Rational optimism

Thanks to a couple of decent train journeys, I’ve at last read Matt Ridley’s [amazon_link id=”0007267126″ target=”_blank” ]The Rational Optimist: How Prosperity Evolves[/amazon_link], published in 2010. Some readers will no doubt think it mis-titled, and might argue instead for The Delusional Optimist. After all, the nearly two years since publication have hardly seen a lot of economies enjoying the sunny uplands of vigorous growth. But they would be unfair to read the book as a commentary on the current state of the economy; its theme concerns the very long run of growth.

Ridley’s main thesis is that specialisation and trade are what drive innovation and growth. Indeed, he argues that trade came before agriculture, before urbanisation and is in fact part of our genetic nature, although as a non-expert on genetics, I thought this particular bit of the argument involved quite a lot of “It is a reasonable guess that…”. The book canters through history from the dawn of time, touching on everything from natural selection to the specifics of the Industrial Revolution. If, like me, you’ve read Paul Seabright’s [amazon_link id=”0691146462″ target=”_blank” ]Company of Strangers[/amazon_link] and Ian Morris’s [amazon_link id=”1846682088″ target=”_blank” ]Why The West …. For Now[/amazon_link], and some economic histories like Greg Clark’s [amazon_link id=”0691141282″ target=”_blank” ]A Farewell to Alms[/amazon_link] or David Landes’ [amazon_link id=”0349111669″ target=”_blank” ]Wealth and Poverty of Nations[/amazon_link], a lot of this material will be familiar. But for everyone else, The Rational Optimist gives an accessible and useful overview of the wide range of material. And there were inevitably some new nuggets of information – I didn’t know the Calico Act of 1722 banned the wearing of cotton in England – and was not repealed until 1774.

I share Ridley’s conviction that specialisation and trade are the key to improving the well-being of people in general, even if not that of specific producer groups, like English textile manufacturers of the 18th century. I also very much enjoyed his spluttering against what he calls the ‘green chic’ movement, rich people who enforce totemic beliefs about what is ‘natural’, often to the detriment of poor people – or even the environment. Ridley is acid about the environmental movement’s opposition to GM crops, for example, and with the authority that comes from genuinely understanding the genetics.

Why does protectionism recur again and again? The book suggests it is part of an inevitable cycle of a society’s decline. Trade creates a surplus which is increasingly appropriated by rulers or governments, encouraged by producer interests, or by priests or intellectuals who do not like the fact that nobody is in charge of trade. I think he underestimate the support protectionism gets from many citizens who do not like uncertainty or change. After all, specialisation is disruptive of livelihoods. This is an issue I touched on in my 2001 book,[amazon_link id=”1587990822″ target=”_blank” ] Paradoxes of Prosperity[/amazon_link]. Nor am I wildly optimistic about averting protectionism during the current economic crisis – let’s hope this is wrong, but rational pessimism could be more in order for the next few years.

[amazon_image id=”0007267126″ link=”true” target=”_blank” size=”medium” ]The Rational Optimist: How Prosperity Evolves[/amazon_image]