The Darwin Economy


Last year, in his comedy special Bare, the Australian comedian Jim Jefferies riffed on gun control and the burden of unregulated behaviors that harm other people.

If you’re a responsible gun owner and you don’t fuck around with guns, then you should be allowed to own them. But that’s not how society works. We have to play to the 1 percent who are such fuckwits that they ruin it for the rest of us.  

I take drugs like a fucking champion, and we should all be allowed to take drugs. But we can’t because Sarah took drugs and stabbed her fucking kids. Thanks Sarah, you fucked it up for everyone!

Everyone should be able to drive their car as fast as they can. But we can’t because Jonathan got drunk and ran over his family. Thanks Jonathan, now I have to drive under 30mph!

The punch line elicits a rowdy laugh because it’s true. Despite Jefferies’ provocative language and crude examples—the rest of his special is equally vulgar—society would be worse off if everyone was allowed to do anything they wanted to do.

This is the central insight of Robert Frank’s The Darwin Economy: Liberty, Competition, and the Common Good. What makes this book smart is not the rather obvious point that laws are important but the more groundbreaking hypothesis that in the next century Charles Darwin, and not Adam Smith, will be considered the intellectual founder of modern economics. Frank, a professor of Economics at Cornell University, explains it like this.

The large antlers of an adult bull elk function as weapons not to deter predators but to beat rival males. Because the genetic mutation that coded for larger antlers helped elk win more females, it spread quickly and triggered an arms race. Today, the largest antlers measure more than four feet across.

Although large antlers helped some elk, the cumulative effect made the entire species worse off. Large antlers weigh about 40 pounds, which makes it difficult for elk, even those with small antlers, to evade predators. If a pack of wolves were chasing you through dense woods, it wouldn’t help to have 40 extra pounds mounted on your skull.

“Bull elk face a collective action problem,” Frank says. “As a group, [they] would be better off if each animal’s antlers were much smaller.”

This was one of Darwin’s greatest and most underappreciated insights, that individual animals pursuing self-interest often profoundly and systematically undermine the broader interests of their own species. The most conspicuous example is the male peacock, whose fanciful tail attracts the most fertile females—and the fiercest predators.

Adam Smith famously postulated that the power of individual greed would naturally generate new genres of economic output that would in turn benefit the collective. In this view, regulation disrupts the free market, which is perfectly capable of weeding out inefficiencies on its own.

Darwin observed that market failures can happen precisely because individuals are left to pursue their self-interest. As Frank puts it:

Sometimes individual and group interests coincide, [Darwin] recognized, and in such cases we often get invisible hand-like results. A mutation that codes for keener eyesight in one particular hawk, for example, serves the interests of the individual, but its inevitable spread also makes hawks as a species more successful.

In other cases, however, mutations that help the individual prove quite harmful to the larger group. This is in fact the expected result for mutation that confers advantage in head-to-head competition among members of the same species.

Frank cites Thomas Schelling’s research on hockey players. Schelling theorized that players who skate without helmets have a small competitive advantage—they can watch plays develop and hear their teammates better—yet the overwhelming majority of hockey players would vote to require helmets. It would make everybody safer. Unfettered competition, in other words, not only fails to promote the common good; it can actively undermine it.

Frank spends most of the book investigating how libertarian, conservative, and liberal ideals clash with the Darwinian model of economics and John Stuart Mill’s harm principle. But the most interesting sections, in my view, address a fundamental puzzle about the psychology of wealth and happiness.

Consider this: Would you rather make a salary of $100,000 in a company full of people who make $50,000, or $120,000 in a company full of people who make $200,000? Even though the salary in the second scenario is $20,000 more, participants in one study indicated that they prefer the salary in the first.

From the Darwinian perspective, opting for the meager $100,000 actually makes sense. Evolution selects traits—speed, intelligence, and even eye color—only if they increase fitness relative to rivals, which partially explains why our evolved brains are so deeply attuned to what our peers are earning and not necessarily the median household income. “As Darwin saw clearly, much of life is graded on the curve,” Frank writes.

However, in a debate at the 2011 Aspen Ideas Festival involving Professor Frank, Justin Wolfers, Professor of Economics at the University of Michigan, argued that despite what participants in the study indicated about which salary they’d prefer, data clearly show that people often opt for more overall wealth at the expense of relative status. For example, middle class people from poor countries tend to immigrate to rich countries—where they are relatively poorer but richer overall—while middle class people from rich countries tend to stay put, despite the opportunity for them to enjoy higher status in a poorer country. (Likewise, I’m guessing wealthy parents wouldn’t move to a district with bad schools just to boost their children’s academic standings.)

At first glance, it seems like Wolfers is right. People are willing to make more money even if that means making relatively less money. However, Frank is also correct that we care deeply about relative position. The key difference is harm. In domains such as hockey, where unregulated behavior harms both the individual and the whole, humans show an overwhelming preference for rules that level the playing field. “We have to play to the 1 percent who are such fuckwits that they ruin it for the rest of us,” as Jefferies told the crowd, sounding a bit like a belligerent John Stuart Mill.

If Frank’s prediction is correct, and Darwin unseats Smith as the intellectual founder of modern economics, it is because we will begin to fully embrace and appreciate our tremendous ability to balance the motivations of ourselves with the broader interests of our species. John Locke was right. “Where there is no law, there is no freedom.”


Image via Wikipedia CC