The Rational Optimist: How Prosperity Evolves

by Matt Ridley

An evolutionary bargain seems to have been struck: in exchange for sexual exclusivity, the man brings meat and protects the fire from thieves and bullies; in exchange for help rearing the children, the woman brings veg and does much of the cooking. This may explain why human beings are the only great apes with long pair bonds.

Anthropologists used to argue that the sexual division of labour came about because of the long, helpless childhood of human beings. Because women could not abandon their babies, they could not hunt game, so they stayed near the home and gathered and cooked food of the kind that was compatible with caring for children.

This pattern of shifting from big prey to small as the former were wiped out was characteristic of the new ex-Africans wherever they went.

In Australia, almost all larger animal species, from diprotodons to giant kangaroos, became extinct soon after human beings arrived.

In the Americas, human arrival coincided with a sudden extinction of the largest,...

Without trade, innovation just does not happen. Exchange is to technology as sex is to evolution. It stimulates novelty.

There is more invention between 80,000 and 20,000 years ago than there had been in the previous million. By today’s standards, it was very slow, but by the standards of Homo erectus it was lightning-fast.

If you are not self-sufficient, but are working for other people, too, then it pays you to spend some time and effort to improve your technology and it pays you to specialise.

Which only raises another question: why did economic progress not accelerate towards an industrial revolution there and then? Why was progress so agonisingly slow for so many millennia? The answer, I suspect, lies in the fissile nature of human culture. Human beings have a deep capacity for isolationism, for fragmenting into groups that diverge from each other.

‘Cultures, it seems, like to shoot messengers.’ People do their utmost to cut themselves off from the free flow of ideas, technologies and habits, limiting the impact of specialisation and exchange.

Specialisation would lead to expertise, and expertise would lead to improvement. Specialisation would also give the specialist an excuse for investing time in developing a laborious new technique.

comparative advantage

England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. England would therefore find it in her interest to import wine, and to purchase it by the exportation of cloth. To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England.

human beings learn skills from each other by copying prestigious individuals, and they innovate by making mistakes that are very occasionally improvements – that is how culture evolves. The bigger the connected population, the more skilled the teacher, and the bigger the probability of a productive mistake. Conversely, the smaller the connected population, the greater the steady deterioration of the skill as it was passed on. Because they depended on wild resources, hunter-gatherers could rarely live in bands larger than a few hundred and could never achieve modern population densities. This had an important consequence. It meant that there was a limit to what they could invent.

There was nothing special about the brains of the moderns; it was their trade networks that made the difference – their collective brains.

Tools are in effect a measure of the extent of the division of labour and, as Adam Smith argued, the division of labour is limited by the extent of the market.

The Tasmanian market was too small to sustain many specialised skills

It seems the hunter-gathering lifestyle was doomed if too isolated.

The success of human beings depends crucially, but precariously, on numbers and connections.

The ‘Tasmanian effect’ may also explain why technological progress had been so slow and erratic in Africa after 160,000 years ago.

As Steve Shennan and his colleagues have calculated, whenever the right combination of (say) seafood, freshwater and fertile savannahs produced local population explosions, technology would have grown sophisticated in proportion to the number of people networked by exchange to sustain and develop it – in proportion to the scale of the collective intelligence. But when a river dried up or deserts advanced and human populations collapsed or shrank, technology would simplify again. Human cultural progress is a collective enterprise and it needs a dense collective brain.

Thus the extraordinary change in technology and cultural tradition that seems to have flourished more than 30,000 years ago in western Asia and the Near East – the so-called Upper Palaeolithic Revolution – may be explained by a dense population.

Collaboration between unrelated strangers seems to be a uniquely human achievement.

in other group-living species, such as ants or chimpanzees, the interactions between members of different groups are almost always violent. Yet human beings can treat strangers as honorary friends.

I think the first overtures may have been ventured first by human females. After all, homicidal raids against neighbouring groups are – in human beings and in most other primates – conducted always by males.

So perhaps the first steps to trade with strangers began as individual friendships.

Trade with strangers, and the trust that underpins it, was a very early habit of modern human beings.

This ability to transact with strangers as if they were friends is made possible by an intrinsic, instinctive human capacity for trust.

oxytocin does not affect reciprocity, just the tendency to take a social risk, to go out on a limb.

So oxytocin specifically increases trusting, rather than general risk-taking.

If human economic progress has included a crucial moment when human beings learned to treat strangers as trading partners, rather than enemies, then oxytocin undoubtedly played a vital role.

Human beings are capable of empathy, and are discerning trusters. Is that it, then? That human beings can build complicated societies and experience prosperity is down to the fact that they have a biological instinct that encourages cooperation?

people have become oxytocin-junkies far more than many other animals.

As a broad generalisation, the more people trust each other in a society, the more prosperous that society is, and trust growth seems to precede income growth.

‘A 15% increase in the proportion of people in a country who think others are trustworthy,’ says Paul Zak, ‘raises income per person by 1% per year for every year thereafter.’

‘The success of trust-based peer organizations such as eBay, Wikipedia, and the open-source movement, indicates that trust is a highly expandable network property.’

Zero-sum thinking dominates the popular discourse, whether in debates about trade or in complaints about service providers.

The notion of synergy, of both sides benefiting, just does not seem to come naturally to people. If sympathy is instinctive, synergy is not.

Wherever the ways of man are gentle, there is commerce, and wherever there is commerce, the ways of men are gentle,’

The nineteenth century, when industrial capitalism drew so many people into dependence on the market, was a time when slavery, child labour and pastimes like fox tossing and cock fighting became unacceptable. The late twentieth century, when life became still more commercialised, was a time when racism, sexism and child molesting became unacceptable.

so today it is the new money of entrepreneurs and actors that funds compassion for people, pets and planets.

There is a direct link between commerce and virtue.

But the idea that the market destroys charity by teaching selfishness is plainly wide of the mark. When the market economy booms so does philanthropy.

The lesson of the last two centuries is that liberty and welfare march hand in hand with prosperity and trade.

In that sense ‘capitalism’ is dying, and fast. The size of the average American company is down from twenty-five employees to ten in just twenty-five years. The market economy is evolving a new form in which even to speak about the power of corporations is to miss the point. Tomorrow’s largely self-employed workers, clocking on to work online in bursts for different clients when and where it suits them, will surely look back on the days of bosses and foremen, of meetings and appraisals, of time sheets and trade unions, with amusement. I repeat: firms are temporary aggregations of people to help them do their producing in such a way as to help others do their consuming.

Where commerce thrives, creativity and compassion both flourish.

Even if the world is indeed becoming a more trusting and less violent place as it becomes more commercial, that does not mean that commerce is in itself either the only way to make the world trusting, or enough on its own to create trust. As well as new tools, there had to be new rules. The innovations that made the world nicer, it may be argued, are institutions, not technologies: things like the golden rule, the rule of law, respect for private property, democratic government, impartial courts, credit, consumer regulation, the welfare state, a free press, religious teaching of morality, copyright, the custom that you do not spit at the table and the convention that you always drive on the right (or left if in Japan, Britain, India, Australia and much of Africa). These rules made trustful, safe commerce possible, at least as much as vice versa.

Good rules reward exchange and specialisation; bad rules reward confiscation and politicking.

a sample of 127 countries, the sixty-three with the higher economic freedom had more than four times the income per capita and nearly twice the growth rate of the countries that did not.

‘Rich countries,’ concluded the Bank, ‘are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity.’