A Fuller Darwinian Economics

by Matthew Shaffer

Robert Frank’s latest book, The Darwin Economy (compressed in the National Interest here) is getting a lot of buzz. I found it, like all of Frank’s work, very illuminating. But while Frank is a sharp, deep and serious economist, not all of his readers are. I want to push back not so much against Frank’s carefully chosen words as against the less-careful interpretations I’ve found on my progressive friends’ Facebooks and blogs, where The Darwin Economy is held as a revolutionary and devastating riposte to free-market economics. I’m skeptical.

Frank frames his argument around a “prediction: One century hence, if a roster of professional economists is asked to identify the intellectual father of their discipline, a majority will name Charles Darwin,” rather than Adam Smith. Darwin, he says better understood competition, and how “positional goods” pit the interests of the individual against those of the species. (Consider the example of the ill-fated Irish elk: Each incremental advantage in antler size helped each Elk’s chances of mating and reproduction. But over time this produced a very unwieldy, and very extinct, species.) This, Frank says, refutes the Smithian belief that perfect competition channels private interests into public good.

Fair enough, but how serious is Frank’s prediction? Even if Darwin grasped aspects of competition that Smith missed, why would this make him economics’ founder in place of the man who (a) predated him, (b) still gave a pretty good take on competition, and (c) studied the economy itself, as opposed to giving us conceptual tools that could be applied later? If Darwin replaces Smith on that basis, then shouldn’t mathematical game theorists replace Darwin next?

But Frank’s prescriptions are more important than his predictions. Mainly, he argues for a more progressive tax schedule, based on his claim that high income is, like a great pair of antlers, largely a positional good. If the wealthy are mainly motivated by relative position (that is, status) rather than absolute income, raising taxes on all of them should leave their incentives to work, and even their happiness, unharmed. This should soothe the concern that tax hikes on the wealthy will sap productivity. And so, my progressive friends conclude, we can soak the rich without feeling guilty or hurting GDP. But this ignores a much simpler and more persuasive argument against soaking the rich: If we don’t think the government is likely to use extra revenues wisely, we shouldn’t raise taxes even if the wealthy don’t really “need” their absolute levels of income.

And this is a pattern — Frank and his readers do a great job finding interesting ways to think about market failures, without thinking equally hard about the kinds of government failures involved in their alternatives.

To see what I mean, consider one of Frank’s own examples: In order to give their kids the advantage of going through a good school system, parents work longer hours to make higher incomes to afford the property needed to live in the best districts they can. But when all parents do this, no one’s kid gains an advantage, and all have greater stress and debts. I think this story has some truth, but — at the risk of coming off as jeering — it is strange indeed to point to public education as a paradigm for market failure. We jostle for high-price properties precisely because our choice of schools is constrained by law and determined by residence — that is, because education is not a fully competitive, open market. Frank’s market failure is at least in part a government failure.

And the fact that Frank didn’t put it that way may hint that he’s asymmetrically focused on the former at the expense of the latter. I can imagine a fuller Darwinian economics in which insights from evolutionary psychology could shed light on why legislators and regulators are rarely selfless and rational, or on how positional jostling might predictably bias and pervert the functioning of government agencies. That, more complete, Darwinian economics might look less anti-libertarian.

A final note: it should be remembered that Frank’s focus is a Darwinian exception rather than the rule. The case of the gazelle — in which each gazelle’s evolutionary reward for outrunning a cheetah improves the fitness of the species as whole — is more common than the case of the Irish elk. And Darwin’s most basic insight was that species survive and flourish through variation and natural selection — in other words, innovation and the destruction of outdated models. An appreciation for that, I submit, hardly bolsters the case for an expanded public sector.

 

Matthew Shaffer is a former William F. Buckley Fellow, and now works as a researcher in Cambridge, MA.

The Agenda

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