Measurement and Meaning in Economics: The Essential Deirdre McCloskey by Deirdre Nansen McCloskey
My rating: 3 of 5 stars

A Bourgeois Aesthetic

McCloskey’s book is a collection of her previously published papers in a variety of professional journals. It contains no new theoretical or empirical thinking, but it does demonstrate the trajectory of her thought over the last four decades. Most significantly for the argument I want to make here, the book shows a discontinuity in her thought which is both regrettable and avoidable. Regrettable because it makes much of her analysis irrelevant to economists. Avoidable because her journey from economic positivism to the literature of economics needs only a few more steps to have an impact on the discipline and the world.

The first half of Measurement and Meaning is substantially that of conventional economic analysis of issues like growth, interest rates, and risk. The techniques, dominantly statistical, employed in these papers are largely methodologically repudiated by McCloskey in her 2008 The Cult of Statistical Significance. The second half of the book falls under the heading of Meaning and summarises McCloskey’s arguments for what she calls Rhetorical or Story-telling Economics.

The trajectory of her work is clearly from the scientific toward the aesthetic. I think I understand her impulse. Economics, like other social sciences, has been plagued by scientism, the attempt to establish a fixed method as the sole source of truth. McCloskey wants to establish the validity of other methods as well. She claims she doesn’t want to supplant classical economic method but to enhance it through the introduction of literary-like techniques of rhetorical analysis. She wants to make economists conscious of their habitual choices.

I would like to do the same thing with McCloskey. The problem she has is that her story, and it is such, about Rhetorical Economics is just another story set against the story of what those who call themselves economists have been telling themselves, and the rest of us, for at least a century. The two stories are contraries. Except for her exhortation to get better at writing professional papers, and to read more novels, the stories have no point of intersection. The result is that each story has its own incommensurable criterion of importance and validity and there is absolutely no intelligent way to choose between the two.

But I believe there is a way to tell a unified story which includes those of McCloskey and of Classical Economics. It starts by recognising that the heart of traditional economics is precisely what McCloskey is promoting: aesthetics. She has claimed that her purpose is to make economists more aware of what they are doing. I think that purpose is laudable and correct. But to do that effectively she first has to ‘make her colleagues right,’ that is, show them the aesthetic judgements they make now and how these judgements are appropriate within some limits, and what other judgements are possible.

I think an effective way to show this is by a serious consideration of measurement itself. While McCloskey’s shift from classical to rhetorical economics seems to imply a reduction in the role of quantitative measurement, I believe just the opposite to be the case. Measurement is an aesthetic not a scientific, much less a merely technical, activity. It is not only economists or other social scientists who do not recognise this; scientists of all sorts get themselves into tight spots and dead ends as well.

Measurement is one of the few activities that every person on the planet has some experience of, and therefore has an implicit theory, or prejudice, of what measurement means and how it works. The most common theory, somewhat formally stated, goes something like this: Measurement is the more or less precise observation of the properties of an object, event or phenomenon; it usually involves assignment of numerical values to these properties, the accuracy of which can be determined by the comparison of multiple observations against each other; variation at increasingly precise levels of observation in the numerical values thus obtained is the primary indication of measurement error.

Every part of the above paragraph is either wrong or misleading however. It is only when measurement itself is considered in very restricted circumstances - like measuring for the drapes in the sitting room or estimating the cubic yards of top soil required for the garden - does that description capture what is going on in the process. From a philosophical perspective, which McCloskey advocates insistently, measurement is somewhat more involved... and interesting. It is an activity which touches the limits of both language and mathematics. It is also a metaphysical and an ethical challenge.*

Below is an outline of an alternative ‘aesthetic’ theory of measurement which I think captures both Classical and Rhetorical motivations within it. There are further implications that can be drawn from this theory but I think it is sufficient as stated to demonstrate the point at issue: Classical Economics is already an aesthetic activity. However it is a somewhat cramped and limited activity because it does not focus on the main source of aesthetic error, namely the choice of the aesthetic criterion itself.

There are a number of points in Measurement and Meaning at which the aesthetic theory of measurement agrees with but redirects McCloskey’s conclusions. For example, she addresses the problem of economic modeling in her later work. She feels such modeling is often misdirected. But what she doesn’t realize is that it is misdirected precisely because the primary judgement being made in an economic model is not the relationship among its ‘variables’ but it’s aesthetic, its criterion of what’s important. For example, models of economic risk typically use the statistic of variance as their aesthetic. This is not necessarily wrong but it is almost always ill-considered.

The only rationale for using variance and not some other statistic, its story, is one of mathematical convenience. Variance has certain properties which allow it to be used in calculations. It does not express the experience of anyone, economists included. This is not to say that one’s keys are never to be found under the lamp post at night because there is light there; but it is nonetheless unlikely.

The economist Nassim Taleb has made a rather good living selling books about the fact that what people really experience is the threat of extreme not merely variable events - the so-called third order statistic, or skew. In fact it is clear that the portfolio models used in Financial Economics which used the second order statistic of variance as their aesthetic were the dominant reason for the financial crisis of 2008. Their error was not on the metric it was of the metric, always a far more significant mistake.

McCloskey actually proposes an aesthetic at one point. She expresses this as ‘buying behaviour,’ or what can be called a Bourgeois Aesthetic, and suggests that it is a function of what she terms, somewhat inelegantly, the Profane and Solidarity. Her point is that there is a rather admirable combination of classical virtues - Courage, Prudence, Justice, Love, and Temperance - which are actually used by people in their economic activity. This proposal is brilliant, not necessarily because her aesthetic is correct, but because it combines the influences of culture and individual preference in a single proposal. The professional risk she takes in formulating this aesthetic will provoke others to improve or challenge it.**

This last point is crucial. Aesthetics can only be improved when they are articulated and discussed. Classical Economics does an outstanding job at articulating economic aesthetics. But it is woefully inadequate in discussing these aesthetics among those who are most affected by the choices they imply. The power of classical economic aesthetics is enormous because they are so precisely specified. But the errors they incorporate are also immense. This, I think, is a summary of the battle McCloskey is waging.

The most important stories that have to be told in Rhetorical Economics are not about the complex dynamic relationships among economic entities - consumers, businesses, and governments. Rather they are the stories about which aesthetics should be considered in economics at all, what the criteria of advance, improvement, development ought to be. This is a matter for economists but not only for economists. The stories that have to be told are not technical, they are human, and they are, therefore, essentially political. This is what I think McCloskey is missing in both measurement and meaning.

* See: https://www.goodreads.com/review/show... for a more detailed discussion of the aesthetics of mathematics.
**McCloskey’s aesthetic is remarkably similar to that of George Birkhoff in his book Aesthetic Measure. See: https://www.goodreads.com/review/show...

An Outline Aesthetic Theory of Measurement

1. Measurement is not the quantification of the properties of an object, event or phenomenon. Nothing has the property of being, say, 1 yard square. Such a designation runs into all sorts of philosophical problems having to do with human sensory perceptions and the epistemological difficulties of determining the inherent properties of what Kant called “the thing in itself.”
2. Rather measurement is the establishment of the position of a thing, event or phenomenon, on a scale. The thing is a property of the scale, not vice versa. When we measure we are ordering things on a scale not determining the properties of a thing. This is the primary Ontological Principle of measurement
3. The scale used in measurement is called a metric, and can have a variety of properties. Metrics, unlike other things, can have properties because they are mathematically defined to have them. Metrics, like all numbers, have a unique mode of existence. We do not ‘find’ metrics in the natural world, we create them. They are both imaginary and incontrovertibly real at the same time. GDP is a metric, economic utility can be a metric if it is specified mathematically, price and costs are metrics.
4. Metrics are expressed in terms of a numeraire, that is a unit of measurement like feet, dollars, utiles, but these should no be confused with the nature of the metric itself which is purely mathematical. For example, the metric of price is one of constant proportions: $2 is exactly twice $1 and half of $4. But $4 of income may not be twice as many utiles as $2. The metric of utility recognizes what economists call declining marginal utility.
5. A metric is what economists call an aesthetic, the more general term used for a criterion for judging value, worth, importance etc. GDP, for example, is an aesthetic that treats increases as beneficial. Unlike utility, benefit is directly proportionate to the ‘place’ an economy is placed on that metric. Such a metric is not required by any scientific or moral method, but it is an aesthetic choice, the most fundamental choice that all economists make. The choice of metric is a work of art.
6. The error in choosing an aesthetic is always greater than the error of measurement on or within an aesthetic. The aesthetic of GDP for example is not necessarily correlated with a metric of ‘National Happiness.’ As GDP increases, National Happiness could conceivably decrease due to pollution, and other environmental degradation. A 1% error in the measurement of GDP (that is enough to make it useless for policy-making purposes) would be far less significant than the error of choosing GDP over the National Happiness measure, for example.
7. An aesthetic itself has a value, that is, is better or worse, depending on how effective it is in expressing the experience of a population. To the degree that an aesthetic is accepted politically as such an expression, it is more or less verified for that population for the purposes of the issues at hand. This can be called the Ethical Principle of the aesthetic. The art of the economic aesthetic is, like all aesthetics, social. In a sense the aesthetic is ‘true’ to the degree it represents the sentiment of a population.
8. The Ethical Principle of the aesthetic implies that its choice can neither be objective nor subjective, only communal. Any attempt to restrict the politics of a community in its choice of aesthetic is the primary source of aesthetic error. The only way in which contrary aesthetics can be reconciled within any community is the the discovery of a synthetic or ‘larger’ aesthetic that recognises the conditions in which these ‘lesser’ aesthetics are relevant. Thus, for example, measurement with a everyday yardstick is perfectly sensible so long as what is measured is not too small or too fast, in which case quantum measures are necessary. This is the Political Principle of measurement.

For a somewhat less axiomatic exposition of this theory see: https://www.goodreads.com/review/show...

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