Alice to the Red Queen: imperious econometrics

Abstract

A cCloskey's response to our paper is at once a remarkable misreading LYof our criticism, and a curious misrepresentation of the paper he coauthored with Nash. McCloskey suggests that the main purpose of this paper was to show that the cost of storage was 'formidable' in medieval England.' 'The point was to get a rough idea of storage cost (not storage amounts)' in which he had only a 'desultory' interest.2 Nor did he have any more than a 'tangential' concern for the matter of interest rates, and his reflections there represent an 'extra dividend'.3 Yet his very title belies such modest claims: 'Corn at interest: the extent of and cost of medieval grain storage'. He then devotes the first two sections of the paper to the proposition that the storage amounts were small: 'i. The direct evidence that storage was small,' and 'ii. Using prices to show that storage was small'. He spells out the significance of interest rates in subsequent sections: 'iv. The cost was high because the interest rate was high;' and 'vi. The significance of high medieval interest rates.'4 His conclusion reiterates his opening premise, namely that the cost of storage and the rate of interest were 'shockingly high. Stores of grain were therefore very low.'5 If McCloskey misrepresents his own article, he wildly misunderstands our response. He claims that we read his argument 'precisely backwards', that we think he 'deduced' the high cost of storage from interest rates, an endeavour that he now admits would be 'idiotic.'6 Although he puts the word 'deduced' in quotation marks, the word choice is his, not ours. To be sure, we did assert that according to McCloskey, 'the quantity of grain stored . . . was primarily a function of the rate of interest.' However, we referred not to the empirical part of his paper but to its causal analysis, and we stand by that assertion. After all, the paper in question begins by assuming as much: 'At the interest rates he faced a medieval farmer seldom stored more than two years in.a row.'8 What is more, as noted above, he devotes the concluding sections of the paper to elaborating this assertion. Now he faults us for taking his assertions and reasoning seriously. We certainly challenge his 'empirical' deduction of interest rates from asumptions regarding the cost of storage as inferred from changes in the