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Darwin Economy: Liberty, Competition, and the Common Good

by Robert H Frank Princeton University Press
Pub Date:
Pbk 272 pages
AU$37.99 NZ$39.12
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Who was the greater economist--Adam Smith or Charles Darwin? The question seems absurd. Darwin, after all, was a naturalist, not an economist. But Robert Frank, New York Times economics columnist and best-selling author of The Economic Naturalist, predicts that within the next century Darwin will unseat Smith as the intellectual founder of economics.

The reason, Frank argues, is that Darwin's understanding of competition describes economic reality far more accurately than Smith's. And the consequences of this fact are profound. Indeed, the failure to recognize that we live in Darwin's world rather than Smith's is putting us all at risk by preventing us from seeing that competition alone will not solve our problems. Smith's theory of the invisible hand, which says that competition channels self-interest for the common good, is probably the most widely cited argument today in favor of unbridled competition--and against regulation, taxation, and even government itself. But what if Smith's idea was almost an exception to the general rule of competition? That's what Frank argues, resting his case on Darwin's insight that individual and group interests often diverge sharply.

Far from creating a perfect world, economic competition often leads to 'arms races,' encouraging behaviors that not only cause enormous harm to the group but also provide no lasting advantages for individuals, since any gains tend to be relative and mutually offsetting. The good news is that we have the ability to tame the Darwin economy. The best solution is not to prohibit harmful behaviors but to tax them. By doing so, we could make the economic pie larger, eliminate government debt, and provide better public services, all without requiring painful sacrifices from anyone. That's a bold claim, Frank concedes, but it follows directly from logic and evidence that most people already accept. In a new afterword, Frank further explores how the themes of inequality and competition are driving today's public debate on how much government we need.

Preface ix
Chapter 1 Paralysis 1
Chapter 2 Darwin's Wedge 16
Chapter 3 No Cash on the Table 30
Chapter 4 Starve the Beast--But Which One? 46
Chapter 5 Putting the Positional Consumption Beast on a Diet 64
Chapter 6 Perpetrators and Victims 84
Chapter 7 Efficiency Rules 100
Chapter 8 "It's Your Money . . ." 119
Chapter 9 Success and Luck 140
Chapter 10 The Great Trade-Off? 157
Chapter 11 Taxing Harmful Activities 172
Chapter 12 The Libertarian's Objections Reconsidered 194
Afterword to the Paperback Edition 217
Notes 223
Index 235

Important. -- Nicholas D. Kristof, New York Times Robert Frank's The Darwin Economy . . . provide(s) much-needed information and analysis to explain why so much of the nation's money is flowing upward. Frank, an economist at Cornell, draws on social psychology to shatter many myths about competition and compensation. -- Andrew Hacker, New York Review of Books excellent new book . . . -- Jonathan Rothwell, New Republic's The premise of economist Adam Smith's 'invisible hand'--a tenet of market economics--is that competitive self-interest shunts benefits to the community. But that is the exception rather than the rule, argues writer Robert H. Frank. Charles Darwin's idea of natural selection is a more accurate reflection of how economic competition works . . . because individual and species benefits do not always coincide. Highlighting reasons for market failure and the need to cut waste, Frank argues that we can domesticate our wild economy by taxing higher-end spending and harmful industrial emissions. -- 'Nature mpressive, original and thoughtful. -- Tim Harford, Financial Times is a smart, complex, and thoughtful book that will make many readers view the dismal science in a wholly different way. -- 'Biz Ed rovocative. . . . Frank is an economist for the rest of us. . . . he Darwin Economy . . . focus on one paradox of economic life: behavior which makes sense for a particular individual can harm the community as a whole. -- Chrystia Freeland, Reuters Frank's worthy and unfashionable aim is to argue the economic case for some forms of government regulation, to defend taxation, and even to advocate certain forms of tax increase. -- Howard Davies, Times Higher Education The Darwin Economy fundamentally challenges this theory of competition which, argues Frank, is a flawed way of understanding competitive forces throughout many aspects of economic life. . . . Frank adds something new to the debate. . . . e offers a powerful theoretical insight into the nature of competitive economic forces and the free market. . . . t is an insight we could all potentially benefit from. -- Daniel Sage, LSE Politics and Policy blog ery illuminating. -- Matthew Shaffer, National Review Online's The Agenda Frank's argument is a strong critique of the neo-classical view of the market and unlike many liberal critiques, does not rely on arguments about market imperfections, dominant powers, information asymmetries or irrationality. . . . he Darwin Economy provides an important argument that must be addressed by any libertarian. -- Evolving Economics blog Frank's book is peppered with examples of how actions that improve the well-being of the individual harm the collectivity. . . . rave and welcome . . . -- Robert Kuttner, American Prospect The practical implications of Frank's insight are quite broad. . . . Frank manages to write breezily and with a minimum of jargon. His book deserves wide readership among people who suspect that something has gone drastically wrong with the economy. -- Charles R. Morris, Commonweal Applying Darwin to economics provides new ways of thinking about taxation and the role of government in a free society. It also reminds economists and bankers how much they have neglected the humble wisdom with which they must confront uncertainty. -- 'Arab News Frank makes a compelling argument against the libertarian view that government should not interfere with individual liberty by forcing us to buy safety or insurance, via taxation. . . . His book is a welcome addition to a field that is in need of more economists and political theorists who challenge the status quo and explore concepts of justice in the spirit of John Rawls and Michael Sandel. -- 'ForeWord Reading this book will . . . provide a useful counterpoint to EU discussion about fiscal austerity and the importance of solidarity in the EU budget. Whether you start on the left or the right this book invites some re-thinking. -- 'European Voice Frank is one of the most interesting economists regularly writing for the public. Serious scholars across the social sciences will learn a lot from this book. -- 'Choice he Darwin Economy is noteworthy for its very acrobatic devotion to some--any--model that would seem well positioned to supplant the invisible hand as the prime mover of economic life in market societies. Instead of simply noting the abundant empirical failures of free-market theorizing for what they are--and thereby placing the burden of accountability on the small-government apostles of deregulation--Frank opts for the centrist dodge of trimming the differences between the excesses of libertarian dogma on the one hand and the reflexes of an allegedly Naderite, intervention-happy left cadre of government bureaucrats on the other. -- Chris Lehmann, Democracy: A Journal of Ideas xcellent; clearly written, engaging, and logically argued. -- Devorah Bennu, GrrlScientist
Robert H. Frank is an economics professor at Cornell's Johnson Graduate School of Management, a regular 'Economic View' columnist for the 'New York Times', and a Distinguished Senior Fellow at Demos. His books, which have been translated into twenty-two languages, include 'The Winner-Take-All Society' (with Philip Cook), 'The Economic Naturalist, Luxury Fever, What Price the Moral High Ground?', and 'Principles of Economics' (with Ben Bernanke).