The free market, or, to use a more loaded term, capitalism, produces more wealth and higher standards of living than any other economic system that humanity has conceived and implemented. The differences in economic performance between South and North Korea, West and East Germany, Chile and Venezuela, Botswana and Zimbabwe, not to mention the United States and the Soviet Union, speak for themselves. In spite of that generally recognized fact, capitalism has never enjoyed anything close to universal long-term support. In fact, quite the opposite is true. As the commentator and retired classicist Steven Farron put it:
There have been innumerable political parties called socialist. In the history of the world, there has never been a single political party called capitalist. There is not even a name for a supporter of capitalism. A socialist champions socialism; a democrat champions democracy. But a capitalist is someone who owns and manipulates capital.
Why? The primary reason for the constant struggle to preserve the freedom of the market is that capitalism rubs against some very important parts of human nature. As Jerome H. Barkow, Leda Cosmides, and John Tooby put it in their 1992 book The Adapted Mind: Evolutionary Psychology and the Generation of Culture:
What we think of as all of human history — from, say, the rise of the Shang, Minoan, Egyptian, Indian, and Sumerian civilizations — and everything we take for granted as normal parts of life — agriculture, pastoralism, governments, police, sanitation, medical care, education, armies, transportation, and so on — are all the novel products of the last few thousand years. In contrast to this, our ancestors spent the last two million years as Pleistocene hunter-gatherers, and, of course, several hundred million years before that as one kind of forager or another. These relative spans are important because they establish which set of environments and conditions defined the adaptive problems the mind was shaped to cope with: Pleistocene conditions, rather than modern conditions.
Among the relevant psychological characteristics that humans developed in the Pleistocene were our propensities toward tribalism, egalitarianism, and zero-sum thinking. We evolved in small bands composed of 25 to 200 individuals. We all knew and were often related to one another. Everyone knew who contributed to the band’s survival and who shirked his or her responsibilities. Cheaters and free riders were targets of anger and, sometimes, punishment. Just as important, cheaters and free riders lost valuable cooperative partners. The latter would work with more reliable or generous individuals instead.
In such bands, the sharing of food was common. The storing of food for future consumption, on the other hand, was not practical for seminomadic people. So, when hunters or gatherers acquired more food than their families could consume, they “stored” it in the form of social obligations (i.e., they shared it with other members of the band, in the expectation that the favor would be returned in the future). How widely the foragers shared food was sensitive to whether variation in foraging success was due primarily to luck or to effort.
Luck played a large role in hunting success. Hunters who had worked hard often came home with nothing. So meat was shared widely within the band as a way of pooling risk and buffering against hunger. When effort played a larger role in foraging success, as it did with the gathering of many plant foods, sharing was more targeted. In these cases, the gathered foods were shared primarily within the family and with specific reciprocation partners.
Moreover, the volume of personal possessions was limited by what our ancestors could carry on their backs as they moved from one location to another. In other words, accumulation of property and wealth inequality could not have been major concerns. Also, like other animals, we have evolved to form hierarchies of dominance; an individual’s survival and ability to pass on his genes were enhanced if he could rise within a group and control access to greater resources. But humans also evolved to form coalitions, in which less dominant individuals cooperated to take down the stronger and more successful. Finally, sharing and cooperation among hunter-gatherers ended at the band’s edge, so to speak. In a world without specialization and trade, disproportionate gains by one band often came at the expense of another. By forming aggressive coalitions, men could expand their band’s foraging territory or gain more wives by cooperating to kill men from other bands.
The hunter-gatherer psychology helps to explain our contemporary attitudes toward the extent and freedom of the market. Consider, for example, the provision of health care. When a hunter got sick or injured, he could not go on hunting. His sickness or injury was a double whammy for the band. Not only did the stricken hunter cease to contribute to the band’s survival, but he also needed to be fed and cared for. Furthermore, no one could guarantee that a stricken hunter would ever be able to hunt again. So humans benefited as they evolved the ability to feel compassion and surrounded themselves with caring individuals. Feelings of compassion and acts of caring contrast with calculated and profit-seeking exchanges in the marketplace. Employers, for example, tend to pay wages and provide benefits to their employees not because they care about their employees’ welfare but because they want to make money. In other words, the employer calculates that the productivity of the employee outweighs the cost of the employee’s compensation.
Market exchanges, then, are signs of social distance, whereas illness or injury activates our hunter-gatherer intuitions about helping others. The notion of socialized medicine as a fix to the problem of bad luck, which is usually the cause of sickness or injury, satisfies those intuitions. Conversely, the notion of market-based health care is completely counterintuitive — and remains so even if it can be shown that people get better results from a market-based health-care system. Note that people are much less sympathetic to the government’s paying for the health care of patients whose illness is not caused by bad luck, such as smokers with lung cancer. When people want to advocate helping patients with lung cancer, they usually turn to arguments about addiction — e.g., he or she could not help smoking; the evil tobacco company knowingly sold an addictive product to him or her as a teenager, etc.
The hunter-gatherer psychology also helps to explain why it was relatively uncontroversial for many governments to pass huge spending bills at the beginning of the COVID-19 pandemic. It was not a lack of effort that prevented most people from working. Instead, government-enforced stay-at-home orders kept them from earning money. Moreover, it helps to explain why later spending bills, such as the $1.9 trillion “American Rescue Plan” that was passed by the Congress after the economy had already largely reopened, were much more controversial. Put differently, many arguments about the various aspects of the welfare state and the extent of market exchanges follow straightforwardly from the different sharing rules that have evolved to deal with the variance of fortunes due to luck and the variance due to effort.
To summarize, the psychology that evolved when our ancestors lived in small hunter-gatherer groups prepared us to cope with a world of personal cooperation and exchange in small communities. It did not prepare us to cope with a world of impersonal cooperation and exchange between millions of people (i.e., a typical advanced economy) or billions of people (i.e., the global economy). In a way, the complexity of the modern economy outran the ability of our Stone Age minds to understand it. Yet it is that transition, from personal simplicity to impersonal complexity, that makes capitalism so effective at producing great wealth. To complicate matters further, the extended marketplace of millions or billions of people enables enterprising individuals with value-creating ideas to amass greater wealth than they would be able to amass while catering to small communities. That resulting wealth inequality rubs against our egalitarian predispositions and zero-sum thinking. Finally, our tribalism helps to explain why, even when we do consent to trade with other nations, we often continue to resent them and suspect them of thriving at our expense.
To understand capitalism — let alone to appreciate its benefits — requires all of us to distinguish between the personal and the impersonal, between the simple and the complex, and between the limited and the extended. Or, as the ever-insightful Friedrich Hayek put it:
Part of our present difficulty is that we must constantly adjust our lives, our thoughts and our emotions, in order to live simultaneously within different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed rules of the micro-cosmos (i.e., of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilization), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of world at once.
Striking a balance between those two sets of rules is a difficult task, and we often fail to do so. When we do fail — as, most recently, in Venezuela — the results can be catastrophic. The predictable collapse of Venezuela’s “21st-century socialism” should provide a warning to future generations; given our inability to learn from the very similar socialist failures of the 20th century, though, it’s unlikely that it will be heeded. I suspect that the defense of free markets will remain, thanks to the predispositions of the Stone Age mind, a never-ending struggle.
This first appeared in the National Review.