bjbjLULU JEFFREY BROWN: Now, what does the
work of naturalist Charles Darwin have to
do with economics?
NewsHour economics correspondent Paul Solman
finds out.
It's part of his regular reporting on Making
Sense of financial news.
PAUL SOLMAN: There's an idea war being waged
over American economics.
The left contends that greed and the market
have become malign influences which must be
brought to heel.
The right, which blames government for most
of what ails us, has a more positive view
of greed.
As Cornell economist Bob Frank puts it: ROBERT
FRANK, Cornell University: The self-serving
actions of greedy individuals will be channeled
by market forces to produce the greatest good
for all.
PAUL SOLMAN: And so the right swears by the
simple, invisible hand of free market competition,
summed up here in simplistic graphics perhaps,
but 18th century British thinker Adam Smith's
own timeless words.
MAN: "It is not from the benevolence of the
butcher, the brewer or the baker that we expect
our dinner, but from their regard to their
own interest."
PAUL SOLMAN: Smith is widely regarded as the
father of economics.
But in a new book, Bob Frank says that honor
should go instead to another British subject.
ROBERT FRANK: A hundred years from now, if
people poll professional economists, people
like me, and ask, who's the founder of your
discipline, most people are going to say Charles
Darwin.
PAUL SOLMAN: Charles Darwin?
Mr. Evolution?
Yes, claims Frank, who met us at the touring
Darwin exhibit now at Atlanta's Fernbank Museum
of Natural History.
ROBERT FRANK: So, if we think about an animal
like the rhea here, how does it get away from
predators if it can't fly the way other birds
can?
Well, it's got to outrun them.
PAUL SOLMAN: Of course, as Darwin and Frank
both acknowledge, competition is, in fact,
one key to progress.
ROBERT FRANK: And so, generation by generation,
small mutations contributed a little bit to
the extra speed for an individual animal.
That animal is less likely to be caught and
eaten by predators, and so it left copies
of that mutation in the next generation, and
then it spread generation by generation, until
the bird is really quite a racehorse.
PAUL SOLMAN: And that is the survival of the
fittest.
ROBERT FRANK: That's the invisible hand story.
It's good for the individual bird to be fast,
and rheas as a species being fast is good
for the species.
It makes them less vulnerable to predators.
PAUL SOLMAN: Same with the keen eyesight of
hawk -- the better their eyes, the better
their meals -- or the markings on these butterflies
that mimic big bad owls, protecting them from
predators.
Thus, the invisible hand of natural selection
promotes the survival of the individual and
the prosperity of the species.
In economic terms, this is the greatest good
for the greatest number, the grand achievements
of a market economy, made possible by competitive
individuals like Thomas Edison, Henry Ford,
or Steve Jobs.
But to Frank, the Darwin show also depicts
the dark side of competition, individuals
vying in ways that stultify the species.
In the evolution of male elk, for example,
the fight for females results in outsized
antlers.
ROBERT FRANK: Having bigger ones than your
rival made you more likely to win your fight.
And so every mutation that coded for larger
antlers was very strongly favored.
And they grew generation by generation.
We see bull elk now with antlers that are
four feet across.
They weigh 40 pounds.
That's great for doing battle with other bull
elk, but it's horrible if you get chased into
a densely wooded area by a wolf.
PAUL SOLMAN: You can't get out of the forest.
ROBERT FRANK: There's nowhere to turn, literally.
That's a feature that absolutely captures
the conflict between individual and group.
PAUL SOLMAN: But returning to Darwin the economist,
how does competitive evolution hurt the species
known as Homo sapiens?
Years ago, Frank began thinking that we engage
in the same sort of wasteful, self-defeating
contests that Darwin documented in other animals.
In "The Winner-Take-All Society" in the mid-'90s,
a younger Bob Frank wrote and explained to
us, that, though the use of strength-enhancing
steroids in sports was hurting the general
health of athletes, for example, it was in
no way enhancing the game.
ROBERT FRANK: But, from an individual point
of view, it's compellingly attractive to take
the drug, because, otherwise, you don't land
a spot on the team, you don't have a shot
at the NFL roster.
PAUL SOLMAN: Frank's line of thinking continued
to evolve.
The winners were separating from the rest
in almost every field, and their sky-high
pay was fueling "Luxury Fever," his 1999 book
where he warned of competitive, conspicuous
consumption among the super-rich, taunting
and tempting us all.
ROBERT FRANK: There's no question but that
we're in the midst of another Gilded Age.
The robber barons had accumulated great wealth,
and they spent it in very visible ways.
The cyber-barons of today have accumulated
great wealth, and they're spending it in visible
ways.
PAUL SOLMAN: Ways so visible that those down
the ladder began emulating them.
And that's the downside of conspicuous competition,
says Frank.
With humans, as with other animals, the survival
of the so-called fittest may come at a cost
to the species as a whole.
ROBERT FRANK: So, in one species of seals,
for example, 4 percent of the males sire 88
percent of all offspring.
That's like the rich get richer that we're
seeing in modern society.
And, so, I think you see a very parallel processes.
The sexual selection that arises from battles
among males in those species produces enormous,
outsized animals with huge weaponry that's
all self-canceling in the end, wasteful.
When you see incomes concentrating at the
top of the income ladder, as we have seen
for the last three decades, then you see spending
patterns that are essentially a duplicate
of the waste that Darwin saw.
PAUL SOLMAN: And that's what you call luxury
fever.
ROBERT FRANK: Exactly.
If everyone builds a mansion twice as big,
that just raises the bar that defines how
big a mansion rich people feel they need.
They build bigger because they have more money.
People just below them who travel in the same
social circles, their frame of reference shifts.
They have got to build bigger, too, and it
cascades all the way down.
PAUL SOLMAN: And why is that a problem?
ROBERT FRANK: If you have to spend 50 percent
more on a house and you don't have more money,
that's a short explanation of why conditions
confronting the middle class have gotten more
difficult in the last 30 years.
PAUL SOLMAN: No wonder there's so much discontent,
so bitterly felt, from the other 99 percent
on the left to the Tea Party on the right.
Though Bob Frank is usually identified with
the left, he was a devout deregulator when
he served in government.
And he thinks that, for all their earnestness,
both sides are missing the essential message
of Charles Darwin, that there are two sides
to economics: the invisible hand of market
competition, to be sure, making us faster,
keener, safer, but also the helping hand of
the community in the form of government to
restrain ourselves when the competition starts
costing more than it benefits.
ROBERT FRANK: The political conversation these
days seems to be dominated by the idea that,
if the society tries to act collectively,
it's always going to make matters worse.
But you can't just turn selfish people loose
and hope for the best.
In those cases, both in nature and in the
marketplace, you get very bad results oftentimes.
PAUL SOLMAN: So then yours is the message
of the benevolent economist, if you will,
who says both left and right are, in some
fundamental sense, wrong because they don't
understand both the value of the market from
the left and the importance of government
from the right?
ROBERT FRANK: That's exactly the point of
the argument, yes, that -- that there really
is much more to the market than its critics
realize, and the people who say government
can do no good for the society are way off
base.
They don't understand the fundamental conflict
that often arises between individuals and
groups.
PAUL SOLMAN: To Bob Frank, then, as to Charles
Darwin, success is a balance between the urge
to cooperate and the impulse to compete, a
balance in the origin of our species and in
its continued evolution.
JEFFREY BROWN: The Charles Darwin exhibit
is on view at the Fernbank Museum of Natural
History in Atlanta through Jan. 1.
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