Nature: An Economic History

Geerat J Vermeij, Princeton University Press, 2006, 445p, £12.95 (paperback), £32.50 (cloth).

Geerat Vermeij of the University of California is a very distinguished palaeontologist. This is readily apparent. Most of the book consists of a wealth of examples of the evolution of biological species. Vermeij shows how this involves both competition and co-operation between species, adaptation and feedback. He writes clearly and illustrates splendidly how the process of biological evolution takes place in practice. The book can be recommended highly to anyone interested in this topic.

But Vermeij to some extent, and certainly his publishers, make much grander claims for the book. It is billed as "a groundbreaking exploration of the facts and theories of biology, economics and geology to show how processes common to all economic systems govern evolution as surely as they do the human economy".

Essentially, he argues that both biological and economic systems are special cases of a more general phenomenon of a complex system in which the component agents evolve. So, for example, an economy is "a network of interacting entities, a whole whose properties differ from those possessed by the component parts individually". Further, the system is in perpetual change, with agents gaining and losing fitness, with extinctions and emergence of new species. It is a world far removed from the equilibria which characterise conventional economic theory.

I regard this view as being so well established empirically as to brook no argument. However, many of my fellow economists are as yet less persuaded. The basic problem with recommending the book to an audience of economists is that the economic sections of it are really rather thin. Unless the reader is already willing to see the economy as a complex system, there is just not enough material to persuade him or her otherwise.

Moreover, Vermeij appears to have been unduly influenced by economic authors who are basically critics of capitalism. This leads him to make some distinctly odd statements. For example, he suggests that the Western world at present suffers from under-consumption, that old Marxist bugbear, with wealthy individuals not spending enough to ensure that the demand for products keeps pace with supply. He insists that the reason Europe was first to industrialise was slavery, a highly questionable view, and ignores the evidence that, for example, we had evolved superior institutions such as private property and contract law. In a section on famines, he singles out the Irish potato famine but does not refer at all to the deliberate creation of famines in the Ukraine and China in the middle decades of the last century which killed the best part of 100 million people.

This is a pity, because the book contains flashes of real insight into how the economy operates. Intellectually, Vermeij is profoundly Hayekian. The world is highly complex and uncertain and we make progress not through the omniscience of a central planner or the Walrasian auctioneer, but through trial and error. Adaptation is always imperfect and never optimal, even amongst successful agents. Anyone even partly persuaded by this will enjoy the book, even though they will have to construct many of the economic examples for themselves.

Paul Ormerod

Director of Volterra Consulting and author of ‘Why Most Things Fail’, Faber and Faber, 2006