The Mind of the Market by Michael Shermer

Here are my notes on the rest of Michael Shermer's The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics (click here to read my notes through chapter five, here to read my notes on chapter six and seven, and here to read my initial thoughts on this book).

In chapter eight, Why Money Can't Buy You Happiness, Shermer introduces Jeremy Bentham's "seven circumstances" by which "the value of a pleasure or a pain in considered (part of Bentham's "hedonistic calculus" to measure happiness):

• purity: "the chance it has of not being followed by sensations of the opposite kind"
• intensity: "the strength, force, or power of the pleasure"
• propinquity: "the proximity in time or place of the pleasure"
• certainty: "the sureness of the pleasure"
• fecundity: "the chance it has of being followed by sensations of the same kind"
• extent: "the number of persons to whom it extends"
• duration: "the length of time the pleasure will last"

Shermer then describes all the ways in which the standard of living has dramatically risen over the past fifty years -- median income is up, crime is up, leisure is up, pollution is down, and more -- and contrasts that with the statistic that "by all measures of the Subjective Well-Being (SWB), people are no happier today than they were half a century ago" (this I know I learned from The Paradox of Choice: Why More is Less by Barry Schwarz and other books related to positive psychology) which he calls the "Happiness Disconnect."

Chapter eight continues quoting many ideas from positive psychology; since I've written much about this topic I'll refrain from writing about it here. Instead I'll list some of the books quoted in this chapter:

• The Social Organization of Sexuality: Sexual Practices in the United States by Edward O. Laumann
• The Happiness Myth by Jennifer Hecht
• The Origin of Minds: Evolution, Uniqueness, and the New Science of the Self by Peggy La Cerra and Roger Bingham
• The Genesis of Animal Play: Testing the Limits by Gordon Burghardt

Chapter nine, Trust with Credit Verification, seems highly relevant to the current credit crisis. Shermer has a spot-on quote from Paul Zak: "when trust is low, investment lags. The same positive correlation holds for GDP growth and trust." Shermer goes on to say that "countries that have higher rates of generalized trust show higher rates of return on national stock markets" and "that in order for a nation to achieve prosperity it is vital to maximize positive social interactions among its members in order to increase trust." Surprisingly, Zak found that people in polluted environments tend to have less trust (related to levels of oxytocin) and found many other conclusions related to trust:

• trust and happiness: "people who trust and are trustworthy report being hapier"
• trust and touch: touch increases trust
• trust and smell: trust may be mediated by smell (read The Scent of Desire: Discovering Our Enigmatic Sense of Smell by Rachel Herz for more on smell)
• trust and neglect: "animals that are abused or neglected shortly after birth show a loss of regions in the brain that have oxytocin receptors, and those animals become withdrawn, socially inappropriate, and depressed."

Shermer continues to discuss Zak's findings throughout this chapter, including Zak's postulate that "evil" people (people who do not respond to oxytocin and who basically cannot be trusted) "are necessary from an evolutionary standpoint because they keep physiologic balance between appropriate levels of trust and distrust optimally tuned. Without these exceedingly selfish people, humans might have evolved into being unconditional trusters. If so, we would become susceptible to invasion by those who would prey on our perfectly trusting nature."

Chapter ten, The Science of Good Rules, starts out with Shermer's story of founding the three-thousand-mile nonstop transcontinental bicycle Race Across America (RAAM) from Los Angeles to New York and the subsequent creation of the Ultra-Marathon Cycling Association (UMCA) to deal with the development and adjudication of the rules as the rules increased in complexity with the number of participants. This chapter is all about the need for a society based on the rule of law and formal institutions, due to our evolved potential sources of conflict: "our selfish desire for self improvement conflicts with or altruistic desire for social enhancement, and our competitive desire to better our lot in life sometimes comes in conflict with the same desire that others have in themselves."

Chapter eleven is named after Google's corporate motto, Don't Be Evil. Shermer states:

For markets to be moral, there must be two conditions: (1) internal trust reinforced by personal relationships, and (2) external rules reinforced by social institutions.

This chapter what happens when those institutions fail, our desire to conform to the social norms of our group, WorldCom and Enron type corporate failures, Phil Zimbado's classic Stanford Prison Experiment, Stanley Milgram's well-known experiments on obedience to authority (increasing "shocks" to help someone "learn"), and (of course) Google. I have lots of friends who work at Google so the passage about the free meals and such at Googleplex weren't new to me, but they might be surprising to non-nerds.

Chapter twelve, Free to Choose, discusses the importance of freedom and the problems with paternalism while the epilogue, To Open the World, returns to the Yanomamo hunter-gatherers and the Manhattan consumer-traders that the book began with. Shemer's oversimplified conclusion?

Power kills; democracy saves. Spread democracy.

Trade leads to peace and prosperity. Spread trade.

Where Starbucks crosses frontiers, armies will not.

Where information and knowledge cross frontiers, armies will not.

Freedom finds a way.

I don't want to sound harsh, but I would not recommend this book. Maybe it's just me and my constant reading, but I found much of the book unoriginal. And I felt mislead about the book's premise, and that gives me a generally bad feeling.

Still, I enjoyed the education on free market theory!