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Homo economicus?

Economist.com | Human evolution

Human evolution

Homo economicus?

Apr 7th 2005
From The Economist print edition

SINCE the days of Adam Smith and David Ricardo, advocates of free trade and the division of labour, including this newspaper, have lauded the advantages of those economic principles. Until now, though, no one has suggested that they might be responsible for the very existence of humanity. But that is the thesis propounded by Jason Shogren, of the University of Wyoming, and his colleagues. For Dr Shogren is suggesting that trade and specialisation are the reasons Homo sapiens displaced previous members of the genus, such as Homo neanderthalensis (Neanderthal man), and emerged triumphant as the only species of humanity.

Neanderthal man has had a bad cultural rap over the years since the discovery of the first specimen in the Neander valley in Germany, in the mid-19th century. The “caveman” image of a stupid, grunting, hairy, thick-skulled parody of graceful modern humanity has stuck in the public consciousness. But current scholarship suggests Neanderthals were probably about as smart as modern humans, and also capable of speech. If they were hairy, strong and tough—which they were—that was an appropriate adaptation to the ice-age conditions in which they lived. So why did they become extinct?

Neanderthals existed perfectly successfully for 200,000 years before Homo sapiens arrived in their European homeland about 40,000 years ago, after a circuitous journey from Africa via central Asia. But 10,000 years later they were gone, so it seems likely that the arrival of modern man was the cause. The two species certainly occupied more or less the same ecological niche (hunting a wide range of animals, and gathering a similarly eclectic range of plant food), and would thus have been competitors.

Bartering for your life
One theory is that Homo sapiens had more sophisticated tools, which gave him an advantage in hunting or warfare. Another is that the modern human capacity for symbolic thinking (manifest at that time in the form of cave paintings and carved animal figurines) provided an edge. Symbolic thinking might have led to more sophisticated language and better co-operation. But according to Dr Shogren’s paper in a forthcoming edition of the Journal of Economic Behaviour and Organisation, it was neither cave paintings nor better spear points that led to Homo sapiens’s dominance. It was a better economic system.

One thing Homo sapiens does that Homo neanderthalensis shows no sign of having done is trade. The evidence suggests that such trade was going on even 40,000 years ago. Stone tools made of non-local materials, and sea-shell jewellery found far from the coast, are witnesses to long-distance exchanges. That Homo sapiens also practised division of labour and specialisation is suggested not only by the skilled nature of his craft work, but also by the fact that his dwellings had spaces apparently set aside for different uses.

To see if trade might be enough to account for the dominance of Homo sapiens, Dr Shogren and his colleagues created a computer model of population growth that attempts to capture the relevant variables for each species. These include fertility, mortality rates, hunting efficiency and the number of skilled and unskilled hunters in each group, as well as levels of skill in making objects such as weapons, and the ability to specialise and trade.

Initially, the researchers assumed that on average Neanderthals and modern humans had the same abilities for most of these attributes. They therefore set the values of those variables equal for both species. Only in the case of the trading and specialisation variables did they allow Homo sapiens an advantage: specifically, they assumed that the most efficient human hunters specialised in hunting, while bad hunters hung up their spears and made things such as clothes and tools instead. Hunters and craftsmen then traded with one another.

According to the model, this arrangement resulted in everyone getting more meat, which drove up fertility and thus increased the population. Since the supply of meat was finite, that left less for Neanderthals, and their population declined.

A computer model was probably not necessary to arrive at this conclusion. But what the model does suggest, which is not self-evident, is how rapidly such a decline might take place. Depending on the numbers plugged in, Neanderthals become extinct between 2,500 and 30,000 years after the two species begin competing—a range that nicely brackets reality. Moreover, in the model, the presence of a trading economy in the modern human population can result in the extermination of Neanderthals even if the latter are at an advantage in traditional biological attributes, such as hunting ability.

Of course, none of this proves absolutely that economics led to modern humanity inheriting the Earth. But it does raise the intriguing possibility that the dismal science is responsible for even more than Smith and Ricardo gave it credit.

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Jonathan Power, India overtaking China

Jonathan Power, India overtaking China

Watching India overtaking China
By
Jonathan Power

May 6, 2004

LONDON – India is now in the middle of what many Chinese would give their right arm for- a general election. Yet China is the power that gets all the attention. When president Richard Nixon first went to China it was widely assumed at the time that the reason he ignored India and courted China was that China had nuclear weapons and could help balance the Soviet Union.

Since 1998 India has possessed nuclear weapons and can balance China. Slowly Washington is waking up to the fact that the tortoise soon might overtake the hare. Still the investors and the press continue in their old ways. Last year the inflow of foreign capital into China was two and a half times that into India. The press barely covers the Indian election whilst every day there is a story out of Beijing.

This skewed appreciation has been going on since the time of Mao Tse Tung. Whilst in the 1960s and 70s China basked in accolades, India’s economic planners were widely abused. India was mocked for its “Hindu growth rate”. China’s people were fed, housed, clean and tidy, while India’s were ragged, hungry and sinking into a trough of despondency- “a wounded civilization” wrote V.S. Naipaul.

Neville Maxwell of Oxford University was one of the more prominent of the legion of Western intellectuals who in the 1960s and 70s thought China had found the answer to underdevelopment. In 1974, he wrote, “Mao and his party triumphed where Stalin cruelly failed, basically because Mao understood and trusted the peasantry”. It was hog wash.

With the 1981 famine we could see, to use George Watson’s phrase, “the intellectuals were duped”. As Watson exposed the romantic gullibility of Beatrice and Sydney Webb, Stephen Spender and Andre Gide and their glowing reports of the Soviet economy in the 1930s, so too the China seers of the 60s and 70s were held up to the harsh light of day. China had to beg around the world for grain whilst India had managed to survive the savage drought of 1979 without having to import a sack.

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Now with Mao long dead and the capitalistic reforms of Deng Xiaoping well into their stride the story is being repeated but in a more complex way. To many China’s economic progress has been nothing less than spectacular. But inflationary pressures, bad bank loans, a fast increasing maldistribution of income and crime all threaten its economic stability.

India meanwhile has been gradually but with increasing speed loosening up its old Fabian socialist system. After a major economic crisis in 1991, finance minister Manmohan Singh (now Sonia Gandhi’s principal economic advisor) introduced major promarket reforms and fiscal expansion and India’s economy has never looked back. Annual growth averages above 5% and now thanks to a good monsoon is 8%. Singh believes that with more reforms than the present government has so far countenanced an average annual growth rate of 6.5% is sustainable- which is what he privately thinks China’s over-hyped growth rate actually is.

In reality India is better placed for future growth. Its capital markets operate with greater efficiency than do China’s. They are also much more transparent. Companies can raise the money they need. India’s legal system whilst over slow is much more advanced and is able to settle sophisticated and complex cases. Its banking system has relatively few non-performing assets. Its democracy and media are alive and vital which provides a safety valve for the incoherent changes that modern day economic growth brings. India has religious riots, secessionist movements, urban squalor and bitter rural poverty. But the voters know they can throw the rascals out, and regularly do.

Moreover the massive flows of foreign investment into China are a two edged sword. It has become a substitute for domestic entrepreneurship. Few of the Chinese goods we buy are in fact made by indigenous companies. And the few that exist are besieged by regulatory constraints and find it hard to raise domestic capital. Its remaining state owned enterprises remain massive but bloated and possess a frightening number of non-performing loans from China’s vulnerable banking system. It is India that has created world class companies that can compete with the best in the West, often on the cutting edge of software, pharmaceuticals and biotechnology.

India’s trump cards are its language, English, its emphasis on maths in its schools (begun in Indira Gandhi’s time), and the talents of its diaspora. For decades China has benefited from the wealth and the investment potential of its diaspora and the economic energy of Hong Kong and Taiwan. After years of ignoring its diaspora India is now welcoming them back- and they have much more “intellectual capital” to offer than China’s, much of it coming from Silicon Valley where the Indian contribution has shone.

Watch the tortoise continue its course as the hare starts to lose its breath.

I can be reached by phone +44 7785 351172 and e-mail: JonatPower@aol.com

Copyright © 2004 By JONATHAN POWER

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