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A “Rational” Optimist?

September 27, 2011

Matt Ridley, The Rational Optimist: How Prosperity Evolves

Post No. 3 in the Prosperity Series

Has the world been getting better, and can it continue to do so?

Yes, says Matt Ridley. He documents the many ways in which economic growth has enabled life to be better in recent centuries – people are richer, healthier, taller, cleverer, longer-lived, freer and safer and the environment is getting cleaner.  But for all the improvement, he says, life is still not good: “war, disease, corruption and hate disfigure the lives of millions; nuclear terrorism, rising sea levels and pandemic flu may yet make the twenty-first century a dreadful place.” Therefore, says Ridley, we have a moral duty to allow economic evolution to continue.

Exchange – division of labour – specialisation – innovation – prosperity

Ridley’s central idea is that human betterment began when people started bartering. By exchanging goods, humans discovered the division of labour – people specialising in what they were good at doing, and exchanging the goods they made for ones that other people were skilled at making, so that both parties benefit. Specialisation led to expertise and encouraged innovation because it made it worthwhile to invest time in devising tools. Ideas began to meet and mate. “Exchange is to cultural evolution what sex is to biological evolution,” he says. Economic growth and prosperity became synonymous with moving from self-sufficiency to interdependence.

In effect, Ridley is claiming that humans invented the market 100,000 years ago, and was the only animal to do so. The explanation for the advance of the human race lies in economics.

The market makes us nice

While cooperation within families is widespread in the animal kingdom, cooperation between unrelated strangers is uniquely human, and arose from the mutual benefits of exchange. Having to deal with strangers teaches us to be polite to them and to recognise that our enlightened self-interest lies in seeking cooperation. Commerce makes us trust each other and become more generous. Societies that use markets extensively develop a culture of cooperation, fairness and respect for the individual. Where commerce thrives, says Ridley, art, culture and compassion flourish.

Ridley does recognise that commerce is not enough on its own to create trust – we also need such institutions as the rule of law, respect for private property, consumer regulation, the welfare state and a free press. But apart from these, government should remain small and stay out of the way of bottom-up innovation. If innovation is allowed to flourish, the world will be able to feed itself to a higher and higher standard throughout the twenty-first century while reducing farmland area and protecting rainforests.

Looking for provocation? Read this book!

I have only summarised Ridley’s central thesis, but The Rational Optimist is chockfull of other provocative ideas which, for those like me who doubt his optimism, are useful for testing one’s assumptions. Both his denunciations and praise are passionate:

  • Biofuels, organic farming, self-sufficiency and reliance on renewables all destroy nature.
  • Corporations and bureaucracies stifle innovation.
  • Fossil fuels save nature, and will last longer than we think because of increasing efficiency.
  • GM and intensive farming save nature.
  • The Industrial Revolution abolished slavery.
  • By using nuclear energy we can decarbonise the economy while not increasing energy costs.
  • With innovation we will avoid most of the effects of climate change, although rising sea levels may remain a worry.

He says that pessimists are right when they say that, if the world continues as it is, it will end in disaster for all humanity. His point is that the world will not continue as it is – that is, pessimists are guilty of extrapolationism. “The question is not ‘Can we go on as we are?’ because of course the answer is ‘No’, but how best can we encourage the necessary torrent of change that will enable the Chinese and Indians and Africans to live as prosperously as Americans do today.”

Commerce might build trust, but does Ridley?

Ridley describes himself as a “rational” optimist, that is, he has arrived at his optimism not through temperament or instinct, but by looking at the evidence. But however he arrived at it, I think it does colour the way he looks at evidence (just as pessimism may influence his critics to draw opposite conclusions from the same data.)

Ridley does not include footnotes or sources in the body of his text. Instead a large ‘notes and references’ section at the back gives the sources for statements made in the text. This makes reading easy and checking up on him hard, but it seems to me that he does cherrypick his sources, for example using scientists from the rosier end of the spectrum on global warming issues such as what’s happening to polar bear populations. Many critics (for example, George Monbiot here) have catalogued long lists of errors and misuse of references.

He does appear to be careless in the way he uses evidence. On page 317 he says, “Paul Collier and his colleagues at the World Bank encountered a storm of protest from non-government organisations (NGOs) when they published a study entitled Growth is Good for the Poor. This suspicion of growth is a luxury that only wealthy Westerners can indulge.”

I could not believe this as most NGOs recognise the urgency of growth for poor countries, as does Tim Jackson, author of Prosperity without Growth (review here). Ridley’s source was Collier’s book in which he says “Some NGOs hated” the study. Collier doesn’t say which ones, but eventually I found Oxfam’s critique of the study, entitled Growth with Equity is Good for the Poor. Oxfam is pro-growth, but also pro-poor, so it criticised growth that enriches the wealthy and further impoverishes the poor. The World Bank study had said that any type of growth, even if it was inequitable, was good.

Ridley’s distortion, which turned a reasonable criticism from an NGO into a storm of protest from anti-growth Westerners, is evidence that he uses sources in a cavalier fashion. He may have been just as cavalier as Chairman of Northern Rock, in failing to heed the warning signs of the bank’s reckless strategies which caused it to go bust. (See Why Did the GFC Happen?)

Still, I liked this book …

We should be sceptical of Ridley’s arguments and the way he uses evidence. Still, the book is fun to read – Ridley is a better writer than Tim Jackson (the devil has all the best lines). His survey of the last 100,000 years of human history from the viewpoint of his central idea is entertaining and thought provoking. I liked his exchange-specialisation-innovation-prosperity thesis, not as a complete explanation of human progress, but as one aspect of how the human race has developed. It has prompted me to rethink my ideas about the future – have I paid enough attention to innovation and human resourcefulness? Perhaps I have looked too much on the dark side of evidence, just as Ridley always looks on the bright side.

But can we just keep growing? Tim Jackson argues that exponential growth is not sustainable on a finite planet. Ridley doesn’t see this as a problem. To this issue I will turn in a later post in the prosperity series.

 

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