Monday, January 04, 2016

Ridley - The Rational Optimist

Having always embraced the optimist’s perspective on life, Matt Ridley’s Rational Optimist: How Prosperity Evolves (2010) was a natural for me to read. Ridley, a popular science author who is a Conservative member of the British House of Lords, advocated a perspective that diverges from many of the things I read but I appreciated the depth of his analysis and his challenge to the fear mongering we so often hear.

‘Apocaholics’ (a term credited to Gary Alexander) are authors, speakers, consultants and others who “exploit and profit from the natural pessimism of human nature.” The latest version includes many of the current politicians running for President of the United States. Ridley backs up his criticism of apocaholics with lists of books and campaigns that have predicted calamity that have not materialized. The evidence cited by Ridley indicates that, although there is much that is not right about the world in which we live, significant progress has been made in addressing hunger, poverty, environmental degradation, and economic disparity. The most dangerous implication of apocaholism is that it teaches children that things only get worse which justifies withdrawing and not engaging to make things better. He suggests that instead of retreating into fear and finger pointing, we should strive to martial the emerging revelations of science and technology to resolve the problems we face in the modern day. Ridley asserts that it is precisely because so much progress has been made in improving life for all that the “continuing imperfections of the world places a moral duty on humanity to allow economic evolution to continue,” natural evolution that addresses real problems through effective and competitive economic progress.

Ridley’s assertion that optimism, not pessimism, should drive our thinking is based on the idea of evolutionary innovation that results from exchange and specialization in complex cultures. A very graphic example of how life has changed as a result of specialization and competition among unencumbered actors is what we spend on life necessities. As an example, a British farm in 1790 spent 75% of his wages for food, 10% on clothing and bedding, 6% on housing, 5% on heating, and 4% on light and soap. In 2005, the average British consumer spent in after-tax income 20% on housing, 18% on transportation, 16% on household conveniences, 14% on food, 6% on health care, 5% on entertainment, 4% on clothing, 2% on education, 1% on sundries, and 11% investing to secure future prosperity. What we now spend on life’s essentials has introduced greater diversity, and most would say quality, because specialization, innovation, and trade have exploded in the last 225 years! In a nutshell, “The characteristic signature of prosperity is increasing specialization. The characteristic signature of poverty is a return to self-sufficiency,” and the isolation of possible innovators, producers, and consumers from each other.

While he did not pinpoint when it actually began, Ridley described numerous examples across history and culture when humans began to exchange things with each other, bringing value to high expertise and specialization, which then created an economy, consumer acquisition, and ongoing processes of innovation. “Human beings diversified as consumers and specialized as producers, and the more they then exchanged, the better off they have been, are, and will be.” The periods of greatest advance in quality of life were mostly when innovators and entrepreneurs were set free to create. The reason for Ridley’s title is that Rational Optimism “holds that the world will pull out of the current crisis because of the way that markets in goods, services, and ideas allow human beings to exchange and specialize honestly for the betterment of all.”

Ridley does not deal with the abuses of the natural market. The question that could be raised is if all the markets now available to us create a better quality of life or if the imbalance in what we pay for certain products and services is justified (i.e. one might ask if an investment of 2% on education and 5% on entertainment will secure a positive future). Ridley also assumes that the economic market is, in essence, democratic, responding to the natural needs of the public. In either an autocratic or oligarchic environment, the needs of the public are manufactured or manipulated and sometimes not in ways that will serve the public good. Regardless of what Ridley does not address, his prediction for the 21st century is very appealing and perhaps plausible – “intelligence will become more and more collective; innovation and order will become more and more bottom-up; work will become more and more specialized, leisure more and more diversified. Large corporations, political parties and government bureaucracies will crumble and fragment…”

No comments: