The Rational Optimist: How Prosperity Evolves

Published by EH.NET (October 2010)

Matt Ridley, The Rational Optimist: How Prosperity Evolves. New York: HarperCollins, 2010. vii + 438 pp. $27 (cloth), ISBN: 978-0-06-145205-5.

Reviewed for EH.Net by Philip R.P. Coelho, Department of Economics, Ball State University.
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This is a path-breaking book; its deficiencies (a less than comprehensive index, no bibliography, minor errors in economic logic, and an infatuation with game theory) are minor.? It is definitely worth reading. Arguably this is the best book I have reviewed; I recommend it wholeheartedly and have already assigned it in my classes. But its excellence generates a problem: How does one review it without gushing?? The following is my attempt to solve that question; I want to give you some idea of what the book is about and the difficulties I have with it; regardless, this is an excellent book.?

The author, Matt Ridley, is neither an economist, nor a historian; he is a trained biologist who in The Rational Optimist has written a book in which he uses his training to shed light upon economic history and development.? Ridley addresses the long sweep of history; his primary hypothesis is that human intelligence and knowledge are best conceived as collective and cumulative rather than a characteristic of individuals.? He argues that the accretion of collective knowledge allowed cultural evolution to progress along with a concomitant increase in human material and technological accomplishments. Ridley contends that it was voluntary exchange that allowed knowledge, intelligence and culture to become cumulative; thus specialization and exchange are roots of human progress.

Ridley readily admits (p. 8) that Adam Smith made a similar contention: that exchange and specialization drive material improvement.? Ridley modestly and accurately states that: ?I cannot hope to match Smith?s genius as an individual, but I have one great advantage over him — I can read his book.?? Articulated here is a second theme of Ridley?s book that ideas are like sex in the biological sense.? In biology, sex is the transmission of coding (that is what DNA is) from one organism to the germ line of another organism; the germ line is the part of the reproductive system that imparts DNA into succeeding generations.? Biological sex affects future generations because it is passed through the germ line to all future generations. As an example, using sex as a metaphor for the transmission of ideas, we can say that Malthus?s writings on the consequences of population growth entered into the germ line of biology and were partially responsible for Darwin?s theory of evolution and the subsequent developments in evolutionary biology. Malthus?s contribution to evolution is well recognized; now Ridley is attempting to return the favor to economics by introducing a strong dosage of evolution into economic history.

Ridley devotes the first six chapters (of eleven) in The Rational Optimist to examining the progress of the species of H. Sapiens from its putative origins 200,000 BC to approximately 1200 AD. Ridley believes that the division of labor between sexes may have been the genesis of specialization within the human community. Specialization and the concomitant increasing productivity led to trade and trust, what Ridley calls the manufacturer of virtue; here his work mirrors that of Deirdre McCloskey on Bourgeois Virtues (McCloskey is mentioned (p.109) and referenced in the end notes, but not in the index).?? Throughout his survey of history, Ridley links the growth of civilization, material progress, and rising living standards with population growth. He conceives of population growth as the basis for increased specialization and exchange which, in turn, generates material progress and increasing well-being. His approach to demography is decidedly anti-Malthusian.

Chapters seven through eleven are devoted to the explication of his ideas on the period from roughly 1700 C.E. to the present. His title, The Rational Optimist, is derivative of these chapters; two chapter epigraphs are worth repeating:
On what principal is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?? (Macaulay, p. 11)
I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage. (J.S. Mill, p. 279)

Pessimism sells, from Ecclesiastes, to Malthus, to Al Gore. But what is its track record for predictive success? Economics has had the sobriquet of the ?Dismal Science? bestowed upon it; but this is truly a misnomer.?? In market economies, prices interacting with production and purchasing decisions produce outcomes that tend to be socially beneficial as well as economically efficient.? Economics deserves the ?dismal? appellation only because we continue to dispute the childhood fantasies such as Santa Claus and Tooth Fairies, and the charlatans/fools in public life who proclaim that we can do what they want at no cost.? Honesty and integrity demand that we say repeatedly ?there is no free lunch.? There are always costs. Yet Ridley (chapter 8) comes dangerously close to contradicting this when he writes about the increasing pace of human knowledge.

Once produced or discovered, knowledge is a public good in that one person?s acquisition does not limit another?s acquisition and use. Still there are costs: education, training, and dissemination of knowledge all involve non-trivial costs; aggregated, these costs are a substantial percentage of total GDP. Still Ridley?s point is well made; new knowledge is like the biologist?s sex, it can leap from one person/discipline/industry to another. Once embedded into the ?germ? line the knowledge forever changes its new host.? This is path dependency in spades. The reduced costs of acquiring and producing knowledge in the era in which we live are a basis for Ridley?s optimism.? A second basis is history and science.

Ridley refuses to be a Pollyanna; he does NOT say the world is perfect; he does say that the world is improving along a whole series of metrics (living standards, land in wilderness, the preservation of bio-diversity, etc.). His final chapters are devoted to supporting this thesis.? The data he presents are formidable, if we accept that ?man is the measure of all things,? then the improvements in the material standard of living and life-expectancies over the past 60 years is indisputable. (If we do not accept that ?man is the measure of all things? then who or what is? Is the ultimate arbiter the whale, Yersinia pestis, Anopheline mosquitoes, dung beetles, flatworms or what?? And how will the ultimate arbiters let us know their preferences?) The penultimate chapter, 10, takes on the two great pessimisms of the day: climate change and Africa.? He convincingly argues that in recent decades Africa has been improving after previous decades of decline. More controversially, Ridley argues that the effects of global warming and its associated changes in climate are likely to be relatively mild and less costly than the remedies proposed to reduce the putative causes of global warming.? Ridley predicts that any systematic attempt by governments to impose a system of taxes and regulations that address the issue of global warming will be subverted to enhance the well-being of politicians and their supporters; what economists would call rent-seeking.? Some may call this cynicism, on the other hand economists would say that Ridley is merely calling a spade a damned shovel, and bestow the honored title of politically incorrect upon him.?

The final chapter is devoted to a reprise of what Friedrich von Hayek termed catallaxy: the ever increasing possibilities that are opened up by exchange and the division of labor. Here another biological analogy may be useful; the increasing complexity of life on earth from single celled to multi-cellular organisms opened increasingly complex niches for other organisms to prey, parasitize, or utilize in a variety of ways. In turn these organisms open up ecological niches for other organisms that in unthinking combinations create a diverse ecology. Similarly, a growing economy opens up economic niches, from genetic engineers to satellite-television installers and repairmen, which were unimaginable a generation ago. These niches were neither contemplated nor planned by economists, elites or politicians, instead they are the evolving results of increasing complexity in the human economy; by its very nature evolution is unpredictable except that in the face of increasing resources, diversity increases; this is true for both the natural and human economies.? Or as Hayek said it: ?The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design? (The Fatal Conceit: The Errors of Socialism, 1991, p.76).??

Philip R. P. Coelho is the author of Parasites, Pathogens, and Progress: Diseases and Economic Development (MIT Press, forthcoming 2011) with Robert McGuire.

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