Nature: An Economic History
Princeton University Press, 2006
445 pp., 42.0
Andrew P. Morriss
What do you think of when you think of economics? Supply and demand curves crossing? Constrained optimization problems? Is economics just a science (or black art) dealing with the money supply, comparative advantage, and inflation? Over the past fifty years, there have been a number of bold efforts at pushing the frontiers of economic analysis past such obviously "economic" issues. Gary Becker won the Nobel Prize for applying economic analysis to issues ranging from marriage to discrimination, and several economists, including Lawrence Iannaconne at George Mason University, have profitably deployed economics to study religion.
Even these bold steps outside of the traditional subject matter of economics left a great deal of the world outside economists' domain. No longer. Geerat Vermeij, a geologist, has taken economic reasoning even further, arguing in Nature: An Economic History that economists and natural scientists are asking the same kinds of questions in their seemingly disparate fields. He contends that "common principles underlie all these diverse fields, and that these principles imply broadly predictable patterns of change through time, patterns with interesting implications for our future." Margaret Schabas, a philosopher with an economics degree, makes the case in The Natural Origins of Economics that economics once had strong connections to the natural sciences, connections that she thinks the discipline should revive. These are provocative assertions worth considering in detail.
Is Natural Science Economics?
Vermeij defines an economy to be "a system of living, self-interested, interacting beings or entities that compete for locally scarce resources." With this broad definition, much of the natural world falls into a system of natural economies. Vermeij makes a convincing case that thinking about large swaths of the natural world in terms of a competition for scarce resources is both accurate and useful. For example, Vermeij's science leads him to reflect on the importance of the limits on resources available in the immediate location of an organism. Success in the competition for these resources "means perpetuation in the face of predictable and unpredictable change, achieved by entities that control the right resources for a time long enough to leave descendants."
Why have we been treating human activity as different in kind from the activities of mollusks and plants? Vermeij sets up and knocks down three possible explanations. First, the differences may simply be too large, and so human and nonhuman behavior is simply too dissimilar for analogies between them to be enlightening. He rejects this claim, arguing that "our economic system is only one of many variations on a simple common theme: an array of adaptable entities competing for resources." The division of labor among humans is simply an expression of the same behavior that causes the seastar Pisaster ochraceus to eat mostly mussels and barnacles in the northern Pacific while eating mostly snails along the Baja California coast.
Second, man's technological achievements, including "caus[ing] destruction more rapidly and on a vastly larger scale than other life forms," set us apart. Not so, says Vermeij, with dry humor: "If the simple life forms of the Archean—the era of Earth history before 2.5 billion years ago (Ga)—could have passed laws against pollution, their principle target surely would have been oxygen. … Pollution has remained a pervasive phenomenon ever since." Our cars and factories are thus merely the latest "in a very long line of environment-altering activities of living entities." Even globalization was "by no means unknown in the prehuman biosphere," with "birds, mammals, fish, sea turtles, and even insects" engaging in long distance migrations.
Third, "as sentient creatures capable of prediction and deliberate action, humanity has forged economic systems for which there are no historical precedents and to which new principles apply." In particular, "much human technological innovation represents a break with established form." Moreover, we plan our activities to a degree that appears unparalleled in the rest of the biosphere. Vermeij finds, however, what he considers close parallels: "The greatest evolutionary innovations involved the combination and integration of previously independent life forms in a way that violates the principle of modification of established themes." Moreover, "[l]earning in the way the immune system and the nervous system do it—with parallel processing using a vast multitude of simple components each endowed with a few simple instructions—is an emergent capacity that produces what we would call intelligence." We're not as different from other species as we first appear to be: "Intelligent design such as that practiced by humans, or such as that ascribed by some humans to the higher authority of an omnipotent and omniscient god, is a derived adaptation that has made innovation more rapid and more wide ranging but whose roots extend all the way back to the origins of life."
Having established man as simply one species among many, Vermeij then takes the reader on a remarkably comprehensive tour of recent biological and geological knowledge, developing a wide range of analogies between human behavior and the behavior of various other organisms, from plants to mollusks to mammals. For example, Vermeij explains how natural scientists think about organisms' use of power: "Increases in an entity's temperature, metabolic rate, size, and structural complexity are the chief mechanisms by which entities can acquire and deploy more power and [do] so under a wider range of circumstances." Vermeij contends that power in the economic and political sense is no different from power in the metabolic sense, and that analogies between how human organizations acquire and make use of power and how various non-human creatures do so can be enlightening. A biological innovation that might increase an animal's ability to use energy can be analyzed in the same terms as a human innovation. Vermeij then moves seamlessly from an analysis of "colonial" marine animals such as corals to a critique of dictatorships, finding the redundancy and versatility in the organization of a coral reef to be similar to the description of democratic government: "As the history of centralized forms of government makes all too clear, rigid allegiance of society and its parts to central authority exposes everyone to errors or foolish policies generated at the seat of power. Napoleon's and Hitler's decisions to invade Russia proved disastrous for them both and for their nations."
There is a reason Vermeij wants to unify natural science and economic thinking: he sees disaster looming if we continue to exhaust the stock of resources. For example, he states that "Much land has been paved over with roads and urban sprawl, reducing the ability of soils and rivers to soak up and transport water and therefore increasing the intensity of devastating floods." Such problems, he contends, are more likely to be addressed if economics gets closer to the natural sciences in its approach.
The reality is that there is not quite the crisis Vermeij suggests. The USDA "National Resources Inventory" for 2003 (the most recent available), prepared by an agency that one can hardly think is staffed by apologists for sprawl, reports that while developed land increased from 72.9 million acres in 1982 to 108.1 million acres in 2003, land in the conservation reserve program (begun in 1985) put 31.5 million acres into conservation uses and forest land grew by 2.4 million acres, nearly equaling the increase in developed land. Moreover, forest cover in the United States has grown substantially over the past century.
The survey of the science is captivating in spite of such flaws. Vermeij writes well and has a knack for presenting illustrative details without overwhelming the reader. In the hands of a lesser writer, this would have been a far more difficult book to read. Nevertheless, the book has a serious problem that sinks its attempt to provide an overall synthesis: Vermeij doesn't appear to have read very much economics and certainly hasn't read economics writing of the same quality as his natural science sources. The book's bibliography is almost sixty pages long—but almost none of it lists articles from important economics journals or leading economics texts. There are more citations to leading science journals, from Nature to the Journal of Geology, than I had the patience to count, but almost none to the American Economic Review, Quarterly Journal of Economics, Journal of Political Economy or similar distinguished economics journals.
Even worse, the economic literature he cites is often out-of-date or simply wrong. For example, the bibliography includes works by John Kenneth Galbraith, William Greider, and Paul Hawken, popular writers without serious reputations. Missing are citations to Friedrich Hayek's work, a Nobel laureate whose focus on spontaneous orders would make a natural fit with Vermeij's analysis, or Jean Tirole, possibly the most important contemporary industrial organization economist and a game theorist whose analyses of firm behavior in the market could have intriguing biological parallels.
The point is not that Vermeij ought to be reading particular authors, but that his economics does not come from the same professional strata as his natural science. This leads him into some bizarre contentions, such as that the solution to food shortages in North Korea is improving transportation networks. The North Korean people are starving because of deliberate policy choices made by their evil leaders. That starvation exists side by side with the prosperity in South Korea is convincing evidence that institutions matter. And such howlers flow directly from Vermeij's failure to read the modern economic work on institutions. Douglass C. North and Robert Fogel, who shared the Nobel Prize in 1993 in recognition of each man's work on the economic impacts of institutions, both published major works on the subject beginning in the 1960s. (Nothing by either man appears in the bibliography.) The failure to grapple with serious economics ultimately dooms Vermeij's attempt to synthesize the two disciplines. Ironically, had he focused on the serious economic literature, I believe he could have built a far more compelling case that there are important commonalities between the natural and social sciences.
Was Economics Natural Science?
Where Vermeij wants to bring economics and natural science together, Schabas undertakes to show that they once were closer—and perhaps should be again. Like Vermeij, Schabas is a gifted writer tackling a dense and difficult subject. She ably packs a sufficient history of economic thought to make her point into less than 160 pages of text.1 The more than thirty pages of references and fourteen pages of notes aptly document the depth of the scholarship supporting the book. Schabas regularly acknowledges disagreements with her sources and fairly summarizes opposing viewpoints, leaving it to the reader to judge who has the better argument. Indeed, one of the primary strengths of the book is the sense it provides of engaging the reader in a conversation with Schabas over the issues she raises.
She begins by noting the ubiquity of economics in our daily lives while showing at the same time how recent the habit of thinking about the world in economic terms is: "If one goes back a few centuries, however, it is by no means clear that people, even the learned communities of Western Europe, perceived such an entity as the economy." Moreover, topics that we now include within economics (e.g., trade and agriculture), and so derived from individual behavior, were once thought of quite differently.
Even early economists such as Adam Smith, Schabas tells us, saw economics and nature as linked in a way that economics today does not. Beginning with the great English economists of the early 19th century, such as Ricardo and Malthus, and taking hold in John Stuart Mill's work, there was "a radical reconfiguration" in our understanding of economics' relationship to nature. This reached fruition with the "marginalist revolution" of the 1870s, which provided completion of the shift "toward the role of human institutions as the point of origin for economic phenomena" and away from "providing a detailed account of human nature and of wealth as a natural phenomena."
Schabas puts great weight on a detailed analysis of the metaphors and analogies to the natural world which these economists used to explore economic issues. Adam Smith, for example, spent a great deal of time with scientists and regularly read the science literature of his day. Schabas' analysis of Smith's posthumously published early essay "The History of Astronomy" is a fascinating window into Smith's thought. It documents Smith's long-standing fascination with science, which most likely influenced his penchant for analogies to the natural world to explain his economic ideas. Schabas argues that Smith's ideas about labor drew on the contemporary scientific understanding of the then-recent discovery of "fixed air" in substances like amber. Similarly, Schabas persuasively documents David Hume's fascination with scientific discoveries, particularly electricity, which his scientific contemporaries thought was a fluid.
The next step in the argument, however, is less convincing. Schabas contends that Smith's theory of labor arose out of Smith's use of "the conceptual tools of contemporary chemists" and that Hume's theory of money built from his understanding of electricity as a fluid. As intellectual history this is interesting. As the foundation for an analysis of what is wrong with economics today, however, it contains a substantial flaw. The understanding of chemistry and electricity in Smith and Hume's time was, we now know, incorrect. We now understand the properties of gases well enough to know that 18th-century understandings of the properties of "fixed air" were not accurate. Similarly, we now know that electricity is not a fluid. These examples may have illuminated economics for Hume's and Smith's readers because they shared beliefs with the authors, such as that electricity was a fluid. The examples no longer do so because we no longer share those beliefs. In fact, an understanding of electricity today is likely to make it harder to follow Hume's arguments, since the fluid analogy runs counter to what we know about electricity. Moreover, natural science today has become sufficiently complicated and the lives of most Americans sufficiently divorced from direct experience of non-human natural processes that such analogies are not always the most enlightening to modern audiences. Because we have more direct experience with complicated economic phenomena today, we have less need of analogies to physical processes to understand them.
There is more to Schabas' argument than whether economists ought to be choosing natural analogies to communicate their ideas, however. Her concern is the substitution of an engineering approach to economics for a natural science approach: "A central motif of postwar economics is the ability to stabilize the economy via manipulation of the interest rate and the money supply. In short, many economists under the sway of Keynes believed they could engineer the economy . … The rhetoric is very much like that of civil engineers." For Schabas, this shift was not a good thing.
There are two parts to an engineering view of economics, and it's important to distinguish between them. The first relates to the use of mathematical tools similar to those used by scientists and engineers. It's true, of course, that Smith, Ricardo, Malthus, and the other early economists did not make use of the same mathematical methods used today, but that reflects more on the state of mathematics than on the content of their ideas.2 Doing economics while giving up mathematical tools would be like conversation after dispensing with all words in English beginning with the letter M. One could still convey most ideas, it would just be harder to do so with precision.
Schabas is quite right, however, to criticize the second aspect of the engineering approach to economics—the assumption that application of those tools allows manipulation of the economy in the same way an engineer manipulates the controls of a machine. Economies are not like bridges, and any attempt to construct ways of understanding them as if they were bridges is bound to lead to disaster—as did the Keynesians' attempts at manipulating the economies of developing and developed world alike. That's not how most people do economics today, however—at least if they want to do it right. It is true that many macroeconomists through the 1970s fell under Keynes' spell. And it is not surprising that they did so, since his approach put them in charge of important policies. But beginning in the 1970s, economic theory began to break free from the overly simplistic engineering metaphor, changes that accelerated as it became clear that the Keynesian approach could neither explain nor cure the economic woes of the 1970s.
Today, even macroeconomists have developed richer, more nuanced views of the world than the simplistic view of economies as machines manipulated by central bankers that dominated the 1960s and 1970s. Some of the newer approaches in economics make considerable use of natural science insights and analogies. One trivial example makes the point nicely: the website for Macroeconomics II at MIT (on the open courseware website), where I did my graduate work and which, based on my experience, could not be expected to embrace anything but the most rigorous approach, featured a photograph of the earth from space, suggesting an organizational framework far different from civil engineering. More substantive examples are the rise of "neuro-economics" and experimental economics (for which Vernon Smith won the Nobel Prize in 2002). In the former, individuals' brains are studied using MRI technology while they make decisions, and insights from neurology illuminate the economic analysis. In the latter, economists use the results of experiments that provide opportunities to vary conditions and incentives for actual decision-making. Economists no longer need an exhortation to return to the natural world, for it appears that many have already done so.
There is a deeper problem with both of these books that I think will provide food for thought for many Books & Culture readers. Both books wrestle with the issue of man's place in nature. Is man a part of nature? Or is man somehow outside nature, disrupting the "natural order" with his internal combustion engines, large scale mono-crop agriculture, and vast cities? What exactly is nature? Neither Vermeij nor Schabas is completely clear on the answers to these questions, and that lack of clarity plays a role in undermining their theses.
Vermeij has little time for those who claim humanity is unique. I've owned enough cats, dogs, and horses to appreciate the similarities between ourselves and other mammals and to share some of Vermeij's discomfort with drawing a bright line between man and other creatures. But I've also spent enough time with animals and with people who work with animals more regularly than I do to appreciate the differences as well. When Vermeij states that the differences between people and other species "are real, but they are differences in amount and scale, not in kind," he is going farther than most people will be willing to go. I think he's wrong.
Why do we think that man is different? According to Vermeij, Judeo-Christian traditions have "created a climate against ideas linking human characteristics to those of lesser beings." Yes and no. There are many points in the Judeo-Christian heritage—not least in Scripture itself—where humankind is seen firmly located in the natural world, and where kinship between humans and animals is acknowledged (see Proverbs for starters). Still, man is different because man is made in God's image and has a direct relationship with God. And both Jews and Christians recognize man's dominion over the rest of the natural world based on Genesis 1:26:
And God said, Let us make man in our image, after our likeness: and let them have dominion over the fish of the sea, and over the fowl of the air, and over the cattle, and over all the earth, and over every creeping thing that creepeth upon the earth. (KJV)
There is a rich debate over what this dominion entails (as Spiderman's Uncle Ben told him, "with great power comes great responsibility"), but this text clearly entails an important distinction between man and the rest of the world.
Vermeij has little time for such ideas. In a brief early section entitled "Good and Evil," he rejects the possibility that any religion offers an account of the world worthy of consideration:
The world's religions, for example, offer guidance to the behavior of their adherents, and fulfill emotional wants in many people for an abstract security and a promise of a better life to come. The monotheistic religions have been highly successful in uniting disparate peoples into societies capable of expansion and political domination over other, often polytheistic societies.
Religion, he says, is "an adequate hypothesis about the society in which the religion originated or spread. As truth—in the scientific sense—religion fails." He returns to this theme in the book's conclusion, saying that monotheistic religions "are cultural adaptations to an economy that operated close to carrying capacity given the level of technology of the time. By assigning a dominant role to a supernatural being whose actions are largely beyond the control of mortal humans, they reinforce the perception that little can be done to improve the lot of people." Religion is thus just a set of beliefs that provide some cultures with advantages in some circumstances. The solution is to recognize that "Evolution and economics—different expressions of the same principles that govern life and the emergence of life's organization—show us what works and what does not, which adaptive hypotheses preserve adaptability and opportunity and which lead to rigidity and constraint. Our future depends on them."
Schabas does not make claims as sweeping as Vermeij's, but she too relegates religion to a sidenote, a puzzling position for an analysis of 18th- and 19th-century European thought. For example, Smith, whose religious views she notes are "more disputed than any other facet of his thought," ultimately is classified as a deist. She conjectures that the Rev. Thomas Malthus was "unorthodox" in his theology and notes his failure to cite "chapter and verse" to support his economic views as evidence of a preference "to look to the 'Book of Nature' rather than to Scripture as the source of scientific inquiry." It may be that Schabas is right about each of the individual economists' views, although it seems unlikely that every major economist in this period would turn out to be not only lacking in general religiosity but free of serious influences from Christian thought.
I find these authors' determination to marginalize religion puzzling. One reason I found Vermeij's book so compelling was his lucid descriptions of the details of myriad creatures, whose intricacies are a delight to the mind and the eye. Almost daily I encounter an aspect of nature that convinces me not only of God's existence but of his essential goodness. Why create the exquisite fish that populate coral reefs or the bizarre and wonderful things that we find in the depths of the sea unless he loves both the beauty of such creations and the joy that their discovery brings to his children who find these presents? For that matter, why create cats, unless he delights in playfulness?
But even man's creations can be exhilarating. The Hoover Dam took my breath away the first time I saw it (and not just because it was finished on time and on budget). The Golden Gate Bridge is stunning. The details on European cathedrals are astounding works of beauty. The Sitka Icon of the Mother of God, brought from Russia to Alaska by St. Innocent, recently toured the lower 48 states—and brought tears to my eyes with its beauty. Man's place is both within nature, for we are created beings, and in a position of authority over nature.
Herein lies the problem with appeals to bring economics, a science of human nature, into harmony with "the rest of nature." They are doomed to failure unless they are built on an understanding of man's unique place in nature. We can't go "back to nature" unless we know where nature is. We can't get wherever that is without knowing where we are. And, ultimately, we can't know either without knowing God.
Andrew Morriss struggles with the economics of nature on ten acres with five horses, nine cats, and a dog and with the nature of economics at the University of Illinois, where he teaches law and economics.
1. Robert Nelson's books Reaching for Heaven on Earth (Rowman & Littlefield, 1993) and Economics as Religion (Penn State Univ. Press, 2002) provide more complete summaries of the development of economic thought and also discuss the issues using religious analogies which Books & Culture readers may find more useful than the compressed discussion in Schabas.
2. As Michio Morishima has shown, Ricardo's classic treatise, the Principles of Political Economy, anticipates much of modern economic theory and can be readily and usefully restated in mathematical terms. See Ricardo's Economics (Cambridge Univ. Press, 1990).
Copyright © 2007 by the author or Christianity Today/Books & Culture magazine.
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