The Darwin Economy: Liberty, Competition, and the Common Good [Hardcover]

The cover of this splendid book shows two libertarian bull elk, locked in combat, celebrating their individual freedom to do just as they please. There is no meddling third elk, itching to regulate their behaviour. On the evolutionary timescale, the species has been locked in a costly and unwinnable arms race in antler size not of its choosing, in which any relative advantage gained by one side is soon matched by the other. Individual males would prefer antlers half as huge, but lack the capacity to act collectively. Instead of antlers, we humans have social rank, expressed in countless expensive ways, from cars to coming-of-age parties. Like the elk, we get locked into escalating consumption which, at the highest level, "is almost purely positional". Unlike the elk, we can come together for the common good, and work out how best to limit harmful activities and promote personal autonomy. The solution according to Robert H. Frank is the progressive consumption tax, and he invites rational libertarians to roll up their antitax and antigovernment banners and choose taxation over heavy-handed regulation as the way to cut waste.

Just in case getting libertarians to love taxes is not ambitious enough, Frank predicts "that economists a hundred years from now will be more likely to name Charles Darwin than Adam Smith as the intellectual founder of their discipline". This will strike even staunch Darwinians as a bold claim, and yet, intellectually, Darwin is linked to Smith via Malthus, and understanding competition for resources is key to natural selection. Even more relevant, Darwin revealed "a systemic flaw in the dynamics of competition" and "the failures he identified resulted not from too little competition, but from the very logic of the process itself". This leads to one of Frank's central themes: "as individuals we often face incentives that lead us to undermine the common good, and that to counteract these incentives, taxes are generally a far more efficient and less intrusive instrument than direct regulation".

The power of this Darwinian approach is that it allows Frank to grant "every traditional libertarian assumption" while still showing that the libertarian position collapses. For the sake of argument, he accepts that markets are perfectly competitive, that consumers are essentially rational, and that government may not restrict behaviour except to prevent undue harm to others. He adds only one substantive element - "namely the completely uncontroversial observation that many important aspects of life are graded on the curve" - and it's this observation that in the end proves fatal.

Frank concedes that the direct effect of paying any tax is to reduce your autonomy (which "is about being able to do what you want to do"). If those taxes produce public services of high enough value, however, the indirect effect of paying taxes will be to increase your autonomy. (Most of us would like to be able to cross a bridge without fear of it collapsing because public funds for maintenance ran out.) What matters is not the private-good/public-bad ideological split but how efficiently goals can be achieved. To this end, Frank recruits Ronald Coase (although often cited as a champion of libertarians, Coase was no ideologue). Following Coase's strictly pragmatic concerns, Frank argues that personal autonomy "will always be compromised unless all problems stemming from activities that cause harm to others are resolved efficiently". Failure to agree to the most efficient solution leaves everyone - libertarians included - worse off. Coase's "framework casts in sharp relief an underappreciated link between efficiency and autonomy" and shows how "efficiency is a prerequisite for maximum autonomy".

Those bull elk may have their autonomy, but they suffer the inefficiencies of carrying around heavy antlers and increased risk of predation by wolves. What they cannot organize but humans can are positional arms control agreements, which limit the harmful use of resources, freeing them up for more productive work. Critics who invoke the nanny state at this point must explain why getting more of what you want is a bad thing. (They would also have to explain who would replace the nanny: a disciplinarian patriarch? Or have no state at all and live in anarchy? This last option, as Steven Pinker shows in The Better Angels of Our Nature: The Decline of Violence in History and Its Causes, is not recommended.)

I want to live in a society that discourages behaviours that cause more harm than good in the most efficient way possible. Harmful activities can be regulated, but a better solution, according to Frank, is to make them more expensive. (He addresses the legitimate concern that such a mechanism is unfair to the poor.) The beauty of the tax approach is that it "keeps total costs to a minimum while restricting options as little as possible" - it "doesn't forbid someone from doing what he wants; it merely makes doing it more expensive".

Frank acknowledges that "advocating new taxes in the United States has often been described as politically unthinkable". If he's right (and though I found his arguments persuasive, I'm not qualified to judge the technical detail) that a "well-designed tax system actually makes the economic pie larger", then economists and politicians ought to pay attention. Unfortunately, slogans such as "all taxation is theft" are often used not as shorthand for complex arguments but to mask their absence, and the response from many of the less rational libertarians will simply be to turn up the volume.

My fear is that in a country in which presidential candidates can endorse creationism with a straight face, where no politician running for office dares admit to having no religion, where Darwin is to many another name for the devil, proposing new taxes is the least of our worries: many will not even get past the title. The irony is that those who hate Darwin say they love the family, their community, the nation, and yet it is Darwin who showed us how "the interests of individual animals were often profoundly in conflict with the broader interest of their own species" and it is Robert Frank who shows us how "groups of mixed ability can form in which everyone fares better than each would as a member of a separate society of equals".

This is in my opinion not R. Frank's best book. His excellent "Choosing the Right Pond", written in 1985 (25 years ago !!!) covers much of the same ground in a much better way.
The main ideas defended in the book will be uncontroversial to most educated people, but R. Frank wants his book to be an attempt to convince "libertarians", rational or not. This however is the main problem of the book : if you want to convince right-wing readers, who statistically are probably "creationists" or anti-darwinian, *uselessly* bringing Darwin in at every corner in the first third of the book guarantees the supposed target reader of the book stops reading and does not continue to the (better) later chapters. And the pity of this is, that Darwin and his ideas are *absolutely* irrelevant and are just a gimmick. The whole book could have been written with the same content and without mentioning Darwin once. The much more relevant ideas of Fred Hirsch (mentioned only once) are all that is needed.
Furthermore, while claiming to want to address and convince "libertarians", R. Frank is so patently disdainful and condescending towards them that he will lose any goodwill of them to listen.
All this while the content and the message are actually interesting and topical.
So my advice to R. Frank and his editor / publisher , if you really seriously want to influence public debate and the libertarian audience :
- find a "libertarian" co-author with the right-wing credibility but also the brains needed to agree to the actions proposed in the book (should not be so difficult)
- rewrite the book together as a non-partisan appeal
- purge all mention of Darwin and interpret the libertarian ideas as useful and logically bringing us to the same conclusion
- change the title to "how libertarian ideas can help solve our government crisis" or similar
Otherwise , you will only be preaching to the converted , which is pleasant but useless...

Frankly, I expected this book to be about (for me) incomprehensible economics and dull. Wrong on both counts, although thoughtful consideration of conflicting economic principles and contentious issues is included. In fact, Robert Frank's purpose is to explain how and why "departures from rational choice" (with and without regret) have occurred and what to do about them. He does so with a rare combination of erudition, rigor, eloquence, and wit. As he explains, "From the beginning, most of the work in behavioral economics has focused on departures with regret - those caused by cognitive errors...From the beginning, however, I've believed that much bigger losses result from departures from ration choice without regret. That's because people generally have both the desire and the ability to remedy cognitive errors unilaterally once they become aware of them [and then, hopefully, not repeat them]. In contrast, we typically lack both the means and the motive to alter behaviors we don't regret, even when those behaviors generate large social costs." That, in the proverbial nutshell, is the focus of this lively and entertaining book: An explanation of how to accommodate the wishes and behavior of self-interested individuals with the wishes and behavior of self-interested groups.

Here are three of Frank's observations that caught my eye:

"Charles Darwin was among the first to perceive the underlying problem clearly [i.e. equating Adam Smith's concept of `the invisible hand' to competition]. One of his central insights was that natural selection favors traits and behaviors primarily according to their effect on individual organisms, not larger groups. Sometimes individual and group interests coincide, he recognized, and in such cases we often get invisible hand-like results." (Page 7)

"John Stuart Mill's harm principle must be understood as saying that the only legitimate reason for government to limit someone's freedom is to prevent [begin italics] undue [end italics] to others...For the harm principle to make any sense at all, it must be understood to mean that the legitimacy of a restriction must be decided by weighing its cost to those being restricted against the harm others would suffer if the behavior weren't restricted." (Page 85)

"The bottom line is that if society`s rules don't make the total economic pie as large as possible, they squander an opportunity to enhance the personal autonomy of every citizen. Again, when the economic pie is larger, it's always possible for everyone to have a larger slice than before, and that means having an option to do mire things." (Pages 209-210)

Frank does not cite nor even imply the relevance of Abraham Maslow's concept of a "hierarchy of human needs" but I think there is relevance nonetheless because people struggling to survive are wholly preoccupied with that; only when they are secure and confident they will remain so can they consider what Maslow characterizes as self-actualization. Sometimes an individual can fulfill all three needs; in other circumstances, these needs can only be achieved in collaboration with others in a society, with groups that range in size from a family or community to a city or state...or perhaps even to an entire nation.

If I understand Frank's ultimate objectives in this book (and I may not), he attempts to introduce more light and less heat to our understanding of the admittedly complicated relationships between a government and those governed, and, between an individual's rights and that individual's obligation to respect (and when necessary, protect) others' individual rights. I carefully selected the title of this review because I think he has much of great value to say about how and why "departures from rational choice" (with and without regret) have occurred and what to do about them. He comes across to me as a pragmatic idealist, calling upon "a new generation of libertarians who are willing to accept legitimate restraints on their own behavior, while continuing to battle ferociously to prevent government from intruding any more than necessary."

It is especially appropriate that Robert Frank concludes his book with this quotation from Miguel Cervantes, in words expressed by Don Quixote: "Too much sanity may be madness - and the maddest of all - to see life as it is, and not as it ought to be."