Book Review: The Rational Optimist

41lE-6SCVdL._SS500_Matt Ridley’s latest book, The Rational Optimist: How Prosperity Evolves, is a dense but fascinating argument for why life is going to get better and better. Ridley’s optimism has to do with specialization, trade, globalization, networks, cooperation, exchange–there’ll be more of it, all, he says. Especially as ideas cross-pollinate: “when ideas have sex” is when civilization flourishes.

I found the book highly stimulating. First, Ridley synthesized and expanded on ideas I was already loosely familiar with. It was helpful to think back to these different books, and to try to draw some connections. His discussion of the interplay of ideas reminded me of Steven Johnson and Frans Johansson; his discussion of evolving modern prosperity remidned me of Nick Schulz and Arnold Kling; his discussion of why globalization leads to huge creative gains reminded me of Tyler Cowen; his discussion of why we’re pessimisstic despite the good news reminded me of Gregg Easterbrook; his discussion of non-zero sum global cooperation reminded me of Robert Wright. And of course his basic theses about trade and exchange draw on Adam Smith’s foundational work.

Second, Ridley taught me several new things. For example, he spends a good chunk of time discussing global food shortages and “renewable” energy. He covers these topics with an overt libertarian bent, admittedly, though in a style that’s never dogmatic.

My favorite sentences/paragraphs from the book are below. All are direct quotes from Ridley, but the bold emphases are my own.

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

Imagine if the man who invented the railway and the man who invented the locomotive could never meet or speak to each other, even through third parties….I shall argue that 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.

Specialization encouraged innovation, because it encouraged the investment of time in a tool-making tool. That saved time, and prosperity is simply time saved, which is proportional to the division of labour. The more human beings diversified as consumers and specialized as producers, and the more they exchanged, the better off they have been, are, and will be.

Today, of Americans officially designated as “poor,” 99% have electricity, running water, flush toilets, and a refrigerator; 95% have a television, 88% a telephone, 71% a car and 70% air conditioning. Cornelius Vanderbilt had none of these….In Europe and America rivers, lakes, seas, and the air are getting cleaner all the time…Today, a car emits less pollution travelling at full speed than a parked car did in 1970 from leaks.

Time: that is key. Forget dollars, cowrie shells or gold. The true measure of something’s worth is the hours it takes to acquire it. If you have to acquire it for yourself, it usually takes longer than if you get it ready-made by other people. And if you can get it made efficiently by others, then you can afford more of it….This is what prosperity is: the increase in the amount of goods or services you can earn with the same amount of work…A three minute phone call from New York to Los Angeles cost ninety hours of work at the average wage of 1910; today it costs less than two minutes.

The Easterlin paradox does not exist. Rich people are happier than poor people; rich countries have happier people than poor countries; and people get happier as they get richer.

It is probably true that the rich do lots of unnecessary damage to the planet as they 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.

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.

“Declaration of interdependence”

Think of this: never before this generation has the average person been able to afford to have somebody else prepare his meals.

Reciprocity means giving each other the same thing (usually) at different times. Exchange — call it barter or trade if you like — means giving each other different things (usually) at the same time: simultaneously swapping two different objects…Barter is a lot more portentous than reciprocity. After all, delousing aside, how many activities are there in life where it pays to do the same thing to each other in turn? “If I sew you a hide tunic today, you can sew me one tomorrow” brings limited rewards and diminishing returns. “If I make the clothes, you catch the food” brings increasing returns. Indeed, it has the beautiful property that it does not even need to be fair. For barter to work, two individuals do not need to offer things of equal value. Trade is often unequal, but still benefits both sides. This is a point that nearly everybody seems to miss…. I am saying that 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…Economists see barter as just one example of a bigger human habit of general reciprocity. Biologists talk about the role that reciprocity played in social evolution, meaning “do until others as they do until you.” Neither seems to be interested in the distinction that I think is vital, so let me repeat it here once more: at some point, after millions of years of indulging in reciprocal back-scratching of gradually increasing intensity, one species, and one alone, stumbled upon an entirely different trick. Adam gave Oz an object in exchange for a different object.

A trillion generations of unbroken parental generosity stand behind a bargain with your mother. A hundred good experiences stand behind your reliance on a friend. The long shadow of the future hangs over any transaction with your local shopkeeper…My point is simply this: with frequent setbacks, trust has gradually and progressively grown, spread, and deepened during human history, because of exchange.

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.

On average, when it lands in a town, Wal-Mart causes a 13 per cent drop in its competitors’ prices and saves its customers nationally $200 billion a year.

The size of the average American company is down from twenty-five employees to ten in just twenty-five years.

This is what it would take to feed nine billion people in 2050: at least a doubling of agricultural production driven by huge increase in fertiliser use in Africa, the adoption of drop irrigation in Asia and America, the spread of double cropping to many tropical countries, the use of GM crops all across the world to improve yields and reduce pollution, a further shift from feeding cattle with grain to feeding them with soybeans, a continuing relative expansion of fish, chicken and pig farming at the expense of beef and sheep (chickens and fish convert grain into meat three times as efficiently as cattle; pigs are in between) – and a great deal of trade, not just because the mouths and the plants will not be in the same place, but also because trade encourages specialization in the best-yielding crops for any particular district.

There is not a single example of a country opening its borders to trade and ending up poorer.

Farm subsides and import tariffs on cotton, sugar, rice, and other products cost Africa $500 billion a year in lost export opportunities — or twelve times the entire aid budget to the continent.

Rural self-sufficiency is a romantic mirage. Urban opportunity is what people want.

Not long ago, demographers expected new technology to hollow out cities as people began to telecommute from tranquil suburbs. But no – even in weightless industries like finance people prefer to press into ever closer contact with each other in glass towers to do their exchanging and specializing, and they are prepared to pay absurdly high rents to do so.

United Nations’ best estimate is that world population will probably start falling once it peaks at 9.2 billion in 2075.

6 comments on “Book Review: The Rational Optimist
  • This is straight out of the ‘fishing for a stipend from the Cato Institute’ playbook: telling rich, powerful people what they want to hear.

    Ah, the wonders of the free market place. These libertarian propagandists have no shame. And shades of the anarcho-capitalist Albert Jay Nock, and his book, Our Enemy, the State.

    From George Monbiot writing at the Guardian:

    “What Ridley glosses over is that before he wrote this book he had an opportunity to put his theories into practice. As chairman of Northern Rock, he was responsible, according to parliament’s Treasury select committee, for a “high-risk, reckless business strategy”. Northern Rock was able to pursue this strategy as a result of a “substantial failure of regulation” by the state. The wonderful outcome of this experiment was the first run on a British bank since 1878, and a £27bn government bail-out.”

    “Just imagine what the response would have been if someone who tells the rich and powerful what they don’t want to hear had caused the first run on a British bank in 130 years and had to go crawling to the people he had spent years attacking for a £27bn bailout. Imagine that this person, having learned nothing from the experience, then published a book insisting that the strategy he applied with such catastrophic consequences should be rolled out universally.”

    “I also pointed out that Ridley had made a series of shocking errors and distortions in his book. I showed how he had misrepresented economic history, made claims that bore no relation to the references he gave, and reeled off facts about the environment which were just plain wrong. Again, none of this has been picked up by Ridley’s reviewers.”

    As they say, it business as usual in Bizarroworld.

  • world population will probably start falling once it peaks at 9.2 billion in 2075

    I think the history of UN (over-)population estimates shows that the UN has been consistently wrong. Europe is already going thru a demographic neutron bomb, and China’s population is about to start declining, with their huge shortage of marriageable women.

    The win-win nature of peaceful (=voluntary) trade needs to be more promoted, and Ridley’s quotes above seem excellent. But if he was involved in National Rock, his real-world credibility is, and should be, questionable.

    Even if his phrases are the best way to say the good messages, others with less failures are likely to be saying similar good messages.

  • As I mentioned at dinner, loved this post. Thanks for bringing to my attention. Question: What’s Ridley’s source for the statement that “The size of the average American company is down from twenty-five employees to ten in just twenty-five years.” ? Does he reference a source? The Bureau of Labor Statistics seems to say 16, and not changing as rapidly.

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