Friday, October 27, 2023

Review of The Darwin Economy: Liberty, Competition, and the Common Good Robert H. Frank

This book review was written by Eugene Kernes   

Book can be found in: 
Book Club Event = Book List (07/06/2024)
Intriguing Connections = 1) How Competitive Is Competition?, 2) The Evolution of Evolution

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“Darwin’s analysis revealed a systemic flaw in the dynamic of competition.  The failures he identified resulted not from too little competition, but from the very logic of the process itself.  The central premise of his theory was that natural selection favored variants of traits and behaviors insofar as they enhanced the reproductive fitness of the individual animals that bore them.  If a trait made the individual better able to survive and reproduce, it would be favored.  Otherwise, it would eventually vanish.  In many cases, Darwin recognized, the same variant that served the individual’s interest would also serve the interest of its species.  But he also saw that many traits promoted individual interest to the detriment of the species.” – Robert H. Frank, Chapter 2: Darwin’s Wedge, Page 33

“Many other traits, however, increase the reproductive fitness of each individual while simultaneously imposing significant costs on large subgroups of the species.  Such conflicts are especially likely for traits that confer advantage in an individual’s head-to-head competition with members of its own species.” – Robert H. Frank, Chapter 2: Darwin’s Wedge, Page 34

“In a stripped-down version of an arms race, one nation gains advantage over a rival by building additional armaments, which prompts the rival to build additional armaments of its own to restore the balance.  The first nation then acquires still more weaponry, provoking yet another response from its rival, and so on.  When the dust settles, neither side enjoys greater security, despite having spent a substantial share of its national resources on armaments.” – Robert H. Frank, Chapter 5: Putting the Positional Consumption Beast on a Diet, Page 75


Is This An Overview?

Competition is usually thought of as favorable, as the better competitor will be rewarded while worse competitors will be removed.  Making the system better for everyone.  But, competition is not always beneficial, and can lead to harmful consequences for the group.  A consequent that occurs through the process of competition.  An insight that comes from Charles Darwin.  Evolution by natural selection favors the fittest, those who have favorable traits for survival and reproduction.  Traits such as behaviors and physical features.  Those who are fittest, pass on their favorable traits which become broadly shared with the group.  While there are traits that enhance the group, there are also traits that hurt the group.  The individual’s traits can make the individual more competitive within the species or group, but also make the individual more vulnerable to predators or other groups.  Leading to traits being passed on that are better for the individual but worse for the group, reducing the groups intergenerational fitness.  Traits that are to the detriment of the species.

The effect that competition has on a group depends on whether the individual and group interests are aligned.  If the interests are aligned, everyone benefits.  If they are not alighted, everyone loses.  Interests tend not to align when the competition is among members of the same group.  Another feature of harmful competition, is that fitness depends on conferring a relative advantage, rather than an absolute advantage.  The competitor just needs to be more helpful than the competition. 

In this way do individuals within various fields and industries, escalate their claims and change their behavior to appear relatively better while imposing costs on society.  Sparking collective action problems.  Within politics, political competition to maintain political independence depends on defending the state from opposition.  This can lead to an arms race, in which every state builds armaments to make sure they are secure from their opposition.  But the opposition does the same, build more armaments.  As every state builds armaments, creates a situation in which every state pays more for armaments without greater security.   


Are There More Examples Of Problems Caused By competition?

There are various examples of competition creating collective action problems, one is about hockey.  Hockey players have an advantage when they play without a helmet, but that is risky.  But if everyone does not wear a helmet, then there is no advantage.  This incentivizes the collective restriction on behavior by imposing a policy of wearing a helmet.


How Does Government Effect Behavior?

Neither markets nor government are perfect.  There are tasks that government does better, such as collective actions tasks that include national defense and pubic infrastructure.  Favorable opinions of government occur when there are good public services.  Weakest governments that provide little public benefits are deemed ineffective and corrupt.  As government is needed, especially to resolve collective action, better to have an effective government.

To operate and resolve the collective action problems, government needs to be funded by tax revenue.  Without a tax, there would be no government to resolve collective action problems.  Taxes generate revenue and discourage the activity being taxed.  Taxes are problematic when they discourage useful activities such as job creation, but taxes can be helpful when discouraging activities that are harmful to others.  Taxes on harmful activity produce revenue while discouraging harmful behavior.



This book is mired in group polarization.  Within politics and economics.  The oppositions claims are simplified, and appear to have only one or a few explanations and reasons to provide.  The author is ready with chapters filled with explanations to prove the opposition’s few ideas wrong.  Much of the author’s argument is about defending the value of government, and about the role of taxes.  That taxes can be used to discourage the detrimental competition while providing tax revenue

The author repeats the simplified claims about an opposing political framework, as if the opponents make the same claims that the author can counter using various arguments.  Making much of the disagreement, a one-sided argument against political claims that are not represented in the book.  The attacks become contradictory, for the author attacks a political claim but recognizes that in practice the opposite happens, but still blames those making the disapproved political claim. 

The author proposes that Charles Darwin takes precedence as foundational for economics.  But, the author acknowledges that Darwin learned from economists such as Thomas Malthus and David Ricardo.  The main reason for favoring Darwin is due to the concept of relative advantage, which is superior to the absolute advantage of Adam Smith.  The author’s favor is contradictory, for two reasons.  First, Ricardo identified relative advantage, in what economists call comparative advantage.  The author keeps claiming that economists failed to recognize context and relative position, even though they do and the ideas are not original to Darwin.  Second, for a book about evolution, the author implies that ideas do not evolve.  The author keeps referencing all economic opposition as claiming favor for a single term from Adam Smith, the invisible hand.  Besides the fact that Adam Smith’s work was not limited a single term which was not central to Smith’s work, and that economists do not use that term to explain all their views.  The ideas of Smith were also improved, changed, and transformed.  Economic ideas evolved.  The views about competition have evolved. 

There are also plenty of contradictory economic arguments being made.  In a chapter, the author claims that safety is costly and that it does not make sense to be completely safe.  This claim was made in a chapter about private firms.  In another chapter, arguing that safety is beneficial because it prevents more expensive harm.  This claim was made in a chapter about public funds.  The reason the claims are contradictory is because the author does not consider the same variable when making the claims.  As in, the author chooses the variables that support the author’s claims, but dismisses the other variables.

In chapters about taxes, there is a claim that those hurt by the tax system, specifically those who lack appropriate income, can be monetarily compensated.  Many economists make the claim about compensating those who are losing due to economic policy or activity.  The problem is that historically, claims about potential compensation did not materialize into actual compensation.  

Questions to Consider while Reading the Book

•What is the raison d’etre of the book?  For what purpose did the author write the book?  Why do people read this book?
•What are some limitations of the book?
•To whom would you suggest this book?
•What are the effects of competition?
•How can competition have harmful consequences? 
•Who was Charles Darwin? 
•Who are the fittest by evolutionary standards?
•How does the relative position have on competition?
•What is a positional good? 
•What is an arms race?
•What is Coase Theorem? 
•What is the Invisible Hand? 
•How does competition effect the bull elk? 
•What are the collective action problems with hockey players?
•What is the role of the government? 
•How to overcome the destructive competition? 
•What happened to labor-managed firms? 
•How does government use tax revenue?
•How do taxes and their use effect incomes? 
•Why do some societies regulate behavior more than others? 
•How to transfer income? 
•How does success and merit effect incomes?
•How does luck effect income? 
•What is trickle-down theory? 
•How does regret effect cognitive errors? 

Book Details
Publisher:               Princeton University Press
Edition ISBN:         9780691153193
Pages to read:          211
Publication:             2012
1st Edition:              2011
Format:                    eBook 

Ratings out of 5:
Readability    5
Content          4
Overall          4