The Darwin Economy: Liberty, Competition, and the Common Good

Howard Davies admires the aims of a defender of government but questions his certainties

September 22, 2011

I almost always wear a cycle helmet, especially when I'm on my bike. I do so for two reasons. First, a friend who works nearby had a son seriously injured in a cycle accident where a helmet would have reduced the damage, and he has in the past shouted at me when I rode by unaccoutred. Indeed, he once sent a helmet to my office as a result. Second, my current crash hat is an SS-style Bell, given to me by my younger son for a recent birthday: it seems churlish not to use it.

I am not, however, persuaded that I am thereby much safer on the roads. In 38 years of cycling in London I have never had an accident (watch out next week, I hear you think). So, like those banks that knew that house prices could not fall, I do not expect trouble. But there is also research that suggests that cyclists who wear helmets may not in practice be conspicuously safer. That may be because helmets make them more aggressive riders, or perhaps because car drivers take less care as they approach them. The research is by no means conclusive, and the best conclusion one can reach is that the academic jury remains out.

Robert Frank has no such doubts. Discussing New York State law he notes "that the requirement (to wear a helmet) prevents enormous harm is beyond dispute". This is just one of a number of contentious observations presented as incontrovertible fact, without support or citation. Another is that the US is "a resource-rich nation with the most educated and productive workforce on the planet". There may be some definition of "most educated" that makes this sentence true, perhaps if we define it as the most time spent in educational institutions, but US school students significantly lag behind those of many other nations in cross-country comparisons of attainment, while on a per-hour basis, US workers are certainly less productive than the Germans.

Perhaps we should not worry about these points, or his almost total neglect of research conducted outside the US, as this is a book written entirely for an American audience, and a quite particular audience at that.

Frank's target is a group he describes as "movement libertarians", a rather unfamiliar phrase over here. They might be thought of as the provisional wing of the Tea Party. They pop up as pundits on the Fox television network, which is now of course to be seen as one of the upmarket bits of the Murdoch empire.

They argue that all government is bad government, that all taxes are damaging for the economy, and that Washington should be allowed to revert back to a malarial swamp. (After a couple of steamy days there in July, I wonder if that last part of the programme might not be such a bad idea.)

Frank's worthy and unfashionable aim is to argue the economic case for some forms of government regulation, to defend taxation, and even to advocate certain forms of tax increase.

His own pet scheme to resolve America's fiscal problems is a progressive consumption tax, whose implementation he describes as "straightforward".

"Taxpayers would report their incomes to the tax authorities just as they do now. They'd also report how much they had saved during the year...(and) would then pay tax on their taxable consumption, which is just the difference between their income and their annual savings."

I have never worked in HM Revenue and Customs, although I did spend a few years in the Treasury in my youth. And I have a sneaking feeling that this "straightforward" calculation might just be quite tricky in practice, and I can see why the idea has made little headway with policymakers in the US, or indeed anywhere.

Elsewhere in The Darwin Economy, Frank makes some good points, borrowing heavily from Ronald Coase, although most of them seem fairly obvious to a European. He is battling an intellectual tendency that has so far made little headway over here: the opposition by a group of economists to the 50 per cent tax band is hardly in that category.

And the idea presented at the start, to the effect that Darwin, rather than Adam Smith, will come to be seen as the father of modern economics, gets lost on the journey. Indeed, he reveals in the preface that the book's title was imposed by the publisher, and that his own preference would have been for The Libertarian Welfare State, which would have been a clearer guide to the material he presents.

The Darwin Economy: Liberty, Competition, and the Common Good

By Robert H. Frank

Princeton University Press

256pp, £18.95

ISBN 9780691153193

Published 21 September 2011

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