The Rational Optimist: How Prosperity Evolves

by Matt Ridley

It was a collective phenomenon.

At some point, human intelligence became collective and cumulative in a way that happened to no other animal.

Humanity is experiencing an extraordinary burst of evolutionary change, driven by good old-fashioned Darwinian natural selection. But it is selection among ideas, not among genes.

cultural evolution:

is that at some point in human history, ideas began to meet and mate, to have sex with each other.

I shall argue that there was a point in human prehistory when big-brained, cultural, learning people for the first time began to exchange things with each other, and that once they started doing so, culture suddenly became cumulative, and the great headlong experiment of human economic ‘progress’ began. Exchange is to cultural evolution as sex is to biological evolution.

By exchanging, human beings discovered ‘the division of labour’, the specialisation of efforts and talents for mutual gain.

Specialisation encouraged innovation, because it encouraged the investment of time in a tool-making tool. That saved time, and prosperity is simply time saved, which is proportional to the division of labour. The more human beings diversified as consumers and specialised as producers, and the more they then exchanged, the better off they have been, are and will be. And the good news is that there is no inevitable end to this process. The more people are drawn into the global division of labour, the more people can specialise and exchange, the wealthier we will all be.

an income gap is an inevitable consequence of an expanding economy.

Yet the global effect of the growth of China and India has been to reduce the difference between rich and poor worldwide.

Put it another way, an hour of work today earns you 300 days’ worth of reading light; an hour of work in 1800 earned you ten minutes of reading light.

The true measure of something’s worth is the hours it takes to acquire it.

This is what prosperity is: the increase in the amount of goods or services you can earn with the same amount of work.

Rich people are happier than poor people; rich countries have happier people than poor countries; and people get happier as they get richer.

extra income does indeed buy general well-being.

more money does make you happier.

point to an important relationship between economic growth and growth in subjective well-being’.

‘hedonic treadmill’;

to be well off and unhappy is surely better than to be poor and unhappy.

people are programmed to desire, not to appreciate.

the big gains in happiness come from living in a society that frees you to make choices about your lifestyle – about where to live, who to marry, how to express your sexuality and so on. It is the increase in free choice since 1981 that has been responsible for the increase in happiness recorded since then in forty-five out of fifty-two countries. Ruut Veenhoven finds that ‘the more individualized the nation, the more citizens enjoy their life.’

More than any other animal, human beings borrow against their future capabilities by depending on others in their early years.

Intriguingly, this pattern of production over the lifespan in hunter-gatherers is more like the modern Western lifestyle than it is like the farming, feudal or early industrial lifestyles.

The banking system makes it possible for people to borrow and consume when they are young and to save and lend when they are old, smoothing their family living standards over the decades.

Most past bursts of human prosperity have come to naught because they allocated too little money to innovation and too much to asset price inflation or to war, corruption, luxury and theft.

Self-sufficiency is therefore not the route to prosperity.

In 1900, the average American spent $76 of every $100 on food, clothing and shelter. Today he spends $37

‘never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess’.

This is the diagnostic feature of modern life, the very definition of a high standard of living: diverse consumption, simplified production. Make one thing, use lots.

Today, 1 per cent works in agriculture and 24 per cent in industry, leaving 75 per cent to offer movies, restaurant meals, insurance broking and aromatherapy.

The cumulative accretion of knowledge by specialists that allows us each to consume more and more different things by each producing fewer and fewer is, I submit, the central story of humanity.

This is history’s greatest theme: the metastasis of exchange, specialisation and the invention it has called forth, the ‘creation’ of time.

Evolutionary change happens largely by the replacement of species by daughter species, not by the changing of habits in species.

The rich meat diet also enabled erectus hominids to grow a larger brain, an organ that burns energy at nine times the rate of the rest of the body. Meat enabled them to cut down on the huge gut that their ancestors had found necessary to digest raw vegetation and raw meat, and thus to grow a bigger brain instead. Fire and cooking in turn then released the brain to grow bigger still by making food more digestible with an even smaller gut – once cooked, starch gelatinises and protein denatures, releasing far more calories for less input of energy. As a result, whereas other primates have guts weighing four times their brains, the human brain weighs more than the human intestine. Cooking enabled hominids to trade gut size for brain size.

As you can tell, I like neither theory. I am going to argue that the answer lies not in climate, nor genetics, nor in archaeology, nor even entirely in ‘culture’, but in economics. Human beings had started to do something to and with each other that in effect began to build a collective intelligence. They had started, for the very first time, to exchange things between unrelated, unmarried individuals; to share, swap, barter and trade. Hence the Nassarius shells moving inland from the Mediterranean. The effect of this was to cause specialisation, which in turn caused technological innovation, which in turn encouraged more specialisation, which led to more exchange – and ‘progress’ was born, by which I mean technology and habits changing faster than anatomy. They had stumbled on what Friedrich Hayek called the catallaxy: the ever-expanding possibility generated by a growing division of labour. This is something that amplifies itself once begun.

Exchange needed to be invented. It does not come naturally to most animals.

Reciprocity means giving each other the same thing (usually) at different times. Exchange – call it barter or trade if you like – means giving each other different things (usually) at the same time: simultaneously swapping two different objects. In Adam Smith’s words, ‘Give me that which I want, and you shall have this which you want.’

For barter to work, two individuals do not need to offer things of equal value. Trade is often unequal, but still benefits both sides.

Exchange is therefore a thing of explosive possibility, a thing that breeds, explodes, grows, auto-catalyses.

But I am saying that barter – the simultaneous exchange of different objects – was itself a human breakthrough, perhaps even the chief thing that led to the ecological dominance and burgeoning material prosperity of the species. Fundamentally, other animals do not do barter.

so let me repeat it here once more: at some point, after millions of years of indulging in reciprocal back-scratching of gradually increasing intensity, one species, and one alone, stumbled upon an entirely different trick. Adam gave Oz an object in exchange for a different object. This is not the same as Adam scratching Oz’s back now and Oz scratching Adam’s back later, or Adam giving Oz some spare food now and Oz giving Adam some spare food tomorrow. The extraordinary promise of this event was that Adam potentially now had access to objects he did not know how to make or find; and so did Oz. And the more they did it, the more valuable it became. For whatever reason, no other animal species ever stumbled upon this trick – at least between unrelated individuals.

True barter requires that you give up something you value in exchange for something else you value slightly more.

My argument is that this habit of exchanging, this appetite for barter, had somehow appeared in our African ancestors some time before 100,000 years ago.

Why did human beings acquire a taste for barter as other animals did not? Perhaps it has something to do with cooking.

Richard Wrangham makes a persuasive case that control of fire had a far-reaching effect on human evolution. Beyond making it safe to live on the ground, beyond liberating human ancestors to grow big brains on high-energy diets, cooking also predisposed human beings ...

The time spent in cooking is subtracted from the time spent in chewing:

So cooking adds value: the great advantage of cooked food is that though it takes longer to prepare than raw food, it takes just minutes to eat, and this means that somebody else can eat as well as the person who prepares it.

throughout the human race, males and females specialise and then share food.

In other words, cooking encourages specialisation by sex. The first and deepest division of labour is the sexual one.

Women demand meat as their social right, and they get it – otherwise they leave their husbands, marry elsewhere or make love to other men