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The Rational Optimist: How Prosperity Evolves (P.S.)

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Matt Ridley's The Rational Optimist is a history of progress based on a simple but unpopular idea: that specialization and markets are the prime movers of progress. In fact, Ridley suggests in his introduction that the answer to the perennial "What makes humans unique?" question is our unique ability to specialize and trade. Instead of catching our own food, making our own shelter, etc (as other animals do), we humans have created a system where everyone can specialize and trade with others who specialize in other things. This means that those best at making houses make houses, those best at making food make food, and by trading, we can each benefit from that which others do and vice versa. Self-reliance equals subsistence: interdependence through trade equals ingenuity and a boom in living standards.

"What?!" you say. What about Rousseau, Marx, Ehrlich, Marcuse, and all of those other critics of society! What about all the stuff we hear about how capitalism exploits the poor, reduces living standards, rapes the environment, etc, etc. The first few chapters of Ridley's book are devoted to showing that, on all fronts, markets have actually produced higher living standards FOR ALL (and especially the poor, as also shown in Sowell's Economic Facts and Fallacies), MORE leisure time for all, and - here's the most surprising - better environmental conditions.

The next several chapters are a history of how this progress happened. To be honest, these chapters may be the most dry as they are very detail-laden and repetitive in that they stress the same theme across time - that specialization leads to ingenuity and progress. In the vein of Robert Wright's Nonzero: The Logic of Human Destiny, Ridley demonstrates - and explains the principle behind - this equation. In brief, when humans invented the idea of specialization and trade, I could make x and you could make y, things we each excel at. Each of us, then, can trade what we excel at for what others excel at rather than having to do all of it ourselves. Finally, when I realize that I can trade my x's for your y's and her z's, it pushes me to be as productive at making my x's as possible (and innovating new ways to make better and faster x's) so that I can make the most of my time. Thus, we stumble upon a brilliant non-zero sum way to ensure that we all benefit from each other's ingenuity, creativity, and labor. Most of these chapters (starting in the stone-age and ending in the present) stress the idea that as transportation allowed us to trade with increasingly larger groups, and as technology allowed us to create more efficiently, the "collective brain" became bigger and everyone could benefit from everyone else's progress.

The last three chapters may be the most controversial as they deal with current naysayers - particularly environmentalists. To be clear, RIDLEY IS NOT ADVOCATING THAT WE CONTINUE CURRENT ENVIRONMENTAL PRACTICES (I bold that because inevitably, some folks will accuse him of an environmental Pollyanna-ism.) Yes, depending on non-renewable fuel, by definition, means that at some point, the fuel will run out. Ridley only points out that naysayers rely on a hidden but faulty premise: that the future will resemble the past. Yes, we will run out of fossil fuels if we keep using it, but whose to say that we will keep using them? Just like Ehrlich's remarkably failed prediction that over-population will lead to food shortages, these folks' error lies in assuming that future ways of production will resemble past ways, and time and time and time again, this assumption has proved erroneous! Ridley's point is that while we can NEVER say that the future WILL solve all pressing problems, so far we have. And we can assume we will in the future because our method of exchange has globalized the "collective brain," assuring that innovation will keep occurring and the best minds will all be working on the pressing problems of the day. (Again, Ridley is not attempting Pollyanna-ism here, but only suggesting that the burden of proof should now lie on the naysayers because the past gives us every reason to think that we will, rather than will not, solve the problems that confront us.)

Now, for two minor criticisms of the book. First, I do question whether Ridley has the knowledge base to go into as much history as he does. When looking through the large endnote section, many of his citations are from non-peer-reviewed trade books, magazines, etc. I simply have a feeling that Ridley's book may not be as academically rigorous as some might want.

I also question Ridley's omission of the crucial function language plays in his theory, for he doesn't spend much time on it. When he asks, as he does repeatedly, what it is about humans over other animals that have been able to create trade networks and specialization, it seems that ONE of the obvious answers is "language." We have the ability to create language that is not only self-expressive but also can be used to inform others of our intent, etc. It seems difficult to create a trade network without the kind of language that can let others know your intent, establish trust, etc. If this is correct, Ridley's shouldn't omit the topic. If it is wrong, he might have explained why.

Be that as it may, this is still a great read. In a world where pessimism simply sells (and makes one sound intellectual) more than optimism, books like these need to be written... and read.

First, the GOOD NEWS: the sky isn't falling! The world is actually improving dramatically and the pace is quickening. There are abundant facts to prove it. The BAD NEWS predicted isn't true after all. The not-so-good news is that good news doesn't sell newspapers or prime-time ads. So we'll keep on hearing that doomsday drumbeat of horrific predictions from the media, all of it certified by officials of academia and government with an obvious agenda in the vision of impending environmental collapse which can only be averted by comparably drastic intervention. We have a glut of popular books and articles feeding these fears with plausible evidence for the demise of civilization or the planet, but a critical shortage of books like "The Rational Optimist" which challenge that evidence, describe its pathologies, and show where those disastrously coercive interventions will lead, and what they'll cost in human terms. So why risk ostracism in cocktail-party conversation by reading a persuasive contrarian essay which proclaims a heretical optimism in its title?

Well, one reason might be the pleasures of an utterly readable book. Unlike talk-show polemicists, Matt Ridley uses good-natured eloquence, serious erudition and incisive wit to deflate the imminent-disaster scenarios which dominate our evening news, academic and political discourse. Despite its length, the book is remarkable for its brevity and the sheer quotability of its prose. (A reader cribbing zinger quotes will soon have writer's cramp.)

Another reason might be the challenge of unfamiliar ideas, of cleaning the mental attic of the baggage left by cultural osmosis. No book can guarantee final truth, but a fresh perspective can provide plenty of creative stimulation for a skeptical mind. Ridley's long view of human history, his perspective on the unrequited human penchant for seeing imminent catastrophe informs both his skepticism and his optimism, and it makes great straight-to-the point reading. No obfuscatory jargon, no shrill hype or invective.

Two of his unfashionable heresies are A) that prosperity is a hugely positive benefit to humanity--not a planet-killing consumerist fetish, and that B) individual freedom--not government planning or humanitarian intent--is the primary engine of that prosperity. His earlier book, "The Red Queen" described sex as the primary engine of evolution. The sexual metaphor gets new life in this one. The explosive growth of human knowledge and wealth in recent centuries is described as the result of "ideas having sex"--something that rarely occurred in prior millennia. It's not a coincidence that science, individual liberty, and the industrial revolution experienced a virtually simultaneous birth. This "sex" between ideas has been increasing in both quality and frequency with cumulative results of stunning usefulness. Think of what's happened in your own lifetime.

He's also compiled a list of dire prophecies which never happened, some of which are perennially predicted anew with updated "tipping point" projections: worldwide starvation, hydrocarbon exhaustion, mass extinctions, nuclear extermination, mineral resource depletion, genetic decay (eugenics was invented to prevent that) global cooling (global warming could be next if the last decade's weather stasis continues). Environmental problems which were once big news (acid rain, industrial hormone mimicry, lung-rotting smog, skyrocketing cancer proliferation, holocaust viral epidemics, etc.) quietly vanished from the news when the threat receded or failed to produce significant harm, much less bio-Armageddon. A historical batting average of .000 has done little to discourage fresh predictions of the apocalypse.

A minor focus is the relatively harmless rash of costly and often foolish environmental fads. He writes penetrating analyses the value and costs of organic farming, local food, and the obsessive horror of modern chemistry, fertilizers, pesticides, and genetically modified crops.

His more deserving targets (I think) are the dubious "green" technologies with high--often disastrous--environmental costs: ethanol in particular, but also solar, wave & wind power. He's not opposed to the latter energy options in principal, but shows they're unlikely to replace hydrocarbons anytime soon. Most of these alternative energy "cures" are not only environmentally worse than the "disease" (fossil fuel), but their their high costs will be borne in heavy disproportion by the world's poor. But for dogmatic insensitivity, few examples can match the righteous zeal of some activists for preventing America's poor from shopping at WalMart, for shutting the developing nations out of the global economy, or keeping genetically modified food out of the hands of literally starving Africans. A corollary widespread belief (Ridley quotes some prominent advocates) is that prosperity itself is the enemy of the planet and global salvation must necessarily entail global impoverishment--in effect, a lethal Malthusian population limit waiting to be imposed by environmental decree.

Ridley avoids a pro or con position on global warming, but he's rightly wary of reacting in panic: the cost of overestimating GW could be much higher than underestimating: in his words, it's like stopping a nosebleed by putting a tourniquet around your neck. (It would be even more foolish in response to a predicted nosebleed.) But he didn't write this book to heap ridicule on doom sellers. He shows why they're always wrong: linear extrapolation from the present inevitably predicts a disastrous future--which is invariably wrong because it ignores the equally inevitable (but unpredictable) free market actions which future investors, entrepreneurs and inventors will take to sidestep the icebergs in the shipping lanes. Ideas "having sex" are far more nimble and productive than governments issuing prohibitions or doomsday prophets clamoring for an emergency reversal of course.

(My note: only in inflexible dictatorships does mass civilian disaster arrive inexorably, as in Ukraine in the 1930s, China in the 1960s, North Korea today. In none of these regimes were (any) ideas allowed to "have sex". Unfortunately, just such a dictatorship will probably be necessary if the world decides to implement the Environmental Taliban's agenda to save us from planetary sacrilege.)

"The Rational Optimist" is a wonderfully well-written counterpoint to the alarmist feel-bad prophecies (which will probably continue to outsell it) but it is not overtly political nor brimming with righteous denunciations. It is at least as rewarding as an insightful tract on human nature (and folly) and as much a call to reason as survey of contemporary intellectual hysteria and prejudice. I enjoyed reading it immensely, and unless you are allergic to bad news about the BAD NEWS, I think you will, too.

Differentiation of individual activity, specialization and trade are the activities that have enabled humankind to overcome obstacles in the past and advance at a rapid pace. The future should be no different.

According to Matt Ridley, trade was and is the essential element in human progress. He suggests that the first farmers were already traders and used their static location and accumulated inventory to meet hunter-gatherer demand. He also credits the farmer as the creator of property rights. Hunter-gatherer societies are egalitarian sharing the hunt and enforcing non-compliance. A farmer who plants a field expects to harvest it and store or trade the surplus. This, Ridley posits was the origin of private wealth.

Ridley maintains that progress is dependent on idea sharing. As population density increases, the availability of new ideas and differentiation of occupation allows those with extra time to make use of these ideas.

Twentieth century collectivist bias leads one to ask "who was in charge" looking for a central initiator of policy. Ridley suggests that the world is a complex adaptive system, where trade and progress emerged from the interaction of individuals. It was an evolutionary rather than a planned process.

He recounts historical examples of institutional and industrial stagnation from the Bronze Age to British Rail and the U.S. Postal Service. What Ridley says they have in common is an attitude that rewards caution and discourages experiment. A planned economy requires perfect knowledge. The possibility of new knowledge makes a steady state or economic equilibrium model invalid.

He says the Dark Ages were a massive back to the land hippie movement minus the trust funds, similarly the Maoist Cultural Revolution.

Ridley thinks that governments tend to be good initially, but increasingly bad the longer they last. `Government brings inefficiency and stagnation to most things it runs.' Governments `employ ambitious elites who capture an increasingly greater share of the society's income by interfering in peoples lives and creating rules to enforce until they kill the goose that lays the golden eggs'

African poverty, hunger, climate change, resource depletion, and disease are all challenges that an intellectually evolving human race will conquer.
Individual creativity within a bottom-up political structure and a free-market economy will increase our individual wealth, health, and longevity according to Matt Ridley.

Mr. Ridley's book reads like a 360 page newspaper op. ed. piece. The central thesis is twofold: that comparative advantage and trade have enabled humans to make great leaps forward over time, and that the sharing and cross-breeding of ideas have further catalyzed the process with the cumulative product ultimately leading to better and more innovative ideas, products, and solutions. Mr. Ridley also challenges modern pessimists - primarily those to the left - on topics ranging from global warming to run-away population growth and Malthusian predictions for food shortages, and he even, in entertaining fashion, challenges the error of making pessimistic predictions in the first place (although many more have more credibly pointed out the foolishness in making ANY long-range predictions and forecasts at all!). Mr. Ridley succeeds in providing interesting and well-supported counter points to arguments in favor of popular issues like the superiority of organic farming to chemical-based crop raising, green energy, the desire for top-down population control, taking action against climate change, and even providing certain types of aid to Africa (see the November 27, 2010 debate in the Wall Street Journal between Mr. Ridley and Bill Gates for a great clash of ideas between the two on this topic). If you fervently believe in any of these causes, you will find well-argued counter points in The Rational Optimist. I will not spoil the book by giving away the evidence.

However, Mr. Ridley lost me early in Chapter 1. when he made arguments for improving human health based on data about declining death rates from stroke and for improving environmental habitat in the U.S. and Europe based on less toxic pollution. He lost me because his arguments were too obviously one-sided, and thus more along the lines of well-elaborated opinions rather than balanced arguments. While death from stroke may be getting better, what about the ballooning obesity and diabetes epidemics? I also wondered why the scientific consensus that we're in a human-caused mass extinction of the world's species was not given more weight throughout the book's environmental arguments, primarily for the sake of balance. It became clearer and clearer to me that Mr. Ridley sees the world much more from the lends of an economist than from someone well-versed in both economics and science, as I had hoped (but which I don't completely understand given Mr. Ridley's scientific eduction; perhaps the world he lived in as a journalist compelled this more one-sided view). I had been hoping for compelling and balanced arguments from Mr. Ridley, but left the book feeling uninspired and skeptical given his propensity to provide only data in support of his views.

While The Rational Optimist argues that things are great today because of how amazing humans are, and that things are only going to get better over time, I found the conclusions unconvincing because they were argued only from one side. Mr. Ridley hasn't persuaded me that Emerson's observation from Self-Reliance isn't true in that, "Society never advances. It recedes as fast on one side as it gains on the other." Emerson realized issues on both sides. Mr. Ridley seems only to see from one.

Ridley's thesis is that the key to prosperity lies in economic growth, and that economic growth is caused primarily by innovation fueled by the exchange and mating of ideas. As long as ideas are allowed to move freely they will inevitably mate, mutate, and produce innovations that will drive economic growth and improve the quality of life:

"The perpetual innovation machine that drives the modern economy owes its existence not mainly to science (which is its beneficiary more than its benefactor); nor to money (which is not always a limiting factor); nor to patents (which often get in the way); nor to government (which is bad at innovation). It is not a top-down process at all. Instead, I am going to try now to persuade you that one word will suffice to explain this conundrum: exchange. It is the ever-increasing exchange of ideas that causes the ever-increasing rate of innovation in the modern world."

Why is Ridley a "rational optimist"? Because, in his words, he has "arrived at optimism not through temperament or instinct, but by looking at the evidence". As Ridley sees it, throughout history, when the free exchange of ideas has been hampered by natural disasters, disease, war, wrong-headed government policy and monopolistic business practices, the result has been a reverse in development and a regression of health and happiness. Despite these periods of regression, Ridley remains optimistic that the world will continue to get better as long as we ensure that society remains open. Recent developments in communication technology have only accelerated what Ridley sees as an already robust atmosphere for ideational mating. This, combined with the progress already achieved in medicine, agriculture, and human rights gives him more hope than not that as a global society we will avoid the many catastrophic predictions making the rounds.

Overall, the book was quite enjoyable. Ridley spares no sacred cows and marshalls logical and empirical evidence to make his point--whether he is eviscerating the organic farming and climate change movements or patent rights. He traces over 200,000 years of human history to make the case that we are, on balance, far better today than we have ever been. This isn't to gloss over the many problems that persist. Rather, Ridley freely admits the issues we face while arguing that the past should give us confidence that these issues will also be overcome. History has shown us that when ideas are allowed to freely move about and reproduce with each other, society is able to drastically improve itself and solve seemingly intractable problems. I would have liked to see more explicit discussion of ideational "mating", rather than it's sprinkling through various chapters, but overall the point is well taken. My biggest peave with the book is Ridley's treatment of government.

Ridley is clearly not a "big government" advocate, and that is a totally reasonable position. The idea that innovation and economic growth is primarily driven by bottom-up activity versus top-down planning and decree is correct. However, at many points in the book, Ridley seemingly fails to adequately wrestle with the fact that much of the progress he lauds is a by-product of optimal government policy, not despite it.

For example, when discussing how the country of Botswana could have developed at an incredible rate despite facing many of the same crushing obstacles as other perpetually underdeveloped African states, Ridley succintly notes that the main difference was that Botswana had "good institutions":

"In particular, Botswana turns out to have secure, enforceable property rights that are fairly widely distributed and fairly well respected. When Daron Acemoglu and his colleagues compared property rights with economic growth throughout the world, they found that the first explained an astonishing three quarters of the variation in the second and that Botswana was no outlier: the reason it had flourished was because its people owned property without fear of confiscation by chiefs or thieves to a much greater extent than in the rest of Africa. This is much the same explanation for why England had a good eighteenth century while China did not."

I agree whole heartedly with Ridley's emphasis on property rights. Here, he is following such eminent economic historians as Douglass North (whom he cites) by emphasizing that good institutions are critical to shaping the economic outcomes we hope to achieve. However, Ridley goes on to argue that property rights cannot simply be imposed from above by government, but must evolve from the bottom-up. The bottom-up evolution of institutions and the importance of government are not mutually exclusive or at odds. Optimal property rights, particularly those that allow for robust exchange in an impersonal economy, must at some point be formalized and enforced through fully functioning legal and court systems. Additionally, they must be codified in a such a way where they can be changed if necessary to improve their efficiency and functionality. The only way to formalize such rules, ensure their proper enforcement, and allow for occasional "tweaking" is to have in place a government system that is at once robust in it's authority and responsive enough to citizens to minimize the abuse of property rights (e.g. through the creation of a rentier class). In other words, liberal Democracy. This is not to say that governments are optimal or do not, in some cases, harm innovation and economic growth (surely they do). Rather, the point is that the dynamics that Ridley so covets cannot flourish despite government, but rather require "good" governments and institutions that can facilitate free idea exchange and commerce.

I can't do better that repeat Steven Pinker's endorsement from the dust jacket:
" A delightful and fascinating book, filled with insight and wit, which will make you think twice and cheer up."

It's also filled with historical insights into human psychological and social evolution from prehistory through the present day.

This book is in fact the latest in a long line of lonely books explaining why spontaneous order (unconscious and unplanned) works so amazingly well, and bravely speaking out against the dominant pessimism that always reigns. Ridley cites these authors liberally: Adam Smith, Charles Darwin, Friedrich Hayek, Julian Simon, Bjorn Lomberg. Since all these men are heroes of mine, I needed little convincing. I am already a committed optimist.

But a part of me is deeply pessimistic. That's because as always, the dominant view of the elites and the media everywhere is global pessimism. Political "leaders" everywhere believe the opposite of what this book teaches. And they mostly push for well intended but misguided policies that will guarantee that bad outcomes occur. John Holdren, Obama's chief science advisor, will not read this book, but he believes passionately the exact opposite of everything it explains.

Matt Ridley understands all this, and his frustration with counterproductive policies (like Biofuels) is clearly stated. But the question is "Why are humans so intent on pessimism?" As someone fairly expert in evolutionary psychology, I was hoping Ridley would shed some light on this. A related question is "Why do humans prefer top down hierarchies to spontaneous order."

My own hypothesis goes something like this:
For hundreds of thousands of years, (and before trading occurred) our prehistoric ancestors evolved in small tribal bands, in desperate scarcity, and in constant total war with other tribes, deadly animals, and a harsh environment. In such a situation, a tribal band must operate with the discipline of a combat army. Survival was completely dependent on rigid conformity, obedience to authority, and the assumption that everything that moves is a potential threat motivated by conscious intent.

Only in the last few hundred years have some civilizations allowed the spontaneous order of billions of individual decisions to generate far greater benefit than top down systems do. But our primitive past is so deeply imbedded in our mental genes, that most people still believe in gods, "great" leaders and/or socialism.

My only other quibble with Ridley concerns his bias for markets but against financial markets which he sees as corrupt or exploitative. He is correct to see a difference, but he needs to read more Hayek to understand why. The answer is that financial markets are built on anti market foundations: fiat money printed by governments to serve political ends and price fixing of interest rates by central banks which loan money to banks at favored rates not given to others. This leads to markets distortions, mispriced risk, malinvestment, fraud and periodic bubbles.

An extended argument that human intelligence and the well-being it allows is created, collected, maintained, distributed and extended by trade. Trade is "ideas having sex." Ridley builds his case with point after point then examines all the usual counterexamples and objections, taking them out one by one. It's a wonderful book. Of course it helped that he was preaching to the choir with me. What's most delightful is Ridley's goodhearted skewering of pessimists -- the technological and environmentalist Jeremiahs in particular -- with the most obvious of weaknesses is their flimsy cases. He's almost embarrassed for them. Ridley is a bit repetitive at times, but maintains a wry humor and lighthearted tone throughout, which makes his writing all the more effective. He's a good writer and he's right about everything.

As the author states, this book is a fusion of the ideas of Adam Smith and Charles Darwin. Mankind is the only species that is able to build on the knowledge gained by our ancestors. This unending and logarithmic accumulation of knowledge has allowed us to specialize economically and our ideas and discoveries have 'mated' in an unending (albeit bumpy) stream of economic progress.

Where Ray Kurzweil emphasizes technological progress in The Singularity Is Near: When Humans Transcend Biology, Ridley's approach is similar but stresses the economic and social progress enabled by the march of technology.

Having witnessed decades of doomsayers myself, from Paul Ehrlich's in retrospect laughable Population Bomb, global cooling in the 70s, no-nukes hysteria, AIDs (which would supposedly kill millions in the U.S. alone), Y2K, 40 years of peak oil is imminent warnings, SARS etc and seen that these concerns bordering on hysteria were either outright misplaced or highly exaggerated, I appreciate the fact that Matt Ridley is able to put all this in perspective. In this regard, I think it especially important for younger people who have not yet lived through decades of pessimism and anti-development featuring one hysterical over-reaction after another that have ultimately proven inconsequential, to read this book.

Wonderful to be regaled with positive things that humans have achieved and are capable of.
We hear and see too much doom and gloom and sometimes I wonder if humans are programmed to be negative or are just fascinated with disaster and failure and predictions of the 'bad'.
Good news does not seem to sell so I hope this wonderful book succeeds.
Certainly has given me some insights which were in hindsight, intuitive, but of course without foresight, are generally not.
it's a bit like saying, "yes we can"!
Highly recommended.

Matt Ridley has written a very compelling theory about why we should be optimistic about our global economy, taking into account humans ability to learn and adapt from adversity. However, he does indicate that the adversity IS coming (global climate change, faltering markets, the end of the American Empire, etc.). He indicates that through knowledge and perseverance, we will get through it and potentially prosper from it through Green technologies, global economic investments, etc. So, while this book does not paint an optimistic future for humankind, it does make a good argument for the ways we can "take lemons and make lemonade" from the upcoming challenges we will face in this world. Ridley has done some interesting and insightful research into our history as a race, and how we have continually overcome the challenges we have faced...and how it's very likely that we can do it again. Given all of the books about the upcoming "doom and gloom" on Earth, this was a refreshing change of pace to read.