The Company of Strangers: A Natural History of Economic Lifeby Paul Seabright
The Company of Strangers shows us the remarkable strangeness, and fragility, of our everyday lives. This completely revised and updated edition includes a new chapter analyzing how the rise and fall of social trust explain the unsustainable boom in the global economy over the past decade and the financial crisis that succeeded it./p>/i>… See more details below
The Company of Strangers shows us the remarkable strangeness, and fragility, of our everyday lives. This completely revised and updated edition includes a new chapter analyzing how the rise and fall of social trust explain the unsustainable boom in the global economy over the past decade and the financial crisis that succeeded it.
Drawing on insights from biology, anthropology, history, psychology, and literature, Paul Seabright explores how our evolved ability of abstract reasoning has allowed institutions like money, markets, cities, and the banking system to provide the foundations of social trust that we need in our everyday lives. Even the simple acts of buying food and clothing depend on an astonishing web of interaction that spans the globe. How did humans develop the ability to trust total strangers with providing our most basic needs?
Shortlisted for the 2005 British Academy Book Prize, The British Academy
One of Strategy & Business's Best Business Books for 2004
"The Company of Strangers is a model of how different disciplines can enrich each other to explain human progress."--George Peden, Times Literary Supplement
"A welcome and important contribution. . . . The Company of Strangers exemplifies a new breed of economic analysis, seeking answers to fundamental questions wherever they are found and ignoring disciplinary boundaries. . . . [It] is highly readable and will be accessible to a wide audience."--Herbert Gintis, Nature
"A very unusual new book about economics, and much else besides. . . . Elaborate co-operation outside the family, but within the same species, is confined to humans. The requirements for such co-operation, and hence for modern economic life, which is founded on specialization and an infinitely elaborated division of labor, are more demanding than you might suppose. . . . The fact that things could have turned out so differently makes the modern global economy, with all its awesome productivity, seem even more miraculous."--The Economist
"A clear, thought-provoking and elegant book."--Howard Davies, Times Higher Education Supplement
"An important and timely book."--Giles Whittell, The Times (London)
"An entertaining, wide-ranging account about how the economy evolved in a way that allowed strangers, even potentially hostile strangers, to cooperate and even collaborate within market-based institutionsŠ. Seabright tells the story of how human beings, despite their genetic predisposition toward violent and even murderous behavior, have managed to produce a complex civilization through market-based institutions."--Choice
"We now depend on the efforts of many strangers for our lives. In these days of terror and conflict, Seabright's stunning exploration of this human social experiment is timely. . . . This is a book every concerned citizen should read, along with anybody in business who ever has to tangle with government regulations or the law, and who wants to understand why those relationships are so complex."--Diane Coyle, Strategy and Business
"A brilliant book."--Martin Wolf, Financial Times
"In his absorbing book, Seabright . . . marvels at how easily we 'entrust our lives to the pilot of an aircraft, accept food from a stranger in a restaurant, enter a subway train packed full of our genetic rivals.' It's not often that an economist provides nuggets for cocktail party conversation."--Peter Young, Bloomberg News
"Few economists are so sweeping in their ideas as Seabright, and few so anxious to make us look freshly at the world. . . . In The Company of Strangers, Seabright has produced one of those books that lie low, speak quietly, but work a change on the reader."--Robert Fulford, National Post
"There seems to be no place where Seabright is a stranger. He obviously feels as much at home among classical economists as among evolutionary biologists, quotes modern literature and ancient history with equal aplomb, jumps from experimental psychology to political philosophy and draws liberally on his personal memories of places from Ukraine to India. . . . [His] book is obviously not meant as an exercise in planned economy, but as an excursion, without blinkers and without apprehension, through a tumultuous crowd of ideas."--Karl Sigmund, American Scientist
"Paul Seabright contends that the Neolithic revolution, which saw the beginning of farming, changed not only the environment but also human nature. Settling down to tend fields promoted societies based on trust. Today, he says, all our economic institutions rely on trust. . . . [I]t is a provocative read."--Maggie McDonald, New Scientist
"So what does it take to become truly global? In a nutshell, it means learning how to live in The Company of Strangers. In [this] illuminating book . . . Paul Seabright, himself an economist, brings together insights from history, biology and sociology to explain the concept of modern civilization."--Korea Herald
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The Company of StrangersA Natural History of Economic Life
By Paul Seabright
Princeton University PressPaul Seabright
All right reserved.
THE GREAT EXPERIMENT
Our everyday life is much stranger than we imagine, and rests on fragile foundations. This is the startling message of the evolutionary history of humankind. Our teeming, industrialized, networked existence is not some gradual and inevitable outcome of human development over millions of years. Instead we owe it to an extraordinary experiment launched a mere ten thousand years ago.* No one could have predicted this experiment from observing the course of our previous evolution, but it would forever change the character of life on our planet. For around that time, after the end of the last ice age, one of the most aggressive and elusive bandit species in the entire animal kingdom began to settle down. It was one of the great apes-a close cousin of chimpanzees and bonobos, and a lucky survivor of the extinctions that had wiped out several other promising branches of the chimpanzee family.1 Like the chimpanzee it was violent, mobile, intensely suspicious of strangers, and used to hunting and fighting in bands of close relatives. Yet now, instead of ranging in search of food, it began to keep herds and grow crops, storing them in settlements that limited the ape's mobility and exposed it to the attentions of the very strangers it had hitherto fought or fled. Within a few hundred generations-barely a pause for breath in evolutionary time-it had formed social organizations of startling complexity. Not just village settlements but cities, armies, empires, corporations, nation states, political movements, humanitarian organizations, even internet communities. The same shy, murderous ape that had avoided strangers throughout its evolutionary history was now living, working, and moving among complete strangers in their millions.
Homo sapiens sapiens is the only animal that engages in elaborate task-sharing-the division of labor as it is sometimes known-between genetically unrelated members of the same species.2 It is a phenomenon as remarkable and uniquely human as language itself. Most human beings now obtain a large share of the provision for their daily lives from others to whom they are not related by blood or marriage. Even in poor rural societies people depend significantly on nonrelatives for food, clothing, medicine, protection, and shelter. In cities, most of these non relatives crucial to our survival are complete strangers. Nature knows no other examples of such complex mutual dependence among strangers. A division of labor occurs, it is true, in some other species, such as the social insects, but only among close relatives (the workers in a beehive or an ant colony are sisters).3 Modern biology has provided a convincing account of the evolutionary mechanisms by which such cooperation between close relatives must have evolved: it is known as the theory of kin selection.4 This theory has shown that cooperation through a division of labor between close genetic relatives is likely to be favored by natural selection, since close relatives share a high proportion of genes, including mutant genes, both good and bad.5 But for a cooperative division of labor to evolve among genetically unrelated individuals would be very surprising indeed, since individuals with mutant genes favoring dispositions to cooperate would help others who had no such dispositions and offered nothing in return. And sure enough, cooperation through a division of labor has never evolved in any species other than man.
Some species, it is true, practice a small degree of cooperation between unrelated individuals on very precise tasks. It has been seen among sticklebacks, vampire bats, and lions, for example-albeit only in very small groups.6 But these rudiments bear as much relation to the elaborate human division of labor between relatives, nonrelatives, and complete strangers as do the hunting calls of chimpanzees to the highly structured human languages spoken all over the globe. Nature is also full of examples of mutual dependence between different species-such as that between sharks and cleaner fish (this is known as symbiosis).7 But members of the same species occupy the same environment, eat the same food, and-especially-pursue the same sexual opportunities; they are rivals for all of these things in a much more intense way than are members of different species. Nowhere else in nature do unrelated members of the same species-genetic rivals incited by instinct and history to fight one another-cooperate on projects of such complexity and requiring such a high degree of mutual trust as human beings do.
No solution to this puzzle can be found in evolutionary biology alone. Ten thousand years is too short a time for the genetic makeup of Homo sapiens sapiens to have adapted to his new social surroundings. If it were somehow possible to assemble together all your direct same-sex ancestors-your father and your father's father and so on if you're male, your mother and your mother's mother and so on if you're female; one for each generation right back to the dawn of agriculture-you and all of these individuals could fit comfortably in a medium-sized lecture hall.8 Only half of you would have known the wheel, and only 1 percent of you the motor car. But you would be far more similar to each other-genetically, physically, and instinctually-than any group of modern men or women who might have assembled there by chance. Apart from a small number of genes that have been subject to unusually strong selective pressures over the last ten millennia (such as the gene for lactose tolerance-the ability to digest milk-in adults)9 and the effects of improved nutrition and other environmental developments over the centuries, the biological differences between you and your furthest ancestor would be very hard to distinguish from random variation within the group. If you are reading this book in a train or an airplane, this means your most distant ancestor from Neolithic times was almost certainly more like you, biologically, than the stranger sitting in the seat next to you now.
Yet evolutionary biology has something important to tell us all the same. For the division of labor among human beings has had to piggyback on a physiology and a psychology that evolved to meet a far different set of ecological problems. These were problems faced by hunter-gatherers, mainly on the African woodland savannah, over the six or seven million years that separate us from our last common ancestor with chimpanzees and bonobos. Some time in the last two hundred thousand years or so-less than one-thirtieth of that total span-a series of changes, minuscule to geneticists, vast in the space of cultural potential, occurred to make human beings capable of abstract, symbolic thought and communication.10 The changes themselves must have occurred before the last common ancestor of the human beings alive today. This implies that they occurred at least 140,000 years ago.11 But the first evidence of the new cultural capabilities to which they gave rise is found in the cave paintings, grave goods, and other symbolic artifacts left by hunter-gatherer communities of anatomically modern man (Cro-Magnon man, as he is sometimes known), which are no older than sixty or seventy thousand years-and most are much younger.12 These capabilities seem to have made a move toward agriculture and settlement possible once the environmental conditions became favorable, after the end of the last ice age. Indeed, the fact that agriculture was independently invented at least seven times, at close intervals, in different parts of the world suggests it was more than possible; it may even have been in some way inevitable.13 These capabilities also enabled human beings to construct the social rules and habits that would constrain their own violent and unreliable instincts enough to make society possible on a larger, more formal scale. And they laid the foundation for the accumulation of knowledge that would provide humanity as a whole with a reservoir of shared skills vastly greater than the skills available to any single person. But these cultural capabilities did not evolve because of their value in making the modern division of labor possible. Quite the contrary: modern society is an opportunistic experiment, founded on a human psychology that had already evolved before human beings ever had to deal with strangers in any systematic way. It is like a journey to the open sea by people who have never yet had to adapt to any environment but the land.
THE ARGUMENT OF THIS BOOK
The chapters that follow explore what made this remarkable experiment possible and why, against all the odds, it did not collapse. They also explore why it could collapse in the future, and what might be done to prevent that from happening. Part 1 shows why the division of labor is such a challenge for us to explain. It looks at the way in which even some of the simplest activities of modern society depend upon intricate webs of international cooperation that function without anyone's being in overall charge. On the contrary, they work through eliciting a single-mindedness from their participants-a tunnel vision-that is hardly compatible with a clear and nonpartisan vision of the priorities of society as a whole. It seems hard to believe that something as complex as a modern industrial society could possibly work at all without an overall guiding intelligence, but since the work of the economist Adam Smith in the eighteenth century, we have come to realize that this is exactly how things are. Like medical students studying the human body, therefore, we have to understand and marvel at the degree of spontaneous coordination displayed in human societies before we can even begin to investigate its pathologies. This coordination comes about simply because of a willingness of individuals to cooperate with strangers in a multitude of small but collectively very significant ways.
Part 2 looks at what makes such cooperation possible, given the psychology we have inherited from our hunter-gatherer ancestors. The answer consists of institutions-sets of rules for social behavior, some formal, many informal-that build on the instincts of the shy, murderous ape in ways that make life among strangers not only survivable but attractive, potentially even luxurious. These rules of behavior have made it possible for us to deal with strangers by persuading us, in effect, to treat them as honorary friends. Some of the institutions that make this possible have been consciously and coherently designed, but many have grown by experiment or as the by-product of attempts to achieve something quite different. Nobody can claim they are the "best" institutions that human beings could ever devise. They are simply the ones that happen to have been tried, and that, given the psychology and physiology of the creatures that tried them, happen to have survived and spread.14
The explanation begins by showing how the division of labor can create great benefits for those societies that can make it work. These benefits come mainly from specialization, the sharing of risk, and the accumulation of knowledge. But advantages to society as a whole cannot explain why a division of labor evolved. We also need to understand why individuals have an interest in participating. A division of labor needs to be robust against opportunism-the behavior of those who seek to benefit from the efforts of others without contributing anything themselves. In other words, participants need to be able to trust each other-especially those they do not know. Social cooperation depends on institutions that have exactly such a property of robustness. Given the facts of human psychology, they ensure that cooperation not only happens but is reliable enough for others to be willing to take its presence for granted, at least most of the time. One such robust human institution will be described in detail: it is the institution of money. Another is the banking system. We shall look at the foundations of trust in financial institutions, and examine the delicate balance between the natural incentives of individuals to signal their trustworthiness to others and the need for outside supervision to enforce trust. Effective institutions rely on a minimum of outside supervision, knowing that a little outside supervision can make natural incentives go a long way.
The rest of part 2 completes the task of explaining how human cooperation is possible by addressing the paradox of tunnel vision. Not only does widespread social trust arise in spite of the limitations of people's individual perspectives, but it even requires tunnel vision in order to persist. This is because the most effective mechanisms for ensuring trust rely not just on incentives but on people's internalization of values through education and training. This process entrenches commitment to professional values and at the same makes them resistant to change. Codes of professional ethics can therefore make individual acts of local cooperation more reliable, while generating a degree of systematic blindness to the more distant consequences of our actions. Such blindness-tunnel vision-has dangers that are a natural by-product of its inherent virtues.
Part 2 has therefore argued that we can understand why human beings have proved capable of cooperating with strangers, thanks to institutions that build on their already evolved hunter-gatherer psychology. Part 3 goes on to look at global consequences-at what happens when human beings equipped with this psychology, and responding to the presence of these institutions, come together in the mass. Our mutual interdependence has produced effects that utterly surpass what any of the participants can have intended or sometimes even imagined. The growth of cities, the despoliation of the environment, the sophisticated functioning of markets, the growth of large corporations, and the development of stocks of collective knowledge in the form of science and technology: all are part of the landscape of human interaction even though nobody has planned them to look the way they do, and all have contributed to the dramatic historical improvement in the prosperity of mankind. But since nobody has planned them, we should not be surprised that while some of them look encouraging, others look very troubling indeed. For instance, the growth of cities-the result of countless uncoordinated individual decisions about where to live and work-has led to some of history's most creative and innovative environments. It has also produced pollution and disease on an unprecedentedly concentrated scale. Cities themselves have often been able to organize collective action to overcome these by-products of their affluence, but only by living off a hinterland whose resources they exploit and to which they export their waste. But the world as a whole cannot do as cities have done, for it has no hinterland.
Excerpted from The Company of Strangers by Paul Seabright Excerpted by permission.
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What People are saying about this
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Jon Elster, Robert K. Merton Professor of Social Science, Columbia University, author of "Alchemies of the Mind" and "Ulysses and the Sirens"
Robert M. Solow, Institute Professor Emeritus, Department of Economics, Massachusetts Institute of Technology, and Nobel Laureate in Economic Sciences
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