Bringing Values In

Although most economists — and most people — would agree that creativity and innovation are central to the workings of a free society and the modern economy, the fact remains that creativity and innovation have not been central to the development and dogma of the field of economics. We can trace many reasons for this, but more important is to define a research program to rectify this state of affairs.

My own research program focuses on developing formal models of how individuals come to be creative. I study creativity as a process of development — what does someone choose to learn, what experiences do they have, what life paths do they follow, what conditions do they find themselves in, that spark ideas and insights? It turns out that to do this requires modeling the knowledge and cultural environment — the conceptual world — within which individuals function. In turn, this increases the complexity of the models, in particular through embedding individuals in fields defined by knowledge structures (often described as lattices), but that suits me fine, since I am committed to the view that every individual has a unique life path and makes a unique contribution to society. With modern computers we can handle the complexity and develop richer models.

Ms. McCloskey is right to allude to the Austrian School of economics as a tradition in which creativity and innovation are recognized as central. I have learned a lot from this tradition. But whereas the Austrian School has generally opposed formal modeling (perhaps on valid grounds of the tendency towards over-simplification) I believe formal modeling is the best approach for its clarity and will raise the standing of creativity and innovation.

I understand Ms. McCloskey as focusing specifically on the values that promote creativity and innovation and their historical emergence. I agree this is important. Indeed as several of the participants have noted, values — many different values — are crucial as underpinnings of modern economic systems. Anyone who works in taxation and public economics as I have knows how important honesty, lack of corruption, and trust are to tax compliance, government operations, and business contractual dealings. Like creativity, values deserve much greater study in economics. Values are best thought of in groups, constellations that fit together to define a cultural order. We really have as yet very little understanding of how this works, for example why certain sets of values are more stable and lead to more productive life, and what tends to destabilize values. Any light Ms. McCloskey can shed on the topic is welcome. Like creativity, our understanding of values gains from formal modeling, and values will gain prominence by being incorporated into formal models.

To appreciate and depict the value of liberty I am convinced requires approaches that model what individuals learn, experience, know, imagine, create, and decide down to a level of individuality and precision beyond what has been standard heretofore in the field of economics.

Also from this issue

Lead Essay

  • In this month’s lead essay, Deirdre McCloskey summarizes the argument of her forthcoming book, Bourgeois Dignity: Why Economics Can’t Explain the Modern World. She argues that while the modern world rode an economic tide, the tide did not have economic causes. Changes in thinking and, yes, in rhetoric did the real work. Neither thrift, nor greed, nor the Protestant ethos are at the heart of this transformation, which brought material prosperity to whole classes that had never before known it. A variety of possible causes must be dismissed, she argues, from foreign trade, to legal institutions, to coal. The dignity and liberty of the bourgeoisie are the keys to economic transformation.


  • Gregory Clark argues that cultural or intellectual developments, like the rise of the bourgeois virtues, ultimately can’t explain the modern world. Not only were such virtues around long before the Industrial Revolution, but they have come and gone throughout many different societies over thousands of years. Why, then, did the Industrial Revolution only happen so recently, and only once? Worse, if we accept that cultural changes brought modern prosperity, we face the prospect that future changes in intellectual fashion may rob us of prosperity as easily as it was bestowed. This he finds both unfortunate and, thankfully, unlikely.

  • Matt Ridley makes two connected points: First, surges in creativity and innovation are far from unique. They can be observed throughout history, and they are usually connected to increases in trade and specialization. In this sense, Britain during the eighteenth century was not exceptional.

    Second, however, Britain was exceptional in another respect — it had large reserves of coal, and it began putting them to use. Cheap energy helped ensure that the boom in innovation didn’t die out. Entrepreneurs won out against plunderers in part because they had this resource at their disposal, and because they could make the case for the benefits of innovation so easily. It was only after the switch to a coal-driven economy that wages finally began to rise for the typical British worker. They continue to do so today thanks to coal and to other sources of cheap energy that have since been discovered and exploited.

  • Jonathan Feinstein suggests that the revolution in human creativity is still underway, and that we have not yet fully recognized what it means to be creative. The science of creativity, he argues, is key here, as the creative process is very different from what most people imagine it to be.