The Company of Strangers

"This is really remarkable if you think about humanity’s evolutionary origins: very tight-knit social circles, where if somebody wasn’t a member of your immediate family or kinship group, you’d probably kill them as soon as you saw them. So this extension of trust to millions of other people who make products and services that we depend on every day is really quite extraordinary. The book is about how miraculous this is – and we normally don’t think about it in those terms very much. Also, how fragile that makes the economy in some ways. The new edition looks in particular at the global financial crisis as a demonstration of the kind of fragility that comes about through those interconnections. Paul Seabright isn’t hugely pessimistic: he’s not one of the people who are saying that civilisation is bound to collapse because it’s become overextended and overcomplicated. There are some books that do that – Jared Diamond’s Collapse is a good example of a book that is pretty pessimistic about our ability to sustain the kind of global economy and society that we’ve developed. But in The Company of Strangers Paul Seabright says we need to think about the way human beings relate to each other. We need to think about what we can learn, as economists, from anthropology and sociology, in order to understand how better to govern what we’ve created. Because if you think about it, there are lots of examples of how we don’t have very good rules and systems for making sure that the world economy is well related between countries. It’s still a very nation-state based system. “Although I think the insights of economics are essential, actually, good economists have never thought economics was enough.” This is something that people had started to say about globalisation anyway. If you look, for example, at what’s been happening at the Foxconn factory in China…when we think about the standards that those kinds of factories have, compared to the standards in our own country. What do we think about international trade rules that mean that we import things from low cost countries? What kind of intellectual property rules do we have between different countries, where what a US court decides about an American company, in the Google Books case, for example, has implications for writers and artists around the world? So the argument of the book is the need to think about how to do it better and how to draw on psychology and anthropology to allow us to do it better. That’s right, and although I think the insights of economics are essential, actually, good economists have never thought economics was enough. There’s a kind of caricature about economics, that it’s all about the false assumption that people are rational, calculating machines who don’t care about anybody else. That’s never been true. There was a high tide of economics that was like that in the Thatcher and Reagan era, but that was well over 20 years ago now. For the past generation economists have moved very far away from that kind of caricature. And good economists always drew on history , they drew on mathematics , they understood psychology (even if they didn’t incorporate psychology formally in their models), they were interested in political science and political decision-making. It’s always been a subject that’s been at the cusp of a lot of other disciplines, and I think that interdisciplinary strength has been revived recently and is very much to the fore in a book like Paul Seabright’s."

"This book probes a layer deeper into the mystery John Kay describes – that successful markets and economic structures, driven by rivalry and competition, can only exist in basically cooperative societies. Competition only produces economic success when it’s conducted within clearly defined bounds, and in creating those bounds, cooperation dominates over competition. The question that Seabright raises is how the strong biological drive to compete – in many cases violently and ruthlessly – can coexist with the cooperation that makes competitive societies successful. He gives the amusing example of taking a taxi in a strange city. Why do you believe the driver will take you to your destination instead of following the instinct bred into him through millions of years of evolution to steal your food and possessions? And when he does bring you to your destination, why do you hand over your fare instead of simply getting out of the taxi and running away? This is not just about fear of law enforcement – you could claim to the police that you had already paid the taxi driver and he was trying to rob you – and if necessary you could bribe the policeman with half the fare you would otherwise have paid. So what is it about human biology that has made us trusting and cooperative, as well as competitive? Seabright engages in some fascinating speculations on anthropology and biology. He posits a form of “group selection” – natural selection operating within entire societies rather than individuals, a concept very controversial among biologists and anthropologists. Without our delving deeply into the issues, his economic arguments illuminate some of the fundamental paradoxes and mysteries of why the market system works. He concludes that the crisis marks a serious challenge to the way societies were organised before the crisis. His conclusion – which is quite pessimistic – is that over millions of years humans have evolved to operate quite successfully in limited and well-defined groups. But we’re now moving into a world where the social group that is relevant to the future success, maybe even survival, of humanity is no longer a tribe, a city or a nation. It is the world as a whole. Once humanity is operating on a global level, people have to cooperate on a far broader scale, and the mechanisms for cooperation which have evolved over thousands of years may break down. He gives the financial crisis and the inability of nation states to control it as one example of this breakdown. Others are climate change, nuclear proliferation, energy depletion and environmental destruction. These are all global challenges for which cooperative social mechanisms have not had time to evolve."