Have you ever had the uncomfortable feeling that Adam Smith's famous Invisible Hand hasn't been working all that well of late--that is, if it's ever really worked? The wealth gap just keeps widening everywhere, even here in the mecca of free entreprise. The rich just keep getting richer and the poor poorer. Indeed, it seems that if the Invisible Hand works, it only does so to ensure that private greed trumps the common good in most, if not quite all, cases.
So why does reality differ so much from the theory many use to attempt to describe it?
A minority of economists believe the disconnect between classic economic thought and reality is attributable to the field not adopting the evolutionary approach as have the sciences. These economists belong to a splinter movement called evolutionary economics.
This month's issue of Mother Jones has an interesting article on evolutionary economics. I stumbled across it after engaging in a discussion about the validity of the Invisible Hand. Here are a few key excerpts from Smith versus Darwin:
Like Intelligent Design, the idea of the Invisible Hand stubbornly persists in the face of overwhelming evidence.
Economists, on the other hand, have been Intelligent Designers since the beginning. Adam Smith was a deist; he believed in a world governed by a benevolent system of natural law.
Smith's Creator did not interfere. He simply wrote the laws and left them for events to demonstrate and man to discover. The greatest American economist, Thorstein Veblen, observed that "the guidance of…the invisible hand takes place…through a comprehensive scheme of contrivances established from the beginning." What is this if not Intelligent Design?
But to Veblen this was, precisely, unscientific. And so he made a mighty effort back in 1898 to move economics into the Darwinian age. In a magnificent essay entitled "Why Is Economics Not an Evolutionary Science?" Veblen pointed out the problems of classical economics: too much preoccupied with classification schemes and higher purposes, too little with material process and "cumulative or unfolding sequence." Economics could become a science, but only if it detached itself from the idea that change intrinsically led to improvement.
More than a century later, economics has not escaped its pre-Darwinian rut. Economists still don't understand variation; instead they write maddeningly about "representative agents" and "rational economic man." They still teach the "marginal product theory of wages," which excuses every gross inequality faced by the laboring poor. Alan Greenspan even recently resurrected the idea of a "natural rate of interest" to justify raising rates, though that doctrine had been extinct for 70 years. Economists still ignore the diversity of actual economic and social life. They say little about forms of ownership and the distribution of power, and almost nothing about how pointless product differentiation and technical change now shape and drive the struggle for survival among firms.
Modern economics resembles religion in other, more prosaic ways. The American Economic Association (AEA) runs like a priesthood; its flagship Review is as unreadable as a Dead Sea Scroll. And when heretics gather in the Association for Evolutionary Economics and elsewhere, Inquisitors keep after them. (At the annual academic meetings, the AEA sends seat counters to the heretical sessions, looking for groups small enough to cut from its rolls.) To borrow an old line from Robert Kuttner, the evolutionists are "a tiny and despised sect that stubbornly refuses to disappear."
Yet we're a threat. For Darwin cannot be erased; his material, randomized, godless view of change informs every aspect of the way real scientists investigate physical, biological, and social problems, from cosmology to the study of political or technological change. The new mathematics of chaos and complexity are evolutionary, for they study how simple determinate processes can give rise to lifelike diversity. These techniques yield many new insights into the origins of pattern and structure. (For a fun example, download John Conway's "Game of Life" and have a look at what it can do.) One day, they may break through even in economics, and Veblen's long-delayed evolutionary revolution will be complete.
Read the entire article on evolutionary economics.
I bring this up because my hope is that this emerging field of economics may begin to explain why some of us feel that there is more to life than the simplistic pursuit of personal monetary gain alone. For example, poll after poll shows that the vast majority of Americans (>80%) want universal health care, yet special interests block it time after time. As a result the USA spends a far higher percentage of GDP on health care than other developed nations yet has 45 million of its citizens uninsured. Then there's the globalization issue: a steadily growing number of Americans are beginning to question the soundness of trading away good jobs with benefits for access to cheap Made in China shower caps and We Support Our Troops stickers. As the race for rapidly diminishing oil supplies heats up over the next decade, China will most likely be our opponent in a major resource war. All we are doing right now with our short-sightedness is helping it to bulk up for such a war.
Evolutionary economics holds promise in providing us with a fresh and more relevant perspective for better decision making.