Abstract
According to neoclassical economics, the most efficient way to organize human activity is to use the free market. By stoking self interest, the theory claims, individuals can benefit society. This idea, however, conflicts with the evolutionary theory of multilevel selection, which proposes that rather than stoke individual self interest, successful groups must suppress it. Which theory better describes how human societies develop? I seek to answer this question by studying the opposite of the market: namely hierarchy. I find evidence that as human societies develop, they turn increasingly to hierarchical organization. Yet they do so, paradoxically, at the same time that the language of free markets becomes more common, and culture becomes more individualistic. This evidence, I argue, contradicts free-market theory, but only if we treat it as a scientific doctrine. If instead we treat free-market theory as an ideology, the pieces come together. Free-market thinking, I speculate, may stoke the formation of hierarchy by cloaking power in the language of ‘freedom’.
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Notes
Note that the words ‘interest’ and ‘self-interest’ do not indicate intent. Rather, they are a Darwinian metaphor for actions that increase relative ‘fitness’ (differential reproduction). Also, multilevel selection theory notes that the ‘suppression’ of self interest (when it occurs) is always partial and never complete.
Armies often suppress the motive to desert by making it a capital crime. The certain threat of capital punishment makes the possible threat of battlefield death the lesser of two evils.
Speaking about the importance of the atomic theory of matter as the basis of other fields, Richard Feynman remarked: “The most important hypothesis in all of biology, for example, is that everything that animals do, atoms do” (Feynman et al. 2013, emphasis in original).
Note that because the minimum hierarchical power is defined to be 1 (not 0), the concentration of hierarchical power can never be exactly 1.
If one is skeptical of this choice, note that there is strong correlation between energy use and real GDP (Brown et al. 2011). As such, should we measure economic development using real GDP, the results in this paper would likely remain unchanged.
On a historical note, the data in Fig. 3 captures the collapse of the Soviet Union in action. The data begins in 1990, just when the Soviet Union disbanded. Former Soviet states like the Ukraine, Estonia, Moldova and Armenia begin (in 1990) with almost 100% government employment—a relic of their communist history. But over the next decade, governments in these countries shrank drastically, collapsing to levels similar to their non-communist counterparts. With this government collapse came a decline in energy use.
For case studies of firm hierarchy, see Audas et al. 2004; Baker et al. 1993; Dohmen et al. 2004; Grund 2005; Lima 2000; Morais and Kakabadse 2014; Treble et al. 2001. For aggregate studies of firm hierarchy, see Ariga et al. 1992; Bell and Van Reenen 2012; Eriksson 1999; Heyman 2005; Leonard 1990; Main et al. 1993; Mueller et al. 2016; Rajan and Wulf 2006; Tao and Chen 2009. For a summary of these studies, see the Appendices in Fix 2018, 2019c.)
I thank Jonathan Nitzan for suggesting to me the phrase ‘power in the name of freedom’.
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Funding
This research was funded in part by John Medcalf, Mike Tench, Robin Shannon, Brent Gulanowski, Tom Ross, Steve Keen, Hilliard MacBeth, Joe Clarkson, Grace and Garry Fix, Pierre, Norbert Hornstein, and Ed Zimmer.
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Fix, B. Economic development and the death of the free market. Evolut Inst Econ Rev 19, 1–46 (2022). https://doi.org/10.1007/s40844-021-00224-2
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DOI: https://doi.org/10.1007/s40844-021-00224-2
Keywords
- Hierarchy
- Hierarchical power
- Free market
- Economic development
- Sociality
- Cultural evolution
- Multilevel selection
- Energy