The Rational Optimist (P.S.)

by Matt Ridley

species has multiplied by 100,000 per cent, from perhaps three million to nearly seven billion people. It has given itself comforts and luxuries to a level that no other species can even imagine. It has colonised every habitable corner of the planet and explored almost every uninhabitable one. It has altered the appearance, the genetics and the chemistry of the world and pinched perhaps 23 per cent of the productivity of all land plants for its own purposes.

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

bacteria, which trade genes without replicating at the same time – hence their ability to acquire immunity to antibiotics from other species.

there was a point in human pre-history 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.

markets in goods and services for immediate consumption – haircuts and hamburgers – work so well that it is hard to design them so they fail to deliver efficiency and innovation; while markets in assets are so automatically prone to bubbles and crashes that it is hard to design them so they work at all. Speculation, herd exuberance, irrational optimism, rent-seeking and the temptation of fraud drive asset markets to overshoot and plunge – which is why they need careful regulation, something I always supported. (Markets in goods and services need less regulation.)

On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us? THOMAS BABINGTON MACAULAY Review of Southey’s Colloquies on Society

Since 1800, the population of the world has multiplied six times, yet average life expectancy has more than doubled and real income has risen more than nine times. Taking a shorter perspective, in 2005, compared with 1955, the average human being on Planet Earth earned nearly three times as much money (corrected for inflation), ate one-third more calories of food, buried one-third as many of her children and could expect to live one-third longer. She was less likely to die as a result of war, murder, childbirth, accidents, tornadoes, flooding, famine, whooping cough, tuberculosis, malaria, diphtheria, typhus, typhoid, measles, smallpox, scurvy or polio. She was less likely, at any given age, to get cancer, heart disease or stroke. She was more likely to be literate and to have finished school. She was more likely to own a telephone, a flush toilet, a refrigerator and a bicycle. All this during a half-century when the world population has more than doubled, so that far from being rationed by population pressure, the goods and services available to the people of the world have expanded. It is, by any standard, an astonishing human achievement.

American carbon monoxide emissions from transport are down 75 per cent in twenty-five years. Today, a car emits less pollution traveling at full speed than a parked car did in 1970 from leaks.

pessimists, but what about quality of life in old age? Sure, people live longer, but only by having years of suffering and disability added to their lives. Not so. In one American study, disability rates in people over 65 fell from 26.2 per cent to 19.7 per cent between 1982 and 1999 – at twice the pace of the decrease in the mortality rate. Chronic illness before death is if anything shortening slightly, not lengthening, despite better diagnosis and more treatments – ‘the compression of morbidity’ is the technical term. People are not only spending a longer time living, but a shorter time dying.

As Hayek put it, ‘once the rise in the position of the lower classes gathers speed, catering to the rich ceases to be the main source of great gain and gives place to efforts directed towards the needs of the masses. Those forces which at first make inequality self-accentuating thus later tend to diminish it.’

Time: that is the key. Forget dollars, cowrie shells or gold. 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.

In all three categories of comparison – within countries, between countries and between times – extra income does indeed buy general well-being. That is to say, on average, across the board, on the whole, other things being equal, more money does make you happier. In the words of one of the studies, ‘All told, our time-series comparisons, as well as evidence from repeated international cross-sections, appear to point to an important relationship between economic growth and growth in subjective well-being’.

go on striving to get richer long after the point where it is having much effect on their happiness – they are after all endowed with instincts for ‘rivalrous competition’ descended from hunter-gatherers whose relative, not absolute, status determined their sexual rewards. For this reason a tax on consumption to encourage saving for investment instead is not necessarily a bad idea. However, this does not mean that anybody would be necessarily happier if poorer – to be well off and unhappy is surely better than to be poor and unhappy. Of course, some people will be unhappy however rich they are, while others manage to bounce back cheerful even in poverty: psychologists find people to have fairly constant levels of happiness to which they return after elation or disaster. Besides, a million years of natural selection shaped human nature to be ambitious to rear successful children, not to settle for contentment: people are programmed to desire, not to appreciate.

Getting richer is not the only or even the best way of getting happier. Social and political liberation is far more effective, says the political scientist Ronald Ingleheart: 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.’

It is precisely because so much human betterment has been shown to be possible in recent centuries that the continuing imperfection of the world places a moral duty on humanity to allow economic evolution to continue. To prevent change, innovation and growth is to stand in the way of potential compassion. Let it never be forgotten that, by propagating excessive caution about genetically modified food aid, some pressure groups may have exacerbated real hunger in Zambia in the early 2000s. The precautionary principle – better safe than sorry – condemns itself: in a sorry world there is no safety to be found in standing still.

the collective brain. As Friedrich Hayek first clearly saw, knowledge ‘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’.

the interdependence of the world through trade is the very thing that makes modern life as sustainable as it is.

‘Homo homini lupus’, said Plautus. ‘Man is a wolf to man.’

human beings evolved to strive to signal social status and sexual worth. What this implies is that far from being merely materialist, human consumption is already driven by a sort of pseudo-spiritualism that seeks love, heroism and admiration.

cooking selected mutations for smaller guts and mouths,

milk drinking selected for mutations for retaining lactose digestion into adulthood in people of western European and East African descent.

Friedrich Hayek called the catallaxy: the ever-expanding possibility generated by a growing division of labour. This is something that amplifies itself once begun.

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.

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 to swapping different kinds of food. And that maybe got them bartering.

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.

no other species of ape can encounter strangers without trying to kill them, and the instinct still lurks in the human breast. But by 82,000 years ago, human beings had overcome this problem sufficiently to be able to pass Nassarius shells hand to hand 125 miles inland. Barter had begun.

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, slowest-breeding beasts. Much later in Madagascar and New Zealand mass extinctions of large animals also followed with human colonisation. (Incidentally, given the obsession of ‘show-off’ male hunters with catching the largest beasts with which to buy prestige in the tribe, it is worth reflecting that these mass extinctions owe something to sexual selection.)

Without trade, innovation just does not happen. Exchange is to technology as sex is to evolution. It stimulates novelty. The remarkable thing about the moderns of west Asia is not so much the diversity of artefacts as the continual innovation. There is more invention between 80,000 and 20,000 years ago than there had been in the previous million.

The extraordinary thing about exchange is that it breeds: the more of it you do, the more of it you can do. And it calls forth innovation. 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.

According to the anthropologist Joe Henrich, 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.

Self-sufficiency was dead tens of thousand years ago. Even the relatively simple lifestyle of a hunter-gatherer cannot exist without a large population exchanging ideas and skills. The importance of this notion cannot be emphasised too strongly. The success of human beings depends crucially, but precariously, on numbers and connections. A few hundred people cannot sustain a sophisticated technology: trade is a vital part of the story.

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. Fed by an increasingly intensive and vegetarian hunter-gathering lifestyle, and with close contact between tribes, the people of south-west Asia were in a position to accumulate more and more skills and technologies than any previous human populations. A large, interconnected population meant faster cumulative invention – a surprising truth even to this day, as Hong Kong and Manhattan islands demonstrate. As the economist Julian Simon put it, ‘population growth leading to diminishing returns is fiction; the induced increase in productivity is scientific fact’. And one of those inventions was farming,

Money is not metal. It is trust inscribed. NIALL FERGUSON The Ascent of Money

on the whole, having to deal with strangers teaches you to be polite to them, and that in order for such generosity to emerge, costly punishment of selfishness may be necessary. Rejecting the offer is costly for the second player, but he reckons it is worth it to teach the first player a lesson. The argument is not that exchange teaches people to be kind; it is that exchange teaches people to recognise their enlightened self-interest lies in seeking cooperation. Here, then, lies a clue to the unique human attribute of being able to deal with strangers, to extend the division of labour to include even your enemies.

Cooperation, exchange and specialisation within a family group are routine throughout the animal kingdom: among chimpanzees and dolphins, among wolves and lions, among individuals of almost any social species. A meerkat or a scrub jay trusts its relative on sentry duty to sound the alarm if an eagle appears and shares the duty. A worker ant divides labour with its queen, with soldiers and with its sisters in other castes of worker. All these societies are just large families. Collaboration between unrelated strangers seems to be a uniquely human achievement. In no other species can two individuals that have never before met exchange goods or services to the benefit of each other, as happens routinely each time you visit a shop or a restaurant or a website. Indeed, 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.

generally speaking the more cooperative a species is within groups, the more hostility there is between groups. As a highly ‘groupish’ species ourselves, still given to mutual aid within groups and mutual violence between groups, it is an extraordinary thing that people can overcome their instincts enough to have social commerce with strangers.

homicidal raids against neighbouring groups are – in human beings and in most other primates – conducted always by males. So encounters between strange females are not necessarily going to turn violent. Moreover, in all apes females are the sex that leaves the group into which they were born when they mate; in monkeys, curiously, it is males that leave. Assuming human beings follow the ape pattern – as they do to this day in most human societies – then women would have had close relations in other groups in the shape of their mothers, fathers and brothers with whom to build relationships.

oxytocin does not affect reciprocity, just the tendency to take a social risk, to go out on a limb. Moreover, a second game, identical to the first except that the generosity of the trustees is randomly decided, shows no effect of oxytocin on the investors. So oxytocin specifically increases trusting, rather than general risk-taking. As with lovers and mothers, the hormone enables animals to take the risk of approaching other members of the species – it ‘links the overcoming of social avoidance with the activation of brain circuits implicated in reward’. It does this partly by suppressing the activity of the amygdala, the organ that expresses fear. 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.

the entire edifice of human cooperation and exchange, upon which prosperity and progress are built, depends on a fortunate biological fact. Human beings are capable of empathy, and are discerning trusters.

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.

was not how hard it proved to enable people to trust each other in the anonymous reaches of the ether, but how easy. All it took was for eBay to solicit feedback from customers after each transaction and post the comments of buyers about the sellers. Suddenly every deal lay under the shadow of the future; suddenly, every eBay user felt the hot breath of reputation on his neck as surely as a Stone Age reindeer hide salesman returning to a trading place after selling a rotten hide the year before.

with frequent setbacks, trust has gradually and progressively grown, spread and deepened during human history, because of exchange. Exchange breeds trust as much as vice versa. You may think you are living in a suspicious and dishonest world, but you are actually the beneficiary of immense draughts of trust.

If people trust each other well, then mutual service can evolve with low transactional friction; if they do not, then prosperity will seep away. That is, of course, a large part of the story of the banking crisis of 2008. Banks found themselves holding bits of paper that told lies – that said they were worth far more than they were. Transactions collapsed.

Perhaps Adam Smith was right, that in turning strangers into honorary friends, exchange can transmute base self-interest into general benevolence. The rapid commercialisation of lives since 1800 has coincided with an extraordinary improvement in human sensibility compared with previous centuries, and the process began in the most commercial nations, Holland and England.

The working poor give a much higher proportion of their income to good causes than the rich do, and crucially they give three times as much as people on welfare do. As Michael Shermer comments, ‘Poverty is not a barrier to charity, but welfare is.’ Those of libertarian bent often prove more generous than those of a socialist persuasion: where the socialist feels that it is government’s job to look after the poor using taxes, libertarians think it is their duty.

Politically, as Brink Lindsey has diagnosed, the coincidence of wealth with toleration has led to the bizarre paradox of a conservative movement that embraces economic change but hates its social consequences and a liberal movement that loves the social consequences but hates the economic source from which they come. ‘One side denounced capitalism but gobbled up its fruits; the other cursed the fruits while defending the system that bore them.’

‘business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger.’ They are addicted to corporate welfare, they love regulations that erect barriers to entry to their small competitors, they yearn for monopoly and they grow flabby and inefficient with age.

In America, roughly 15 per cent of jobs are destroyed every year; and roughly 15 per cent created.