Review: Delving into the mind of the technocrat

February 23, 2012 | Sp!ked |

Frank, a professor of economics at Cornell University in New York state, is one of the most articulate experts in the field. As the joint author of an economics textbook with Ben Bernanke, the chairman of America’s Federal Reserve central bank, he also has a direct personal connection with one of the world’s most powerful policymakers.

 
The starting point of The Darwin Economy is what economists call the collective action problem: the divergence between individual and collective interests. A simple example is a fishermen fishing in a lake. For each individual, it might be rational to catch as many fish as possible, but if all fishermen follow the same path the lake will eventually be empty. It is therefore deemed necessary to find ways to negotiate this tension between individual and group interests.
 
Those who have followed the discussion of behavioural economics will recognise that this is an alternative way of viewing humans as irrational. Behavioural economists focus on individuals behaving in supposedly irrational ways. For example, they argue that people often do not invest enough to secure themselves a reasonable pension. For Frank, in contrast, individuals may behave rationally but the net result of group behaviour can still be irrational.