Deirdre McCloskey on how the Modern World Became Rich

McCloskey, who is a historian as well as an economist, revealed that in 1800, the average American earned and spent about $4.00 per day in modern prices.

“If I were wise, I would write a pessimistic book,” economist Deirdre McCloskey told her audience at the University of Colorado, Colorado Springs in April 2019. “People love to hear that the sky is falling. You know—Chicken Little. They love to hear that the end is near.”

McCloskey, the author of the Bourgeois trilogy and, more recently, Why Liberalism Works, continued:

A great many of my colleagues in economics believe that the end is near and that we’re doomed . . . But I believe my friends are wrong. And these three books [in the Bourgeois trilogy] are optimistic arguments. They are arguments that our best days are ahead of us. In fifty or one hundred years, the whole world will be rich. We even, in advanced industrial countries like the United States, we will be richer still in goods and in spirit.

Deirdre McCloskey,
Deirdre McCloskey
Deirdre McCloskey, University of Colorado, Colorado Springs

What drives McCloskey’s indefatigable optimism? Numbers. McCloskey, who is a historian as well as an economist, revealed that in 1800, the average American earned and spent about $4.00 per day in modern prices.

“Imagine getting along in Colorado Springs on four dollars a day,” she said. In many other countries, the average daily spend in 1800 was even lower—in Norway, where some of McCloskey’s ancestors lived, about $2.00 per day in modern prices.

“So there’s been this remarkable increase,” McCloskey said. “Utterly unprecedented.”

What’s behind that remarkable increase? How did the modern world become wealthy? There are two basic explanations, McCloskey said: The basic conservative explanation is that wealthy people started saving and investing their money well and the accumulation of capital made the world rich; while the basic progressive explanation is that the wealthy began exploiting the working class.

Neither explanation is correct, according to McCloskey.

“It’s technology, stupid,” McCloskey said. “It’s improving how we do things. Not just piling up more bricks, but thinking of better ways to use them. Better buildings to build. Better ways to use human capital, as we economists call it. That’s what made us rich.”

Watch the full lecture by Deirdre McCloskey below.

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