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.