How Ideas, Not Capital, Enriched the World

“Ideas have consequences.”

On 16 September 2015 Deirdre McCloskey, Distinguished Professor of History, Economics, English, and Communication at the University of Illinois at Chicago, delivered a lecture at the Legatum Institute that argued ideas, rather than capital, play a crucial role in making the Western Society as better off than the rest of the world.

The rule of law and equality before the law and before opportunities were crucial factors for the progress. The transformation began in early seventeenth-century led by Calvinist ministers. Their framework and thoughts led to the development of new world, modern economics and exponential growth.

Deidre McCloskey is both a historian and an economist. It’s rare to meet a person who possess both expertise. Bourgeois Virtues and Bourgeois Dignity.

Her gist is that Ideas, not capital, made the growth modern economic world. The ideas that we possess have tremendous effect on the outcome of our lives. Words define worlds.

McClosekey’s thesis is that idea was morally legitimate, and those who work hard for the acquisition and development of these are rewarded and viewed with dignity.

Order and progress can only be achieved when the Biblical principles of law and order, justice and other value come into play. It’s not capital that raises a society such as human or natural capital. It’s ethics, values, ideas. Ideas uplfit societies. Words or principles blesses nations.

McCloskey doesn’t prefer to call the main idea as Capitalism since it gives the notion that capital accumulation is the core or the heart of the system. She calls herself Christian Libertarian.

Her note about environmentalism is that it’s an idea that portrays humanity as the destroyer. It pictures nature as god.

She defines innovation in a remarkable way. Until the 19th century, innovation is a bad word. Changing the order of the public thinking or the mass. It is actually a theological word.

A note about socialism: We grew up in a family, and a family is a socialist unit. Income is divided equally according to the needs. Socialism is an attempt to scale the socialist idea of a family to a national scope. The idea of Denmark is a country of a big family.

How do we know that ideas are good? Market Test. If you sell a bad product, the Market will punish you and you have to think of other products to offer. Socialism does not offer this and thus could lead to a society filled with incompetence. Equality could only be front, but the possible negative aftermath weighs the good-motivated front.