Chimpanzees Prove That Elites Don’t Understand Darwin’s Message About Cooperation

The evolutionary roots of our social contract

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By Eric Michael Johnson

Fairness is the basis of the social contract. As citizens we expect that when we contribute our fair share we should receive our just reward. When social benefits are handed out unequally or when prior agreements are not honored it represents a breach of trust. Based on this, Americans were justifiably outraged when, not just one, but two administrations bailed out the wealthiest institutions in the country while tens of thousands of homeowners (many of whom were victims of these same institutions) were evicted and left stranded. It smacked of favoritism, the corruption of politics by corporate money, and it was also just plain unfair. But isn’t that the way the world works? Isn’t it true, as we were so often told as children, that life is unfair?

The American financial tycoon Andrew Carnegie certainly thought so and today’s economic elite have followed his example. In 1889 he used a perverted form of Darwinism to argue for a “law of competition” that became the cornerstone of his economic vision. His was a world in which might made right and where being too big to fail wasn’t a liability, it was the key to success. In his “Gospel of Wealth”, Carnegie wrote that this natural law might be hard for the least among us but “it ensures the survival of the fittest in every department.”

We accept and welcome therefore, as conditions to which we must accommodate ourselves, great inequality of environment, the concentration of business, industrial and commercial, in the hands of a few, and the law of competition between these, as being not only beneficial, but essential for the future progress of the race.

In other words, his answer was yes. Life is unfair and we’d better get used to it, social contract or no social contract.

While this perspective may be common among those primates who live in the concrete jungle of Wall Street, it doesn’t hold true for the natural world more generally. Darwin understood that competition was an important factor in evolution, but it wasn’t the only factor. Cooperation, sympathy, and fairness were equally important features in his vision for the evolution of life. In The Descent of Man he wrote, “Those communities which included the greatest number of the most sympathetic members would flourish best, and rear the greatest number of offspring.”

By working cooperatively, by sharing resources fairly, and by ensuring that all members of society benefited, Darwin argued that early human societies would be more “fit” than those societies where members only cared about themselves. The Russian naturalist Peter Kropotkin championed this aspect of Darwin’s work and argued that mutual aid was essential for understanding the evolution of social mammals as a whole. In the time of Darwin and Kropotkin the research needed to verify these claims was in its infancy, but recent work has supported this vision of the natural world. However, one study in particular has added an additional plank to this growing edifice of knowledge, and the view from on top suggests that life, in contrast to what Carnegie believed, may not be so unfair after all.

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According to research published in the journal Animal Behaviour (pdf here), fairness is not only essential to the human social contract, it also plays an important role in the lives of nonhuman primates more generally. Sarah F. Brosnan and colleagues conducted a series of behavioral tests with a colony of chimpanzees housed at the University of Texas in order to find out how they would respond when faced with an unfair distribution of resources. A previous study in the journal Nature by Brosnan and Frans de Waal found that capuchin monkeys would refuse a food item when they saw that another member of their group had received a more desired item at the same time (a grape instead of a slice of cucumber). Some individuals not only rejected the food, they even threw it back into the researchers’ face. The monkeys seemed to recognize that something was unfair and they responded accordingly. This raised the provocative question: can the basis of the social contract be found in our evolutionary cousins?

Chimpanzees are known to be highly individualistic where food is concerned, so Brosnan and colleagues sought to determine whether these earlier results could be replicated in a more competitive species. The researchers first trained all 16 chimpanzees to exchange an inedible token for a food reward and then assessed their food preferences (it turns out that chimpanzees always prefer grapes to a similarly sized piece of carrot). In this simple cash economy they came to understand that each token was worth one reward and they eagerly handed it over to the researchers in expectation. Once all chimps had made the association individually they were brought into the testing area in pairs where they were allowed to exchange their tokens for food so that researchers could gauge their responses when in the company of a group mate.

In the first trial both chimpanzees were given the same food reward when they exchanged their token (sometimes the high-value grape, other times the low-value piece of carrot). This served as the control test and was used for comparison in the trials that followed. In the second trial, what the researchers called the Inequity Test, only one member of the pair was given a grape while the other received a carrot. In a third variation, both individuals were shown a grape at first, but were then given carrots once they handed over their token. In each trial the researchers recorded the number of times that chimpanzees refused a food item and then compared this with the control test to determine if they behaved differently when receiving a different reward.

Perhaps unsurprisingly, chimpanzees behaved the same way that capuchins did and objected if they only received a carrot when their group mate was given a delicious grape for the same price. Out of 76 trials the chimpanzees were significantly more likely to refuse a carrot in these tests compared to times where both received the same low-value food reward (p = 0.004). Likewise, when both individuals received a carrot after first being shown a grape, they were significantly more likely to refuse than in cases where no expectation of a better reward had been presented. The bottom line was that if things weren’t fair a tantrum would ensue.

If this sounds eerily familiar, you’re right on the mark. Parents will testify to how careful they must be to make sure that siblings are always treated equally and fairly, and chimpanzees are known to have the cognitive abilities of three-year-old children. What these results suggest then is that chimpanzees have an expectation of fairness and will protest in cases where this expectation is not met. This existed both in cases where rewards were handed out unequally and when a prior agreement was not honored.

However, chimpanzees in this study went beyond the basic tenets of the social contract and demonstrated what could be considered the foundation of social solidarity. In 95 trials chimpanzees that received a grape were significantly more likely to refuse the high-value reward when their group mate only received a carrot (p = 0.008). Even those who benefitted from inequality recognized that the situation was unfair and they refused to enjoy their own reward if it meant someone else had to suffer. As the authors reported:

We unexpectedly found that chimpanzees were more likely to refuse a high-value grape when the other chimpanzee got a lower-value carrot than when the other chimpanzee also received a grape. . . This reaction was not seen in previous studies of inequity in primates, either among chimpanzees or among capuchin monkeys.

But in comparing this simple behavior in chimpanzees to the complexities of human ethics aren’t we really talking apples and oranges (or, perhaps more appropriately, carrots and grapes)? I don’t think so. When we were children we wouldn’t have understood that using financial derivatives to repackage subprime loans in order to resell them as AAA-rated securities was an unfair thing to do. Few of us today (including members of the commission charged with overseeing the financial services industry) can even understand that now. But we did know it was unfair when our sibling got a bigger piece of pie than we did. We began life with a general moral sense of what was fair and equitable and we built onto the framework from there. Chimpanzees, according to this study, appear to have a similar moral sense. The intricacies of what we judge to be fair or unfair would seem to have more to do with human cognitive complexity than anything intrinsically unique to our species. In other words, what we’re witnessing here is a difference of degree rather than kind.

What this also suggests is that we’ve been swindled. The Andrew Carnegies of the world have led us to believe that they are an exception to the social contract; fairness and equality may be fine for the little people, but for masters of industry it is best to leave such quaint ideas by the wayside. But he was as wrong about this as he was about the way that evolution operates. As we move to regulate financial markets it might be wise to consider Darwin’s understanding of human society and follow the lead of our ape cousins. By emphasizing cooperation and sympathy with other members of our society we stand a better chance of success than each of us working alone. But if the situation is unfair we should refuse to perpetuate it, even if that means giving up a larger share of the pie for ourselves.

19 November 2015

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  • Matt Baen

    I’m very wary of simple applications of evolution, biology, and ethology to human social policy advocacy, regardless of the politics.

    “While this perspective may be common among those primates who live in the concrete jungle of Wall Street, it doesn’t hold true for the natural world more generally.” Someone else could argue that in a eusocial insect colony the masses work tirelessly and sacrifice for a massively fed queen and breeding males, so we should emulate that. Or in a wolf group the offspring of the lower rank females are killed, and that would be OK for us. Or the ferocious competitiveness of sibling hyena pups is a model for us all.

    The complete unwillingness of chimps to cheat each other under those circumstances may have something to do with experimental conditions of enforced equality in leverage and transparency of action. In zoos there may be more complex interactions with alliances and shifting dominance, even reprisals. In a natural situation the complexity is greater still. And the social behavior may vary by local ecology, maybe even learned traditions. We don’t completely understand why chimps and bonobos despite their similarities have such different social systems and relations between sexes; it may be more due to local ecology than anything inherited that affects their brains.

    States – with specializations, classes, anonymity in urban centers, differential access to information etc – are massively different than hunter gatherer bands (which themselves are not exactly Arcadian). Perhaps the biggest rift was not the state but Holocene animal husbandry and plant cultivation and the changes that wrought (including much worse patriarchy in most societies). All of this happened without reorganizing the brain (despite claims by the accelerated selection crowd). Those changes are perfectly “natural” though often materially awful for those on the lower end of the pecking order (and even for women – and maybe everybody in some ways – above).

    The unfairness and meanness of capitalism (or 20th c Communism, or even the more progressive Swedish society which had its problems like misogyny and anti-Sami bigotry) is perfectly “natural”. It’s just not the only possible manifestations of human nature under the conditions of the technologically advanced industrial state. The truth is we don’t know what the range of that is. We won’t until we try.

    But in the meantime screw evolution, biology, nature, ethology – they may as well be the mythos of another world. Since the dawn of our species we’ve been creating our own.

  • Swami Cat

    Is this journal absolutely intent upon peddling bad rhetoric? Social Darwinism was a perverse misinterpretation of Darwin which occured on both the far right and the far left. To characterize this as the current dominant ethos of Wall Steeet though is either ignorant or dishonest.

    This is simply one more in the long stream of articles published in this journal which takes the most absurd example from the other side of the argument and then paints everyone in this camp with this broad brush to dismiss them as nefarious knuckleheads. It is a cheap rhetorical trick. Straw manning pure and simple.

    If the author wants to have a legitimate and honest discussion on the role of competition and the need for fair rules in Wall Street, then I am game. Yes, I am aware that people will rationalize any action to exploit others, but this is a trend in human nature, not one confined to Wall Street.

    Now, allow me to enlighten the author on the real complexities of fairness, you know, beyond the childish or chimp brain level of absolute equality of outcome. There are actually multiple ways to define fairness.

    First, there is equality of outcome. We divide benefits even-Steven. Capuchins and toddlers get this one easily.

    Second there is fairness where we divide by need. Those needing more get more than those not in need.

    Third is fairness based upon effort. Those who put in more effort or cost deserve more proportionate to their contribution.

    Fourth is fairness based not upon effort, but actual results. It is possible for skilled individuals to contribute more with less effort.

    Fifth is procedural fairness, or rule egalitarianism. This one basically says that we will assign rewards via a system and fairness is not based upon the outcomes or distribution of rewards at all, but based upon fair, equal and impartial rules.

    The point is that for complex social creatures with evolved minds beyond that of a bonobo we have to wrestle with all five interpretations, and they are often, indeed they are usually contradictory. Fair rules often lead to widely disparate outcomes, and it is rare for results, effort and need to overlap perfectly, and it is highly unlikely any of these are uniformly equal on any given uniform scale of outcome.

    Further complicating things is that in the real world, people do not share the same exact values or goals. Some humans actually do prefer carrots, and others never touch fruits or vegetables.

    My point is that the author is dumbing down the real complexity of social fairness to a level which is laughably ignorant of actual institutional evolution. Markets do require fairness of course, but not just toddler fairness, but also fairness according to rules, to need, to outcome, to contribution and so on.

    Don’t get me wrong, we can all agree abuses can and do occur. We can agree that getting the balance between these types of fairness is really difficult. But this equality of grape distribution uber alles oversimplification is doing nothing to advance the discussion, and, sadly, probably wasn’t actually intended to either.

    • Ricardo Monteiro

      Oversimplification is the substantive that better embraces the assumptions within some of the Nobel laureated economists. And yet, they have a point. Markets are mostly built on information. Information is created by the ones with the most power at hands. It is up to us to create the rules that refrain our intentions to “create” inequality. If we assume altruism is an impossible state of mind, and considering that is humanly more acceptable than exploitation then laws should impose it instead of neutralizing it.

      • Swami Cat

        Sorry, Ricardo, I can’t interpret what your comment is trying to express.

        Markets are best understood as a collective problem solving system where using simple rules of property, voluntary interaction and contract, we specialize and exchange, thus producing unimaginably more than we could alone. Competition between the various specialized players, when properly constrained drives an arms race to solve more problems better and more efficiently as everyone seeks to be the best in their domain. Markets are essential to the modern breakthrough in living standards and lifespan.

        Altruism isn’t an impossible state of mind, but it simply isn’t essential to the working of markets. What is necessary is institutions which ensure a positive sum dynamic — in other words a propensity toward win/win outcomes. Property rights and voluntary interaction and specialization do just this. When the system works as designed (and in modern society it does so billions of cumulative times each day) an individual needs to optimize their rewards while getting others to voluntarily agree. Each interaction thus is expected to create value for each. Altruism isn’t impossible, it is simply unnecessary, as every individual involved is expected to look out for their own interest.

        Markets, despite a dependency on impartial (egalitarian) RULES do not create anything close to equal OUTCOMES, and if they did they would be broken. Only a person with no grasp of markets would expect them to. It’s like expecting every football game to end a tie, or every scientist to get an equal distribution of Nobel prizes. To even suggest such a thing reveals a foundational misunderstanding of the institution. Egalitarian rules don’t lead to egalitarian outcomes.

        That said, altruism and protection of the less successful is essential. It comes not from screwing up the impartial rules of but via social safety nets. Some of these can be market based (insurance mechanisms) but others are state or charity based.

        • Ricardo Monteiro

          Hi Swami, your definition of market is great but unfortunately for humanity markets don’t seem to fit in that definition any longer. We do not produce more through markets (at least tangible positive outcomes); markets are the perfect tools for the 1% to get more wealth and consequently more power. Markets are information and the latter possesses, creates, and manipulates it. “The strongest man is never strong enough to be always master, unless he transforms his power into right, and obedience into duty”. That is how power has evolved; that is how power found its way without being questioned. When banks get bail out and poor people lose their houses we find it unfair but laws don’t. Laws are actually created to unbalance markets (see the example of Reagan and his attack to the trade unions affecting the labor market, for instance). Law and ethics are divorced for a long time. What I mean is: outcomes do not need to be balanced (as you say a football match doesn’t need to end up with a tie which would make it rather dull); but the rules should. Credit in the institutions create the incentive to produce more and better, I would add.

          Durkheim would disagree when you say altruism isn’t an impossible achievement and his point is a very lucid one, but still subjective. Someone argued that chimps were probably constrained in their actions for eventual reprisals but then again that is theory of games applied to the animal kingdom (they get their own Paretos, I would say, which confirms the search for rational decisions). Win/win situations are beautiful especially when they do not have to be enforced. But then again, we tend to focus exclusively on the direct players and ignore all indirect or collateral effects (e.g. conflict). Maybe the model could be win/win/looser (and maybe sum of utility (win1+win2) is not greater than utility (looser-others-)?). That is the complexity of the human being with actions being taken that often bring unexpected payoffs.

          So, basically, on one hand, markets and laws are biased; on the other hand, humans are too complex and win/win situations often carry a third party which is constantly neglected: we could always simplify our models and start doing what we can (manage the stock of “grapes vs carrots” better and considering each one’s needs/ambitions to the maximum extent possible). And that is why I think the article, even having its flaws (as all have), has its point.

          • Swami Cat

            Your rhetoric on the demise of markets fails to match any resemblance to reality. Are you unaware of the unprecedented level of global prosperity? More people have emerged out of poverty in the last generation than any in the history of, well history. Average incomes, literacy, freedom, lifespan, health and so on at a global level are at UNPRECEDENTED LEVELS and growing as fast or faster than any time ever. And those benefiting are those gaining exposure to markets, those left behind are the ones that are denied exposure to markets. Markets have literally saved and enriched the the lives of billions.

            Are you really unaware of this, or are you just in denial of the critical (though partial) role markets play in this miracle?

            Next, I suggest you drop the blanket envy toward the one percent. As long as they make their money by un-coercively enriching others lives by creating, improving or delivering products and services to their fellow men, then they deserve to be compensated. If Gates or Koch or Buffet or whomever can become a thousand times richer than they are today by expanding the value they do to others, I wish them well. I am pro “gazillionaire” if they make their money by providing value to others. Human prosperity and the thriving of the one percent are not mutually exclusionary concepts, indeed, if the institutions are set up right — and in general they are — the two mutually reinforce each other. They are rich because they grew lots of grapes for their fellow monkeys. Good monkeys!

            That said, I am certainly against partial, or biased rules. That was the basic point in my comment –markets assign fruit to the monkeys based upon value added by the monkey to his fellow monkey in the opinion of the monkey receiving the service. More value added, more fruit, with no limit to the cornucopia. however, if no value is added, no fruit, and no cucumbers either until the monkey gets his furry little act together and starts serving his fellow simian. This is basic rule egalitarianism.

            It was a bad precedent and a clear violation of rule egalitarianism to bail out the stupidity of bankers. This isn’t a criticism of markets, it is a criticism of government interference and lack of proper oversight of markets. This is an institutional fail and needs to be corrected. Using the football metaphor, the referee negated the fair play and arbitrarily assigned points to the losing party. The referee violated his role and our trust. Bad monkey!

            Your comment on trade unions is also suspect. Unions, in terms of voluntary associations of workers is fine. However, unions in practice are essentially extortionist cartels which exploitatively use illegitimate coercion to restrict the supply of labor. They rob from less skilled and fortunate prospective labor (and consumers and stockholders) to enrich themselves. They are classic examples of rent seeking — using privilege to benefit themselves at the net expense of others and society in general. Union privilege is another form of unfair bias which harms market functioning and lowers net prosperity. Cartels and monopolists and rent seekers are again bad monkeys, though to be fair, the blame probably goes more to the officials allowing them to cheat than to the cheaters themselves.

            “Win/win situations are beautiful especially when they do not have to be enforced. But then again, we tend to focus exclusively on the direct players and ignore all indirect or collateral effects…”

            Markets either need to take into consideration the externalities, or non market mechanisms need to be used to supplement markets. The devil is in the details, but both approaches can and do work. This isn’t an appropriate criticism of functional markets embedded in other functional institutions (upon which markets clearly depend — i.e. Rule of law, property rights, financial markets, limited liability corporations, etc).

            “So, basically, on one hand, markets and laws are biased; on the other hand, humans are too complex and win/win situations often carry a third party which is constantly neglected: we could always simplify our models and start doing what we can (manage the stock of “grapes vs carrots” better and considering each one’s needs/ambitions to the maximum extent possible).”

            Your comment basically amounts to a statement that complex society is indeed complex. As I stated in my original comment we have multiple definitions of fairness and equality. Yes we need to balance these. However please note that markets are NOT about distributing fixed resources. They are about CREATING and distributing resources. Markets work by rewarding value creation in proportion to the value created. When people lose sight of this and treat them as zero sum value distribution systems, they lose all sight of what markets are doing. In the article the author assumes the fruit. In the real world, people actually grow fruit, and markets reward them in proportion to this contribution.

            Other institutions such as national defense, courts, charity organizations and government redistribution programs ensure that other types of fairness — including equality of outcome regardless of contribution, or results according to need — are met. In developed nations, we do quite well at this overall, with living standards of our poorest better in many ways than that of Carnegies in prior generations. Specifically the recipe is to use the fruit created by markets and science to produce a surplus used to fund poor and unfortunate monkeys.

            It works better than any other social organization in history. If we honor and respect it and build upon it perhaps we can get it to work even better.

          • Ricardo Monteiro

            I would say prosperity is a very weak variable to determine whether
            one country is better off than another one. Prosperity would find suitable proxies
            in wealth, profitability, and opulence. But we all know how GDP per capita is
            incapable of measuring poverty and therefore prosperity (if my neighbor has 2
            chickens and I have none, we both have 1 in average; but the issue here is: I
            am still starving).

            Worldwide poverty has decreased if you use long term cycles
            (Kondratieff’s). However, poverty is still so ridiculous high (so much higher
            than what is commonly informed to the developed world) that the WB had to find
            this odd value of 1.25 USD/day so that only
            800 million people were considered to be living in extreme poverty. This value mentioned
            doesn’t even cover the most basic Maslow needs in some countries. This value
            hides poverty as it only shows (and wrongly) extreme poverty. If good
            intentioned researchers take some thought on this and calculate the real number
            of poor people we will suddenly discover how far we still are from prosperity.

            In countries like the US, where liberal principles have boosted
            markets, the results have actually shown very bad results. On the other hand,
            in countries such as the Scandinavian ones, where social policies strive, people
            seem happier and more “prosperous”. Let me show you a few practical examples:

            Education: The
            gap in test scores between rich and poor American children is roughly 30% to
            40% wider now than it was 25 years ago. This has a reason: markets; when
            education becomes a commodity tagged with a price, then those who cannot afford
            good education will see their poverty perpetuated by the same markets that
            impede them from getting the education they need to leverage their social status.
            By the way, the chances of an American citizen making his way from the bottom
            to the top (American dream) are less than those in more social industrial countries.

            Freedom: Markets are
            all about maximization of profits, no matter what. War has been one of the most
            profitable businesses, not only because it involves selling high margin
            weaponry but also because it implies getting control of important strategic
            points and valuable resources (such as oil and gas). Allowing this sort of
            market to evolve has contributed to approve laws that actually contribute to decrease
            individual freedom (such as the patriot act following the 9/11) for the sake of
            a few corporations’ fat profit.

            Lifespan/Health: USA
            life expectancy of 78 years old ranked 40th just below Cuba. The
            infant mortality is worse than in Malaysia, and Belarus. The Health system is
            again highly determined by free markets implying that poor people in the US
            live 8 years less than those at the top. Due to very “relaxed” labor laws,
            companies are free to get rid of employees who get sick. Unfortunately, poor
            families who find themselves with a sick member will hardly step out from this
            poverty trap.

            Human Development
            (UNDP): The US is ranked 23th (if I am not mistaken, it is behind all
            European countries) and yet is the one that most supports free markets.

            Nowadays, markets are committed to serve a few. Just as an
            example, how can markets explain the fact that bank executives received
            outsized bonuses for outsized losses during crisis? During that same period,
            employees got fired and salaries were reduced. Of course, I will agree with you
            if you tell me markets are not to be fully blamed. Inequality (or lack of
            prosperity as you so mention) doesn’t just happen. It is created. “(…) Market
            forces played a role, but it was not market forces alone”. And I would add that
            minds have been shaped in order to normalize the acceptance of these systems.
            Anyone who does attack it is “envy” lacking the capacity/competencies to
            achieve the top. And so, the richest 20%
            of income earners earn (after tax) more than the remaining 80% of the
            population which does not compute well with prosperity.

            Trickle-down economics is no longer a reality, unfortunately
            for humanity. Most wealth is created in capital markets (the real economy is
            small), which actually contributes to create unprecedented crisis that affects mostly
            poor people. Also, wealth is generated through rent seeking (win/loose
            situations). Companies who deal with technology (and make some of the highest
            profits) often hire not so many people (e.g. Apple). Moreover, some big
            companies move their capital to other countries, not benefitting their own

            Egalitarianism is more than that. Is giving fruits to those
            chimps who cannot produce, due to any natural or forced impediment. That is
            what distinguishes men from animals.

            You mention the interference of governments, but I actually
            think is the other way around (if it is relevant anyway). It is the
            interference of corporations within the political arena that created the proficient
            rent seeking tools that are in place.

            About Unions, we certainly disagree on this one. You might
            even find a few examples where unions misbehaved and did not followed their
            mandates. However, thanks to unions we have paid leave, weekends, sick leave,
            minimum wage, pensions, safety rules that have been saving many lives, and so

            Markets have their flaws. Man has a natural instinct to take
            advantage of others. It is a social contract, a coercive one with “altruistic” principles
            imposed that would balance markets and take the best from them. But the reality
            is far from this: powerful people already took control of the game. Those, at
            least some, are the same who show on televisions contributing with large
            amounts of money to charity. However, charity is not what human beings wish
            for: they wish for equality and proper rules that enhance their potentials.

          • Swami Cat

            I am having trouble responding to your comments as I find them a scattershot which just blurs the discussion.

            First, I am arguing for the critical role of markets in advancing human prosperity and welfare. At no time did I suggest GDP was the only measure of this advance.

            More importantly, never did I argue that this was the only source of the advance. It would be more accurate to state that modern prosperity comes from the three legged institutional stool of 1) open access political institutions (including rule of law, property rights and divided government), 2) science, and 3)!markets. The US and Scandinavia have all three. I am not arguing against Scandinavian institutions. They seem pretty good to me considering the small, homogenized, high IQ, liberal-minded culture. Indeed, Scandinavian states tend to have as good or in some cases better market institutions as the US.

            Markets are necessary, not sufficient. The three reinforce and amplify each other. Markets depend on open access institutions and science, and they depend upon markets for the prosperity and value creation necessary to fund science and government.

            Second, I have no idea how your comment on poverty being even worse than commonly considered supports your side of the argument. Two hundred years ago, 90% of the people on earth were living miserable, short, uneducated, illiterate, insecure, back-breaking, unfree lives on a couple of dollars a day. Those with markets and the other two legs of the stool have emerged out of this hell, with incomes, lifespans, education, freedom, dental care and rights which are incomparably better. Those excluded from markets (or open access institutions such as NK and Cuba which drafted in the productivity advances of free markets) were denied this cornucopia.

            Next you argue against markets by bringing up the failure of education (I will set aside your illogical assumption that equality of outcomes is a measure of education quality — talk about unfounded assumptions!). Are you really suggesting that education is an example of market failure? Really? You are unaware that education is possibly the least free market industry in the US? Again, you argue against me by throwing evidence that supports my position and makes yours look foolish.

            Next you somehow imagine that a criticism of getting national control of important resources and the government/industry cronyism of the industrial military complex is an attack on free functioning markets. Huh?

            Then you ask how markets can explain the government bail out of banks. Um, they can’t and they don’t. Markets didn’t bail out the banks, non market mechanisms of government privilege did. Government redistribution to investors is not a market failure. It is a non free action of illicit coercion.

            As a person living in a developed country (I assume) you probably are one of the worlds elite 20%. The secret isn’t that you and I stole the money from someone else. In general we created it. We are wealthy, healthy and free not at anyone else’s expense but because we cooperated together to create value. It is a positive sum game, and the same is true in a market setting for billionaires. If they got rich by creating value for themselves and others then everyone gained. They added value. They didn’t harm anyone in Bangladesh. The problem is that Bangladishies are not allowed the opportunity to compete with those in market economies. They are excluded from the game. If you can’t play in a positive sum game, you can’t gain. Oddly your solution is to prohibit anyone from playing the game.

            I guess somewhere you have substituted the pursuit of profit with functioning free markets. The distinction is how profit is allowed to be generated. Absent relatively free competition and unprivileged cooperation, you do not have a free market. You are basically defining football as “cheating at football”. If you think football is the process of conspiring with refs to cheat the other team, then I have to assume the basic concept of football escapes you. Indeed your comment overall seems to amount to the belief that anything in the world you don’t like can be blamed on the boogie man of markets. It probably causes AIDS and bad breath too.

            Somehow you have convinced yourself that free markets are not a positive sum game, and that the eradication of this system would advance the interests of the billions of people who have clearly and empirically benefitted from it (I could provide thousands of examples of how markets enrich our lives).

          • Ricardo Monteiro

            I think we live in different planets. I congratulate you for living in such a better place and I hope one day I can build a spaceship and visit you there so we can have further discussions about markets and its attributes.

            You explain all good things come through markets and when markets do fail you argue that well, it is not really the markets that fail but people who do not control them well. When a referee gets money to benefit one team, I am afraid is still football. You may argue, it is beyond the rules of the game, but the “market” is focusing on the payoffs (and until that situation is corrected, if ever, what matters is which team continues winning the leagues). I believe physicians, engineers and all sort of crafty people will probably not enjoy your company as you give all credits of humanity to the markets. People are not entirely driven by demand/supply and markets do not entirely benefit (and thus encourage) those who contribute the most for social development/economic growth (which is contrary to the principle of free market, isn’t it?). Some of the most intelligent people who ever lived are not rich after contributing so much for the prosperity of humanity. However, those who manipulate well markets and the rule of law get fatter and fatter. 300 years ago people were probably not so much better off than 500 years ago and trade and free markets already existed; what made life of people much better was the industrial revolution, scientific advances and effective management. As I know (and I may be mistaken) the rules of free market did not change (ceteris paribus).

            On education, how do you explain then the huge difference in school results? dumbness among poor students? rich kids are more intelligent? or maybe they, just maybe, they have access to much better education (they can afford for it: market talking again)? education in the US is the least liberalized market? Are you sure? Please take a look at this: “Nearly 20 million Americans attend college each year. Of that 20 million, close to 12 million – or 60% – borrow annually to help cover costs. In Europe, higher education receives much more government funding, so student loans are much less common” (sorry, it doesn’t have a time frame but I can assure you it hasn’t changed much).

            About freedom. Let me try to explain this though a causality chain:

            Free markets and corporations are not about morality and egalitarianism. They are about profit maximization. Thus, it is very profitable to sell guns to other countries (they also promote coupes d’état in countries in order to control their resources or offer loans through international monetary institutions, who then ask them back huge interests making them more dependent). But, in order to maximize the amount of sales, they promote wars and all sorts of nasty things, making this business very sustainable. On the other hand, to keep all this machinery of war working and oiled, they realized (maybe they read 1984 or Brave New World) they constantly needs enemies. So, they created their own enemies and now their own people are afraid, and because they are afraid, they do not mind (they even appreciate and thank) to be controlled (this diminished their freedom…at least, that is what I think).

            There are all sorts of markets as long there is money on the table. when you argue that it was not the markets who bailed out the bankers, I fully disagree. There is a market based on lobbying and law-loophole-creation that is extremely profitable and is 100% licit and legal. This second market (and not the original market of banking) worked to help bankers (from the first market). You tend to oversimplify reality, which makes me think on why would you criticize the original article in the first place. You also mix law with morality: like I said before, and you probably overlooked, they are divorced.

            Please take a look at how much capital markets make and then compare to the real economy value generated. Yes, it is a ridiculous comparison and makes us think if the money we have in our pockets is worth anything…Now, imagine if I buy a stock and lose money when selling it. I sell it to you and you make money. Is this a win/win situation? no, it isn’t. Capital markets domain the world and they are not win/win situations. Yes, I agree with you when you say: “Somehow you have convinced yourself that free markets are not a positive sum game”. And you know why? Because the only free market I know is probably the Swaps market and still I have doubts it really works well as it is about information (which can easily be manipulated and created). Btw, this was the market that coincidently provoked the latest world crisis…coincidences!
            You do really believe in trickle down economics. I am amazed, as I though you were an extinct race. Please, take a look at the latest work of Stiglitz as he approaches rent seeking and trickle down economics. You will be amazed how the world has changed.
            And to finalize, you mention diseases such as AIDS. Do you realize that many experience were carried out in many countries in Africa, without people even knowing what they were being subjected to? that happened because it was far less expensive, and faster, to do so than in elaborate labs in western countries. Moreover, I am sure many diseases are created in order to sell antidotes…market talking: “The supply creates its own demand”.

          • Swami Cat

            “I think we live in different planets.”

            Nope same planet. One of us recognizes that the following have improved to an unprecedented degree in past 250 years: living standards (30-100x in market economies), lifespan (2X), child mortality (10X?), literacy, equality, freedom, ability to travel and communicate cheaply, quickly and safely, career opportunities, leisure time, average health, educational attainment, etc, etc.

            The other one is in denial that the world has improved in so many ways.

            “You explain all good things come through markets….”

            No, I explicitly and repeatedly said that markets were simply necessary, not sufficient. Remember the three legged stool comment? When I repeat something three or four times with emphasis and you overlook it, you need to start asking yourself why. All good things do not come from markets any more than a good engine is sufficient to make a good car. You also need wheels, brakes, a driver and so on. Read what I wrote, not what you wish I had written.

            “…..and when markets do fail you argue that well, it is not really the markets that fail but people who do not control them well. When a referee gets money to benefit one team, I am afraid is still football. You may argue, it is beyond the rules of the game, but the “market” is focusing on the payoffs (and until that situation is corrected, if ever, what matters is which team continues winning the leagues).”

            Markets are the complex adaptive system based upon property “rights” and the rule of law which determines how people can gain control of property and exchange it for mutual gain. The core concept is that if people are free (not prohibited by others) to specialize in their productivity, they can voluntarily agree to exchange the output of that effort to others who voluntarily agree to exchange something in return. It is thus an expected win/win by definition, as coercion and fraud are not permitted. Markets, as you allude, go back as far as humanity itself and have always added value to us.

            What makes modern markets so spectacularly, outrageously enriching for fellow humans is the scale and scope of markets emerging since Adam Smith clarified how and why they work. If the property rights, rule of law, and freedom of action and interaction are carefully enshrined via institutions into a culture (note these are all non market institutions), it allows people to freely cooperate in countless ways in increasingly complex, specialized and productive ways. You thus get enormously complex networks of investment, employment specialization, production and consumption. People effectively self aggregate into enormous networks of mutual problem solving. Instead of people being primarily self sufficient, we become mutually dependent and massively cooperative. Every investment, purchase, hire, and exchange is an expected win/win interaction. Repeated and accumulated billions of times a day, for hundreds of years we have created massive increases in our ability to solve problems for each other.

            Yes, paying the refs to throw a game is not football. Shooting opposing teams is not football. It is coercion, it is privilege seeking. It is might makes right. Similarly, coercion, deception, privilege seeking are all actions which undermine the workings of markets. The ideal market, like the ideal football game, may never exist, but it is the ideal which we strive for. Cheating is not part of the ideal, it is the problem which needs to be corrected so that the system can work better.

            “I believe physicians, engineers and all sort of crafty people will probably not enjoy your company as you give all credits of humanity to the markets.”

            Stop saying this. See my comments in markets working along with science and other institutions. Physicians and engineers also benefit from science. But science is greatly funded by the productivity advances of markets, and both are supported by rule of law and property/contract law. Markets are in no way sufficient. How many times do I need to repeat this for it to sink in?

            “People are not entirely driven by demand/supply and markets do not entirely benefit (and thus encourage) those who contribute the most for social development/economic growth (which is contrary to the principle of free market, isn’t it?).”

            Who said people are entirely driven by supply and demand? Why would you say this? Markets only reward players in the market. Scientists and politicians and state bureaucrats can add value in non market settings and get rewarded in the currency of that institution. But within markets, they work so well because those adding the most value routinely tend to be rewarded the most. That is what a profit is for a producer or distributor. They create value for a consumer and the consumer rewards them with profit. Profit then acts as a signal to other competitors who are completely free (not constrained by others) to enter this market, increasing supply, improving products and lowering costs in a self amplifying virtuous circle. Wages, prices and profits are all terms for the value added to various components in free, mutually voluntary exchange.

            “..those who manipulate well markets and the rule of law get fatter and fatter.”

            Yes, exactly. Those who seek to benefit themselves by cheating at the rules of markets can get rich by exploiting others and or privileging themselves. You are defining markets as any greedy, shitty thing one person does to another. I am defining markets as a particular domain of mutually voluntary actions. I define football as playing within the rules of football, you define it more by how successfully one cheats.

            “300 years ago people were probably not so much better off than 500 years ago and trade and free markets already existed; what made life of people much better was the industrial revolution, scientific advances and effective management. As I know (and I may be mistaken) the rules of free market did not change (ceteris paribus).”

            Lots of things changed, one of which was the beginning of the formulation of the rules and benefits of markets by Smith in 1776. The paradigm began to emerge. But on a broader scope, what began to happen is that people started to form, better, smarter, more efficient problem solving networks. We see the roughly simultaneous emergence of the scientific method, open access rule of law divided government, and formally protected markets with banks, insurance, stock exchanges, limited liability corporations, and prohibitions against monopolies and guilds. Prices became increasingly set based upon supply and demand rather than fiat or tradition or the concept of “just prices.”

            I could go into more detail (the transition to modernity is my primary area of study), but it will drag us too far astray. Let me just add that in the Netherlands, where markets first started emerging in modern form, were where prosperity first started rising.

            “On education, how do you explain then the huge difference in school results?”

            Of course poorer students tend to be less intelligent, broadly speaking, in sweeping generalities. I am sure I could point you to dozens of empirical studies on intelligence and social status. Less intelligent people statistically speaking compared to the norm tend to be LESS LIKELY to marry, to be educated, to stay married, to marry people of higher intelligence and marriagability, to work, to wait to have children after getting married or finding a reliable partner, and to stress education, reading and intelligence to their kids. They are also quite likely to have kids which resemble them genetically, including intelligence. See associative mating, and the genetic component of intelligence.

            These poor kids then get placed in public schools which are established based not upon free choice, but based upon a coercive government monopoly which requires kids to go to school by neighborhood. Since the above “problem” parents tend to aggregate together due to housing prices, the challenged kids all go to school together and similarly the advantaged kids all go to school together.

            Sorry if this sounds politically incorrect to you. My guess is you have grown up in a politically correct bubble with virtually no exposure to conflicting views (as already demonstrated your views seem to reject any semblance of exposure to reality).

            Look back at my definition of something as market based. Are primary schools a place where people can choose absent coercion where to send their kids? Do they spend their own money? It is a local government monopoly supported via taxes, infested with exploitative public service unions. Yes it fails, but this is the furthest possible situation from a market failure. It is a government institutional failure and should be fixed immediately, whether by markets, or better government institutions. Again, you just assume everything in the world you dislike is a result of markets because your lack of a definition allows you to simplify reality into crappy stuff in the world is caused by markets because your definition of markets IS “crappy stuff people do to each other.”

            Colleges are better, and we do have some of the finest in the world, but the funding situation is absurd and again the absurdity is not market based, I could explain this as well, but again we are getting way off topic. I will explain it if you insist.

            “Free markets and corporations are not about morality and egalitarianism. They are about profit maximization.”

            No. Within a free market a company is only allowed to make a profit via voluntary, non coercive, free, non-fraudulent actions. Profits derived from rule violations, coercion, fraud, threats, rule manipulation, privilege, coupes d’etats, and so forth are not acceptable market actions. I am well aware they occur, and always have. People can always make more via cheating, stealing and rule manipulation IF THEY CAN GET AWAY WITH IT. The principle of free markets is that we will all be better off if we don’t allow the jerks to get away with it. Football is better if we limit cheating.

            Wars (and violence within states) were substantially more common (by almost a factor of ten) before markets began tying the fates of states together via voluntary win/win interactions. I certainly don’t disagree that it is possible to make a profit via voluntary interactions and still harm the world (cigarettes, the sale of weapons of mass destruction). As such these markets require regulations. I am all for impartial, enlightened and parsimonious regulations. Again, we can’t solve all problems with markets, they are (wait for it)….. Necessary but not sufficient.

            “There are all sorts of markets as long there is money on the table. when you argue that it was not the markets who bailed out the bankers, I fully disagree. There is a market based on lobbying and law-loophole-creation that is extremely profitable and is 100% licit and legal.”

            Here is the perfect example of how you redefine everything you don’t like and call it a market failure. The market of “lobbying and loop holes.” This is an act of involuntary coercion using the apparatus of the state to undermine and limit markets.

            “You tend to oversimplify reality, which makes me think on why would you criticize the original article in the first place. You also mix law with morality: like I said before, and you probably overlooked, they are divorced.”

            Not aware of when I mixed law and morality. Please enlighten me, as I may have overlooked something. Considering your track record so far, I won’t be holding my breath.

            As for oversimplifying reality, the author explained reality as based upon one primitive, childish version of equality based upon equal distribution regardless of contribution assuming an infinite supply of resources and I clarified that there are at least five kinds of equality and that over-simplifications that even a monkey can understand is the problem not the solution.

            “…imagine if I buy a stock and lose money when selling it. I sell it to you and you make money. Is this a win/win situation? no, it isn’t.”

            Another soft ball. You are using hindsight to evaluate voluntary interactions of eclectic but uncertain results. When it comes to instruments of risk, there is never a guarantee of success. The reward to profit is in the expected risk adjusted rate of return. But this is at best a statistical property, and never perfectly calculated. When one buys and another sells, they are both declaring their expectation of gain based upon different situations, capital needs, risk profiles, and risk portfolios. It is possible both gain, both lose, both break even or one wins and one loses, but both expect to benefit at the time of the sale. It is still by definition a non zero sum game. You do not understand finance if you see every financial interaction as zero sum. Admittedly this is a common misconception. Another version of this error is to equate insurance with gambling, where most people lose. Insurance sells risk reduction, and is an expected gain to both parties even though in hindsight we can see that most would have been better off not being insured.

            “You do really believe in trickle down economics. I am amazed, as I thought you were an extinct race.”

            I never said anything about trickle down anything. I said billions of people voluntarily cooperating, specializing and exchanging can form networks of prosperity which when combined with other institutions allow us to produce unlimited prosperity. I am quite familiar with the history of economics over the last ten thousand years, and can provide oodles of empirical data to support my position. Few serious scholars deny this (I’ve read most and only one or two quacks even try). So why are you so far out of the loop?

            I have also repeatedly stated that markets need to be supplemented with safety nets and non market redistribution systems. Markets, like in Scandinavia!, create the wealth which then funds the safety net. You want all redistribution with no concept of where the thing being redistributed comes from, the exact same error as the author of this article.

            Your comment on AIDS is another example of blaming every horrible action imaginable on markets. There is nothing voluntary about fraudulently tricking a person to get infected. This is attempted murder, and is no different than poisoning the other teams water in football.

          • Ricardo Monteiro

            There was this guy called Ernest Labrousse who dedicated some of his career studying different structures: technological, economic, social and psychological. He basically understood that these structures have different lengths/paces and that they obviously are interconnected. One thing he found interesting was that when new technology is used this new technological structure implies changes in the economic structure, which contributes for new social distributions, finally contributing to change in the mindsets. Obviously that considering your point the discovery of fire, the wheel, and many others were consequences of demand and supply.

            Again many things you attribute to markets are actually the result of the needs to refrain the markets (e.g. leisure time, educational attainment), or are not directly dependent on them (e.g. freedom).

            I do not deny the world hasn’t improved (even if you use the concept of ‘prosperity’, which is directly linked to wealth and opulence; that is the reason why I told you GDP – which measures wealth – is not a good indicator to say a country is better off than other).

            I didn’t overlook what you said about 3 legged stool. I just argued that markets influence the remaining legs in such a way that there isn’t independency, which takes us to believe that maybe we should evaluate the whole stool (and not the separate legs as independent members because they aren’t). In Brussels, as we debate here, there are hundreds of lobbysts (paid for doing just that) close to the EU headquarters (they even opened their offices there). They are paid to ‘convince’ politicians to serve the companies (they work for) interests. You may argue that this is illegal. I am sure it is. But it is not illegal that lobbysts exist and that some politicians also “work” or lobby for big companies (see the example of one politician who is running for president in the US and has very close relations with Monsanto). So basically, the only thing that is illegal is probably the most difficult to be checked. The rest is ok (morality is distant from law). Why? because there is a great market called lobbying.

            “Children from high income backgrounds who show signs of low academic ability at age five are 35 per cent more likely to be high earners as adults than children from poorer families who show early signs of high ability”. (you can read the rest in,-better-off-kids-more-likely-to-become-high-earners-than-bright-poor-kids.aspx). I will not argue about the empirical studies that you found and that are quite Darwinistic but I am curious to read a few if you can share.

            Theory of games – people cooperate in sequential games because they are afraid of reprisals: “crappy stuff people do to each other.” But then again, I would stress this is not a market issue only.

            Indeed a sum of gains/losses derived from one specific interaction should not exclusively focus on financial values. Utilities are more important because they incorporate the latter together with other important dimensions. Lately, some researchers decided that giving grants (in some developing countries in south/central America and Africa) without the need for any kind of explanation where the money would be spent, and without having to follow guidelines/mandatory courses was a win/win situation. In fact, giving money that way cuts the costs of having to pay for a consultant to design, implement and maintain a developing program (so we have a winner here); on the other hand, some fellow gets money freely (another winner). This seems an obvious win/win interaction. However, evaluation should be participatory and focus on social transformation. This specific program might raise a few issues (and I am just speculating here) such as: the lucky person’s neighbors might get jealous which will unstable social interactions within (especially) small villages (in some social contexts this might get really serious). This situation might result in a win/win/loss.
            Just to finalize, I don’t think markets are the boogie man. They are useful and brought positive things such as specialization, economies of scale and so on. I just believe that correcting them needs will (politics) as economics is just a tool. However, as powerful people control politics then they control the will…and then, everything flushes down…and this situation is getting worse and worse.

          • SLDI

            Swami correctly states, “… modern prosperity comes from the three legged institutional stool of 1) open access political institutions (including rule of law, property rights and divided government), 2) science, and 3) markets… Markets are necessary, not sufficient. The three reinforce and amplify each other. Markets depend on open access institutions and science, and they depend upon markets for the prosperity and value creation necessary to fund science and government.”

            In order to build a practical model for society to use for decision making, let’s get back to the essence of sustainability – Balance…

            Designing a ‘Big Wheel’ for Civilization –

  • Curious Wavefunction

    Thought-provoking article! It’s also worth noting that people like Andrew Carnegie have a complicated legacy since their massive philanthropy also brought about a lot of social good (in case of Carnegie, to name a few contributions – the Carnegie foundation, Carnegie Mellon University, big sums of money donated to hundreds of public libraries etc.). The legacy of unfairness is also complicated since one could argue that much of capitalism – both the good and the bad aspects of it – came from human beings unfairly exploiting each other. The problem is that without competition there is little incentive to excel, and competition is often intrinsically unfair since people are not always created equal. How to build a society that is both equitable as well as prosperous is as great a question today as it ever was.

    • Ricardo Monteiro

      Excel in what? Money? Knowledge? Most creative and intelligent people who ever lived are less rich than others who are smarter in taking advantage of others…smartness, not intelligence and contribution to societies, drives the world

      • Sam

        Smart in the sense they just screw other people, yes, you’re exactly right. Smart in the sense they know how to manipulate perception, yes. The trait they share is a degree of sociopathy. They just don’t care. Cool, huh?

    • The notion that creativity is enhanced by competition has been clearly debunked.
      Competition enhances output only at the lower levels of human potential. At higher levels, human output is enhanced by cooperation and appreciation, rather than by competition for limited reward.
      All of the human output that is strongly enhanced by competition can be automated relatively easily. All of the rest (the really interesting and important stuff), works best when people feel supported, safe, and valued as part of their group.

      So the idea that without competition there is little incentive to excel is, in the wider context, pure dogma, unsupported by science.

      And sure, we all have our competitive sides, I love playing golf and lots of other things. And my doing better at those takes nothing from anyone else – unlike our capitalistic system – and therein lies the fundamental difference.

      In our current age of ability to automate, there is no need to take from anyone – once we work out how to do something, it is relatively easy to automate the process so all can enjoy it – but that is not how the system works.

      It is a system evolved in an age of scarcity, that cannot (even in theory) adapt to an age of automation and abundance.

      And even in a world of abundance, I will still enjoy a competitive game of golf, or a competitive cycle ride, or a cooperative tramp in the woods. Plenty of outlets for both sorts of activity.

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  • Bradford Hatcher

    Too few people really understand Herbert Spencer’s phrase “survival of the fittest.” Darwin did, and never mistook it to mean “might makes right” or primarily competition. It means adaptive fitness to an environmental niche, how well we fit our place, and this includes altruism, cooperation, health, resilience, immune function and sexual attractiveness or finesse.

  • Rob Lewis

    Fairness is a worthy goal, but the problem of course is that no two people will agree on what is “fair”. Most rich people think it’s unfair that they’re (sometimes) taxed at a higher rate than you and me.
    What we need is an argument for higher taxes on the wealthy that doesn’t invoke “fairness”, and I’ve attempted to provide one here: I list 7 reasons for raising taxes on the rich, and none of them involves “paying their fair share”. They don’t even involve “The government needs more money to do important things.”
    Would love to get people’s reactions.

  • Sam

    They were never thinking of anyone else to begin with. Not difficult to grasp that Carnegie was a sociopath.

  • bachcole

    Notice that conservative people say that they don’t give a fig if So-and-so is absurdly rich and they are not. I believe them. I think that these fairness issues as described in this article are cooperative tendencies and are going to appear in humans when they tend to be liberal, and conservative people are not going to have the same group orientation. I think that this is natural, and I think that it would be a big mistake to condemn anyone because of it.

    Of course, this should not change how one votes.

    I look at it like this. If the economic staircase is too steep, people will get discouraged and not bother to climb it. If it is too flat or almost flat, people won’t see any reason to climb it.

    The liberals are looking at people according to their intrinsic worth. The conservatives are looking at people according to their performance. Both are needed.