Brian Gladish Archives
Mind of the Market, reviewed
Michael Shermer is the gadfly head of the International
Skeptics Society (which meets at the California Institute of Technology), a
columnist for Scientific American and
the author of a number of books on science and belief. He is also one of the rarest of rare birds -
a scientist who promotes the free market.
Shermer arrived at this position through his parents and the courses of
Andrew J. Galambos. After taking
Galambos's introductory course, V-50, he met the person to whom he dedicated
this book - Jay Stuart Snelson, Galambos's former senior lecturer. Through Snelson he was introduced to the
A quick flip to the index is enough to temper our enthusiasm. Two of the names one would expect to find in a book on economics, science and evolution are those of the friendly adversaries Friedrich Hayek and Karl Popper. Hayek has one reference, and Popper has none. We are surprised, but not yet discouraged. After all, a combination of Galambos's zero-state position and von Mises's powerful insights into economics should be enough to put our author on the right path.
The first chapter begins as we might expect - with a
discussion of observations that the author will attempt to explain. Shermer contrasts the Yanomamö people of
South America, still in the Stone Age, with the modern urban "
Evolution, with its bottom-up process of functional adaptations is presented as an analog for market development, but we are brought up short when he declares the market "imperfect" and calls for top-down rules that "provide a structure within which free and fair trade can occur" (emphasis added). This uncritical acceptance of the inability of markets to evolve these structures in a bottom up manner is contrary to the primary teachings he had previously credited and damaging to his thesis. The use of the word "fair" warns us that he has preferred outcomes in mind. Shermer's support of markets seems to weaken with each paragraph.
Almost immediately Shermer begins an attack on human rationality as a means of coping with the modern, post-Paleolithic world. His first argument is based upon the Ultimatum Game, in which two people participate, but only one determines the division of $100 between them. If the second person accepts the division they receive amounts in the offered proportions. If not, neither gets anything. Results show that a $70/$30 split is the general criterion for acceptance, indicating that the second player is exercising an irrational urge (counter to being a "rational, self-interested money-maximizer") to punish the first for his "unfair" division by giving up the "free" money. However, we notice that refusing $30 will not materially affect anyone but the most destitute and wonder whether a $950,000/$50,000 split (equivalent to a $95/$5 split in the actual experiment) might be accepted if $1,000,000 were at stake. To be fair, Shermer uses this argument to discredit Homo economicus, a concept that Austrian economists do not support. Also, his concept of rationality does not affect von Mises's action axiom as the decision to refuse less than $30 is still the choice of a means to an end - the punishment of the first player's "unfairness."
Shermer goes on to throw Occam's razor out the window and declare that "we are selfish and selfless, cooperative and competitive, peaceful and bellicose, prosocial and antisocial," rather than that all of these behaviors are facets of self-interest which appear as they suit us in pursuing our values. Then we are told "markets are moral" with no reference to what that means, other than what a well-educated, former-evangelical-Christian, now-atheist with a Ph.D. in the history of science might think it would mean.
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