September 28, 2011

"The Darwin Economy"

John Whitfield reviews Cornell economist Robert H. Frank's The Darwin Economy. (By the way, as Half Sigma likes to point out, there are a whole bunch of people named Robert Frank who write about economics, so it's important to specify the middle initial.)
Frank bases his argument on the Darwinian notion that life is graded on a curve. How much is enough depends on what others have got. Most people, for example, would rather live in a 4,000-square-foot house that was bigger than their neighbor's than a 6,000-square-foot house that was the smallest on the street. 

Is that true? (Leave aside the difference between a 4,000 and a 6,000 square foot house, both of which would inspire in me the thought I had while taking an endless tour of Blenheim Palace, where Winston Churchill was born: "Man, this place would be a lot to dust.") Personally, I'd rather inflict my low-rent presence on neighbors with more money than me than lord it over even lower rent folks than myself. 

This is especially true when it comes to public school districts. I spent a lot of the 1990s looking at the smallest, crummiest houses in desirable school districts like Lake Forest, IL. I recall seriously considering buying a house in Wilmette that appeared to have started out as a WWII military base Quonset hut. I envied a friend who owned a four-room 1,000 square foot house in Santa Monica.

But, your mileage may vary.
Economists call these positional goods, and contrast them with things that aren't so relative, such as safety at work, where most people think it's better to be safe in absolute terms than the safest worker in a hazardous factory. 

But, of course, safety in your house (measured on an absolute scale) tends to be related to the size of houses on your street. Neighborhoods with big (or at least expensive) houses tend to have lower crime rates. Much of the reason for zoning codes demanding large, expensive housing is to keep out low rent folks and their crime-prone, low test score kids.
Positional goods lead to waste, says Frank, because people end up living in bigger houses than they need to, throwing lavish parties, and spending money on pool cleaners. This pressures other people to do the same, and so takes money from the better uses that might be predicted by [Adam] Smith's rational model. 
As a biological analogy, Frank suggests the difference between running speed and antler size. A faster gazelle is better equipped to outrun a cheetah, and so, he writes, "being faster conferred advantages for both the individual and the species." Antlers, on the other hand, are used for fighting with other males. The pressure to have bigger ones than your rivals leads to an arms race that consumes resources that could have been used more efficiently for other things, such as fighting off disease. As a result, every male ends up with a cumbersome and expensive pair of antlers, says Frank, and "life is more miserable for bull elk as a group." 
This has a lot going for it as an economic metaphor. Sometimes competition results in cheaper, better products, like loft insulation or computer memory, and sometimes it results in Louis Vuitton luggage. (Often, of course, it delivers a combination of utility and status, like the iPad.) But evolutionarily speaking, the distinction is bogus. 
Natural selection sees no difference between running speed and antler size: All evolution is positional. When one gazelle got faster, the slower ones got eaten (a point Frank relegates to a footnote). And when gazelles got fast, so did cheetahs. Cheetahs and gazelles would all be better off if they'd stayed slow, because running fast uses energy you might "better" invest in offspring, and legs that are built for speed are more prone to fracture. The lissome cheetah, meanwhile, is bullied and often killed by bigger carnivores such as lions.

Personally, I like a mostly middle-class society in which daily life is less Darwinian than in a society of a few extremely rich people and a lot of extremely poor people.

51 comments:

Anonymous said...

People at the top will always like to hear society described as a Darwinian survival-of-the-fittest contest where the superior specimens come out on top, for obvious reasons.

It doesn't change the fact that this is a really stupid way to describe any society, perhaps especially our own.

But the job of economist seems to consist of little else but telling rich and powerful people the things they like to hear.

Anonymous said...

Steve, Denmark is the middle class society you yearn for

Traveller said...

"Most people, for example, would rather live in a 4,000-square-foot house that was bigger than their neighbor's than a 6,000-square-foot house that was the smallest on the street."

True, because we are trained to be conformist sheeps and rely on the judgement of others.

True, because the superficiality of the mass brings a better opinion if one has bigger stuff.

True, the other side of the coin, that's because taxes are so successful today. Most people know taxes are useless but they like their (superior feet surface house) neighbour taxed. See Obama and taxing the rich while 50% of Americans does not pay taxes.

"Positional goods lead to waste, says Frank, because people end up living in bigger houses than they need to, throwing lavish parties, and spending money on pool cleaners."

Notice, not even the slightiest effort to hide the envy.

catperson said...

When one gazelle got faster, the slower ones got eaten (a point Frank relegates to a footnote). And when gazelles got fast, so did cheetahs. Cheetahs and gazelles would all be better off if they'd stayed slow,

This also applies to technology. People thought technology would make our lives easier but as we've become more productive, so has everyone else so we're now all expected to use technology to accomplish far more than we ever did in the past. Everyone might be better off if we weren't all glued to our email, internet and cell phones all day.

Anewhypothesis said...

There is little more dangerous in this world than an academic who thinks he's figured it out, and wants to improve things.

He has a flawed understanding of evolution, and is even so wise as to point out nature's errors, such as (beautiful) elk antlers. In his naive view, the highest ideal is simply making copies of your genes. Then, I suppose, fungus is the apex of evolution as it is many orders of magnitude more efficient than humans.

Life, nature, and evolution are much deeper than all this. The concept of sexual evolution helps get at the point. It's possible than human intellect and civilization are the very products of sexual selection as opposed to a strictly survival mechanism. Just like peahens like glorious peacock tails, human females dig certain mental characteristics in human males.

eh said...

Personally, I like a mostly middle-class society in which daily life is less Darwinian than in a society of a few extremely rich people and a lot of extremely poor people.

You ought to give up on 'citizenism' then, unless you become a little more particular about who the citizens are.

josh said...

People seem to want to live in crummy apartments in Manhattan next to the richest people in the universe.

"Steve, Denmark is the middle class society you yearn for"

not for long.

Anonymous said...

"evolution" has become like Freud in the 60s and 70s - an explanation for EVERYTHING.

You like landscapes art? oh its because we evolved on the african savannah.

Really? The most popular lanscapes have hills and mountains?

Anonymous said...

>Personally, I like a mostly middle-class society in which daily life is less Darwinian than in a society of a few extremely rich people and a lot of extremely poor people.<
So Steve, when are you moving to Australia?

Peter A said...

"Personally, I'd rather inflict my low-rent presence on neighbors with more money than me than lord it over even lower rent folks than myself."

The very fact you write this blog tells me you are not like most people. You are a contrarian by nature. Most people want to be in the pack and be high status members of the pack.

Peter A said...

"Darwinian survival-of-the-fittest contest where the superior specimens come out on top, for obvious reasons."

You are missing the point. Frank's thesis is that "superior" does not come out on top, which is also what Darwin says. He is attacking the rich and powerful. Survival-of-the-fittest does not mean survival of the "best" it means survival of the creatures with more advantages in a specific environment. Cockroaches are more fit than most species of mammal, and all species of dinosaur. They will probably prove to be fitter than homo sapiens at the end of the day. Does that mean cockroaches are "superior" to humans? No. Fast breeding NAMs are probably better adapted to our current post industrial environment than high performing yuppies (the "Idiocracy" thesis). Does that mean they are superior?

anony-mouse said...

Everyone with the same income? You like real Communism?

Of course when everyone has the same middle class income, they still end up trying to compete with each other in non-economic ways.

Carol said...

I believe the aspirational data, to a point. I've noticed that poor folk do say they'd prefer the biggest baddest stuff, if only they had the money. One guy who never used his VA benefit, said he wouldn't settle for less than a house on 10 acres or so, and sniffed at the tract homes I was considering. He never bought anything because he was broke all the time.

Had another guy, a drunk without a pot to piss in, tell me he'd have bought a much cooler car than the staid Civic I got, if he only had the money. A NAM acquaintance made fun of my little house (which I owned and loved) because he'd have gotten something much nicer of course. His family lived in a trailer house in a rented space out of town.

Also poor people I know say they would give away a lot more money, if they had it to give. So they don't understand why rich people won't give more to poor people like them.

Anyway, I also like smaller spaces with good neighbors. Big houses are kinda creepy without enough people in them.

The Anti-Gnostic said...

Positional goods lead to waste, says Frank, because people end up living in bigger houses than they need to, throwing lavish parties, and spending money on pool cleaners...

The carpenters, caterers and pool cleaners who make their living off providing the wealthy with positional goods disagree. Just ask the folks in Elkhart, Indiana.

Economists really need to avoid normative statements. The truth is that nobody can know the 'better' uses for the money. And the instant somebody gets the power to fund that better use by compulsory means, the distortions come galloping in. AIDS research is great, right? Surely you can't ever have too much AIDS research. So off we go spending zillions on drug cocktails and HIV vaccines because of this supposed freight train of a virus while everybody ignores the politically incorrect fact that explains so much: exogenous loads on the human immune system.

That's just AIDS research, the examples are legion.

Policy makers should just concentrate on eliminating externalities and rent-seeking. Of course, bureaucrats and central bankers won't pay you six figures for that kind of advice, so economists working to acquire their own positional goods won't give it.

Anonymous said...

People at the top will always like to hear society described as a Darwinian survival-of-the-fittest contest where the superior specimens come out on top, for obvious reasons.

It doesn't change the fact that this is a really stupid way to describe any society, perhaps especially our own.

But the job of economist seems to consist of little else but telling rich and powerful people the things they like to hear.


And people considerably far from the top don't like hearing it described this way, seeing as it marks them out as losers in the game of life.

TGGP said...

You were right to be skeptical on houses & neighborhoods, says Alex Tabarrok.

Justin Wolfers slapped Frank down with data a short time ago on whether more money makes you happier. Answer: yes, it does. Frank's an interesting guy, but should check his claims with data before confidently telling people everything they know is wrong.

Big Bill said...

Steve: "Personally, I like a mostly middle-class society in which daily life is less Darwinian than in a society of a few extremely rich people and a lot of extremely poor people."

You must be a European. Your vision is the Old America. India and China are the New America.

The Chinese/Indian dream is quite different: obscene wealth cheek-by-jowl with the uttermost degraded poverty.

From the alleys of Dharavi, Bombay, the largest slum in Asia, you can look up and see Antilla, the largest skyscraper "home" on the face of the earth owned by the fourth-richest man in the world, who has 600(!) servants to wipe his bottom and lick his shoes clean.

Rather than that old "Do unto others" Golden Rule Christian crap, you need to adjust your mind to Hinduism and Karma: "if you are poor and suffering it is because you did evil things in a past life and the Gods have ordained that you should live in poverty as penance."

Hinduism/Karma really is the best new religion for the growing Eastern Dharavi/Antilla culture of America. It will keep your Dharavi great-grandchildren from revolting and make them content with their lot in life.

And don't worry about "dusting" Antilla. You can hire a full time 6 year old "duster" in Bombay for less than a dollar a day. That's a price even YOU could afford!

Thrasymachus said...

The high-density, apartment or small house, small car or public transportation, "European" lifestyle beloved of leftists is possible and desired by many, but is only possible in an almost all white environment-

http://deconstructingleftism.wordpress.com/2011/08/16/the-green-city-a-world-without-blacks/

Paul Kersey speaks of the "Black Undertow" in which blacks destroyed the cities, then moved to suburbs and destroyed them, repeatedly moving to get away from their own pathologies.

Anonymous said...

I would think nerds would have personalities somewhat resistant to feeling shame/inferiority over a positional disadvantage as long as they were gaining some other advantage by allowing the loss of status in less important aspects of life, house size vs school quality.

My neighborhood used to be an excellent example of this phenomenon. Less academically competitive students and their families proved their status with displays of wealth.

Polynices said...

Being the poorest folks in a really rich neighborhood works awesome. I guess my wife and I are really in the below average category than poorest, but being in a very rich neighborhood means superb schools, low crime, and beautiful surroundings, with relatively modest property taxes because our house is relatively modest.

Munch said...

Isn't he really saying that the femas of many species prefer traits in the males, which seem to me to not favor individual or species well being. He app;ies his rationalizing and comes up for plausable reasons why big antlers are a waste of respurces and do not favor survival. Similarly he judges the ability and willingness to provide a larger house as a waste of resources. He supplies no empirical evidence of his opinion. He dosen't tag and follow in the wild bucks with larger and smaller antlers to see which is more successful. He does not count the number of serial wives and children of the McMasion against the modest bungalo owner. What's his theory: that these many species where the females prefer males exhibiting traits he considers misguided or wasteful (including humans) are disfunctional genetic failures, destined to be wiped out in the competition for survival?

Maybe women prefering men who build huge wasteful houses motives men to strive for higher achievement than is necessary for simply comfortable and secure survival.

Jacob Roberson said...

Sounds familiar (literally, like my family).

First my parents found the nicest cheap block in town and bought a house there. (Surrounding blocks kept their bullets, but donated the gun echoes and screaming sirens for free.) Paid for private schools.

Paying for private schools when you can't live where your classmates live is gigantically stupid, so then they did what Steve did and found the cheapest place in the ritziest public district around. Muuuch cheaper.

Personally, I like a mostly middle-class society in which daily life is less Darwinian than in a society of a few extremely rich people and a lot of extremely poor people.

First we chase money. Then (maybe) we grab hold of it. Then comes the novelty of having. Novelty wears off, the need for friends and equals comes rushing back. Some of the rich families I was in school with had the same attitude - the ones who didn't hate themselves and get divorced - they would stoop to avoid towering over me.

If we're so desperate for personality and interaction, maybe middle class society is the Darwinian pressure? The individual will die, the group might survive.

Big Bill said...

Positional goods are pointless?

Wasteful?

This, from the "Henrietta Johnson Louis Professor of Management" at Cornell's "Johnson School of Management"?

Without status-seeking, positional-goods-loving patrons would we have Music by Mozart, Michelangelo, or Beethoven? Would we have works by Copernicus or Calvin?

ELVISNIXON.com said...

"Personally, I like a mostly middle-class society in which daily life is less Darwinian than in a society of a few extremely rich people and a lot of extremely poor people."

In other words Orange County, CA circa 1982

Actually CA in general-prior to the 1986 Amnesty and the Rodney King "uprising."

Anonymous said...

A structural flaw of flat middle class societies is that very few families from among your coethnics practice r-selection, so you end up importing ugly foreigners to do low-status work.

Anonymous said...

They do it better in Spitzbergen!

Simon in London said...

We're sending our son to a school where I'd reckon we're in the lowest quartile of social status (and it's 30-45 minutes each way commute, before/after work). I have to say though I'm always looking out for some other parents I can look down on, or at least not feel inferior to.

Geoff Matthews said...

I forget who described England this way, but I liked the metaphor.

The English are like their beer. Dregs at the bottom, froth at the top, but the middle is wonderful.

I agree that a society dominated by the middle class has wonderful advantages.

Whiskey said...

There is a gender disparity there too. Any parent of girls knows that the desire to play with princesses and the like is innate, not just Disney-generated. Women prefer a more hierarchical society, one with a lot of poor people and a few very rich people, because there is always the dream of marrying up.

Look at any tabloid/celebrity magazine at the checkout stand. Quite informative -- various beautiful people/semi-royalty doings described for female readers. The teen moms seem to be of intense interest to girls and their mothers, three times now in the last two weeks I have seen mother/daughter pairs ahead of me pick up magazines with Teen Moms on the cover and page through them.

The Darwin economy is of interest to women as long as they are attractive. Then of course suddenly it is not.

There's Got to be a Morning After said...

> I like a mostly middle-class society in which daily life is less Darwinian than in a society of a few extremely rich people and a lot of extremely poor people.

Me too; I'm uncomfortable around large differences, I don't even like /knowing/ in the back of my mind that there are poor homeless bums in the middle of my town (San Jose CA). Rather than being rich, even just relatively, against my neighbors, I'd choose knowing that within action-shot everyone's doing ok, that that's not an issue between anyone, and choose easy /communion/ instead, as much as is possible. I have been lucky enough to experience that, in an expat community elsewhere. Granted we had more in common than in a general society, but it showed me what's possible.

Who were the people in the studies? A small amount of it I can buy ("we don't have to be embarrassed in front of any neighbor") or among poor people who don't have enough (I'm reminded of a story about Bulgarians (say) whose ambition was to own a nice couch; it dominated their thoughts, but once they either moved to a rich country or Bulgaria went market economy and they acquired it easily, they were sort of lost). But otherwise it seems unintelligent or soulless. I can't believe everyone's that way.

School uniforms exist partly for this purpose, of reducing distinctions between kids in school. Difference is always anxiety + distance provoking; who needs it?

Whitey Whiteman III said...

"Personally, I'd rather inflict my low-rent presence on neighbors with more money than me than lord it over even lower rent folks than myself. "


Do you want a smaller Prius, too??

Anonymous said...

"Without status-seeking, positional-goods-loving patrons would we have Music by Mozart, Michelangelo, or Beethoven? Would we have works by Copernicus or Calvin?"


Don't be stupid. No one said zero at the top and bottom, just a larger middle class fewer dregs. Like 5% not paying taxes instead of 50% not earning enough to pay taxes.

Roger Chaillet said...

Funny he should mention Luis Vuitton bags.

They are still made in France, as well as Spain and the U.S. http://www.louisvuitton.com/en/flash/index.jsp?direct1=home_entry_gb0

So, I guess middle class Frenchmen still make Luis Vuitton bags?

As for quality, I buy American made shoes. Yes, you can still buy them from places such as Orvis and Allen Edmonds stores. Do I buy Allen Edmonds because of the snob factor? Or is it because they are extremely well made, fit like a glove (or at least me like a glove) and can be recrafted over and over again?

What really motivates folks like him other than envy?

Marc B said...

"Perry and Bush hate each other..."

"Bush and Perry are like the Bloods and the Crips. They may hate each other, but there is no real difference between the two."

I don't even believe they hate each other. This rift smacks of just another hoodwink from "The Architect" to get conservative Americans to vote for one of his establishment candidates by being conned into believing a vote for Perry is really a vote against Bush II. Perry's politics are Bush II's on steroids, so why would they be political rivals.

Svigor said...

There is a lot of truth to the grading on a curve thing. Humans are very prone to keeping up with the Joneses far past the point of good sense.

On the other hand, when basic needs like shelter and food are met, people tend to slack right off.

He has a flawed understanding of evolution, and is even so wise as to point out nature's errors, such as (beautiful) elk antlers. In his naive view, the highest ideal is simply making copies of your genes. Then, I suppose, fungus is the apex of evolution as it is many orders of magnitude more efficient than humans.

Your criticism is flawed. Intelligence and tool-making give homo sapiens the opportunity for deliberate self-revision. And the potential of seeding space. One meteor (or virus) could take out all the fungi; mankind has the potential to overcome both.

Anonymous said...

"A structural flaw of flat middle class societies is that very few families from among your coethnics practice r-selection, so you end up importing ugly foreigners to do low-status work."

That or wages rise until the lower status nature of the work is gone.

Anonymous said...

It wasn't exactly Darwinian survival of the fittest when bank executives got handed billions of dollars with no strings attached for being incompetent. What we have now is socialism for the very rich and Darwinism for everyone else.

Anonymous said...

What we have now is socialism for the very rich and Darwinism for everyone else.
problem is darwinians will say that's darwinian.

beowulf said...

Amusing how comments about Robert H. Frank's point tend to say more about the commenter than anything Frank wrote.
He wrote something earlier this year, that makes entirely too much sense.

Taxing harmful activities is the best way to raise the revenue essential for reducing deficits. Only someone who thinks that people have a right to cause undue harm to others could object that such taxes violate anyone’s rights. And because such taxes make the national economic pie bigger, it makes little sense to object that we can’t afford them.
http://www.nytimes.com/2011/02/20/business/economy/20view.html

Nanonymous said...

meteor (or virus) could take out all the fungi; mankind has the potential to overcome both.

Exactly opposite is true: lots of things can wipe out all humans and virtually nothing can kill all fungi (or all bacteria).

Anonymous said...

Has Robert Frank not read Geoffrey Miller? Miller goes into exhaustive detail about how biologists and social scientists have been downgrading the effect of sexual selection ever since Darwin posited it in the Descent of Man. Sexual selection turns out to be very important in human evolution, it is perhaps the source of of a lot of human creativity, developed specifically to attract a mate. Hostility to sexual selection stems first from Victorian prudishness, then by socialist inspired utility concerns. Miller also shows in humans at least, sexual selection benefits other non related humans. Porsche sells a lot of cars to men trying to impress women with their wealth, and these cars provided lots of gainful employment for everyone from factory workers to car salesman to auto mechanics. So the benefits of sexual selection tend to get spread out even if that isn't the intent of the male peacock buying the expensive car, same goes for houses, planes, yachts, etc...

David Davenport said...

Most people, for example, would rather live in a 4,000-square-foot house that was bigger than their neighbor's than a 6,000-square-foot house that was the smallest on the street

That may not be true. Living in a smaller house in a better neighborhood has its advantages, provided that the house isn't too small -- under, say, 3,500 square feet, not counting the two car garage and a one acre lot.

Don't have a lot that big? People who live in big cities are suckers.

David Davenport said...

Steve, maybe you could swing a bigger Haus if you emulated the Instapundit:

THANKS TO EVERYONE who’s bought things through the Amazon links on this page or the searchbox in the right sidebar. By doing so you’ve put a little money in my family’s pocket at no cost to yourself. It’s much appreciated!

Posted at 7:00 pm by Glenn Reynolds


But some people are simply too pure and saintly for this cruel Darwinian world.

Anonymous said...

No one at ALL mentioned the alpha/beta meme?

Huh. Hope!

Anonymous said...

"Big Bill"s comment was intgelligent untill he chose to start babbling religious nonsense. He must have forgotten the worldview and religious perspective of EVERY NATIONALLY SUCCESSFUL CHRISTIAN POLITIAN IN THE UNITED STATES.

He also forgot about Gandhi etc, but his awesome blindness to the reality in this here USA is what really rules.

Other than that he's right of course and we all owe Marx an apology - not for failing to appreciate any "foresight" on his part but for not knowing our own history and what Europe was like before his call to action and the positive results of his call in our very own society (the negative results we all know, it's the positive results that we forget at our own peril).

Anonymous said...

Whitfield is pretty smart, but even he botches the "group selection" question.

I hate to sound like a broken record* but there's a simple proof that group selection occurs: without group selection, where would multicellular organisms come from?

Right. That settles that, so can we move on to something more interesting?

*I hate to sound old, too, so perhaps I shouldn't mention broken records, since hardly anyone under 30 years of age knows what a broken record is. Help me out here... what's the modern equivalent?

ATBOTL said...

People seem to want to live in crummy apartments in Manhattan next to the richest people in the universe.

"Steve, Denmark is the middle class society you yearn for"

not for long.

------------------------

Denmark is at the forefront of restricting immigration. It's one of the Western societies with the best chances for survival.

Anonymous said...

"Problem is Darwinians will say that's Darwinian."

Well, yes, exactly.

Let me remind all the atheist Darwinians quite clearly: if you disbelieve in God, then you permanently forfeit the prerogative of saying "right" and "wrong". All you can ever claim -- and it's _all_ you can ever claim -- is, "My tribe/clan _says_ (x)right, (z)wrong." Properly teased out, this has fascinating implications. Of course many atheists won't mind at all, and will continue buzzing about their insane little projects without a care in the world.

I've been re-reading Plato's Republic lately. Buncha pagans discussing what "justice" is. Interesting as always.

Svigor said...

Exactly opposite is true: lots of things can wipe out all humans and virtually nothing can kill all fungi (or all bacteria).

Okay, supernova then. Use your imagination; fungi aren't jumping off this rock unless they hitch a ride with us.

Anonymous said...

Denmark is at the forefront of restricting immigration
"denmark" might be but EU and traitors within denmark are working like mad to reverse that. One big big will be when the baby boom generation is fully out of power (though their children, at least in the US, are worse)

Luke Lea said...

I second Anonymous's comment on Geoffry Miller and the importance of sexual selection. Miller's book, The Mating Mind, advances the only plausible hypothesis I've seen to explain the human propensity for music, dance, story telling, humor, art, and a lot of other entertaining stuff we put under the general rubric of "culture, " which consumes an inordinate amount of total human time and energy. Indeed, the human appetite for entertainment is manifestly inexhaustible, greater even than our appetites for food and sex (except when the latter two are saturated in culture).