Unlike the previous post where I cheered for Robert Frank’s book The Darwin Economy, I want to be a bit more critical about the book this time.
Before I begin, I want to say that I still cheer for this book, and it is one I ardently, enthusiastically, and wholeheartedly recommend. If I had the chance I would buy lots of them and give them as gifts to my friends, neighbors, legislators, governor … you name it. One of the greatest things about reading this book is that it becomes one of those events which invite you to revise your thinking on a rational basis. And I never cease to marvel at the depths of Frank’s views on the economy. It certainly has stimulated me to revise my own ideological views about how the economy works, and which solutions should be adopted to make this world a better place. As a matter of fact, there are many areas in the book I will use for my Ethics course this semester (most of the students in my course are from Business Management).
That does not mean that I agree with all of the examples he uses in the book, nor do I agree with the way he portrays many aspects of what is a deontological view of Ethics. Frank seems to promote a teleogical or consequentialist view of Ethics, while I use a deontological approach.
What is the Book About?
Before discussing what the book says, let me clarify what the book is not about. When I showed the book to several on my friends in Facebook and Google+, some raised concerns about the subject. They warned me of the possibility that I might fall into social darwinism. Of course, whoever has read my educational material about what Ethics is and is not, knows that I would never fall into it. Although I always begin the course explaining from a biological level how evolution made us have a moral sense, I strongly warn my students that Neodarwinism, as it is proposed today, only describes a whole process by which living beings reproduce, speciate, and change over time. It does not intend to prescribe ethically what we should and should not do as rational moral beings. As we shall see soon, Frank does not turn Darwinism’s description of biological processes into an ethical advice.
Originally, The Darwin Economy was going to be called The Libertarian Welfare State, which gives you an idea of what it is about. Given that Frank was told that such a title would never sell in Europe, he changed its name to The Darwin Economy. It was also written as a reaction to the almost inane (I would say “insane”) “dialogue” that seems to permeate all of political discourse in the United States. Of course, most of us know Adam Smith as being the father of the science of economics as we know it today, yet Frank predicts that in a hundred years from now, the majority of serious and learned economists would name Charles Darwin as the parent of their discipline. Contrary to some misconceptions, Smith showed that, sometimes, if you let selfish people act in the marketplace, the “invisible hand” of the market will lead to good outcomes for society. Frank points out that Smith would not recognize his own views if he ever read the proposals made by extreme libertarians today, who think that government should do nothing and that a free unregulated market will always lead to good outcomes.
Smith’s skepticism about a universal goodness out of selfish people stems from the fact that many business owners can join together and conspire to oppress the people, in which case, the government should intervene to prevent such conspiracies against the public. However, one question we could ask is: When does the invisible hand fail? Frank finds the answer in Charles Darwin’s own work. What drives biological descent with modification is precisely competition among individuals and groups. Both the cheetah and the gazelle compete for survival by trying to be faster than the other. The fastest member of each species tends to survive and reproduce, passing those genes along. When that happens, individual and group interests are in harmony, since the prevalence of fast gazelles and fast cheetahs do actually benefit their respective groups as a whole. In this case, we have “invisible hand”-like results.
However, Darwin also noticed that individual and group interests diverge. This is the case with the bull elk (as you can see in the cover of the book). Members of the species are polygenous, meaning that they take more than one mate if they can, to be able to reproduce. Their male antlers are not really meant to defend themselves against other predators, but to win some fights with other males; whoever wins, will end up with as much as 100 females maximum. So, whoever has the biggest antlers will end up with their mates and pass the genes along. Yet, in this case, there is a problem. If males with heavy antlers prevail, then such feature becomes a disadvantage from the group’s point of view, because they can end up being eaten by predators if chased in dense wooded areas. In this case, individual and group interests diverge. Such cases do happen in the economy, and when they do, the “invisible hand” of the market breaks down.
Bull elk are pretty much stuck with the situation, since their intelligence is not complex enough to make rational decisions about what to do with their antlers. They are pretty much stuck with natural selection. Yet, Frank does not suggest that we ought to be stuck with natural selection, not even market selection for that matter (which is what social Darwinism would suggest). Instead, he points out that we, humans, as intelligent beings who actually can make rational decisions, we should collectively establish a mandate which benefits the group.
He uses the example of hockey players. If you let players have the choice of not wearing helmets, all of them end up not wearing it. This is not because they ignore the fact that helmet protects them (there is no cognitive error in the process), quite the opposite, they know that playing without helmets could increase the chance of being hurt during the game. Yet, given the immediacy of seeing better, hearing better, and intimidating the opponents better …. they are not too worried about a more abstract concern of harm. Yet, if you ask them if they should be a mandate to wear helmets, they would all favor it. Why is there a discrepancy?
If there is no mandate, the individual interest to win prevails, leading other players to do the same, since they are also thriving for their individual interest to win. Yet, when they all do it, the result is that not one individual is in any advantageous position, yet everyone is worse off, since all of them are unprotected. Hence, individual and group interests diverge. A rule mandating helmets and prescribing a penalty for those who do not want to wear it, would make all players wear helmets, everyone would be in equal footing, and they end up better than if there were no mandate.
This is what happens with the construction of ever more expensive houses for the middle class, even when there is no increase in salary in real terms over the years, leading huge problems. Those at the top earned more throughout the years, buying far more mansions, and spending considerably in them, even when they are no happier than before for doing so. This consumerist behavior “trickles down” to those below. As a result, the middle class competed for more and more expensive houses even when they had no real income growth. This apparently benefited them individually, especially regarding status, but not as a group. This inevitably leaves the middle class worse off.
[Note: I highly recommend Robert Frank's analysis on this very interesting subject in his book Falling Behind: How Rising Inequality Harms the Middle Class.]
Frank suggests that a progressive consumption tax will discourage this sort of behavior, among others which create harmful activities such as carbon dioxide emissions which create global warming, while, at the same time, leading governments to have money to invest on roads, bridges, and other infrastructure and services people actually need.
Again, his whole argument makes a LOT of sense, and, in a way, I am completely surprised that this has not led to further policies for scrapping the income tax and payroll tax, and phasing in some of these progressive consumption taxes. In another sense, I am not surprised, since many people in the United States are actually misled regarding how taxes and economic prosperity are related. You need government to take care of bridges, dams, roads, and even the army. As Frank argues, if there were no taxes, there would not be an army, without an army you couldn’t defend yourself against other countries which have armies, and if conquered by another nation you will end up paying mandatory taxes to that country. Also, he shows in the book how lowering taxes has helped terrorist causes. Many people are not aware that because of irresponsible tax cut policies, a lot of funds were cut to keep nuclear missiles in Russia (the former Soviet Union) guarded. This means that terrorists may have far less barriers to reach them. I wouldn’t be surprised if the mushroom cloud metaphor that George W. Bush talked about when launching the failed Iraq War in 2003 will be realized in some way any time soon.
Again, I enthusiastically recommend Frank’s book as being one of those bright lights which challenge people of all along the political spectrum to re-evaluate our own positions on the economy and politics. None of what I will say in these series will ever change that. In fact, I thank him for changing my mind about a lot of things.
Frank’s Ethical Position of the Discussion
Yet, there is a little difference I have with him regarding his approach to the issue of ethics. I confess that I have still to read his book What Price the Moral High Ground?, which seems very interesting. I want to react to Frank’s notion of ethics as he is pondering about the issue presenting Ronald Coase’s contribution to the discussion on what should be the relationship between the economy and the state regarding cases where the traditional ethical framework of perpetrator and victim seems inappropriate. Surprise, surprise! As a deontologist, I fully agree with Coase!
Frank alludes to the famous debate between the consequentialists (teleological ethicists) and the deontologists (deontological ethicists). I happen to be the latter, Frank seems to hold a consequentialist approach. Yet, he recognizes the following:
Consequentialists and deontologists have been at each other’s throats for millenia. Nothing I say here could possibly settle the issues that divide them. But because I will advocate policy claims that follow from Coase’s consequentialist framework, it’s important to emphasize that the two frameworks are less squarely in conflict than may often appear (pp. 94-95).
In many areas of ethical discussions, there seems to be a “battle” between deontologists and consequentialists, but I don’t want to give that impression in this case. Ronald Coase’s views actually does make a lot of sense to me, but reasons very different from Frank’s views. The purpose of my next blog post is to ponder about a deontological solution to some of the problems raised by Coase’s framework.
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fascinating and as always .. very brilliant work my friend..