Crisis Antidote – The Rational Optimist

Take a break from the doom and gloom of the credit crunch with Matt Ridley’s talk on his excellent upbeat book “The Rational Optimist – How Prosperity Evolves”, time to take a step back and appreciate just how lucky those of us alive today really are.

Per the blurb for the talk –

Matt Ridley, bestselling author of The Red Queen, Nature via Nurture, and other books, tells the story of human cultural and economic evolution in his latest work, The Rational Optimist: How Prosperity Evolves. Combining the best of economics and biology, he explains both the “how” and “why” of the amazing (and recent) explosion in worldwide human well-being. Against the pessimism of many of today’s intellectuals and commentators, Ridley presents a compelling case for why progress will continue, but only if cultural evolution is allowed to develop in the direction of more contact, trade, and openness between people.

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  • Driftwood

    The Red Queen is a brilliant book, but Ridley has a bit of ‘form’ re: Northern Rock. Wasn’t he a director there when the company went tits up?

  • willis

    Matt Ridley is rather too modest.

    http://en.wikipedia.org/wiki/Matt_Ridley

    “Ridley was non-executive chairman of the UK bank Northern Rock from 2004 to 2007, in the period leading up to the bank’s near-collapse.”

  • Mack

    No he is pretty up front about that, but thanks for the ad homenim.

  • Mack

    Yes, I’m not sure that undermines everything he’ll ever do or say. He seems to have learnt something from it, as he appears to be in favour of much heavier financial regulation now.

    The book / talk is about the improvement in living standards that flows from trade, not about the benefits of growing a bank rapidly by funding lending from the wholesale markets rather than deposits.

  • Anon

    The point is that maybe soem of his theories have been tried and found wanting?

  • Mack

    Why don’t you watch the video?

  • Good stuff Mack. If I get a moment, I’ll run through the list of cognitive biases that result in people over-focusing on pessimistic indicators – this whole “didn’t he work for RBS? Everything he sez must be bollix” tack is a bit boring, innit?

  • willis

    How very true. What would have happened if BP had been a bit more pessimistic about Deepwater Horizon before April 20th?

  • slappymcgroundout

    Dear lord, another moron. Anyone with even a faintest understanding of physics knows that if the whole world consumed at the rate of the West, the world would be a desert in no time. And his mantra of globalization is a complete and utter lie. That same concentration of wealth into the hands of a few here in the West is happening in the land of the poor as well. And if you have the singularly unpleasant occasion to speak with the cretin:

    * While global GNP grew 40 percent between 1970 and 1985 (suggesting widening prosperity), the number of poor grew by 17 percent.

    Oh, and tell him that my Thompson .22 with a scope has its own response to the privatization of profit and the socialization of debt. And if he wants or needs an explanation, you can relate to him the words of the late Pedro Abad Santos, to wit, I saw the rich ride by in carriages, splashing mud on the street cleaners in the rain, and I asked myself why these things were so.

  • Driftwood

    I can go along with that, but others cannot,

    http://www.monbiot.com/archives/2010/06/01/the-man-who-wants-to-northern-rock-the-planet/

    Politics and Economics cannot be separated.

  • Mack

    Anyone with even a faintest understanding of physics knows that if the whole world consumed at the rate of the West, the world would be a desert in no time

    That’s not necessarily the case.

    For those you who didn’t bother watching the video the central tenant is this – division of labour and trade, supported by high population densities allows people to specialise what they produce, and to benefit from the specialisations of others. Human knowledge supported by writing, computers, telecoms etc is cumulative and overtime we all benefit from the innovations and new specialistions of others.

    FWIW, in the talk he mentions increasing agricultural yields, coupled with declining populations should mean that we can devote more land to other uses than agriculture (rainforests etc). He thinks Genetic Modifications will support this today, in the past yields were boosted by petro-chemicals and who knows how they might be boosted in the future.

    We certainly have issues today regarding the sustainability of our current resource use, but again innovation can help. Wind farms, wave energy, solar power instead of Oil. George Friedman (different book) reckons that by mid/end-century we’ll be generating uninterrupted solar power in space.

    But your pessimistic view is dead wrong..

  • Mack

    Again – it might be worth actually watching the video as the BP oil spill get’s a mention.

  • Mack

    There seems to be a bit of bad blood between the two of them.

    I’d never heard of Ridley before reading the book (only about half-way through, it’s very good so far) and never paid much attention to Monbiot. I wouldn’t neccessarily agree with everything Ridley says – e.g. I’m not convinced that global warming is nothing to be worried about – but I am convinved it can be dealt with by the processes he identifies in the book (human ingenuity, specialisation of labour, trade, increasing prosperity). And that particular section constitutes around 15 pages out of 400-odd.

    Likewise some the points that Monbiot takes issue with, that I’ve come across, aren’t really central tenants of the book but rather mentioned in passing. E.g. the points vs protectionism versus free trade. Certainly there are times and areas where protectionism might be useful, I’d argue they are heavily outnumbered by the case where free trade is more beneficial. E.g. Did you know that Ireland came very close to making it illegal – punishable by 2 years in jail – for a travel agent to sell a plane ticket for a lower price than Aer Lingus? Would we be better off with expensive air travel?

    Monbiot once said ““every time someone dies as a result of floods in Bangladesh, an airline executive should be dragged out of his office and drowned.’’ so maybe he disagrees.

    http://www.rationaloptimist.com/blog/monbiots-errors

  • Mack

    There’s also scope for interpretation here –

    He maintains that rising consumption will keep enriching us for “centuries and millennia” to come(7), but only if governments don’t impede innovation

    Isn’t that a statement of fact? If governments were to imitate early Mao and punish academics, burn books, have a cultural revolution, recurring year zeros. Innovation could well grind to a halt.
    If on the other hand governments invest in education and research..

    I don’t think I’m reading the same book, or watching the same video as Monbiot..

  • Driftwood

    I read Ridley’s excellent ‘The Red Queen’ many years ago. He’s a zoologist (and mate of Dawkins). Basically evolution determines everything, including male preferences for Blondes and BMW’s etc.

    Check out the reviews on Amazon.

    A better book on trade is Jared Diamond’s ‘Guns Germs and steel’ of which some ideas appear to be borrowwed here.

  • Mack

    A better book on trade is Jared Diamond’s ‘Guns Germs and steel’ of which some ideas appear to be borrowwed here.

    Yep definetely. I read Jared Diamonds “Why is sex fun” recently, and am reading “The Third Chimpanze” along with Ridley’s book at the moment. Also read Tim Harford’s (Undercover Economists) “Logic of life” recently too.

    Ridley’s book takes the last chapter of The Logic Life (which analyses the factors of economic growth over the entirety of human existence – and makes many of the same points e.g. Loss of skills in Tasmania due to a population density too small to support specialisation) and marries it with much of what Diamond’s books say about human nature. (Just as likely all four books are based on a synopses of scientific research, but I’d be surprised if Ridley hasn’t read the others..).

  • willis

    Since you have watched it I assume, and it is 60+ minutes long, where does he talk about BP?

  • willis

    It has come to this that being credited as a Bank Chairman is playing the man.

  • Mack

    Not sure – I can summarise it for you seeing as you are not going to watch it – I’ve no problem with that, but wasn’t impressed with various attempts to discredit someone without listen to what they are actually saying in this instance. He’s bound to be wrong about a lot of stuff in the video, or maybe you disagree with it’s fundamental tenants – if so great! Let’s debate that!

    One of the areas where he shows consistent improvement is in relation to oil spills. Despite increased oil production (and drilling at increased depths etc), oil spills have been on a steady downward trend. When he says that, the room laughs, because we have the BP spill at the moment. He cottons on, but points out that the spill would need to continue for another 2 years to rival an oil spill in the Gulf of Mexico in 1979.

    He is not, as perhaps you assumed, making an arguement that firms drilling for oil should not have to adhere to regulations – in this instance (he may well do elsewhere – Milton Friedman argued that Tort law fulfills the same purpose, although after the event. There are very obvious limitations to this, e.g. suing a company after a death is useless – but even free marketeers generally don’t think companies should be able to inflict costs on others).

  • Mack

    Incidentally the presentation is only 35 minutes or so long – the rest in Q&A which you can safely ignore.

  • Greenflag

    paul evans ,

    ‘ I’ll run through the list of cognitive biases that result in people over-focusing on pessimistic indicators’

    According to the very last ‘questioner ‘ we are ‘selected’ for over focusing on the pessimistic .
    As Matt Ridley tentatively returned to 30,000 BC somewhere in Africa when one hunter gatherer says to another ‘ I think there’s a lion behind that boulder ‘ and his less pessimistic fellow hunter says ‘not at all -I’ll just hop over and have a quick look see ‘

    Lion and other predators naturally developed a taste for cock eyed optimists 😉 who presumably self selected themselves out of the human gene pool .

  • willis

    Classic division of labour

    David Ricardo would be proud.

    http://news.discovery.com/earth/gulf-oil-spill-ixtoc.html

    http://en.wikipedia.org/wiki/Oil_spill#Largest_oil_spills

    It looks like, even on the most conservative estimate, that he has made a massive underestimate of the damage.

    Not surprising to be fair. He probably believed BP.

    However this is where my supposed ad hominem comment kicks in.

    “It does not matter how frequently something succeeds if failure is too costly to bear.”

    Nassim Nicholas Taleb

  • Jud

    The miserabilists among us will continue to ignore the long history of humans overcoming one ‘insurmountable’ issue after another.
    This Malthusian outlook is essentially misanthropic and will only ever see humans as an issue to be dealt with, rather then a species full of ideas and solutions.

    Not sure who coined the phrase but the stone age did not end because we ran out of stones.

  • Mack

    Willis

    It looks like, even on the most conservative estimate, that he has made a massive underestimate of the damage.

    Nope. The 1979 Ixtoc oil spill is still 3-4 times bigger than the BP spill although that may change. Which is what he said.

    It does not matter how frequently something succeeds if failure is too costly to bear.

    Ridley’s views in general probably correspond reasonably closely to Taleb’s (at least _after_ his Northern Rock experience). Taleb is a libertarian – in general he’d like to see too-big-to-fail companies broken up so into smaller fail fast companies. And regular banking delivered like a utility.

    The cost of oil spills appears to be receeding.

    I doubt Northern Rock was a Lehman brothers (i.e. to big to fail), they should have let it go. Taleb would’ve approved of that.

  • DC

    Who was it that said: “history always emphasizes terminal events”?

    That’s because as an author once wrote, a lot can be revealed about the person’s character in the manner of his or her downfall.

  • Greenflag

    ‘Ridley presents a compelling case for why progress will continue, but only if cultural evolution is allowed to develop in the direction of more contact, trade, and openness between people.’

    All very well and credible even in the best of all possible worlds . I don’t believe anybody can seriously question his ‘general development ‘ view of mankind’s scientific and technological advance even if here and there there are still a few flat earthers and 6,000 year old Earth creationists and assorted anti evolutionists everywhere predominantly in the USA ( 40% of the population ) and in the Islamic world (95% ) .

    The crucial point as between slappymcgroundnut’s view above and Ridley’s more optimistic scenario is how exactly will our current political environment cope with the massive human social and economic dislocation underway. The USA , Russia , China , India , Pakistan , UK , Israel , North Korea etc ) have more than enough nuclear weapons aimed at each other and the rest of us to wipe out humanity several times over . The fact it has’nt happened as yet has been due to a few fortuitous circumstances which had nothing to do with a general increased human well being on the planet and more to do with the fact that a man sitting deep beneath the earth in an a -bomb proof silo decided that those blips on his screen were not incoming US ballistic missiles but a flock of arctic geese. And anybody who has read in detail the near miss of the Cuban missile crisis can’t but believe that while the probability of mutually assured destruction may have receded it has as they say not gone away .

    As a scientist Ridley has impeccable credentials no doubt . He may be forgetting or understating that science could only develop in a functioning civil society . And as Ridley himself points out there were circumstances in man’s past when innovation came to a standstill for reasons of political isolation (the Chinese in mid 15th century ) and geographical isolation (the Tasmanians after the last ice age ).

    If we can’t get the politics and economics to work effectively for all or the vast majority of people then all the innovation and technical progress will be for naught .

    There was no more educated and culturally advanced nation than the Germans in the 1920’s and 1930’s . Despite their know how and scientific/technological advances they succumbed to ideological unreason and 55 million deaths ensued in a world war . What happened in Germany or similar can also happen in the USA , Russia , China or elsewhere if the ‘political ‘ system fails to deliver .

    While Ridley’s general thesis is fair enough he seems to assume that the future will at the end of the day mirror the ‘recent ‘ past i.e since the 1750’s . While it may do so it’s by no means a certainty . Political and economic realities as well as changing demographics and competition for ‘scarce ‘ strategic resources will determine outcomes as to who sits where on the humanity wellness /prosperity league table .

    One other minor point . The single best way for the USA now to increase it’s GDP is for a slew of terminally ill cancer patients to be given the wrong ‘treatment ‘ by some medical practitioners . The ensuing bill for services including legal fees , court time , insurance claims , wrongful death etc etc would add hugely to the GDP growth figures .

    But what benefit would that be to the present 150 million americans who have no assets or the 20 million unemployed or the 45 million classified as food ‘insecure ‘or the current 6 to 8 million facing foreclosure and the 300 million looking into a double dip recession perhaps ?

    Is there a scientist out there who can sort out that situation ;)? I think not -nor an economist either 🙁

    Ridley is a good read but he may be overstating his case

  • Jane Jaffers

    Is it worth reading the whole book after hearing him talk?

    I find that many of these modern “idea” books aren’t actually worth going through once the basic facts have been grasped.

    For example: Gladwell’s blink and the Wisdom of Crowds to name but two.

  • Mack

    You’ve probably got the gist of it now. I posted up a video where Joe Stiglitz provided the same service for his book Freefall a while back. Link is in this post –

    http://sluggerotoole.com/2010/04/18/soros-institute-for-new-economic-thinking/

  • DC

    But your pessimistic view is dead wrong..

    I’ll give you credit if you’re writing this on the dole.

  • Mack

    Judge genius at its best and character at its worst eh?

    Not that I’m suggesting this is a work of genius – or even that being a non-executive director at a failed bank is massive character flaw, but the two aren’t mutually exclusive!

  • Mack

    Frustrating cheap shot DC.

    You might like to compare what lifestyle the modern dole will buy you with the lifestyle of the average peasant circa 1750 if you disbelieve there has been any progress.

  • Pleb

    Economic growth and unsustainable consumption are far more important factors than population.
    In any case, he is repeating denialist rubbish and the book is littered with glaring errors.

    http://www.guardian.co.uk/commentisfree/cif-green/2010/jun/18/matt-ridley-rational-optimist-errors


    Matt Ridley’s Rational Optimist is telling the rich what they want to hear

    The ex-Northern Rock man is in denial about his book’s mistakes

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    * George Monbiot
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    o George Monbiot
    o guardian.co.uk, Friday 18 June 2010 17.00 BST
    o Article history

    Matt Ridley, author of The Rational Optimist Matt Ridley, author of The Rational Optimist. Photograph: Mark Pinder

    It’s a hackneyed image, I admit, but I’m beginning to feel like the boy who noticed that the monarch was suffering from a serious wardrobe malfunction. In this case, however, the story’s not working out like the original: it seldom does. Exposed, the emperor continues to strut about naked while everyone keeps oohing and aahing over his fine vestments. He confidently asserts that the boy is wrong and he is in fact fully clothed. Desperate to believe that this is true, the crowd agrees. The more you point out the obvious truth, the more defensive and aggressive he becomes.

    A couple of weeks ago, I wrote a column for the Guardian exploring the contrast between Matt Ridley’s assertions in his new book The Rational Optimist and his own experience. In the book, Ridley attacks the “parasitic bureaucracy”, which stifles free enterprise and excoriates governments for, among other sins, bailing out big corporations. If only the market is left to its own devices, he insists, and not stymied by regulations, the outcome will be wonderful for everybody.

    What Ridley glosses over is that before he wrote this book he had an opportunity to put his theories into practice. As chairman of Northern Rock, he was responsible, according to parliament’s Treasury select committee, for a “high-risk, reckless business strategy”. Northern Rock was able to pursue this strategy as a result of a “substantial failure of regulation” by the state. The wonderful outcome of this experiment was the first run on a British bank since 1878, and a £27bn government bail-out.

    But it’s not just Ridley who doesn’t mention the inconvenient disjunction between theory and practice: hardly anyone does. His book has now been reviewed dozens of times, and almost all the reviewers have either been unaware of his demonstration of what happens when his philosophy is applied or too polite to mention it. The reason, as far as I can see, is that Ridley is telling people – especially rich, powerful people – what they want to hear.

    He tells them that they needn’t worry about social or environmental issues, because these will sort themselves out if the market is liberated from government control. He tells them that they are right to assert that government should get off their backs and stop interfering with its pettifogging rules and regulations: they should be left alone to make as much money as they like, however they like. He tells them that poorly regulated greed of the kind that he oversaw at Northern Rock is, in fact, a great moral quest, which makes the world a better place. I expect the executives of BP have each ordered several copies.

    Just imagine what the response would have been if someone who tells the rich and powerful what they don’t want to hear had caused the first run on a British bank in 130 years and had to go crawling to the people he had spent years attacking for a £27bn bailout. Imagine that this person, having learned nothing from the experience, then published a book insisting that the strategy he applied with such catastrophic consequences should be rolled out universally.

    Crucifixion wouldn’t have been good enough for him. Reviewers and leader writers would pile in, heaping execrations on his head. But because Ridley preaches the business gospel, he’s being celebrated throughout the rightwing press, as well as in parts of the liberal media (sometimes I wonder whether we’re too liberal for our own good).”

    http://www.guardian.co.uk/commentisfree/2010/may/31/state-market-nothern-rock-ridley