The Darwin Economy

Robert H. Frank is an economics professor at Cornell's Johnson Graduate School of Management, a New York Times "Economic View" writer, and a Demos Distinguished Senior Fellow. His books include The Winner-Take-All Society (co-written with Philip Cook), The Economic Naturalist, Luxury Fever, What Price the Moral High Ground?, and Principles of Economics (with Ben Bernanke).

Which economist was greater, Adam Smith or Charles Darwin? The question appears to be ludicrous. After all, Darwin was a naturalist, not an economist. But, according to Robert Frank, New York Times economics columnist and best-selling author of The Economic Naturalist, Darwin will dethrone Smith as the conceptual creator of economics within the next century. Frank contends that Darwin's theory of competition more properly captures economic reality than Smith's. And the ramifications of this reality are substantial. Indeed, failing to acknowledge that we live in Darwin's world rather than Smith's puts us all at risk by failing to see that competition alone will not solve our issues.

Smith's invisible hand theory, which states that competition channels self-interest for the general good, is probably the most often quoted argument today in support of unfettered capitalism—and against regulation, taxation, and even government itself. But what if Smith's concept was an outlier to the general rule of competition? That is what Frank contends, basing his case on Darwin's observation that individual and group interests frequently diverge significantly. Far from establishing a perfect world, economic rivalry frequently leads to "arms races," encouraging actions that not only inflict enormous harm to the collective but also give no long-term benefits to individuals because any gains are relative and mutually offsetting.

The good news is that we can control the Darwinian economy. The ideal option is to tax damaging habits rather than prohibit them. We could increase the economic pie, erase government debt, and improve public services without asking painful sacrifices from anyone. Frank admits that is a big claim, but it follows clearly from logic and evidence that most people already accept. The Darwin Economy is one of the best books on behavioral economics.

In a new afterword, Frank delves deeper into how inequality and competition are influencing today's public debate over how much government we need.

Author: Robert H. Frank

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