Book Summary: “The Rational Optimist: How Prosperity Evolves” by Matt Ridley

The Rational Optimist: How Prosperity Evolves

Title: The Rational Optimist: How Prosperity Evolves
Author: Matt Ridley
Scope: 4 stars
Readability: 4 stars
My personal rating: 5 stars
See more on my book rating system.

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Topic of Book

Ridley explores the causes of prosperity and progress.

If you would like to learn more about how prosperity evolved, read my book From Poverty to Progress: How Humans Invented Progress, and How We Can Keep It Going.

Key Take-aways

  • Prosperity is the increase in the amount of goods or services you can earn with the same amount of work.
  • Prosperity comes from the ability of humans to create and exchange ideas.
  • Prosperity can only be understood as a form of evolution, similar to biological evolution for animals.
  • Exchanging ideas and products enabled humans to specialize and get good at what they do.
  • Exchange also created a collective intelligence far greater than any individual.

Other books by the same author:

Important Quotes from Book

Question: What are the root causes of progress?

It is my contention that in looking inside our heads, we would be looking in the wrong place to explain this extraordinary capacity for change in the species. It was not something that happened within a brain. It was some thing that happened between brains. It was a collective phenomenon.  

At some point, human intelligence became collective and cumulative in a way that happened to no other animal.

To argue that human nature has not changed, but human culture has, does not mean rejecting evolution – quite the reverse. Humanity is experiencing an extraordinary burst of evolutionary change, driven by good old-fashioned Darwinian natural selection. But it is selection among ideas, not among genes.

The answer, I believe, is that at some point in human history, ideas began to meet and mate, to have sex with each other. 

I shall argue that there was a point in human pre-history when big-brained, cultural, learning people for the first time began to exchange things with each other, and that once they started doing so, culture suddenly became cumulative, and the great headlong experiment of human economic ‘progress’ began. Exchange is to cultural evolution as sex is to biological evolution. By exchanging, human beings discovered ‘the division of labour’, the specialisation of efforts and talents for mutual gain.

Specialisation encouraged innovation, because it encouraged the investment of time in a tool-making tool. That saved time, and prosperity is simply time saved, which is proportional to the division of labour. The more human beings diversified as consumers and specialised as producers, and the more they then exchanged, the better off they have been, are and will be.

I find myself continually surprised by how few people think about the problem of tumultuous cultural change. I find the world is full of people who think that their dependence on others is decreasing, or that they would be better off if they were more self-sufficient, or that technological progress has brought no improvement in the standard of living, or that the world is steadily deteriorating, or that the exchange of things and ideas is a superfluous irrelevance. And I find a deep incuriosity among trained economists – of which I am not one – about defining what prosperity is and why it happened to their species.

Above all, it is a book about the benefits of change. I find that my disagreement is mostly with reactionaries of all political colors: blue ones who dislike cultural change, red ones who dislike economic change and green ones who dislike technological change. 

This is what prosperity is: the increase in the amount of goods or services you can earn with the same amount of work.

Self-sufficiency is therefore not the route to prosperity. 

Prosperity, or growth, has been synonymous with moving from self-sufficiency to interdependence, transforming the family from a unit of laborious, slow and diverse production to a unit of easy, fast and diverse consumption paid for by a burst of specialised production. 

Interdependence spreads risk. 

This is history’s greatest theme: the metastasis of exchange, specialisation and the invention it has called forth, the ‘creation’ of time. 

I am going to argue that the answer lies not in climate, nor genetics, nor in archaeology, nor even entirely in ‘culture’, but in economics. Human beings had started to do something to and with each other that in effect began to build a collective intelligence. They had started, for the very first time, to exchange things between unrelated, unmarried individuals; to share, swap, barter and trade. 

It has the beautiful property that it does not even need to be fair. For barter to work, two individuals do not need to offer things of equal value. Trade is often unequal, but still benefits both sides. This is a point that nearly everybody seems to miss. 

Barter – the simultaneous exchange of different objects – was itself a human breakthrough, perhaps even the chief thing that led to the ecological dominance and burgeoning material prosperity of the species. Fundamentally, other animals do not do barter…. no other species of ape can encounter strangers without trying to kill them, and the instinct still lurks in the human breast.

This is a startling shift of view. Instead of talking about ‘hunter-gathering’ as the natural state of humanity effectively since forever, as they are apt to do, scientists must begin to consider the possibility that it is a comparatively recent phase, an innovation of the last 200,000 years or so.

No other species of ape can encounter strangers without trying to kill them, and the instinct still lurks in the human breast.

Barter was the trick that changed the world. 

Without trade, innovation just does not happen. Exchange is to technology as sex is to evolution. It stimulates novelty. 

As population density increases, so too does the division of labor, giving more opportunities to trade.

Where modern hunter-gatherers have been deprived of access to a large population of trading partners – in sparsely populated Australia, especially Tasmania, and on the Andaman islands, for example – their technological virtuosity was stunted and barely progressed beyond those of Neanderthals. There was nothing special about the brains of the moderns; it was their trade networks that made the difference – their collective brains. 

Tools are in effect a measure of the extent of the division of labor and, as Adam Smith argued, the division of labor is limited by the extent of the market.

Thus the extraordinary change in technology and cultural tradition that seems to have flourished more than 30,000 years ago in western Asia and the Near East – the so-called Upper Paleolithic Revolution – may be explained by a dense population.

The argument is not that exchange teaches people to be kind; it is that exchange teaches people to recognise their enlightened self-interest lies in seeking cooperation. 

Again and again throughout history, trust has to start with relatives before it can be extended to strangers; 

Perhaps the first steps to trade with strangers began as individual friendships. A woman could trust her daughter who had married into an allied band within the same tribal grouping. Then perhaps the woman’s husband could learn to trust his son-in-law. The alliance between the bands in the face of a common enemy allowed the barrier of suspicion to be breached

There is no known human tribe that does not trade. 

This ability to transact with strangers as if they were friends is made possible by an intrinsic, instinctive human capacity for trust.

The entire edifice of human cooperation and exchange, upon which prosperity and progress are built, depends on a fortunate biological fact. Human beings are capable of empathy, and are discerning trusters.

It is not at all clear what comes first: the trust instinct or trade…Much more plausibly, human beings began tentatively to trade, capturing the benefits of comparative advantage and collective brains, which in turn encouraged natural selection to favor mutant forms of the human mind that were especially capable of trust and empathy – and even then to do so cautiously and suspiciously.

The history of human prosperity, as Robert Wright has argued, lies in the repeated discovery of non-zero-sum bargains that benefit both sides… Yet it takes only a few sidelong glances at your fellow human beings to realise that remarkably few people think this way. Zero-sum thinking dominates the popular discourse… Michael Shermer thinks that is because most of the Stone Age transactions rarely benefited both sides: ‘during our evolutionary tenure, we lived in a zero-sum (win-lose world), in which one person’s gain meant another person’s loss’. This is a shame, because the zero-sum mistake was what made so many -isms of past centuries so wrong. 

Like biological evolution, the market is a bottom-up world with nobody in charge.

My point is simply this: with frequent setbacks, trust has gradually and progressively grown, spread and deepened during human history, because of exchange. Exchange breeds trust as much as vice versa.

Perhaps Adam Smith was right, that in turning strangers into honorary friends, exchange can transmute base self-interest into general benevolence…. This is the extraordinary feature of markets: just as they can turn many individually irrational individuals into a collectively rational outcome, so they can turn many individually selfish motives into a collectively kind result.

I see these rules and institutions as evolutionary phenomena, too, emerging bottom-up in society rather than being imposed top-down by fortuitously Solomonic rulers.  

To argue, therefore, that emperors or agricultural surpluses made the urban revolution is to get it backwards. Intensification of trade came first… Throughout history, empires start as trade areas before they become the playthings of military plunderers from within or without. The urban revolution was an extension of the division of labor.

If you would like to learn more about how prosperity evolved, read my book From Poverty to Progress: How Humans Invented Progress, and How We Can Keep It Going.

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