Darwinian Economics

Cornell Prof. Robert Frank blogs in the NYTimes about the economic lessons in Darwin's theories of evolution. Frank contends that Darwin provides a better framework for understanding competition than Adam Smith's Invisible Hand concept:

Smith’s basic idea was that business owners seeking to lure customers away from rivals have powerful incentives to introduce improved product designs and cost-saving innovations. These moves bolster innovators’ profits in the short term. But rivals respond by adopting the same innovations, and the resulting competition gradually drives down prices and profits. In the end, Smith argued, consumers reap all the gains.

The central theme of Darwin’s narrative was that competition favors traits and behavior according to how they affect the success of individuals, not species or other groups. As in Smith’s account, traits that enhance individual fitness sometimes promote group interests. For example, a mutation for keener eyesight in hawks benefits not only any individual hawk that bears it, but also makes hawks more likely to prosper as a species.

In other cases, however, traits that help individuals are harmful to larger groups. For instance, a mutation for larger antlers served the reproductive interests of an individual male elk, because it helped him prevail in battles with other males for access to mates. But as this mutation spread, it started an arms race that made life more hazardous for male elk over all. The antlers of male elk can now span five feet or more. And despite their utility in battle, they often become a fatal handicap when predators pursue males into dense woods.

(Image from NYTimes.com)

Chimerican Relations

David Brooks reports on a debate over the relationship between China and America. Niall Ferguson takes a hawkish view about the ambitions of a power-hungry China. James Fallows argues that China's interests are oriented towards internal stability and integration with the global economy -- not world domination.

I agree strongly with Fallows, and the psychology argument that Brooks highlights is the key. China doesn't want to rule the world. It does want respect and security... and it wants to be very, very successful. But given those things, Chinese psychology doesn't call for it to dominate other nations the way German or Japanese psychology did in the 20th century.

Afraid of the Dark

Cool article in another NYTimes.com blog -- this time by Harvard psychology professor Daniel Gilbert -- discussing the psychological connection between uncertainty and unhappiness. He says the hardest part of the current economic recession is not knowing what's going to happen. Counterintuitively, knowing things will be bad makes us happier than knowing there is a possibility they will be good. In his words:

Why would we prefer to know the worst than to suspect it? Because when we get bad news we weep for a while, and then get busy making the best of it. We change our behavior, we change our attitudes. We raise our consciousness and lower our standards. We find our bootstraps and tug. But we can’t come to terms with circumstances whose terms we don’t yet know. An uncertain future leaves us stranded in an unhappy present with nothing to do but wait.

This is closely related to something I heard (and believe), about the relationship between psychological stress and control over a situation. Things can be bad, but as long as feel we have control over the situation, we aren't too stressed. Conversely, it's when we feel things are out of our control that we experience stress. A useful application of this principal in my own life is to look at any situation, and try to understand what things you can control and what things you can't... then accept the things you can't control and only worry about the ones you can.

(image by Shoboshobo)

Fascinating: The Underlying Math of Cities

In a post on Olivia Judson's blog for the NYTimes, Leon Kreitzman discusses the hidden patterns mathematics has identified in the efficiency of cities.

He talks about Zipf's Law -- that city size in a nation is inversely proportional to rank (i.e. the biggest city is 2X as large as the 2nd-biggest, and 3X as large as the third biggest) -- and the way cities get more efficient as they get bigger. A topic also covered here, and a trait that is shared not just by cities, but also by mammals.

The similarities between cities and mammals are particularly interesting because they highlight the fact that cities and animals are in some ways both organisms. Mammals are collections of cells and organs organized through evolution to perpetuate life (ignoring for the moment, more lofty potential explanations). Cities are collections of individuals and infrastructure organized through society to enhance productivity and growth. Makes one wonder what the relevant organs correspond to in a city. I've always heard people say City Hall is full of assholes.

(Image above by Lee Jang Sub)

The Virtues of Ex-Patriotism

Article in The Economist: living abroad makes you more creative.

All tied up

Very detailed article in the NYTimes yesterday about Tim Geithner and the economic relationship between the U.S. and China. It's a bit on the long side, but worth a read if you're interested in the issue.

Some of the key points that jumped out at me:

• Obama officials believe China's recent job losses are more than the 20 million officially estimated. Not terribly surprising, but it suggests the Chinese economy may be weaker than generally recognized.
• Good insight about China's aggressive stance towards the U.S. being "more to soothe a domestic audience" than a sign of actual policy. In other words, the Chinese government is are more worried about social unrest than anything else, and if things get really bad for them domestically, they are prepared to blame their economic problems on the U.S.
  

The Story of Our Lives

An amazing story in The Atlantic about the Harvard Study of Adult Development (aka the Grant Study). In 1937, researchers identified 268 of the healthiest and most well-adjusted sophomore men at Harvard University (including the future President Kennedy), and they've followed their lives over the last 72 years.

The results breathtakingly illustrate just how complex our lives are. Highly recommend you take the time to read it. It's a pretty unique vantage point onto the human condition.