Charles Darwin, not Adam Smith, will one day be considered the father of economics, says Cornell University professor and New York Times columnist Robert H. Frank in his new book, The Darwin Economy. He argues that Darwin's theory of evolution by natural selection gives a better description of how markets work, and fail, than Smith's theory of the invisible hand. This insight reverses two centuries of intellectual traffic. Thomas Malthus' ideas shaped Darwin's, and many of the tools of modern evolutionary biology, such as game theory, are borrowed from economics. It leads Frank to many excellent suggestions for improving society by means of a fairer and more efficient tax system that takes the laws of biology into account.
The same insight also leads him to say some misleading things about how natural selection works. Frank's biological misfires aren't mere naivety; they touch on ideas at the leading edge of evolutionary thought and show what stands in the way of the reforms he advocates. Frank bases his argument on the Darwinian notion that life is graded on a curve. How much is enough depends on what others have got. Most people, for example, would rather live in a 4,000-square-foot house that was bigger than their neighbor's than a 6,000-square-foot house that was the smallest on the street. Economists call these positional goods, and contrast them with things that aren't so relative, such as safety at work, where most people think it's better to be safe in absolute terms than the safest worker in a hazardous factory.