Tuesday, June 17, 2014

Matt Ridley's "Rational Optimist:" It Takes a Collective Brain

What makes humans different?  In our modern era our opinion leaders have been moving closer and closer to the Folger's TV commercial insistence that there's "no difference."  People can't tell the difference between Folger's mass-market coffee and the other kind -- at least not after a satisfying restaurant meal.  Nor is there any difference between humans and the rest of the animal kingdom.  We are all Darwin's creatures.

But Matt Ridley in The Rational Optimist: How Prosperity Evolves wants us to accept that there really is a difference between us and the ape species nearest to us in the living world.  The difference is specialization and exchange.  In economic language, the difference between us and the apes is Ricardo's law of comparative advantage.  Humans instinctively understand that, rather than do everything for myself, it's better for me to specialize on something I'm good at, while my neighbor specializes on something else.  Then we can exchange.

But only humans know this.  If you set up an experiment with apes, they don't get it.  Writes Ridley:
The primatologist Sarah Brosnan tried to teach two different groups of chimpanzees about barter and found it problematic...  They could not see the point of giving up food they liked [to get] food they liked even more.(p.59)
Get it?  The whole point of barter and exchange is to give up something that's valuable to you in exchange for something even more valuable.  And chimps don't get it. Barter, trade, exchange: it's a human thing.  We really are different.

In A Splendid Exchange: How Trade Shaped the World William J. Bernstein shows that human trade is not just a modern thing since the breakup of feudalism. Trade started at least 6,000 years ago.  We know that because archaeologists have found obsidian chips hundreds of miles away from their volcanic sources.  People started trading for these razor sharp cutting tools between 6,000 and 12,000 years ago.  Pretty soon people were trading in copper so that they could make weapons and helmets for the continual warfare that obtained in ancient times.

But Matt Ridley wants us to look further back for the dawn of trade.  Half a million years ago hominids were making tools to butcher animals, and they'd been doing it the same way for a million years.  But then something changed.  It's hard to know when, but by 72,000 years ago archaeologists have found perforated shells from estuarine snails at locations that were up to 100 miles away from salt water.  The snails didn't get up and walk.  Most likely they were traded.  People that trade or exchange are people that specialize.  Specialization leads to expertise, and expertise leads to improvement, and improvement leads to innovation.

There's a scale effect here.  The bigger the population the more specialization, the more exchange, the more connections and the more innovation.  Conversely, a small isolated population tends to regress towards less specialization, less exchange and even a negative rate of innovation, a loss of current skills and expertise.  That's what happened to the natives of Tasmania.

"Human cultural progress is a collective enterprise and it needs a dense collective brain."(p.83)  The bigger the collective the more "collective brain" connections and the more progress.  Thus capitalism thrives in cities, and cities specialize: New York in finance, Dallas and Houston in oil, Silicon Valley in information technology.  Even pop-pysch bestsellers get this, as in Richard Florida's Rise of the Creative Class where creatives clump together in "ideopolises."

The biggest impediment to the big collective brain is big government.  Here is how the founder of the Ming dynasty took China from #1 to a wasteland of poverty.
forbid all trade and travel without government permission; force merchants to register and inventory of their goods once a month; order peasants to grow for their own consumption and not for the market; and allow inflation to devalue the paper currency 10,000-fold.(p.183)
Today big government would like to reduce travel to reduce "carbon pollution;" Lefty economist Thomas Piketty proposes a global cadaster of private wealth, and self-sufficiency and "local" food is celebrated by the latest generation of upper-class ascetics.

The point is that the collective brain doesn't just sit there; it does something.  So whatever the challenge, whatever the problem, specialists will start working on a solution.  The more people on the problem talking to each other and exchanging with each other and "borrowing" ideas from each other, the sooner they'll innovate themselves out of a jam. "[T]he human race has become a collective problem-solving machine and it solves problems by changing its ways."(p.281)

And that's the reason to be optimistic, despite the official pessimism about food scarcity and climate change.  Ordinary animals do what they do, and if the world changes and their habitat disappears they disappear with it.  But humans are different.  We don't have a fixed niche; we don't have a fixed way of doing things.  We see a problem and we solve it -- with our collective brain.

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