Friday, September 30, 2011

Bob Frank's The Darwin Economy

Adam Smith advocated for a progressive tax on carriages so that "the indolence and vanity of the rich is made to contribute in an easy manner to the relief of the poor."  His disciples too often forget Smith's regard for justice and advocacy of free(er) markets in the progressive battle against tyranny and oppression.

Robert Frank is true to Smith's original intent, and in his iconoclastic new book The Darwin Economy, he argues that competition can at times undermine the collective good.  (Read the first chapter here.)  Calling on Darwin's observations of runaway selection, Frank shows that this is an apt analogy for competitive consumption in our affluent society.  He calls on behavioral research, showing that affluence and poverty as felt, as lived experiences are relational: our norm adapts quickly to rises in income and material conditions, and we adjust our aspirations upwards in ways that reflect not so much material need or utility but symbolic, social, positional conditions.  He shows how subjective wellbeing has become detached from objective income levels in ways that lead to greater and greater consumption that does not improve quality of life.

Frank is a compelling and persuasive writer, and here he is in top form.  He calls on classic political economists such as Smith, the evolutionary observations of Darwin, and cutting-edge behavioral research to illuminate the way our economy has moved in recent years.  Yet he is not content with this theoretically powerful argument, he also takes the next step and spells out policy implications.

Namely, he advocates a progressive consumption tax to both provide revenue to reduce the deficit but also to curb wasteful (and, as he shows, even harmful) competitive consumption (what he terms the 'expenditure cascade" of recent years).  He is even able to resolve the paradox of advocating such a tax while identifying himself as a libertarian.  Smith would be proud.

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