The Rational Optimist

The Rational Optimist: How Prosperity Evolves, by Matt Ridley, Fourth Estate, RRP£20, 438 pages

It will not be easy, but it is perfectly possible, indeed probable, that in the year 2110, a century after this book is published, humanity will be much, much better off than it is today and so will the ecology of the planet and society.” In these words, the writer and evolutionary biologist Matt Ridley throws down the gauntlet to contemporary pessimists.

I have a file called “doomsters”, which goes back a long time and documents just a few of the scarifying futures with which we have been threatened long before global warming came to occupy centre stage: the millennium bug; a nuclear winter; epidemics of incurable new diseases or at best a world economic depression with no recovery in sight. The name of the file is meant to indicate scepticism on my part – but I am a minority among the writing classes. Like Ridley, I have been depressed by the sight of stacks of books in airport shops emanating gloom and doom without a rejoinder in sight.

It was ever thus. The end of the world was widely anticipated in AD1000. The Lisbon earthquake in the 18th century was hailed as a sign of divine displeasure with the human race. Jumping forward a few centuries, one of the bestsellers of 1923 was Oswald Spengler’s Decline of the West. Of course, Ridley can no more disprove the doomsters than they themselves can substantiate their case. It is always possible that the next alarm will be vindicated. But we can learn a great deal by examining past scares and why they were falsified.

But the book is more than that. In the course of arguing his case, Ridley provides a selective economic history of the human race from before its beginnings. Why of all the hominids whose remains have been discovered, including the Neanderthals, did homo sapiens alone emerge triumphant? The author examines the usual candidates such as language and toolmaking capacities and finds them existing to some extent in earlier species. Man’s unique characteristic is, in Adam Smith’s words, “the propensity to truck, barter and exchange one thing for another”, which has enabled him to succeed when other hominids have failed. This preceded both the invention of money and of anything that might be called capitalism. Indeed, the whole book could be regarded as a marriage of Adam Smith and Charles Darwin. Alfred Marshall, the late 19th-century economist, whose Principles of Economics were inflicted on generations of British students, strongly believed that economics should be studied from a biological point of view but was himself unable to advance beyond mechanical analogies. Ridley has begun to do just this and he has done so without equations and a minimum of jargon.

While conventional economists pay lip service in introductory remarks to the importance of trust in commercial relations, Ridley gives example after example of rules and institutions that encourage trust and were mostly built up from below. Medieval merchant law was made up by merchants as they went along, “ostracising those who break the informal rules and only later do monarchs subsume the rules within the laws of the land”. And how many conventional economists would know that “about 20 per cent of people are homozygous for the long version of the serotonin transporter gene with a genetic tendency to look on the bright side” while the other 80 per cent wallow in doom and gloom stories?

There is a particularly useful penultimate chapter on the two “great pessimisms of today”: the impoverished condition of much of Africa and climate change. The author has the great advantage over most of those who pontificate on “the science” of the latter in having a scientific background himself and is able to show that much of this is not science at all and, therefore, discounts much of the fashionable alarmism. On Africa, his diagnosis parallels that of other liberal economists. He sees most of the continent as an institutional vacuum: a legacy from the slave trade; price and other controls imposed by urban elites; tribal strife; trade barriers imposed by Europe and America, and so on and on. More interesting is his analysis of Botswana, which was in 1950 one of the four poorest countries of the world, but has since enjoyed a faster growth of gross domestic product per head than any other country in the world thanks to good institutions, including widely distributed and respected property rights. He sees this as an example of how the rest of Africa could turn the corner.

Even though I agree with Ridley’s “rational optimism”, no book is perfect. So what are his main omissions? I can hear one or two people saying, wasn’t Ridley the non-executive chairman of Northern Rock, the bank that had to be rescued by the government near the beginning of the credit crunch? Ridley saves reviewers’ embarrassment by recalling this fact early on. He is contractually prevented from writing about his experience. But he does say it has left him “mistrustful of markets in capital and assets, yet passionately in favour” of them in goods and services.

One fault in my mind is that Ridley does not put enough emphasis on future economic growth taking a less materialist form. The law of diminishing returns does sometimes apply. It is quite plausible that as people become better off, they will want to take the benefits increasingly in the form not of material objects, but increased leisure, a less hectic working life and so on. People may, however, also want more “positional” goods, which have their value mainly through jealousy and envy such as a house on the hill with the best view, or for children to be top of the class or to be Olympic athletes; in this sense only there are “limits to growth”.

There is one solution that Ridley is well aware he is not able to deliver. As he says, “generally speaking the more cooperative a species is within groups, the more hostility there is between groups”. Outsiders are all too often treated as scarcely human. (If you do not believe this try presenting the Arab case at a dinner party in Hendon.) Neither education nor prosperity much succeeds on weakening these attitudes. Recall how isolated the philosopher Bertrand Russell felt when he could not share the bellicose attitudes of his countrymen at the beginning of the first world war. Ridley has no special remedy for this in-group out-group dichotomy. Nor have I. But it constitutes arguably a far greater danger than climate change, the exhaustion of raw materials or any of the other fashionable disaster scenarios.

Samuel Brittan is an FT columnist.

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