The Darwin Economy: Liberty, Competition, and the Common Good

Princeton University Press
2
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Who was the greater economist--Adam Smith or Charles Darwin? The question seems absurd. Darwin, after all, was a naturalist, not an economist. But Robert Frank, New York Times economics columnist and best-selling author of The Economic Naturalist, predicts that within the next century Darwin will unseat Smith as the intellectual founder of economics. The reason, Frank argues, is that Darwin's understanding of competition describes economic reality far more accurately than Smith's. And the consequences of this fact are profound. Indeed, the failure to recognize that we live in Darwin's world rather than Smith's is putting us all at risk by preventing us from seeing that competition alone will not solve our problems.

Smith's theory of the invisible hand, which says that competition channels self-interest for the common good, is probably the most widely cited argument today in favor of unbridled competition--and against regulation, taxation, and even government itself. But what if Smith's idea was almost an exception to the general rule of competition? That's what Frank argues, resting his case on Darwin's insight that individual and group interests often diverge sharply. Far from creating a perfect world, economic competition often leads to "arms races," encouraging behaviors that not only cause enormous harm to the group but also provide no lasting advantages for individuals, since any gains tend to be relative and mutually offsetting.

The good news is that we have the ability to tame the Darwin economy. The best solution is not to prohibit harmful behaviors but to tax them. By doing so, we could make the economic pie larger, eliminate government debt, and provide better public services, all without requiring painful sacrifices from anyone. That's a bold claim, Frank concedes, but it follows directly from logic and evidence that most people already accept.

In a new afterword, Frank further explores how the themes of inequality and competition are driving today's public debate on how much government we need.

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About the author

Robert H. Frank is an economics professor at Cornell's Johnson Graduate School of Management, a regular "Economic View" columnist for the New York Times, and a Distinguished Senior Fellow at Demos. His books, which have been translated into twenty-two languages, include The Winner-Take-All Society (with Philip Cook), The Economic Naturalist, Luxury Fever, What Price the Moral High Ground?, and Principles of Economics (with Ben Bernanke).
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Additional Information

Publisher
Princeton University Press
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Published on
Sep 16, 2012
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Pages
272
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ISBN
9781400844982
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Language
English
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Genres
Business & Economics / Economic History
Business & Economics / Economics / Macroeconomics
Business & Economics / Economics / Theory
Political Science / General
Political Science / Political Economy
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Content Protection
This content is DRM protected.
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Available on Android devices
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Eligible for Family Library

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Robert H. Frank
From New York Times bestselling author and economics columnist Robert Frank, a compelling book that explains why the rich underestimate the importance of luck in their success, why that hurts everyone, and what we can do about it

How important is luck in economic success? No question more reliably divides conservatives from liberals. As conservatives correctly observe, people who amass great fortunes are almost always talented and hardworking. But liberals are also correct to note that countless others have those same qualities yet never earn much. In recent years, social scientists have discovered that chance plays a much larger role in important life outcomes than most people imagine. In Success and Luck, bestselling author and New York Times economics columnist Robert Frank explores the surprising implications of those findings to show why the rich underestimate the importance of luck in success—and why that hurts everyone, even the wealthy.

Frank describes how, in a world increasingly dominated by winner-take-all markets, chance opportunities and trivial initial advantages often translate into much larger ones—and enormous income differences—over time; how false beliefs about luck persist, despite compelling evidence against them; and how myths about personal success and luck shape individual and political choices in harmful ways.

But, Frank argues, we could decrease the inequality driven by sheer luck by adopting simple, unintrusive policies that would free up trillions of dollars each year—more than enough to fix our crumbling infrastructure, expand healthcare coverage, fight global warming, and reduce poverty, all without requiring painful sacrifices from anyone. If this sounds implausible, you'll be surprised to discover that the solution requires only a few, noncontroversial steps.

Compellingly readable, Success and Luck shows how a more accurate understanding of the role of chance in life could lead to better, richer, and fairer economies and societies.

Robert H. Frank
A new luxury fever has America in its grip. Independent of stock prices, recessions, and inflation rates, the past two decades have witnessed a spectacular and uninterrupted rise in luxury consumption. Ordinary, functional goods are no longer acceptable. Our cars have gotten larger, heavier, and far more expensive. Mansions larger than 30,000 square feet no longer seem extravagant. Wristwatches for the super-rich cost tens of thousands of dollars. We are living in an era of excess.
Consider:
The average house built in the United States today is nearly twice as large as its counterpart from the 1950s.
Even as houses have gotten more expensive and farther from the workplace, there has been a sharp increase in second-home ownership.
The average price of an automobile sold in the United States now exceeds $22,000, up more than 75 percent from a decade ago.
Total U.S. spending on luxury goods increased 21 percent between 1995 and 1996 (typical of recent years), while overall merchandise sales increased only 5 percent.
Robert Frank caused a national debate in 1995 when he and co-author Philip Cook described the poisonous spread of "winner-take-all" markets. Now he takes a thought-provoking look at the flip side of spreading inequality: as the super-rich set the pace, everyone else spends furiously in a competitive echo of wastefulness. The costs are enormous: We spend more time at work, leaving less time for family and friends, less time for exercise. Most of us have been forced to save less and spend and borrow much more. The annual rate at which American families file for personal bankruptcy has grown to one in seventy. Budgetary pressures have reduced our willingness to fund even essential public services: Our food and water are increasingly contaminated. Potholes proliferate, and traffic delays double every ten years.
Frank offers the first comprehensive and accessible summary of scientific evidence that our spending choices are not making us as happy and healthy as they could. Furthermore, he argues that human frailty is not at fault. The good news is that we can do something about it. We can make it harder for the super-rich to overspend, and capture our own competitive energy for the public good. Luxury Fever boldly offers a way to curb the excess and restore the true value of money.
Robert H. Frank
Financial disasters--and stories of the greedy bankers who precipitated them--seem to underscore the idea that self-interest will always trump concerns for the greater good. Indeed, this idea is supported by the prevailing theories in both economics and evolutionary biology. But is it valid?

In What Price the Moral High Ground?, economist and social critic Robert Frank challenges the notion that doing well is accomplished only at the expense of doing good. Frank explores exciting new work in economics, psychology, and biology to argue that honest individuals often succeed, even in highly competitive environments, because their commitment to principle makes them more attractive as trading partners.

Drawing on research he has conducted and published over the past decade, Frank challenges the familiar homo economicus stereotype by describing how people create bonds that sustain cooperation in one-shot prisoner's dilemmas. He goes on to describe how people often choose modestly paid positions in the public and nonprofit sectors over comparable, higher-paying jobs in the for-profit sector; how studying economics appears to inhibit cooperation; how social norms often deter opportunistic behavior; how a given charitable organization manages to appeal to donors with seemingly incompatible motives; how concerns about status and fairness affect salaries in organizations; and how socially responsible firms often prosper despite the higher costs associated with their business practices.

Frank's arguments have important implications for the conduct of leaders in private as well as public life. Tossing aside the model of the self-interested homo economicus, Frank provides a tool for understanding how to better structure organizations, public policies, and even our own lives.

Robert H. Frank
Quão importante é a sorte no sucesso econômico? Nenhuma pergunta divide conservadores e liberais com tanta confiança. Como os conservadores corretamente observam, pessoas que acumulam grandes fortunas são quase sempre talentosas e esforçadas, mas os liberais também estão corretos ao apontar que muitas outras possuem essas mesmas qualidades e nunca ganharam muito. Recentemente, cientistas sociais descobriram que a sorte possui um papel muito maior em desfechos importantes na vida do que as pessoas imaginam. Em Sucesso e sorte, um dos autores mais vendidos e colunista de economia do New York Times, Robert Frank, explora as surpreendentes implicações destas descobertas para mostrar porquê os ricos subestimam a importância da sorte no sucesso – e como isso prejudica a todos, até mesmo os ricos. Frank descreve como, em um mundo cada vez mais dominado pelo mercado do tudo-ou-nada, oportunidades de sorte e vantagens triviais iniciais frequentemente refletem em vantagens muito maiores – e enormes diferenças de renda – com o tempo, como falsas crenças sobre a sorte persistem, apesar de fortes evidências contra elas; e como mitos sobre sucesso pessoal e sorte moldam escolhas pessoais e políticas de forma prejudicial. No entanto, Frank argumenta, que poderíamos diminuir a inequidade gerada pela sorte adotando políticas simples e não invasivas que liberariam trilhões de dólares a cada ano – mais do que o suficiente para reparar nossa infraestrutura desmoronada, expandir a cobertura de assistência de saúde, combater o aquecimento global e reduzir a pobreza, tudo isso sem demandar sacrifícios dolorosos de ninguém. Se isso soa implausível, você se surpreenderia em descobrir que a solução necessita de apenas alguns passos nada controversos. Uma leitura convincente, Sucesso e sorte mostra como um entendimento mais preciso do papel da sorte na vida pode nos levar a uma economia e sociedade melhores, mais ricas e mais justas.
Robert H. Frank
From New York Times bestselling author and economics columnist Robert Frank, a compelling book that explains why the rich underestimate the importance of luck in their success, why that hurts everyone, and what we can do about it

How important is luck in economic success? No question more reliably divides conservatives from liberals. As conservatives correctly observe, people who amass great fortunes are almost always talented and hardworking. But liberals are also correct to note that countless others have those same qualities yet never earn much. In recent years, social scientists have discovered that chance plays a much larger role in important life outcomes than most people imagine. In Success and Luck, bestselling author and New York Times economics columnist Robert Frank explores the surprising implications of those findings to show why the rich underestimate the importance of luck in success—and why that hurts everyone, even the wealthy.

Frank describes how, in a world increasingly dominated by winner-take-all markets, chance opportunities and trivial initial advantages often translate into much larger ones—and enormous income differences—over time; how false beliefs about luck persist, despite compelling evidence against them; and how myths about personal success and luck shape individual and political choices in harmful ways.

But, Frank argues, we could decrease the inequality driven by sheer luck by adopting simple, unintrusive policies that would free up trillions of dollars each year—more than enough to fix our crumbling infrastructure, expand healthcare coverage, fight global warming, and reduce poverty, all without requiring painful sacrifices from anyone. If this sounds implausible, you'll be surprised to discover that the solution requires only a few, noncontroversial steps.

Compellingly readable, Success and Luck shows how a more accurate understanding of the role of chance in life could lead to better, richer, and fairer economies and societies.

Robert H. Frank

Who was the greater economist--Adam Smith or Charles Darwin? The question seems absurd. Darwin, after all, was a naturalist, not an economist. But Robert Frank, New York Times economics columnist and best-selling author of The Economic Naturalist, predicts that within the next century Darwin will unseat Smith as the intellectual founder of economics. The reason, Frank argues, is that Darwin's understanding of competition describes economic reality far more accurately than Smith's. And the consequences of this fact are profound. Indeed, the failure to recognize that we live in Darwin's world rather than Smith's is putting us all at risk by preventing us from seeing that competition alone will not solve our problems.


Smith's theory of the invisible hand, which says that competition channels self-interest for the common good, is probably the most widely cited argument today in favor of unbridled competition--and against regulation, taxation, and even government itself. But what if Smith's idea was almost an exception to the general rule of competition? That's what Frank argues, resting his case on Darwin's insight that individual and group interests often diverge sharply. Far from creating a perfect world, economic competition often leads to "arms races," encouraging behaviors that not only cause enormous harm to the group but also provide no lasting advantages for individuals, since any gains tend to be relative and mutually offsetting.


The good news is that we have the ability to tame the Darwin economy. The best solution is not to prohibit harmful behaviors but to tax them. By doing so, we could make the economic pie larger, eliminate government debt, and provide better public services, all without requiring painful sacrifices from anyone. That's a bold claim, Frank concedes, but it follows directly from logic and evidence that most people already accept.


In a new afterword, Frank further explores how the themes of inequality and competition are driving today's public debate on how much government we need.


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