Rational Optimism Illuminates the Evolution of Everything
Creationism is just as bad for economics as it is for biology.
Posted December 9, 2015
In his previous book, The Rational Optimist: How Prosperity Evolves (2010), Matt Ridley begins with the observation that (with the exception of sex for food) human beings are the only animals that will trade one object or service for a different object or service. Through time, with large enough populations, trade has led to great division of labor and specialization. We are able to trade for more and more with less and less. Trade increases wealth by reducing self-sufficiency and encouraging specialization, making otherwise more-expensive goods and services more readily available. Thus, prosperity evolves.
Remaining a rational optimist, in his new book, The Evolution of Everything: How New Ideas Emerge, Ridley argues that the theory of evolution is more than just the “universal acid”; it is the key to understanding our world. As he says, “the flywheel of history is incremental change through trial and error, with innovation driven by recombination, and … this pertains in far more kinds of things than merely those that have genes” (319).
For Ridley, language is an excellent example of an evolutionary phenomenon. As he says, “just because something is ordered does not mean it was designed” (318). No one starts out to design a language like English. And in the few cases like Esperanto in which a language has been artificially designed, the language has not succeeded. English has rules, but no one in a position of top-down authority came up with those rules and enforced them. Rather, the rules evolved, and they are subject to change.
Indeed, learning a language is a bottom-up, rather than top-down affair. No one learns to speak their native language by first learning rules of grammar. Instead, one jumps right in and learns through trial and error. Only after one has learned to speak the language quite proficiently is there any attempt to teach one the rules of grammar and parts of speech. Yet, we do this backwards when we try to teach students foreign languages in schools. We start with rules of grammar and parts of speech and lists of vocabulary. The results are predictably poor.
Ridley, like others before, points out that evolutionary thinking predates its application to biology. Indeed, Adam Smith’s conception of order without design via the invisible hand was a major influence on Charles Darwin in developing his theory of evolution. The eminent biologist Stephen Jay Gould argued, in fact, that Darwin’s theory “should be viewed as an extended analogy … to the laissez-faire economics of Adam Smith” (38). Ironically, though, Gould was a Marxist and thus a creationist when it came to economics. As Ridley argues, however, “if life needs no intelligent designer, then why would the market need a central planner?” (110)
The great prosperity of recent centuries makes it tempting to look for an intelligent designer. Ridley points out that “the average person alive in the world today earns in a year between ten and twenty times as much money, in real terms, as the average person earned in 1800” (96). The problem when it comes to economic thinking it that most people are still creationists of one kind or another. But, as Ridley argues, “prosperity emerged despite, not because of, human policy. It developed inexorably out of the interaction of people by a form of selective process very similar to evolution” (97).
Faced with the complexity of an economy, the temptation remains strong to think that some creationist, interventionist planning must be necessary to make things run smoothly. But just as no one planned the way biological evolution has unfolded, no one needs to plan an economy. In fact, attempts at central planning are counterproductive. “The central feature of commerce, and the thing that distinguishes it from socialist planning, is that it is decentralized” (102). No wise leader or bureaucracy can consolidate all the information that is freely available to and taken into account by the myriad individuals in the market. It’s not that individuals are so smart; they’re not. It’s that they work together well without central planning or coordination and that paradoxically attempts to plan for and coordinate them decrease efficiency.
By way of illustration, Ridley cites Bastiat who asks us to imagine feeding the city of Paris. No central planning committee could do it effectively, yet every day the city of Paris is fed. The knowledge of what needs to happen to feed Paris is dispersed among millions of people whose actions are not centrally coordinated. Attempting to synthesize all that knowledge in the hands of a planning committee would be akin to making a map of a territory as detailed as the territory itself, foolish and impossible. As the Austrian economist Friedrich Hayek says in The Fatal Conceit,
The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account (76).
This may sound fine in theory, but in practice, hasn’t it been proven that economies require regulation? Wasn’t the financial crisis of 2008 caused by lack of regulation? Ridley argues that the answer to both questions is no, “The sub-prime crisis was a creationist, not an evolutionary phenomenon” (294). There was tremendous regulation in place in 2008. Indeed, the regulation was the problem to the extent that it created great inefficiency by demanding that loans be made to people who were not good credit risks, and to the extent that the regulators assured us that everything was fine right up until the point where everything went wrong. Thus the tremendous regulation created a false sense of security.
No doubt some readers will recoil at what Ridley says about economics, but the Evolution of Everything deals with much more, as its title promises. Concerning education, Ridley argues that traditional schools are too top-down with rules imposed from above. Much better would be to allow more natural curiosity and discovery. In discussing the evolution of leadership, Ridley rejects the great man theory of history and argues that most CEOs are figureheads and that presidents do not run countries. Also on offer in the book are fascinating insights concerning the evolution of culture, morality, religion, and technology. In all cases the basic message is that “for far too long we have underestimated the power of spontaneous, organic and constructive change driven from below, in our obsession with designing change from above” (319).
The rational optimist hopes for a future that will bring increasing health, wealth, peace, and prosperity largely as a result of accidental, emergent, and unplanned phenomena. And that is not just wishful thinking.
William Irwin is the author of The Free Market Existentialist: Capitalism without Consumerism (Wiley-Blackwell, 2015).