Advocating for Common Sense and Common Decency
Professor Deirdre McCloskey. Photo by Roberta Devlin-Dupuis
In 2008, Deirdre McCloskey, UIC distinguished professor of economics, English, history and communication, published The Cult of Statistical Significance: How the Standard Error Costs Us Jobs, Justice, and Lives with co-author Stephen Ziliak. The book was a culmination of years of work—and several published articles—in which they argued that the much-used standard was “a catastrophe” and “useless for science.” The position was hotly debated in the economics community—as it has been for decades in other social sciences and in medicine—but on March 21, 2011, the point was given significant validation.
Based in part on the amicus brief filed by McCloskey and Ziliak, the United States Supreme Court ruled against Matrixx, a pharmaceutical manufacturer which did not disclose adverse effects of their drug Zicam, because, they claimed, test results fell short of statistical significance. The court’s unanimous opinion held that, “Matrixx’s argument rests on the premise that statistical significance is the only reliable indication of causation. This premise is flawed….” The McCloskey-Ziliak brief had explained the difference between statistical significance and practical significance.
“Statistical significance is not really significance at all,” said McCloskey. “It’s not how reliable the numbers are: that’s what people—even some statisticians—think it is, but it’s mistaken. Statistical significance is how often you might get a result by coin flipping—by chance under certain ideal conditions that practically never hold. Practical significance is what is important.”
Zicam was pulled from the market in 2009 because the U.S. Food and Drug Administration reported that the cold remedy caused anosmia—loss of smell. The Supreme Court finding allows investors to proceed with a security fraud claim against Matrixx.
“Who cares if it happens ‘rarely’? It’s a big disaster when it does,” McCloskey said. “If the loss is really big it doesn’t matter if it’s one in 10,000—I want to know about it. You need to know what we call in statistics the ‘loss function’. It’s the ‘pro and con list’, and you’re being stupid about the cons if you watch only the coin flips. Statistical significance treats the con of sneezing the same as losing a sense of smell for life.”
The first volume of The Bourgeois Era
While savoring her role in this important Supreme Court decision, McCloskey has been focusing her considerable intellectual passions on her apologia for capitalism—a four-volume magnum opus collectively entitled The Bourgeois Era—in which she sets out to persuade readers of the virtue, dignity and general worth of the oft-maligned bourgeoisie. The first two volumes, The Bourgeois Virtues: Ethics for an Age of Commerce and Bourgeois Dignity: Why Economics Can’t Explain the Modern World, are in bookstores and have been extensively reviewed. The Treasured Bourgeoisie: How Innovation Became Ethical 1600-1800 and Bourgeois Rhetoric: Language and Interest in the Era of the Industrial Revolution are expected out in 2012 and 2014. McCloskey applies a cross-disciplinary analysis to the rise of capitalism and the question of how the middle class became respectable. She argues for an ethical capitalism.
“I deny that foreign trade, imperialism, exploitation of the workers or investment made us rich,” McCloskey asserted. “My grounds are similar to my criticism of statistical significance: what matters is the oomph, not the mere probability. It was technology and invention plus entrepreneurship that made us rich. Once we were all peasants, but capitalism has ennobled us. It’s Maslow’s Hierarchy of Needs. If you’re starving, you can’t be an artist. If you’ve been working in some rice paddy all day, you can’t paint.”
The second volume of The Bourgeois Era
But how, exactly, did the bourgeoisie get the respect McCloskey feels they earned? “By accident,” McCloskey stated. “It wasn’t some deep European superiority. And it’s not because the Europeans were nasty to people of color. It’s because in Holland and England there were Reformations and Revolts and Revolutions and Renaissances—in the 17th century especially—that freed people. It was sociological and political—not psychological or racial or material. The ‘four Rs’ were accidents. They could have happened other places. But they didn’t. Now China and India have adopted bourgeois virtues and are off to the races. They’re the big capitalists now.”
Central to McCloskey’s argument is that—despite the headlines over the last several years—capitalism is grounded in the virtues of temperance, prudence, courage, justice, hope, faith and love. The problem is that too many have lost their way and we need an “ethical reinvestment” in capitalism and in society.
“My mother is an FDR democrat. She invests in the stock market, yet keeps saying to me ‘there are so many thieves!’ There aren’t actually,” McCloskey said. “There are a lot of creeps in any society.” McCloskey noted a May, 2011 segment on The Daily Show, in which host Jon Stewart interviewed Jon Ronson, author of The Psychopath Test. “He said that 4% of the CEOs are diagnosable psychopaths who view other people as vending machines. It’s true of aristocratic societies, and theocracies and hunter-gatherers, doubtless. But I want those who can—those who have the wiring—to treat people well, and to curb the sociopaths, and not be misled by ‘economic’ ideas that ‘Greed is Good’. It’s not. It’s a mortal sin.”
We’re human beings and human beings are defined by how they go beyond prudence. They have a sense of the other six principal virtues—above all hope and faith.
“Here’s the problem: The economists advocate treating people like vending machines. It’s called Agency Theory and it’s very popular in business schools in the U.S. and now the world. Students are being taught that the only thing that matters is rationality, efficiency—you should be nice to your employees only if it contributes to the bottom line. They have courses in business ethics in which the theme is not as Moses and Hillel and Jesus said—‘do unto your workers as you would have them do unto you’—but ‘you treat them nicely, then they’ll work hard; otherwise screw them’. That’s not ethics; it’s merely prudence. I don’t want Prudence Only to be the way we run our lives. We’re human beings and human beings are defined by how they go beyond prudence. They have a sense of the other six principal virtues—above all hope and faith.”
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