Counter Classical Economics

ECON 101
HISTORY OF ECONOMIC THOUGHT

12/9/2019 cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020 1

 Our Objective
• At the end of this presentation, we will be able to attained the
following:

1. Discuss Darwin’s Evolution & Natural Selection;

2. Explain and understand the following:

a) Relationship Between Natural Selection & Invisible Hand;

b) Bernard Mandeville and Evolution;
c) Malthus and Evolutionary Theory;
d) William Paley and Rev. Thomas Chalmers on Evolution;
e) Social Darwinism: Herbert Spencer
f) The Forgotten Man: William Graham Sumner
g) Social Darwinism in Economics

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-

12/9/2019 ECON 101 2
2020 HISTORY OF ECONOMIC THOUGHT
 Darwin, Evolution, & Natural Selection
 Key Points:
 Charles Darwin was a British naturalist who proposed the theory of biological
evolution by natural selection.

 Darwin defined evolution as "descent with modification," the idea that species
change over time, give rise to new species, and share a common ancestor.

 The mechanism that Darwin proposed for evolution is natural selection.

 Because resources are limited in nature, organisms with heritable traits that favor
survival and reproduction will tend to leave more offspring than their peers,
causing the traits to increase in frequency over generations.

 Natural selection causes populations to become adapted, or increasingly well-

suited, to their environments over time.

 Natural selection depends on the environment and requires existing heritable

variation in a group.

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020

 What is Evolution?
• The basic idea of biological evolution is that populations and species of
organisms change over time.

• Today, when we think of evolution, we are likely to link this idea with one
specific person: the British naturalist Charles Darwin.

• In the 1850s, Darwin wrote an influential and controversial book called On the
Origin of Species. In it, he proposed that species evolve (or, as he put it,
undergo "descent with modification"), and that all living things can trace their
descent to a common ancestor. [What exactly is a species?]

• Darwin also suggested a mechanism for evolution: natural selection, in which

heritable traits that help organisms survive and reproduce become more
common in a population over time. [What does "heritable" mean?]

• In this article, we'll take a closer look at Darwin's ideas. We'll trace how they
emerged from his worldwide travels on the ship HMS Beagle, and we'll also
walk through an example of how evolution by natural selection can work.

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020

 What is Evolution?

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020

 Natural Selection and the Invisible Hand
• Model for Darwin and Wallace’s Theory of Natural Selection
– The “dog eat dog” world of emerging industrial capitalism
– It is used to refer to a situation of fierce competition in which people are
willing to harm each other in order to succeed.

• Struggle for survival seemed natural

• “Survival of the Fittest”

– The limited resources available in an environment promotes competition in
which organisms of the same or different species struggle to survive.
– Spencer first coined then Charles Darwin suggested that “survival of the fittest”
was the basis for organic evolution (the change of living things with time).
– In economics, It means that a group that fits into its environment has a great
chance to survive.
– “Survival of the fittest” among Brands and Businesses.
– A brand or business that adapts well to its environment has a great chance
of survival.
cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020
 Bernard Mandeville and Evolution
• 1705 Fable of the Bees: Private vices and
Public Virtues

– Well before Adam Smith had the idea that greed

and selfishness may promote the common social
good

– selfish struggle promoted “fitness”

– Forerunner of ideas about the invisible hand,

order out of chaos, optimization from an
apparently chaotic process

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020

 Malthus and Evolutionary Theory
• The “Malthusian Law”
Malthus influence was enormous
– Population, if left unchecked, • Malthusianism played a
increases geometrically while at central role in a debate in
most the food supply increases
arithmetically which biological and social
ideas were part of a common
intellectual context
• Very important new concepts (R.
Young)
• Influence on Darwin and
1. Humans and the environment Wallace
were not necessarily in
harmony
• Influence on social
2. Humans are animals are part of Darwinism
the natural world

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020

 William Paley
• Natural Theology (1802)
– “The distinctions of civil life
are apt enough to be regarded
as evils, by those who sit
under them; but, in my
opinion, with very little
reason.”
• The distribution of money, power
and social status are a natural
product of the Malthusian Law
cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020
Rev. Thomas Chalmers
• “It is quite vain to think that
positive relief will ever do away
with the wretchedness of poverty.
• Carry the relief beyond a certain
limit, and you will foster the
diseased principle which gives
birth to poverty.
• The remedy against the extension
of pauperism does not lie in the
liberalities of the rich;
– It lies in the hearts and habits
of the poor.” (1811)
 Social Darwinism
• Who is rich and who is not is an
outcome of the struggle for
survival and the “survival of the
fittest” (term coined by Herbert
Spencer)
• Helping those who are less fit is a
violation of the laws of nature
• In economics the “marginal
productivity theory of distribution”
is a mathematical formulation of
this theology
cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020
The theory that individuals,
groups, and peoples are subject
to the same Darwinian laws of
natural selection as plants and
animals.
Now largely discredited, social
Darwinism was advocated by
Herbert Spencer and others in the
late 19th and early 20th centuries
and was used to justify political
conservatism, imperialism, and
racism and to discourage
intervention and reform.
 Herbert Spencer William Graham Sumner
• Published a book on evolution in 1852 “The Forgotten Man”
• He popularized the term “evolution” • Sumner and economic theory –
and coined the term “survival of the the marginal productivity theory
fittest”. of value

• Had a huge influence on economists. • What is the purpose of human

Alfred Marshall wrote that he eagerly society? To produce things.
awaited Spencer’s books and would
read them to his wife during hikes in • Well-being “utility” as
the Austrian alps. consumption

• Alfred Russel Wallace named his son • Forerunner of Potential Pareto

Herbert Spencer Wallace improvement and efficiency as
the only important economic
goal

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020

 Social Darwinism in Economics
Charity for the poor diverts resources from
their best use - increasing economic output

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Social Darwinism in Economics
More Forgotten Man
• “Almost all legislative effort to prevent vice is
really protective of vice, because all such
legislation saves the vicious man from the penalty
of his vice.

• Nature’s remedies against vice are terrible. She

removes the victims without pity.

• A drunkard in the gutter is just where he ought to

be, according to the fitness and tendency of
things.”

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020

Social Darwinism in Economics
In Defense of Free Enterprise
• “Private property, also, which we have seen to be a
feature of society organized in accordance with the
natural conditions of the struggle for existence produces
inequalities between men

• Nature is entirely neutral; she submits to him who most

energetically and resolutely assails her.

• She grants her rewards to the finest, therefore, without

regard to other considerations of any kind

• Let it be understood that we cannot go outside this

alternative: liberty, inequality, survival of the fittest; not
liberty, equality, survival of the unfittest.”

cdbalubayan@gmail.com usep-caec HOET 1st Sem SY2019-2020

Social Darwinism in Economics
Survival of the fittest
• The expression has long been an
embarrassment to biologists but still holds
sway in economics.

• Sometimes it’s called a tautology (those that

survive are the fittest) but it really isn’t even
that.

• There are problems with both “survival” and

“fittest”
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 -- END--

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12/9/2019 ECON 101 16
2020 HISTORY OF ECONOMIC THOUGHT