Is Capitalism Inevitable? Part I
Written: Sep 04 '00
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Product Rating:
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Pros: Thought-provoking argument for a new economic paradigm
Cons: Too dry and technical for many lay readers
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| TheAdvocate's Full Review: Bionomics Economy As Ecosystem Books |
Most economists still dismiss the “biological analogy” of economic thought as simplistic, but many forward thinkers have been largely impressed by Michael Rothschild’s Bionomics, first published in 1990. Esther Dyson, the daughter of our technological age, gave the dust-jacket recommendation that this book would “change the way you think about your everyday life.” Had I been asked to contribute to the dust jacket, I probably would have emphasized my appreciation of Rothschild’s consilience (or synthesis) of variant subject matters. Bionomics is a simple, straightforward comparison of economics with evolutionary biology, an argument that seems to satisfy the tenet of Ockham’s own razor.
Rothschild begins by reminding us that our physical reality is dualistic: it’s both static and predictable, on which Newton’s laws can be easily applied, while at the same time defying prediction. If Newton theorized an orderly world, then Darwin theorized its opposite, as his evolutionary postulates recognize life’s inherent changeability, and these two scientists are to play the central roles of yin and yang in Rothschild’s developing argument.
Karl Marx was, in fact, a great admirer of Darwin and the theory of evolution, though, oddly enough, Darwin drew from the writings of free-market economist Adam Smith (among others) in forming his theory: “Smith’s argument that economic prosperity resulted from the interaction of self-interest and the division of labor helped convince Darwin that the unguided activities of diverse individuals can generate a coherent overall trend.” [p.39] Modern economics, however, has rarely drawn from the adaptive paradigm of evolutionary biology; rather, most economists liken their field to Newtonian physics: orderly, predictable, and chartable. “Not surprisingly, Smith was influenced by Newton’s model of the physical universe as he searched for the ‘natural order’ of the economy.” [p.32]
Marx, publishing before Darwin’s “Origin of the Species,” was the only well-known economist to recognize change and adaptation in economic matters: “What is important is that Marx was the first person to propose any theory of how economies change over the course of history. The economists who preceded him – Smith, Malthus, and Ricardo – only considered the workings of the economy at a given point in time.” [p.47]
So where did Marx go wrong? His one great divergence from Darwin’s adaptive model was his focus on groups rather than individuals. “Where Darwin emphasizes competition among unique individuals, Marx stresses conflict between homogeneous classes.” [p.48] A second flaw was his belief in economist David Ricardo’s description of economies as a “zero-sum game.” With a fixed amount of goods present in any economy, Ricardo believed that for one to gain, another must lose. “Ricardo believed that the market system would inevitably produce extremely wealthy landlords and horribly impoverished workers and peasants. Thirty years later, Ricardo’s ideas were to become central to Karl Marx’s economic thinking.” [p.34]
The third flaw of Marx’s vision was his reliance on the inaccurate predictions of Thomas Malthus, who insisted that because human populations increased exponentially and food production increased linearly, famine, disease and human conflict were the inescapable result of the simple passing of time. “For Malthus, the ‘iron law’ of economics meant struggle and hardship leading to disaster.” [p.34]
Marx wasn’t the only follower of Malthus; most economic theorists have accepted his population warnings as gospel, even to this day. Though a blatant misdiagnosis, his argument did seem to explain the malaise of his time: “Malthus did not know it, but the rapid rise in England’s agricultural productivity had begun to slow by 1760, just as population growth began to explode. These fundamental factors – along with the expense and turmoil of the Napoleonic wars and several poor harvests – triggered a sustained rise in the price of bread. As unforgettably portrayed in Charles Dickens’s novels, the streets of England’s cities in the early 1800s seemed to verify Malthus’s straightforward argument.” [p.34]
Because of these three major flaws, as well as the world-wide failure of practiced communism, Marx’s recognition of economic adaptations has been ignored by Western (capitalist) economics: “Most still conceive of the economy as if it were the stable clockwork mechanism of the heavens described by Newton.” [p.53]
And, of course, there was one economic factor that Marx, and indeed many Western economists, never considered: the human brain. Rothschild argues that the most important driving force of any economy is innovation, brought about by the freedom and incentives of the human brain to conceive it. Human innovation seems to proceed in accordance with the Gould/Eldredge theory of “punctuated equilibrium,” defending the coexistence of both sudden and gradual change. “From the beginning of the Industrial Revolution – as far back as we have precise information about economic matters – the record shows that technological progress is not smooth and gradual, but sporadic and disjointed. Periods of stability and modest refinement are shattered by radical inventions that germinate at the outer edge of a technology’s range of economic viability.” [p.74]
It’s important to remember where the theories of Karl Marx led: to the socialist preference for “command & control” economies. Today, Leftist economic policy is bound to the idea that government regulate industries, redistribute income, and tax progress. But as Rothschild points out: “The punctuated equilibrium of unexpected, erratic change across an immense variety of technologies is terribly frustrating for those who want to plan and control the economy.” [p.76] You just can’t control Mother Nature.
So, are we to assume the Western capitalists were right all along? Originally, Bionomics was subtitled: “The Inevitability of Capitalism,” but Rothschild is critical of both sides of our modern-day economic arguments. “The plain facts of daily economic life weigh heavily on the worn-out nineteenth-century economic ideologies that undergird the politics of both the Left and the Right.” [p.76] In fact, one of his biggest complaints about conservatives and liberals in government is this, published in a separate essay: “...because neither side comprehends how capitalism works, neither can hope to devise policies that will harness its forces to cure poverty.”
In my Holistic Republican column for the American Partisan, I cited this quote and complained that most conservatives in government treat free market concepts as some drunken, out-of-control brother they “love,” but prefer to keep away from cameras. Embarrassed by their own allegiance, they’ve been duped by the Left into limiting the power of capitalism to the corporate economy and nothing else. This allows the Left to champion almost all forms of government aid to the poor, in a way that’s both socialist and static. Socialist, because with welfare comes a large impetus for federal growth, very little accountability, and a forced attempt to control human nature; static, because the benefits of welfare expire with the last dollar spent. Now, static aid is sometimes necessary; a starving man has no immediate use for a small business loan or a new computer skill. But while it may save a life at a critical time, static aid will never eradicate systemic poverty.
In Bionomics, Rothschild lays out an adaptive model that points to the sustained prosperity first promised by Adam Smith, which will be fully explored in Part II.
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