Summary
The flywheel of history is incremental change through trial and error, with innovation driven by recombination. A decentralised, bottom-up, trade-centric approach leads to more innovation, prosperity and less violence. Interesting read, but ridden with confirming anecdotal evidence.
Key Takeaways
- In a complex world the very notion of ‘cause’ is suspect.
- Countries where commerce thrives have far less violence than countries where it is suppressed.
- It is perfectly possible to have law that emerges, rather than is created (i.e. Common Law).
- Biological innovation must be both conservative and progressive, because as it redesigns the body, it cannot ever produce a non-functional organism.
- The diagnostic feature of life – and civilisation – is that it captures energy to create order.
- In bodies and cities: with scale, energy consumption becomes more efficient, while innovation and (economic) growth increase.
- Innovation was the key consequence of free enterprise, dwarfing gains from trade, efficiencies of specialisation and improvements by practice.
- Simultaneous discovery and invention mean that both patents and Nobel Prizes are fundamentally unfair things.
- The original idea of a patent, remember, was not to reward inventors with monopoly profits, but to encourage them to share their inventions.
- The story of technology is a story of rules of thumb, learning by apprenticeship, chance discoveries, trial and error, tinkering – what the French call ‘bricolage.
- Technological advances were driven by practical men who tinkered till they had better machines.
- Where conditions are right, new technologies will emerge to their own rhythm.
- Education, done properly, is an emergent, evolutionary phenomenon. It is the process of encouraging learning about the world. Yet it is also a tool of propaganda and indoctrination.
- History is a process driven by thousands of ordinary mortals, not ordained by a few superhuman heroes.
- True egalitarianism comes from liberty, rather than from the state.
- Government begins as a protection racket and emerges spontaneously when population reaches a certain size.
- Bottom–up monetary systems – known as free banking – have a far better track record than top–down ones.
- The only reason a central bank needed to be a lender of last resort was because of the instability introduced by the existence of a central bank.
- Cantillon Effect: opportunities in finance ripple outwards from the Treasury.
- The process of money creation by an expansionary government effectively redistributes money from the poor to the rich.
- Good things are gradual; bad things are sudden. Above all, good things evolve.
- The flywheel of history is incremental change through trial and error, with innovation driven by recombination.
What I got out of it
An extension of Ridley’s Nature Via Nurture and The Rational Optimist, sprinkled with his “my way or the highway”-style found in The Red Queen. We’ve come full circle.
Except unlike his earlier work – well-researched, emphasizing falsification and referencing peer-reviewed journal articles – this one reads like a popular op-ed piece filled with confirming anecdotal evidence and referencing “popular” books.
Despite the radical libertarian views, Ridley’s attempt to extend the theory of evolution to many different areas of life was interesting and gave me plenty of food for thought. His attempt at a “general” and “special” theory of evolution was a bit far-fetched, however.
The book in a nutshell: everything in life evolves via incremental change through trial and error, with innovation driven by recombination. Trade and a decentralised, bottom-up approach lead to more innovation (and prosperity) than a centralised, top-down approach.
I found overlap with Nassim Taleb’s ideas, although Ridley writes more crudely, which leaves me with this final thought: interesting ideas that have sparked my curiosity and require further exploration before I can make up my mind on any of them.
- Summary
- Key Takeaways
- Summary Notes
- Prologue – The General Theory Of Evolution
- The Evolution Of The Universe
- The Evolution Of Morality
- The Evolution Of Life
- The Evolution Of Genes
- The Evolution Of Culture
- The Evolution Of The Economy
- The Evolution Of Technology
- The Evolution Of The Mind
- The Evolution Of Personality
- The Evolution Of Education
- The Evolution Of Population
- The Evolution Of Leadership
- The Evolution Of Government
- The Evolution Of Religion
- The Evolution Of Money
- The Evolution Of The Internet
- Epilogue – The Evolution Of The Future
Summary Notes
Prologue – The General Theory Of Evolution
In a complex world the very notion of ‘cause’ is suspect.
Evolutionary phenomena, in the original meaning of the word, unfold and they are everywhere and in everything. They are the result of human action, but not of human design. Yet we fail to recognise this category. Our language and our thought divide the world into two kinds of things – those designed and made by people, and natural phenomena with no order or function.
Darwinism is the ‘special theory of evolution’; there’s a general theory of evolution too, and it applies to much more than biology. It applies to society, money, technology, language, law, culture, music, violence, history, education, politics, God, morality.
The general theory says that:
- Things do not stay the same;
- They change gradually but inexorably;
- They show ‘path dependence’;
- They show descent with modification;
- They show trial and error;
- They show selective persistence.
- And human beings none the less take credit for this process of endogenous change as if it was directed from above.
The Evolution Of The Universe
The Roman poet Titus Lucretius Carus grasped the current idea that the universe has no creator, Providence is a fantasy and there is no end or purpose to existence, only ceaseless creation and destruction, governed entirely by chance.
Gradually, by reading Lucretius and by experiment and thought, the Enlightenment embraced the idea that you could explain astronomy, biology and society without recourse to intelligent design. Nikolaus Copernicus, Galileo Galilei, Baruch Spinoza and Isaac Newton made their tentative steps away from top–down thinking and into the bottom–up world. Then, with gathering excitement, Locke and Montesquieu, Voltaire and Diderot, Hume and Smith, Franklin and Jefferson, Darwin and Wallace, would commit similar heresies against design. Natural explanations displaced supernatural ones. The emergent world emerged.
The Evolution Of Morality
Hume realised that it was good for society if people were nice to each other, so he thought that rational calculation, rather than moral instruction, lay behind social cohesion. Smith went one step further, and suggested that morality emerged unbidden and unplanned from a peculiar feature of human nature: sympathy.
Voltaire put it pithily: ‘The safest course is to do nothing against one’s conscience. With this secret, we can enjoy life and have no fear from death.’
Morality, in Smith’s view, is a spontaneous phenomenon, in the sense that people decide their own moral codes by seeking mutual sympathy of sentiments in society, and moralists then observe and record these conventions and teach them back to people as top–down instructions.
Moral philosophers observe what we do; they do not invent it.
Elias realised that we have internalised the punishment for breaking these rules (and the ones against more serious violence) in the form of a sense of shame.
Countries where commerce thrives have far less violence than countries where it is suppressed.
It is an extraordinary fact that in the Anglosphere people live by laws that did not originate with governments at all. British and American law derives ultimately from the common law, which is a code of ethics that was written by nobody and everybody:
- It emerges and evolves through precedent and adversarial argument.
- It ‘evolves incrementally, rather than leaps convulsively or stagnates idly’, in the words of legal scholar Allan Hutchinson.
- It is ‘a perpetual work-in-progress – evanescent, dynamic, messy, productive, tantalizing, and bottom up’.
- It is built by natural selection.
It is not just the common law that evolves through replication, variation and selection. Even civil law, and constitutional interpretation, see gradual changes, some of which stick and some of which do not. The decisions as to which of these changes stick are not taken by omniscient judges, and nor are they random; they are chosen by the process of selection.
The Evolution Of Life
The beauty of Darwin’s explanation is that natural selection has far more power than any designer could ever call upon. It cannot know the future, but it has unrivalled access to information about the past.
In order to make a perfect and beautiful machine, it is not requisite to know how to make it.
Biological innovation must be both conservative and progressive, because as it redesigns the body, it cannot ever produce a non-functional organism.
The Baldwin effect: a species that over many generations repeatedly exposes itself to some experience will eventually find its offspring selected for a genetic predisposition to cope with that experience. Why? Because the offspring that by chance happen to start with a predisposition to cope with that circumstance will survive better than others. The genes can thereby come to embody the experience of the past. Something that was once learned can become an instinct.
The Evolution Of Genes
Life consists of the capacity to reverse the drift towards entropy and disorder, at least locally – to use information to make local order from chaos while expending energy. Essential to these three skills are three kinds of molecule in particular – DNA for storing information, protein for making order, and ATP as the medium of energy exchange.
DNA sequences show that at the very root of life’s family tree are simple cells that do not burn carbohydrates like the rest of us, but effectively charge their electrochemical batteries by converting carbon dioxide into methane or the organic compound acetate.
The diagnostic feature of life is that it captures energy to create order. This is also a hallmark of civilisation. Just as each person uses energy to make buildings and devices and ideas, so each gene uses energy to make a structure of protein.
The Evolution Of Culture
It’s a sort of iron rule of ecology:
- There will be more species, but with smaller ranges, near the equator, and
- Fewer species, but with larger ranges, near the poles.
- And here is the fascinating parallel: it is also true of languages.
The great diversity of species in tropical forests has something to do with the greater energy flowing through a tropical ecosystem with plenty of warmth and light and water. It may also have something to do with the abundance of parasites.
As for languages, the need to migrate with the seasons must homogenise the linguistic diversity of extremely seasonal landscapes, in contrast to tropical ones, where populations can fragment into smaller groups and each can survive without moving.
As more and more people move into cities and they grow larger and larger, some scientists have begun to notice that cities themselves evolve in predictable ways.
- There is a spontaneous order in the way they grow and change.
- The most striking of these regularities is the ‘scaling’ that cities show – how their features change with size.
- For example, the number of petrol stations increases at a consistently slower rate than the population of the city. There are economies of scale, and this pattern is the same in every part of the world. The same is true of electrical networks.
- So it does not matter what the policy of the country, or the mayor, is. Cities will converge on the same patterns of growth wherever they are.
Like cities, bodies get more efficient in their energy consumption the larger they grow. There is also a consistent 15 per cent saving on infrastructure cost per head for every doubling of a city’s population size.
The opposite is true of economic growth and innovation – the bigger the city, the faster these increase. Doubling the size of a city boosts income, wealth, number of patents, number of universities, number of creative people, all by approximately 15 per cent, regardless of where the city is. The scaling is ‘superlinear’. Geoffrey West of the Santa Fe Institute, who discovered this phenomenon, calls cities ‘supercreative’. They generate a disproportionate share of human innovation; and the bigger they are, the more they generate.
The Evolution Of The Economy
Prosperity emerged despite, not because of, human policy. It developed inexorably out of the interaction of people by a form of selective progress very similar to evolution. Above all, it was a decentralised phenomenon, achieved by millions of individual decisions, mostly in spite of the actions of rulers.
A modern version of Smithism:
- The spontaneous and voluntary exchange of goods and services leads to a division of labour in which people specialise in what they are good at doing.
- This in turn leads to gains from trade for each party to a transaction, because everybody is doing what he is most productive at and has the chance to learn, practise and even mechanise his chosen task. Individuals can thus use and improve their own tacit and local knowledge in a way that no expert or ruler could.
- Gains from trade encourage more specialisation, which encourages more trade, in a virtuous circle. The greater the specialisation among producers, the greater is the diversification of consumption: in moving away from self-sufficiency people get to produce fewer things, but to consume more.
- Specialisation inevitably incentivises innovation, which is also a collaborative process driven by the exchange and combination of ideas. Indeed, most innovation comes about through the recombination of existing ideas for how to make or organise things.
A glance at economic history makes clear that countries run by and in the interests of merchants have not been perfect, but they have always been more prosperous, peaceful and cultured than countries run by despots:
- Phoenicia versus Egypt;
- Athens versus Sparta;
- The Song Chinese versus the Mongols;
- Italian city states versus Charles V’s Spain;
- The Dutch republic versus Louis XIV’s France;
- A nation of shopkeepers (England) versus Napoleon;
- Modern California versus modern Iran;
- Hong Kong versus North Korea;
- Germany in the 1880s versus Germany in the 1930s.
This decentralised emergence of order and complexity is the essence of the evolutionary idea that Adam Smith crystallised in 1776. In his famous metaphor, Smith made the guiding hand invisible: each person ‘intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention’.
Innovation was the key consequence of free enterprise, dwarfing gains from trade, efficiencies of specialisation and improvements by practice.
Schumpeter saw ‘creative destruction’ as the key to economic progress, and the ‘essential fact about capitalism’. For new firms and technologies to emerge, old ones had to die. There is a ‘perennial gale of creative destruction’. Or, as Nassim Taleb puts it, for the economy to be antifragile (strengthened by running risks), individual firms must be fragile. The restaurant business is robust and successful precisely because individual restaurants are vulnerable and short-lived.
Economic evolution is a process of variation and selection, just like biological evolution. As I argued in The Rational Optimist, exchange plays the same vital role in economic evolution as sex plays in biological evolution. Without sex, natural selection is not a cumulative force.
Take six basic needs of a human being: food, clothing, health, education, shelter and transport. Roughly speaking, in most countries the market provides food and clothing, the state provides healthcare and education, while shelter and transport are provided by a mixture of the two – private firms with semi-monopolistic privileges supplied by government: crony capitalism, in a phrase.
Is it not striking that the cost of food and clothing has gone steadily downwards over the past fifty years, while the cost of healthcare and education has gone steadily upwards?
But perhaps the comparison is unfair. Healthcare is bound to inflate in cost because of new procedures and longer lifespans. There may be a similar excuse for education, but I cannot put my finger on it at the moment.
Real counterfactuals are at hand to test the proposition that healthcare provision would be cheaper and better if consumers were in charge through the market, rather than government officials through the state; and that food provision would be more expensive and worse if the state were in charge, rather than the consumer.
In the Soviet Union the state had – and in today’s North Korea it has – a monopoly in the provision of food, from field to fork. The result was (and in North Korea is) dismal productivity, frequent shortages, scandalous lapses in quality, and rationing by queue – and by privilege.
But the most startling counterfactual is the history of friendly societies:
- These were small, local unions of workers which bought health insurance on behalf of their members and negotiated care from doctors and hospitals.
- Competition between them kept salaries modest, but doctors were still well paid.
- This was, therefore, a national health service that was widespread though not universal, growing rapidly, and reassuring to working people, since it ensured that they had access to more expensive treatments they could not afford to buy directly.
- It had emerged spontaneously and organically, and membership of the movement had doubled in fifteen years.
- This was socialism without the state.
- There is no doubt that it would have continued to expand and evolve.
The Evolution Of Technology
Simultaneous discovery and invention mean that both patents and Nobel Prizes are fundamentally unfair things.
Two other phenomena underline the overwhelming inevitability in the progress of technology:
- The equivalent of what biologists call convergent evolution – the appearance of the same solution to a particular problem in widely different places.
- The way that progress happens incrementally and inexorably – and is impossible to prevent. The clearest example of this is Moore’s Law.
Ray Kurzweil made a startling discovery: that Moore’s Law was being obeyed before silicon chips even existed. By extrapolating the power of computers back to the early twentieth century, when they used different technologies altogether, he drew a straight line on a logarithmic curve.
Before the integrated circuit even existed, the electromechanical relay, vacuum tube and the transistor had all improved along the very same trajectory. And if Moore’s Law has continued through technological change-overs, then there’s no reason to think it will not happen again. When chips eventually reach their miniaturisation limit, the plummeting cost will continue in another technology.
Nor is Moore’s Law the only such regularity to emerge in the computer age.
Kryder’s Law says that the cost per performance of hard disk computer storage is rising exponentially, at 40 per cent a year. Cooper’s Law finds that the number of possible simultaneous wireless communications has doubled every thirty months since 1895, when Marconi first broadcast. These are largely independent of Moore’s Law.
The explanation for this bizarre regularity seems to be that technology is driving its own progress. Each technology is necessary for the next technology.
Biology and technology in the end boil down to systems of information.
The original idea of a patent, remember, was not to reward inventors with monopoly profits, but to encourage them to share their inventions.
Parallel invention is the rule, not the exception.
Technological advances were driven by practical men who tinkered till they had better machines; philosophical rumination was the last thing they did.
From the methods used by thirteenth-century architects building cathedrals to the development of modern computing, the story of technology is a story of rules of thumb, learning by apprenticeship, chance discoveries, trial and error, tinkering – what the French call ‘bricolage’.
Where conditions are right, new technologies will emerge to their own rhythm, in the places and at the times most congenial to them. Leave people free to exchange ideas and back hunches, and innovation will follow. So too will scientific insight.
The Evolution Of The Mind
The human freedom we all boast we possess, said Spinoza, ‘consists solely in the fact, that men are conscious of their own desire, but are ignorant of the causes whereby that desire has been determined’.
Not only did Spinoza see the mind as a product of the emotions and urges of the body, he pointed out that even those of us motivated by impulse think we act freely.
Dennett’s crucial insight is that free will is not some binary, all-or-nothing thing that you either possess or you do not. Freedom to influence your own fate is an almost infinitely variable thing that is the product of biology:
- The ability to move is a step towards freedom; the ability to move farther or faster is a farther or faster step.
- The ability to see, to hear, to smell and to think provide still more freedom to alter your fate.
- Technology, science, knowledge, human rights, the weather forecast – they all increase your freedom to alter your fate.
- It turns out that political liberty and philosophical freedom are rooted in the same thing.
- And to appreciate them, indulge them, value them, you do not need to believe in a simplistic version of free will that is outside the material universe, any more than to celebrate the beauty of nature you need to believe it was created by a man with a long white beard, or than to benefit from the miracle of world trade you need to believe in world government.
The Evolution Of Personality
Children get their personalities mostly from within themselves.
Human beings develop certain social systems as they mature – to socialise, to develop relationships and to achieve and recognise status. Socialisation means learning how to fit in with other people of your own age. Children acquire their habits, their accents, their favoured language, and most of their culture from their peers.
They spend a lot of time learning to be similar to these peers. In forming relationships, however, they learn to discriminate between different people, adopting different behaviours with different individuals.
Learning can only happen because we have innate mechanisms to learn. The human brain comes equipped automatically – though not necessarily from the start – with a tendency to learn language, to learn to recognise faces and emotions, to understand numbers, the wholeness of objects and the mindfulness of other people.
The Evolution Of Education
What would education look like if allowed to evolve?
In his book The Rebirth of Education, Lant Pritchett quotes the frank admission of a nineteenth-century Japanese education minister: ‘In administration of all schools, it must be kept in mind, what is to be done is not for the sake of the pupils, but for the sake of the country.’
As in America, compulsory, state-mandated education was not the only way that learning would reach the poor. When the British state brought in compulsory education in 1880 its population was already almost entirely literate. This had come about entirely through an explosion of voluntary education within family, church and community over the preceding half-century, with the state having almost no policy on the matter before 1870. An entire system of education had evolved spontaneously, with no direction from government. The imposition of a state education system from 1870 in Britain, with compulsion from 1880, in effect simply displaced a growing and healthy private schooling system that would have continued to develop.
Mahatma Gandhi complained later that the British had ‘uprooted a beautiful tree’ and left India more illiterate than it had been, in displacing the indigenous private school network with a disastrously unsuccessful public one, centralised, unaccountable and open to caste exclusion.
The cost, incidentally, of an education is not much greater in the private than the public system. The difference is that the money comes from the parents in the private system, and from the taxpayers in the state system. The only cheaper option – home schooling – has an even better track record of academic achievement.
Pritchett draws an analogy with a spider and a starfish:
- A spider controls everything that happens on its web through the single node of its brain: it is highly centralised.
- A starfish has no brain and is a radically decentralised organism with local neural control of its arms.
- In education, spider systems were designed in the nineteenth century, essentially to build nations to legitimate regimes. Those centralised systems are worse than useless at facing the educational challenges of today, and of innovating.
- Pritchett’s solution is to encourage local evolution of an education system open to variety and experimentation: to make education much more like a starfish.
Education, done properly, is an emergent, evolutionary phenomenon. It is the process of encouraging learning about the world. Yet it is also a tool of propaganda and indoctrination.
There is one education system that seems to be better than most at inculcating resistance to indoctrination, at least in the early years: Montessori schools, with their collaborative, test-free, mixed-age classrooms and emphasis on self-directed learning, have a remarkable track record in producing entrepreneurs. The founders of Amazon, Wikipedia and Google (both of them) went to Montessori schools.
It is true that well-educated people tend to be richer than poorly-educated people, both within and between nations. But as Wolf argues, cause and effect are confused here:
- ‘Could it be,’ she asks, ‘that growth causes education rather than education causing growth?’
- You can certainly find examples of countries that deliberately planned and achieved great improvements in education, both basic and vocational, and which grew very fast: South Korea is the classic case, Singapore another.
- Hong Kong and Switzerland grew just as fast, but with far less central planning or investment in education. Switzerland has far lower than average enrolment in universities for an economy of its level. Hong Kong’s ‘meteoric economic growth had nothing to do with centrally planned education policy’, but Hong Kong parents began pushing their children into good private schools once they got rich enough to do so.
- A bigger example: America has consistently performed poorly in international league tables of educational achievement in school, yet performed well in economic terms.
The countries with the most education simply do not show greater productivity growth than the ones with less. Each year spent in school or university should be enabling an employee to be more productive, but there is no sign of this in the economic statistics.
The Evolution Of Population
Particulate inheritance and recessive genes made the idea of preventing the deterioration of the human race by selective breeding greatly more difficult and impractical. How were those in charge of breeding the human race supposed to spot the heterozygotes who carried but did not express some essence of imbecility or unfitness? How long were we supposed to go on weeding out the unfit as they emerged from marriages of heterozygotes? It would take centuries, and along the way the problem would become worse as our species became more and more inbred, allowing more and more homozygous combinations.
There is only one country where population control was sufficiently coercive to achieve its end – China – yet all that China achieved was a deceleration of population growth almost exactly the same scale as other countries that used almost no coercion at all.
The right thing to do about poor, hungry and fecund people always was, and still is, to give them hope, opportunity, freedom, education, food and medicine, including of course contraception, for not only will that make them happier, it will enable them to have smaller families. Embrace the evolutionary, unplanned, emergent phenomenon of the demographic transition.
Jacob Bronowski, speaking at the end of his television series The Ascent of Man. Standing in a pond at Auschwitz-Birkenau, where many of his relatives died, he reached down and lifted up some mud: ‘Into this pond were flushed the ashes of some four million people. And that was not done by gas. It was done by arrogance, it was done by dogma, it was done by ignorance. When people believe that they have absolute knowledge, with no test in reality, this is how they behave. This is what men do when they aspire to the knowledge of gods.’
The Evolution Of Leadership
History is a process driven by thousands of ordinary mortals, not ordained by a few superhuman heroes.
Baron de Montesquieu, also insisted that leaders were taking credit for inexorable inevitabilities of nature. Human beings, he thought, were mere epiphenomena: history was driven by more general causes. ‘Martin Luther is credited with the Reformation,’ he wrote. ‘But it had to happen. If it had not been Luther it would have been someone else.’ The chance result of a battle could bring forward or delay the ruin of a nation, but if the nation was due to be ruined it would happen anyway. Montesquieu thus made the distinction between ultimate and proximate causes.
‘Let’s fire all the managers’:
- Layers of management increase in number, size and complexity as organisations grow larger, because managers need managing too; and that a large part of a boss’s job in a big firm is to keep an organisation from collapsing under the weight of its own complexity.
- ‘Give someone monarch-like authority, and sooner or later there will be a royal screwup.’
- It also means slower decisions as problems get bounced between dilatory committees.
- And it disempowers junior staff, who think nobody listens to their concerns or suggestions.
What really works inside a big firm is division of labour: you do what you’re good at, I’ll do what I’m good at, and we’ll coordinate our actions. Good management means good coordination.
Chris Rufer, the founder of Morning Star, brought together his employees and asked: ‘What kind of company do we want this to be?’, and the answer built upon three principles:
- That people are happiest when they have personal control over their life;
- That people are ‘thinking, energetic, creative and caring’;
- That the best human organisations are ones like voluntary bodies that are not managed by others, but in which participants coordinate among themselves.
True egalitarianism comes from liberty, rather than from the state.
To this day, despite the fact that we know economic development can happen almost everywhere, and we know some of the conditions that make it possible, we still cannot really make it happen to order.
From ancient Egypt to modern North Korea, always and everywhere, economic planning and control have caused stagnation; from ancient Phoenicia to modern Vietnam, economic liberation has caused prosperity.
The Evolution Of Government
Government begins as a protection racket, claiming a monopoly on violence and extracting a rent (tax) in return for protecting its citizens, and emerges spontaneously when population reaches a certain size.
‘The danger is not that a particular class is unfit to govern,’ said Lord Acton. ‘Every class is unfit to govern.’
Take Richard Cobden, the great champion of free trade responsible more than anybody else for that extraordinary spell between 1840 and 1865 when Britain set the world an example and unilaterally and forcefully dismantled the tariffs that entangled the globe. So pure was his support for free trade that Cobden even lambasted John Stuart Mill for briefly flirting with the idea that infant industries needed protection in their early years. The result was an acceleration of economic growth all around the world.
Public policy failures stem from planners’ excessive faith in deliberate design. They consistently underrate the merits of spontaneous, organic arrangements, and fail to recognize that the best plan is often not to have one.
The Evolution Of Religion
All religions seem to recommend some version of the golden rule – do as you would be done by. They thrived, argue Baumard and Boyer, by appealing to human instincts for reciprocity and fairness – by emphasising proportionality between deeds and supernatural rewards, between sins and penance. In other words, gods evolved by adapting themselves to certain aspects of human nature, the environment in which they found themselves. They were doubly manmade, unconsciously as well as consciously: human-evolved as well as human-invented.
The temptations of superstition:
It taught me just how ready people are to believe supernatural explanations, to trust ‘experts’ (or prophets) even when they are blatantly phony, to prefer any explanation to the mundane and obvious one, and to treat any sceptic as a heretic to be shouted at rather than an agnostic to be persuaded by reason and evidence.
The central theme of the origin of religions is that they are manmade, like crop circles, but also that they have evolved. Like technological innovation, they are the result of selection among variants, of trial and error within cultural experiments. And their characteristics are chosen by their times and places. They are also glimpses into just how gullible we are about prescriptive explanations of the world.
The characteristic features of a mystical and therefore untrustworthy theory:
- That it is not refutable,
- That it appeals to authority,
- That it relies heavily on anecdote,
- That it makes a virtue of consensus (look how many people believe like me!),
- That it takes the moral high ground.
- You will notice that this applies to most religions.
Effects cannot precede causes, and we now know almost for sure that ice ages are caused by changes in the earth’s orbit, with carbon dioxide playing a minor, reinforcing role, if any at all. In short, there is a tendency to over-prioritise carbon dioxide as a cause of global temperature, rather than just another influence among many.
Simplistic cause-seeking is characteristically religious. Certainly, when doubters make the arguments above they are often met with a series of largely religious arguments: that they are ‘deniers’ of the truth, that their position is morally wrong because it ignores the needs of posterity, or that they should accept the majority consensus.
There is a long-standing human tradition to become so enthusiastic about a favoured scientific, religious or superstitious explanation for the world as to close your mind and come to hate those who disagree.
The important insight of Karl Popper: any theory that is incapable of falsification cannot be considered scientific.
The Evolution Of Money
The value of a particular piece of paper money depended on the fragile reputation of one of these private companies, none of which had monopoly power. Surely this was a recipe for disaster?
Quite the reverse. Each of the issuing banks remained keen to have its rivals accept its notes, so took a cautious and sensible approach to lending. The notes were exchanged twice a week, so any doubts about bad lending decisions would be quickly revealed if the exchange system broke down. The system was self-regulating through competition.
Financial stability without central banks
- In the nineteenth century Sweden had a free banking system, in which banks competed to issue their own paper currencies. The effect of this system: ‘During the seventy years of its existence, not a single bill-issuing bank failed, no bill-owner lost a krona, and no bank had to shut its windows for even a single day
- Or Canada in the 1930s. Which advanced economy survived the Great Depression in the best shape and had the least trouble in its banking system?
There is no question that a country can run a stable paper currency without a gold standard, a central bank, a lender of last resort, or much regulation; and not only avoid disaster, but perform well. Bottom–up monetary systems – known as free banking – have a far better track record than top–down ones.
The only reason a central bank needed to be a lender of last resort was because of the instability introduced by the existence of a central bank.
Central banks tend to behave pro-cyclically, pushing down the cost of borrowing as credit expands and slamming the door shut when it contracts.
Surely, though, the great financial crisis that began in 2008 was caused by too little regulation, and too much greed?
- In the run-up to the crisis, ‘every large institution was thronged with examiners, overseers, supervisors, inspectors, monitors, compliance officers and a menagerie of other regulatory constabulary’.
- These invariably gave the institutions a clean bill of health right up till the moment they declared them in need of bail-out.
- My own experience as chairman of a bank was of endless reassurance from intrusive and detailed regulation right up till the point when it all went wrong. Far from warning of the crisis to come, regulators did the very opposite, and gave false reassurance or emphasised the wrong risks.
- The crisis of 2008 was triggered to a large extent by a top–down interference in something that should have been a bottom–up system: credit. Greed, incompetence, fraud and error were in abundant supply, but they always are. A plethora of regulations encouraged and rewarded them.
The key to understanding the 2008 crisis is how the bubble was inflated:
- The Chinese government, by radically devaluing its currency in 1994 to stimulate a mercantilist export strategy, and holding it down thereafter to keep exports competitive, created huge global imbalances between Eastern savers and Western borrowers. In effect, the Chinese made their exports competitive and invested the proceeds in cheap loans to Westerners.
- The flood of cheap debt that flowed through Western economies was bound to find its outlet in asset price inflation, and it did. For nearly four hundred years bubbles have happened when borrowing is cheap, and they will go on happening.
- Crucially, there was active, official encouragement of irresponsible lending. American politicians not only allowed banks to lend this cheap money to people with no deposits and little or no capacity to repay; they not only encouraged it; they actively mandated it by law.
While the surplus savings to create the housing bubble came from China, and the low interest rates to encourage borrowing came from the Fed, the incentive to lend irresponsibly to sub-prime borrowers came from a combination of governments and pressure groups, far more than it came from alleged deregulation or from a new outbreak of ‘greed’.
Opportunities in finance ripple outwards from the Treasury: the state spends money before it even exists; the privileged banks then get first access to newly minted money and can invest it before assets have increased in cost. By the time it reaches ordinary people, the money is worth less. This outward percolation is known as the Cantillon Effect.
The process of money creation by an expansionary government effectively redistributes money from the poor to the rich.
Why can we not learn that prices cannot be fixed correctly by politicians? We do not set the price of toothpaste centrally, so why do we set the price of money so?
The Evolution Of The Internet
The true origin of the internet does not lie in brilliant individuals, nor in private companies, nor in government funding. It lies in open-source, peer-to-peer networking of an almost hippie, sixties-California-commune kind. ‘Like many of the bedrock technologies that have come to define the digital age, the internet was created by – and continues to be shaped by – decentralised groups of scientists and programmers and hobbyists (and more than a few entrepreneurs) freely sharing the fruits of their intellectual labor with the entire world.’
It is still a great first port of call on any uncontroversial topic, but I find Wikipedia cannot be trusted on many subjects. An entirely fictional war in the Indian state of Goa was invented, and not only survived for five years on Wikipedia but became a popular entry and won an award.
A small example, maybe, but one of many instances in recent years to show how Wikipedia had moved away from being a crowd-sourced thing to something more hierarchical and centrally controlled.
Richard Dawkins: ‘Money is a formal token of delayed reciprocal altruism’ – or money makes it possible to pay back favours indirectly and at any time.
Epilogue – The Evolution Of The Future
Two ways to tell the story of the twentieth century:
- You can describe a series of wars, revolutions, crises, epidemics, financial calamities.
- You can point to the gentle but inexorable rise in the quality of life of almost everybody on the planet: the swelling of income, the conquest of disease, the disappearance of parasites, the retreat of want, the increasing persistence of peace, the lengthening of life, the advances in technology.
Bad news is manmade, top–down, purposed stuff, imposed on history. Good news is accidental, unplanned, emergent stuff that gradually evolves. The things that go well are largely unintended; the things that go badly are largely intended. Let me give you two lists:
- The First World War, the Russian Revolution, the Versailles Treaty, the Great Depression, the Nazi regime, the Second World War, the Chinese Revolution, the 2008 financial crisis: every single one was the result of top–down decision-making by relatively small numbers of people trying to implement deliberate plans – politicians, central bankers, revolutionaries and so on.
- The growth of global income; the disappearance of infectious diseases; the feeding of seven billion; the clean-up of rivers and air; the reforestation of much of the rich world; the internet; the use of mobile-phone credits as banking; the use of genetic fingerprinting to convict criminals and acquit the innocent. Every single one of these was a serendipitous, unexpected phenomenon supplied by millions of people who did not intend to cause these big changes.
- Of course, you can find counter-examples:
- Where one individual or institution did an especially good thing according to a plan (the moon landings?);
- Or one emergent phenomenon was disastrously bad (the rise of allergies and auto-immune disorders as a result of excessive hygiene?).
- But I submit that there are not nearly as many of these.
Good things are gradual; bad things are sudden. Above all, good things evolve.
The flywheel of history is incremental change through trial and error, with innovation driven by recombination.