Despite his skepticism about religion, faith healers, UFos, and the like, he never manages to apply a skeptical mindset to economic theories. This is part of the larger phenominon I keep observing where self-describing lovers of science and skepticism never actually learn the need to apply the scientific method to society. Perhaps this is a failure of public relations on the part of sociology?

It is hard to believe that Michael Shermer still has faith in “free” market systems. I say this is a “faith” for 2 reasons:

1) Free markets do not exist. The term “free market” implies that markets are somehow natural and exist independently of government intervention. Nothing can be further from the truth. One of the main findings of the field of economic sociology is that markets are always products of society and cannot exist without laws and rules created by the government. The market is never natural or “free”; it is ALWAYS constructed. The system Shermer defends is not a “Free market” but actually a market that is regulated to redistribute wealth upward and concentrate power in the hands of a small ruling class. This is done either openly with corporate welfare, or more subtely with things like negative externalities or starvation wages.

2) There is very strong empirical evidence that the unregulated markets do not work. That is to say, the countries with the most unregulated capitalist economies tend to have lower standards of living, more inequality, and greater levels of poverty. We can look at data ranking industrialized nations based on percentage of GDP given to social programs. This data puts America near the bottom of the list, meaning we spend very little on welfare programs. Because of our low welfare spending, America also has one of the highest poverty rates in the industrial world. Coincidince? I think not.

http://www.amazon.com/Story-Behavioral-Finance-Brandon-Adams/dp/0595396909/ref=sr_1_1?ie=UTF8&s=books&qid=1207175730&sr=1-1

For a quantitive look at how evolution leads to altruistic/cooperative behavior, check out Martin Nowak’s tour de force:

http://www.amazon.com/Evolutionary-Dynamics-Exploring-Equations-Life/dp/0674023382/ref=sr_1_1?ie=UTF8&s=books&qid=1207175841&sr=1-1

And for a more comprehensive remaking of economic theory in light of the more general lessons of complex systems dynamics (of which evolution is just one part), Beinhocker:

http://www.amazon.com/Origin-Wealth-Evolution-Complexity-Economics/dp/1422121038/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1207175986&sr=1-1

Whybrow … p. 7 Adam “Smith’s economic philosophy was predicated on a dynamic balance between commercial liberty and a set of social structures that are rapidly eroding in America. Smith worried in his writings, as did many other thinkers of the time, that human envy and our tendency toward compulsive craving, if left unchecked, would destroy the empathic feeling and neighborly concerns that are essential to his economic model and a free market’s successful operation. In searching for the necessary counter-balance to this natural human avarice, Smith took comfort in the fellow-communities characteristic of the eighteenth century.

Given the social conditions that prevailed during his lifetime, Adam Smith was prescient in his judgment. Experience tells us that small markets do produce their own constraint and rational order, founded as they are on an interlocking system of self-interested exchange. However, Smith lived before the invention of the megacorporation, before instant communication with a global reach, and before the double cheeseburger and stock options.”

“In America, living with such an abundance of choice, we have discovered some disturbing facts about human behavior–facts that from knowledge of modern neurobiology are predictable and that confirm Smith’s worst fears. In times of material affluence, when desire is no longer constrained by limited resources, the evidence from our contemporary American experiment suggests that we humans have trouble setting limits to our instinctual craving.”

I will give you a quote from the last chapter page 239. “The key is relearning to focus one’s attention. The more demanding the commercial environment gets, the more essential it is to live in the moment, and to use that present moment effectively. It seems deceptively simple, but it works. I know: I’ve found the more I focus on the task at hand, the better are the choices I make. The alternative is to be overwhelmed and swept away by the maniacal excess that exists all around us–the excess of material goods, of food, of competition, and so-on.”

Jim Kawakami