Adam Smith

A conversation with Heiner Rindermann, for Man and the Economy

by Grégoire Canlorbe · Nov 28, 2019

Heiner Rindermann PhD, is Professor of Educational and Developmental Psychology at the Technical University of Chemnitz (Germany). He is psychologist (PhD University of Heidelberg). His work deals with education and ability development, intelligence and student achievement, economy and politics, evolution and culture, and their interplay at the level of individuals and societies. His recent major contribution is Cognitive capitalism: Human capital and the wellbeing of nations published in 2018 by Cambridge University Press.

Grégoire Canlorbe: An early contribution on your part in establishing the connection between cognitive ability and human development (in the broadest sense) was to show how the spread of AIDS among ethnicities of different continents is greater as the cognitive ability is lower. Could you remind us of your analysis?

Heiner Rindermann: In two publications from 2007 and 2009 with my German colleagues Georg W. Oesterdiekhoff, a sociologist, and Gerhard Meisenberg, a biologist, I showed that education (as a proxy for intelligence and knowledge) and cognitive ability (comprising intelligence and knowledge) reduce the impact of the HIV spread.^[i] If wealth and modernity are added in analyses at the level of nations – comparing different countries – the effects of wealth and modernity even turned positive, increasing HIV rates! Disproving the usual theory, that AIDS is a disease of the poor, the data robustly showed that AIDS is a disease of the low intelligent. But why? Isn’t this result biased or mad?

In closer consideration not at all: Studies from other authors on AIDS or on diabetes at the level of individuals also show that income and even education are not crucial for health. The crucial factor is intelligence. Again: Why? Here the Piagetian approach can help us as used by Georg W. Oesterdiekhoff and cognitive hermeneutics of everyday life as I tried to explain in my Cognitive capitalism book: People at lower levels of cognitive development and intelligence, especially if living in a social environment with a similar low level, tend to think and act irrationally, e.g. they believe in magic and behave in ineffective or even self-damaging ways. I.e., AIDS is not seen as being caused by HIV transmitted by unprotected sex but being caused by God, magical powers or sorcery and consequently can be cured by magical treatment, e.g. by having sex with a virgin. And these aren’t excuses for sexual abuse or own failings but people really believe this.

For instance, a quote from a study by African researchers in Mali underscores this: “Accidents are never attributed to faults or incompetence of the people in charge or machine failure, they are always orchestrated by certain superstitious powers.”^[ii] Such a mindset will not lead to more cautiousness or better maintenance reducing accidents.

A conversation with Deirdre McCloskey, for Man and the Economy

by Grégoire Canlorbe · Juin 28, 2017

Deirdre Nansen McCloskey taught at the University of Illinois at Chicago from 2000 to 2015 in economics, history, English, and communication. A well-known economist and historian and rhetorician, she has written 17 books and around 400 scholarly pieces on topics ranging from technical economics and statistical theory to transgender advocacy and the ethics of the bourgeois virtues. She is known as a “conservative” economist, Chicago-School style (she taught in the Economics Department there from 1968 to 1980, and in History), but protests that “I’m a literary, quantitative, postmodern, free-market, progressive-Episcopalian, Midwestern woman from Boston who was once a man. Not ‘conservative’! I’m a Christian libertarian.”

Her latest book, out in May 2016 from the University of Chicago Press—Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World—argues for an “ideational” explanation for the Great Enrichment 1800 to the present. The accidents of Reformation and Revolt in northwestern Europe 1517–1789 led to a new liberty and dignity for commoners—ideas called “liberalism”—which led in turn to an explosion of trade-tested betterment, “having a go.”

The earlier book in the trilogy, Bourgeois Dignity: Why Economics Can’t Explain the Modern World (2010) had shown that materialist explanations such as saving or exploitation, don’t have sufficient economic oomph or historical relevance. The first book in the Bourgeois Era trilogy, The Bourgeois Virtues: Ethics for an Age of Commerce (2006), had established that, contrary to the clamor of the clerisy left and right since 1848, the bourgeoisie is pretty good, and that trade-tested betterment is not the worst of ethical schools.

Grégoire Canlorbe: Could you start by reminding us of the lines of force of your libertarian case in favor of the principle of unhampered market economy and against the belief that state intervention is virtually omnipotent?

Deirdre McCloskey: One principle and one consequence. The principle is the liberal one that persuasion and trade are better for humans than violence and compulsion. The liberal principle fosters the bourgeois virtues, as against the aristocratic/bureaucratic vices. It has long been praised—by the Blessed Smith, by Mill, by Herbert Spencer, by Mises and Hayek and Friedman. Smith wrote of “the obvious and simple system of natural liberty,” and declared in 1755 that “little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.” He did not realize how very true his deduction from the liberal principle would prove to be, when slowly adopted in the nineteenth century, against the old and new pressures of mercantilism—as old as the Navigation Acts and as new as the Trump administration.

The consequence is that adhering to the liberal principle, as China has in economic policy since 1978, and India in both economy and polity since 1991, yields a Great Enrichment, a rise of real income per head in a couple of generations from horrible poverty to reasonably comfort—on the order not of 100% or even 200%, but 3,000%. The consequence of liberalism after 1800 was that masses of ordinary people were encouraged to have a go. The having-a-go resulted in steam power, plate glass, autos, containerization, and the modern university.

Grégoire Canlorbe: One of your favorite fields of study, in which Vilfredo Pareto may have been a precursor with his theory of “residues” and “derivations,” is the rhetoric of economics. A salient feature of our epoch, in this regard, seems to be the invasion of anticapitalist fallacies. “Every mystery, past, present, or future, wrote Pareto sarcastically in The Mind and Society, yields to the magic password ‘capitalism.’ Capitalism, and capitalism alone, is the cause of poverty, ignorance, immorality, theft, murder, war.” How would you account for the persisting attractiveness of anticapitalist rhetoric? How do you respond, in particular, to Thomas Piketty’s highly popular claims about the worsening of income inequalities?

Deirdre McCloskey: I myself was a long time ago a mild-mannered Marxist. I think the attractions of socialism arise from our experience as children in a loving family, in which income falls myserteriously from Dad, and Mom is the central planner. Unless we are raised on a farm or in a small business, we get no early instruction in the charms, and terrors, of voluntary exchange. We think commands rule the economy, the way commands do rule the family or firm inside—though the child does not realize that prices in markets outside rule all. It is shocking to a child of the bourgeoisie such as Marx and Engels and Lenin, to find that he or she cannot command the rich to relieve poverty. It does not occur to the child that voluntary exchange, and having a go under a liberal ethic, are what has in fact relieved poverty. The relief has not come out of redistribution by state violence from the rich to the poor.

As to Piketty, I wrote a 50-page, respectful review of his book, concluding that it was a brave attempt, but mistaken in ethics and economics and history. I listened in October of 2016 in Shanghai to a paper by Samuel Bowles, an ex-Marxist economist at the Sante Fe Institute, in which he showed that in fact the income distribution is notably similar in all societies, old and modern. That Sam then suddenly concluded that we need to massively redistribute income shows merely the persistence of the leftward lean acquired as a child, against the evidence of its failures accumulated as an adult. A policy of redistribution does not follow naturally from Sam’s amazing historical findings. Rather the contrary.

A conversation with George Gilder, for Agefi Magazine

by Grégoire Canlorbe · Mai 28, 2017

George Gilder is a venture capitalist and Senior Fellow at the Discovery Institute and American Principles Project, Editor-in-Chief of the Gilder Technology Forum (from Forbes).

Grégoire Canlorbe: It is not uncommon to hear that the global weakness of the contemporary USA lies in the worsening of income inequalities. The best predictor of social and economic class is nowadays the social and economic class of parents. People like the Rockefellers or the family of Mitt Romney are born into the 1% and pass that position along to their children. In other words, the USA have a plutocracy, like it or not; and that plutocracy should at least pay a higher tax rate and a higher death tax—a higher tax for passing along its wealth to its kids. America works best when it can open the path for dirt-poor kids with drive and intelligence to rise—as Abraham Lincoln rose from the poverty and mud of his father’s farm in Illinois.

What is your opinion on this popular view?

George Gilder: The popular view is nonsense. Inequality is irrelevant. Under free markets, capital flows not to those who most quickly spend it but to those who can best expand it. It goes to suppliers rather than demanders. What matters is mobility and creativity. Forbes magazine shows ever more rapid arrivals and departures from their lists of rich people. However, the “hypertrophy of finance” in the world economy that I describe in The Scandal of Money is fostering more inequality based not on merit but on government privileges.

The world’s central banks have become a fourth branch of government that centralizes economic activity and renders the system fragile and unfair. This is a serious threat to the future of capitalism. Futile and meaningless currency trading is now 73 times larger than all world trade in goods and services. Yet it fails to establish money more stable than the economic activity it supposedly measures. The perversion of money under socialism is the leading cause of immutable inequalities based on power and privilege rather than on knowledge and on contributions to the economy.

I believe that new forms of money based on the Bitcoin blockchain and gold will evolve in coming decades and emancipate the world economy from its central bank socializers. I also believe that this popular hostility towards income inequalities as such—and the inability to recognize that only inequalities based on privilege are illegitimate—is the symptom of an even more general misunderstanding of the nature of material progress.

As I have demonstrated in Wealth and Poverty, material progress is ineluctably elitist: it makes the rich richer and increases their numbers, exalting the few extraordinary men who can produce wealth over the democratic masses who consume it. Material progress depends on the expansion of opportunity: geniuses identify themselves chiefly through their works rather than by their inheritance or test scores. Material progress is difficult: it requires from its protagonists long years of diligence and sacrifice, devotions and risk that can be elicited and financed only with high rewards, not the “average return on capital”. Material progress, although democratically demanded, is procedurally undemocratic: it means the expensive support of activities thoroughly beyond the ken of the people, and often even their leaders.

Grégoire Canlorbe: “One of the problems with organized religion,” affirmed Hugh Hefner, “is that it has always kept women in a second-class position. They have been viewed as the daughters of Eve.” How would you assess these statements by the founder and chief creative officer of Playboy Enterprises?

George Gilder: Feminism condemns women to inferiority by subjecting them to the standards of male achievement. Feminists want to present women as victims, which means inferiors. Hefner celebrated the superiority of women’s bodies, which feminists decry. But Hefner, for all his philosophastering, did not have ideas any more interesting than the vanities of feminism. Generally speaking, he did not articulate nor materialize the true spirit of capitalism.

To the extent that both conservatives and socialists believe the engine of economic growth is driven by consumer demand, they agree to see permissiveness as favourable to growth under capitalism. In reality, demand, whether avaricious or just, is impotent to impel growth without disciplined, creative, and essentially moral producers of new value. All effective demand ultimately derives from supply; a society’s income cannot exceed its output. The output of valuable goods depends not on lechery, prurience, lust, and license but on thrift, sacrifice, altruism, creativity, discipline, trust, and faith. To the extent that pornography and promiscuity debauch the moral capital of the society—to the extent that they distract workers and entrepreneurs from the long-term effort to create new value—these sources of “demand” actually undermine economic growth.

By that measure, the sexual revolution embodied by Hugh Hefner and his magazine clearly retards economic progress and prosperity. It distracts, demoralizes, obsesses, and depraves the men and women who must forgo immediate returns, sacrifice immediate pleasures, master difficult disciplines, and respond to the needs and desires of others if they are to create successful businesses. Capitalism has been incomparably the most productive economic system in the history of the world because it best evokes the effort and creativity—the moral quality and productive energy—of workers and businessmen who put the interests of others before their own gratifications.

Grégoire Canlorbe: Your analysis and your appraisal of capitalism are based on a profound theory of information, which was recently synthetized in Knowledge and Power. Could you remind us and develop the main outlines of this highly integrated view of information, technology and entrepreneurship?

George Gilder: Based on the mathematical ideas of Claude Shannon and Alan Turing, information theory is an evolving discipline that depicts human creations and communications as transmissions across a channel, whether a wire or the world, in the face of the power of noise, with the outcome measured by its “news” or surprise, defined as “entropy” and consummated as knowledge.