material incentives, and people follow these economic incentives to raise income, which allowed them to cause modern economic growth. however, why did the prospect of growth not change institutions, why do humans act against incentives? 2. “needs theory” needs to explain/provide criterion to distinguish needs that can be satisfied through institutions and those that can’t). need to look not just at the action itself but the meaning attributed to it by the human.
8: need to find a better theory of mind beyond behaviorism; look at how humans interpret.

part 2: killer app
basically just about how the great enrichment which led to 3000x increases in per capita income (economic outcome) was due to political and social liberalisation (equality of dignity) which promoted entrepreneurship etc. the rhetoric of this liberalisation allowed it to flourish and for people to flourish too.

part 3: the doubts
a refutation of all the critiques against this idea (and the great enrichment thing). honestly going to have to mostly take her word for it because i don’t particularly feel like reading her extremely long detailed academic analysis book. still, counterarguments seem sound.

[Michael O'Reilly · Rating 1 out of 5]

This book is only 111 pages but contains over 30 pages of notes, references and authorities which you would come to expect of an academic such as the author.

However there is one passage with regard to Donald Trump and Joe Biden on page 13 that does not have an authority despite my diligent search through the 30 pages of notes etc.

The first concerns “What made Donald Trump’s business and political successful……… he never paid his subcontractors what he had promised……”

The second part of the same passage "the opposite - honourable, decent behaviour…… shaped by language, Joe Biden".

Best guess for the authority on Donald Trump was a heresay conversation between two people at a bar/pub. First person says that to become rich just don’t pay your subcontractors, second person says that Donald Trump is rich and the first person relies, therefore Donald Trump does not pay his subcontractors. ( permission to use as authority should the author have a second edition).

I suspect the author did not want to rely on Joe Biden’s “lying dog-faced pony soldier” comment as any authority but referenced Joe Biden as a ‘stutterer’ without mentioning his compromised ‘gait and speech’ and not his advancing dementia.

The author wants the reader to believe this book is a serious contribution to the study of economics but how is this possible when the author shares her political partisanship in a field of study that is apolitical.

If the author refrains from personal attacks on Donald Trump and argued on substantive issues ie. immigration, taxation, trade and job policies etc. it would have more gravitas.

[Jonas · Rating 2 out of 5]

If one is looking for a brief book full of controversial ideas to fill an evening with other Economists, this is your book. Unfortunately, the book is surprisingly short on the side of arguments and mostly rants at mainstream Economics, making any real conversation on the important ideas raised very difficult. This is all the more unfortunate as I enjoyed McCloskey's earlier work (e.g. on the Rhetoric of Economics that strongly influenced my thinking on the Philosophy of Science) and I was purportedly the target of the book (as a researcher in Economics).

Still, I want to try to engage with the main argument of the book and then discuss two further arguments and ideas that I found extremely important (though on which I differed).

For the main argument of the book, McCloskey calls for integrating much more knowledge into current mainstream Economics research (mostly humanities, arts including literature and poetry, but also qualitative research). The argument seems simple: we are ignoring important evidence and insights. I wholeheartedly agree with the premise and would evaluate the benefit of these additional sources of knowledge by what they add to predicting phenomena of interest (which includes predicting prospectively or retrospectively as in ex post theory validation).

As the ("killer") application for showing how humanities leads to better insights, she chooses the Great Enrichment, the huge increase in living standards since 1800. Her main argument is that this is driven (mostly)  by the role of changes in ideas / how people think (which draws on insights from humanities). Unfortunately, this is such a huge topic that requires a lot of historical background knowledge (hence she often refers to her trilogy on this topic) that it is hard to get convinced within the pages of this short book plus making it hard to quantify exactly what it adds (is it really that no other theory can explain the observed pattern of the Great Enrichment? What exactly does it predict that other theories dont predict?).

In the end, I am left being less convinced than before that Economics should incorporate more insights from the Humanities. A better application would have made her point more clearly. Importantly, McCloskey disagrees not just with the methods of modern Economics research (e.g. behaviorism as in revealed preference analyses, neo-institutionalism as in institutions/norms need to be rational outcomes of materialistic concerns, much of econometric practice and theory) but seems also to disagree with how to evaluate research in Economics (e.g. she mocks attempts to predict future economic phenomena). In this way, it seems she cuts off most bridges to communicate with current mainstream Economics. While I am symphathetic to the idea that "ideas matter" for long-run development (as also forcefully argued by Joel Mokyr), the book ends up providing too little evidence beyond some rather unconvincing polemic narrative. For example, attempts at causal identification or clearer mechanisms how these ideas affected entrepreneurs who drove growth and how to separate this from other potential drivers of development was absent. To be clear, I m not questioning the validity of humanities' based sources of evidence (such as the close reading of historical figures to describe how their "ideas" changed) but I question that these sources prove that ideas caused development (versus merely being correlated with).

Having commented on the main argument of the book, I want to pick up two different points/arguments to finish this review. First, is the argument that "ideas" are special and entirely neglected by current mainstream Economics. Here I think the author is unnecessarily contrarian, dismissive of and unwilling to engage with research in Economics. For example, it seems modeling ideas should fit well into previous growth and development models (just treat ideas as exogenous if neo-institutionalist max U endogenizing is incorrect). In fact, it would be interesting to see how such "ideas" changes expectations and investments in new ideas and education, imitation of technology, as well as how it affects the global diffusion of development (all things that current Economics research speaks to). It also seems to speak directly to literatures on  norms, institutions and expectations. Even if max U approaches are wrong (as McCloskey argues) these literatures still provide sufficient evidence to engage with.

Second, I disagree with the strong distinction that McCloskey draws between retrospective explanations for behavior/outcomes and prospective predictions. In retrospect, we can explain a lot, in prospect very little (nothing?). I strongly feel she overestimates Economics (or her) ability to explain the past while greatly underestimating the ability to predict the future (according to her, in this case Economists should all be rich). There are some vague ideas in the book that point to human creativity that is unpredictable and driving all future economic changes, but this was neither clear nor convincing. By discarding prediction, it also seems like she compares epistemic approaches instead by ethics and politics. This made the book and arguments unnecessarily normatively ladden and, again, not very convincing.

There are many more interesting thoughts in the book (in many parts referring to other works of her which are probably the better sources), but they are swamped by polemic and rants that dont encourage to read further.

[Anne · Rating 2 out of 5]

Bettering Humanomics is not, as the inside flap of the book claims, an assertion of a vision that keeps math in economics while adding novels, philosophy, and history. The volume is slim--104 pages of text--and 19 of those pages are rebuttals to criticisms of her previous works (Dr. McCloskey is a retired professor of economics and English, and has written much over the past decades). Despite the 10 pages of notes and 11 pages of "Works Cited" added to the rear of this slim volume, the author, on page 83 of the print volume, does not explain nor give reference to how she comes to the unique conclusion that "The Renaissance...was a celebration of the glittering lives of Federigo da Montefeltro of Urbino or Coso de'Medici of Florence. No wonder the formerly bourgeois northern Italians fell deeply in love with ... military uniforms and the staging of deadly and comical duels." Her tone is impertinent, and unless you are a card carrying libertarian and have been exposed to McCloskey's previous works, you will not enjoy this "Approach to Economic Science."

[Gustavo HdzMry · Rating 2 out of 5]

No me gustó jaja. La escritura es extraña y siento que me hablaba alguien que solo estaba enojada. Lástima, que el tema es interesante: reincorporar, como antes lo fue, las Humanidades a la Economía. De aquí saltaré al libro de Vernon Smith.

[Ronald J. · Rating 5 out of 5]

Another excellent addition to Professor McCloskey’s already prolific body of work. This short book argues that to get better economic science (i.e., “systematic inquiry”) we need “humanomics,” and need to be rigorously modest. There will be a companion to this book, the forthcoming, Beyond Behaviorism, Positivism, and Neoinstitutionalism in Economics. I just love how she presents evidence and logic to back up her conclusions. She finds dubious behavioralist fashions, such as neuroeconomics and behavioral finance, and happiness studies. These studies tend to treat humans like children, or lab mice hooked up to electrodes detecting a brain but not a mind.

There are too many nuggets of wisdom throughout this short book to do it justice. Here are some of my favorites:

“What’s your thought? Oh, I see. Hmm. Well, dear, here’s my considered, and loving, response to your logic and your evidence, your feelings and your dignity. Maybe we can make your own thought better—certainly mine, for I readily admit that mine may be mistaken. Let’s look into it. You come too.”

“Search for all the scientifically relevant knowledge out in the dark, where much of it is to be found, not exclusively under the lamppost.”

Combine what the first editor of the Economist, Walter Bagehot, called in his exposition of the British constitution the “efficient” and the “dignified,” the quotidian and the transcendent, the means and the ends. Both. Thus, humanomics.

Entomologist E. O. Wilson, when asked about a top-down, behaviorist idea for treating humans like ants, such as in thoroughgoing Marxism, said, “Karl Marx was right, socialism works, it is just that he had the wrong species.”

Fritz Machlup, pointedly asked what physics would look like if atoms could . . . wait for it . . . talk.

Prediction is difficult, especially about the future. So, therefore, is control.

People are not, as Samuelsonian economics supposes, vending machines (vending machines wouldn’t need persuasion, and hence no one would pay for advertising). They talk, they converse. By conversation they establish, as we say, the “going” price.

Danish physicist Niels Bohr wrote in 1927, “It is wrong to think that the task of physics is to find out what the world is. Physics concerns what we can say about it.” We. Humans. Say. With words.

"What will matter in fifty years in economic history is poverty and its ending, and in political history what will matter is tyranny and its ending. If poverty and tyranny are ended, the rest follows. Better stick to the important issues, yes?"

Brilliant work.

[Mathilde Fasting]

Interesting, see also review in Financial Times