UPDATE: Did I betray the free market side? see end of this post.
From a review I wrote in yesterday’s NYT Book Review of Matt Ridley’s book The Rational Optimist:
The word “market” tends to set off a religious war. Opponents accuse proponents of blind faith in the Miracle of the Market. The proponents too often seem to confirm this accusation by overpromising and underproving what the market can do. (Opponents are often guilty of equally unthinking belief in the Immaculate Government Intervention.) Each side recites its creeds, giving heart to the faithful but making no converts.
Alas, Matt Ridley’s new book, “The Rational Optimist,” which argues for markets as the dominant source of human progress, is such a case. … he shows a surprisingly casual attitude toward logic and evidence, which is likely to cause the antimarket side to see him as rigging the contest. It’s an example of a phenomenon many economists have noted: natural scientists have remarkably low standards for reasoned argument when they discuss social science, as compared with the rigor they bring to their home fields
Nor does Ridley grapple with why so many people doubt market-based progress. His entertaining account of how such pessimism is always in fashion — whether the subject is overpopulation, genetic engineering, Y2K or global warming (he thinks we’ll all end up living on a slightly hotter but richer planet) — also predicts that today’s pessimists will ignore his message. Ridley is tone-deaf to the 20th-century traumas that were huge setbacks for the gospel of progress. “Despite the wars,” he writes, “in the half-century to 1950, the longevity, wealth and health of Europeans improved faster than ever before” — a true statement that surely misses the point.
Ridley also fails to really address inequality and uncertainty. The free market may produce cornucopia, doubters concede. But it also gave Richard Fuld of Lehman Brothers $60,000 a day (in 2007, the year before the company went bankrupt) while one billion other people survived on a dollar a day. In his discussion of global warming, Ridley argues that we’ve avoided all previous doomsday predictions. But our resourcefulness, or our luck, could run out sooner or later.
A case for individual freedom and market exchange would have to convince doubters that alternatives would create even more inequality and uncertainty, or something worse. Such a case could argue that some of those 20th-century traumas were caused by a backlash against both the “free” and the “market,” and that central planning tends to create even more rigid inequality between political “ins” and “outs” while lacking the creativity needed to cope with future threats. But the case must move from “maybe” to logic and evidence. Alas, this book does not get there.
So read “The Rational Optimist” for its fascinating history of trade and innovation. But also ponder whether the debate over markets can move forward while it remains a purely religious war. Those willing to confront honestly all the doubts about the “free market” might then actually be persuasive in arguing that it is the worst system humans have ever tried — except for all the others.
UPDATE: some have expressed puzzlement and dismay that I was critical of a book when I am in agreement with the conclusions of the book: enthusiasm for free trade, free markets, the creativity of individuals to fuel optimistic hopes that we will keep solving our problems and getting better off. Did I betray my own allies, the free market side?
There are two models of book reviewing: (1) just be positive about a book when you are on the same side of the conclusions, (2) analyze the argument that led to the conclusions, and be positive or negative based on whether it’s a good argument. My model was obviously (2).
It doesn’t do the free market side any favors if all of its advocates are willing to overlook sloppy logic and evidence and just follow clan-like loyalties based on the final conclusions. We will only move beyond the “religious war” if both the anti-market and pro-market sides are rigorously honest about the strengths and weaknesses of their own arguments.