PETER BAUER WAS NOT A CULTURAL PESSIMIST: COMMENT ON MCCLOSKEY.

• Author: Vasquez, Ian
• Position: Deirdre McCloskey - Critical essay

Deirdre McCloskey is an optimist, and rightfully so, when it comes to the development potential of poor countries. As she notes, the impressive records of India, China, and other countries in recent decades in achieving sustained, rapid progress justify that outlook. They also confirm the role of market liberalism in escaping mass poverty. She thus understandably admires Peter Bauer for his courageous advocacy of classical liberal policies at a time when that meant going against the grain in development economics.

McCloskey is bothered, however, by what she considers an oddity or a tension in Bauer's work that at once recognizes the ability of poor people to create wealth when they are given the freedom to do so, and that also recognizes that some widespread cultural factors in some societies can adversely affect progress. She states that "Bauer insisted on cultural pessimism." She compares his views to those of Banfield (1958, 1963) and Putnam et al. (1993) about southern Italy, which leads one to conclude, in McCloskey's words that, "No reigning in of bad government policy could solve the puzzle of culture inherited from the past."

Bauer did believe drat noneconomic factors such as culture play an important role in development, but McCloskey pushes her point too far. He did not consider culture to be as powerful or permanent an obstacle to progress as she depicts. His views were rather more complex and, I would argue, made him an optimist on development. To be fair, McCloskey also qualifies her criticism by citing instances where Bauer notes how the poor have responded rationally to incentives such as price signals to better their situation. She takes this as evidence of an inconsistency in his mood.

In a career as long and prolific as Bauer's, it would be surprising if his views on some issues did not change or evolve. Bauer indeed admitted to having held mistaken opinions--for example, the belief in the primary importance of physical resources such as capital--especially early in his career. But he did not consider his views on the role of culture to be mistaken. On the contrary, he felt that the disregard of noneconomic factors was a major shortcoming of development economics and was impressed again and again with their impact on economic performance and the functioning of society more generally.

One of the reasons McCloskey may take issue with Bauer on his cultural views is that culture is a term that is often ill-defined or that may mean different things to different people depending on how the word is used. As I shall explain, Bauer's conception is probably nearer to McCloskey's understanding of cultural attitudes and changes than is at first apparent. Another reason for the difference of opinion is that McCloskey writes from the perspective of 2018, whereas Bauer began writing in the 1940s as a pioneer in a field that would largely disagree with him and even disparage him. This gave him both a different perspective on development than that of McCloskey and a different objective in his writings.

Bauer as an Applied Economist

Bauer was an applied economist who regularly warned against abstraction and favored direct observation in the study of economic development. He was skeptical of national income and investment statistics in poor countries because their compilation was methodologically flawed, and they missed significant economic activity. It is difficult to find national growth rates, for example, in his writings on development. Instead, he discusses broad transformations such as the move from subsistence to exchange or the fall in fertility rates, and he cites specific, major examples of progress. This was evident from his work in the 1940s and early 1950s in British Malaya, the Dutch East Indies, and West Africa. There he documented vast wealth creation on the part of the poor (Bauer 1948, 1954).

It was thus evident that the ordinary people of the ldcs [less developed countries] were not necessarily torpid, rigidly constrained by custom and habit, economically timid, inherently myopic, or generally deficient in enterprise. In the space of...