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 / Summer 2006 / Issue 43(originally published by Booz & Company)


Deirdre McCloskey’s Market Path to Virtue

By the time Professor McCloskey published his book on rhetoric, he had left the University of Chicago. A promotion to full professor had been slow in coming. So in 1980, when J. Richard Zecher, a friend and colleague who had left the University of Chicago years earlier, became dean of the business school at the University of Iowa and offered Professor McCloskey a full tenured professorship in both economics and history, he jumped at the chance.

While some economists dismissed Professor McCloskey’s book on rhetoric as a frivolous digression, others hailed it as an important step forward in the field. “Her economic rhetoric work is interesting and of considerable value,” says Gary Becker. “She’s right that opinions are influenced not just by scientific example, but also by rhetoric.”

Rhetoric put Professor McCloskey on the front lines of a mounting attack against the formalism of modern economics. Another influential book that was published shortly after Rhetoric, The Making of an Economist, by Arjo Klamer and David Colander, was based on a study of graduate students in economics and concluded that although only a tiny minority — 3 percent — of the students surveyed considered a “thorough knowledge of the economy” important to success in graduate school, well over half considered excellence in mathematics to be very important. The study underscored Professor McCloskey’s argument that economics had drifted too far from empirical research on real-world problems. The Klamer–Colander study also led to the appointment of a commission on graduate education in economics by the American Economic Association, which issued a report in 1991 that concluded, in part, that graduate programs generate “too many idiots savants, skilled in technique but innocent of real economic issues.”

As the debate about Rhetoric and the direction of the economics profession raged in academic circles in the early 1990s, Professor McCloskey was on the cusp of another radical change — this one far more personal. Professor McCloskey was married with two grown children and teaching at the University of Iowa when he began cross-dressing regularly, surfing Internet sites for cross-dressers, and visiting transvestite bars in Chicago. Professor McCloskey, who in the book Crossing: A Memoir describes a compulsion to cross-dress from an early age, began the process leading to a sex change.

Few who knew Professor McCloskey anticipated the change. Friends noted that the McCloskeys seemed to be an unusually close couple. Today Professor McCloskey says that she was never explicitly unhappy. But there were signs of anxiety. Claudia Goldin, a former student of Professor McCloskey’s and a labor economist at Harvard, recalls that, at the University of Chicago, Donald McCloskey had been a “a psychological train wreck. He was trying to be too much of a man, yelling and screaming all the time.”

Today Professor McCloskey is a gracious, even-tempered woman — by many accounts, more amiable than Donald was. “My wife disliked Donald, but she loves Deirdre,” says Arjo Klamer, who holds a chair in the economics of art and culture department at Erasmus University in Rotterdam. Professor McCloskey readily admits that while Donald wouldn’t hesitate to “slip a knife” into an opponent, Deirdre would never do that. “I’m nice to everyone, whereas Donald wasn’t,” says Professor McCloskey. “The personality I now have is very much what I had before adolescence.”

The Klamers helped Professor McCloskey make the transition to womanhood. Professor Klamer arranged for Professor McCloskey to get the first of what would be several visiting professorships at Erasmus University in Holland, where, she says, she could make her transition in an atmosphere of tolerance. Professor McCloskey’s family was not so supportive. Deirdre’s sister, a Harvard psychologist, tried to have her institutionalized twice — once having her hauled off from the Palmer House in Chicago where she was attending the annual meeting of the Social Science History Association. Professor McCloskey’s former wife, with whom she wished to maintain a friendship, has cut her off entirely, as have her children. While Professor McCloskey has rebuilt ties to her sister and other relatives, her mother was the only member of the immediate family who remained loyal throughout the change.

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  1. John C. Bogle, The Battle for the Soul of Capitalism (Yale University Press, 2005): Vanguard Fund founder’s acerbic and non-McCloskeyan view of managerial immortality.
  2. Ann Graham, “Lynn Sharpe Paine: The Thought Leader Interview,” s+b, Summer 2003: Research on ethical ambiguity anticipates some of Professor McCloskey’s ideas. Click here.
  3. Arjo Klamer and David Colander, The Making of an Economist (Westview Press, 1990): Provides hard evidence, based on a survey of graduate students, that economists have veered too far into mathematical models and away from real-world problems.
  4. Art Kleiner, “Daniel Yankelovich: The Thought Leader Interview,” s+b, Fall 2005: A different kind of management morality optimist. Click here.
  5. Deirdre N. McCloskey, The Bourgeois Virtues: Ethics for an Age of Commerce (University of Chicago Press, 2006): Tour-de-force defense of capitalism as ethical source.
  6. Deirdre N. McCloskey, If You’re So Smart: The Narrative of Economic Expertise (University of Chicago Press, 1990): Argues that the power of economists rests more on their abilities to persuade than their abilities to predict the future.
  7. Deirdre N. McCloskey, The Rhetoric of Economics (1985; University of Wisconsin Press, 2nd ed., 1998): How economic formalists have taken their reliance on econometrics and mathematical models “absurdly too far.”
  8. Rob Norton, “Derivative Wisdom,” s+b, Spring 2006: Survey of sources of financial wizards who influenced Professor McCloskey. Click here.
  9. Michael Schrage, “Daniel Kahneman: The Thought Leader Interview,” s+b, Winter 2003: The Nobel Prize–winning economist parses the roles of emotion, cognition, and perception in the understanding of business risk. Click here.
  10. Adam Smith, The Theory of Moral Sentiments (1759; Prometheus Books, 2000): Deirdre McCloskey credits the father of modern economics with much of her thinking on the virtues of capitalism.
  11. For more business thought leadership, sign up for s+b’s RSS feeds. Click here.
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