In his 1776 work An Inquiry into the Nature and Causes of the Wealth of Nations, Scottish moral philosopher Adam Smith identified the cause in a single variable: “the propensity to truck, barter, and exchange one thing for another.” Today we call this free trade or market capitalism, and since the recession it has become de rigueur to dis the system as corrupt, rotten or deeply flawed.

If we pull back and take a long-horizon perspective, however, the free exchange between people of goods, services and especially ideas leads to trust between strangers and prosperity for more people. Think of it as ideas having sex. That is what zoologist and science writer Matt Ridley calls it in his book The Rational Optimist: How Prosperity Evolves. Ridley is optimistic that “the world will pull out of the current crisis because of the way that markets in goods, services and ideas allow human beings to exchange and specialize honestly for the betterment of all.”

Sex evolved because the benefit of the diversity created through the intermixture of genomes outweighed the costs of engaging in it, and so we enjoy exchanging our genes with one another, and life is all the richer for it. Likewise ideas. “Exchange is to cultural evolution as sex is to biological evolution,” Ridley writes, and “the more human beings diversified as consumers and specialized as producers, and the more they then exchanged, the better off they have been, are and will be. And the good news is that there is no inevitable end to this process. The more people are drawn into the global division of labour, the more people can specialize and exchange, the wealthier we will all be.”

In the teeth of the recession and the reality of more than a billion impoverished people in developing countries today, this thesis sounds ripe for skepticism, indeed almost blindly Pollyannaish. But Ridley systematically builds a case through copious data and countless studies that “the vast majority of people are much better fed, much better sheltered, much better entertained, much better protected against disease and much more likely to live to old age than their ancestors have ever been. The availability of almost everything a person could want or need has been going rapidly upwards for 200 years and erratically upwards for 10,000 years before that: years of lifespan, mouthfuls of clean water, lungfuls of clean air, hours of privacy, means of traveling faster than you can run, ways of communicating farther than you can shout,” and with more access to “calories, watts, lumen-hours, square feet, gigabytes, megahertz, light-years, nanometers, bushels per acre, miles per gallon, food miles, air miles, and of course dollars than any that went before.”

Trade does something even more important than enrich our lives. It makes people behave more fairly. In a March 18 article in Science entitled “Markets, Religion, Community Size, and the Evolution of Fairness and Punishment,” University of British Columbia psychologist Joseph Henrich and his colleagues engaged nearly 2,700 people in 15 small communities around the world in two-player exchange games in which one subject is given a sum of money (the equivalent of a day’s pay) and allowed to keep or share some or all of it with another person. You would think that most people would just keep all of the money, but in fact the scientists discovered that members of hunter-gatherer communities shared about 25 percent, whereas members of societies who regularly engage in trade gave away about 50 percent. Although religion was a modest factor in making people more generous, the strongest predictor was “market integration,” defined as “the percentage of a household’s total calories that were purchased from the market, as opposed to homegrown, hunted, or fished.” Why? Because, the authors conclude, trust and cooperation with strangers lowers transaction costs and generates greater prosperity for all involved, and thus concepts of fair trade emerged as part of a larger process of social evolution to maintain mutually beneficial exchanges even when the participants were not bound by kinship, status or other social ties.

In other words, our ancestors had sex with people they knew, but their ideas had sex with strangers, and this form of trade led to trust and prosperity.

Surprisingly — stunningly, in fact — research shows that the majority of people select the first option; they would rather make twice as much as others even if that meant earning half as much as they could otherwise have. How irrational is that?

This result is one among thousands of experiments in behavioral economics, neuroeconomics and evolutionary economics conclusively demonstrating that we are every bit as irrational when it comes to money as we are in most other aspects of our lives. In this case, relative social ranking trumps absolute financial status. Here’s a related thought experiment. Would you rather be A or B?

A is waiting in line at a movie theater. When he gets to the ticket window, he is told that as he is the 100,000th customer of the theater, he has just won $100.

B is waiting in line at a different theater. The man in front of him wins $1,000 for being the 1-millionth customer of the theater. Mr. B wins $150.

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Amazingly, most people said that they would prefer to be A. In other words, they would rather forgo $50 in order to alleviate the feeling of regret that comes with not winning the thousand bucks. Essentially, they were willing to pay $50 for regret therapy.

Regret falls under a psychological effect known as loss aversion. Research shows that before we risk an investment, we need to feel assured that the potential gain is twice what the possible loss might be because a loss feels twice as bad as a gain feels good. That’s weird and irrational, but it’s the way it is.

Human as it sounds, loss aversion appears to be a trait we’ve inherited genetically because it is found in other primates, such as capuchin monkeys. In a 2006 experiment, these small primates were given 12 tokens that they were allowed to trade with the experimenters for either apple slices or grapes. In a preliminary trial, the monkeys were given the opportunity to trade tokens with one experimenter for a grape and with another experimenter for apple slices. One capuchin monkey in the experiment, for example, traded seven tokens for grapes and five tokens for apple slices. A baseline like this was established for each monkey so that the scientists knew each monkey’s preferences.

The experimenters then changed the conditions. In a second trial, the monkeys were given additional tokens to trade for food, only to discover that the price of one of the food items had doubled. According to the law of supply and demand, the monkeys should now purchase more of the relatively cheap food and less of the relatively expensive food, and that is precisely what they did. So far, so rational. But in another trial in which the experimental conditions were manipulated in such a way that the monkeys had a choice of a 50% chance of a bonus or a 50% chance of a loss, the monkeys were twice as averse to the loss as they were motivated by the gain.

Remarkable! Monkeys show the same sensitivity to changes in supply and demand and prices as people do, as well as displaying one of the most powerful effects in all of human behavior: loss aversion. It is extremely unlikely that this common trait would have evolved independently and in parallel between multiple primate species at different times and different places around the world. Instead, there is an early evolutionary origin for such preferences and biases, and these traits evolved in a common ancestor to monkeys, apes and humans and was then passed down through the generations.

If there are behavioral analogies between humans and other primates, the underlying brain mechanism driving the choice preferences most certainly dates back to a common ancestor more than 10 million years ago. Think about that: Millions of years ago, the psychology of relative social ranking, supply and demand and economic loss aversion evolved in the earliest primate traders.

This research goes a long way toward debunking one of the biggest myths in all of psychology and economics, known as “Homo economicus.” This is the theory that “economic man” is rational, self-maximizing and efficient in making choices. But why should this be so? Given what we now know about how irrational and emotional people are in all other aspects of life, why would we suddenly become rational and logical when shopping or investing?

Consider one more experimental example to prove the point: the ultimatum game. You are given $100 to split between yourself and your game partner. Whatever division of the money you propose, if your partner accepts it, you each get to keep your share. If, however, your partner rejects it, neither of you gets any money.

How much should you offer? Why not suggest a $90-$10 split? If your game partner is a rational, self-interested money-maximizer — the very embodiment of Homo economicus — he isn’t going to turn down a free 10 bucks, is he? He is. Research shows that proposals that offer much less than a $70-$30 split are usually rejected.

Why? Because they aren’t fair. Says who? Says the moral emotion of “reciprocal altruism,” which evolved over the Paleolithic eons to demand fairness on the part of our potential exchange partners. “I’ll scratch your back if you’ll scratch mine” only works if I know you will respond with something approaching parity. The moral sense of fairness is hard-wired into our brains and is an emotion shared by most people and primates tested for it, including people from non-Western cultures and those living close to how our Paleolithic ancestors lived.

When it comes to money, as in most other aspects of life, reason and rationality are trumped by emotions and feelings.

This opinion editorial was originally published in the Los Angeles Times.

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In this debate on what are arguably two of the most important questions in the culture wars today — Is Religion a Force for Good or Evil? and Can you be Good without God? — the conservative Christian author and cultural scholar Dinesh D’Souza and the libertarian skeptic writer and social scientist Michael Shermer, square off to resolve these and related issues, such as the relationship between science and religion and the nature and existence of God. This event was one of the liveliest ever hosted by the Skeptics Society at Caltech, mixing science, religion, politics, and culture.

Dinesh D’Souza is the Robert and Karen Rishwain Fellow at the Hoover Institution at Stanford University. Investor’s Business Daily called him one of the “ top young public-policy makers in the country,” and the New York Times magazine named him one of America’s most influential conservative thinkers. Before joining the Hoover Institution, Mr. D’Souza was the John M. Olin Fellow at the American Enterprise Institute. In 1987–88 he served as senior policy analyst at the Reagan White House. From 1985–1987 he was managing editor of Policy Review. He graduated Phi Beta Kappa from Dartmouth College in 1983. His books include the New York Times bestseller What’s So Great About America. His 1991 book Illiberal Education was the first study to publicize the phenomenon of political correctness. He is also the author of The Virtue of Prosperity: Finding Values in an Age of Techno Affluence. D’Souza’s articles have appeared in the New York Times, Wall Street Journal, The Atlantic Monthly, Vanity Fair, New Republic, and National Review. His latest book is titled What’s So Great About Christianity?

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In the sixth century B.C., Siddhartha Gautama — better known as the Buddha — extolled the virtues of enlightenment through a “middle path”:

Avoiding the two extremes the Buddha has gained the enlightenment of the Middle Path, which produces insight and knowledge, and tends to calm, to higher knowledge, enlightenment, Nirvana. This is the noble Eightfold Way: namely, right view, right intention, right speech, right action, right livelihood, right effort, right mindfulness, right concentration.

Twenty-six centuries later American physicist Murray Gell-Mann constructed a subatomic model he playfully called the Eightfold Way, because it consisted of eight particles with eight possible rotations. The name was a joke, he told a Caltech audience in a lecture on “Quantum Mechanics and Flapdoodle,” referring to the New Age fiddle-faddle about his theory presented in books whose authors didn’t get the humor and thus constructed elaborate and imaginary links between Eastern mysticism and Western science. Such comparisons do tug at one’s inner sense that the continuities between Eastern and Western worldviews should reflect some deeper structure, but is it really possible (in an analogy to the uncertainty principle in quantum mechanics) that the orbit of Mars, like the orbit of an electron, is scattered randomly around the sun until someone observes it, at which point the wave function collapses and it appears in one spot? No. Quantum effects wash out at large scales. Microcosms do not correspond to macrocosms. And the vague similarities between Eastern and Western models result from the fact that there are only so many variations on explanations of the world; by chance, some are bound to resemble one another.

I was struck by such East-West contrasts and continuities on several levels during a recent trip to Beijing for the International Conference on Science Communication (which for much of China means such scientific basics as birth control). The conference was held in a sleek downtown high rise, but the projectors routinely broke down during presentations. Throughout the city, bicycles far outnumber cars, buses and taxis. Businessmen and women, before cycling to their jobs, flock to city parks to perform tai chi, the ancient art of adjusting one’s spiritual energy. Buildings and homes incorporate the latest Western amenities but do not neglect feng shui in their architectural design, out of fear for energy blockages at inappropriately located doors and walls.

A tour of the Great Hall of the People at Tiananmen Square (communism at its worst) forces visitors to exit through a basement filled with kitschy crafts of the tackiest sort (capitalism at its worst). The Museum of Science and Technology featured an old, faded IMAX film (The Dream Is Alive) projected onto a waterstained, chipped-tile ceiling; a fabulously clever pneumatic bed of nails would have demonstrated the harmless distribution of mass over many points — if only it had worked. Even in the Forbidden City — where emperors and empresses, concubines and eunuchs, palanquins and peons roamed for five centuries — there could not have been a more striking contraposition in the only store I found in the palace interior:a Starbucks! Of course, I had to imbibe.

For my yuan (80 to a dollar), however, the finest example of contrast and continuity was the Ancient Beijing Observatory, built in 1442 for the sixth Ming dynasty emperor, Zhengtong. Located on the main east-west corridor of the city (itself laid out according to celestial coordinates) on the roof of what was once a tall building, this observatory contains a sextant, a theodolite, a quadrant, an altazimuth, several armilla and a celestial globe, allowing Chinese astronomers to track the motion of planetary bodies, to record eclipses and comets and to mark the location of the Milky Way galaxy and the constellations. It was the Keck Observatory of its age, measuring, for instance, the length of the solar year at 365.2425 days, off by only 26 seconds. Its beautifully crafted bronze instruments starkly oppose the steel girders and scaffolding that abound in nearby high-rises.

A closer examination of these astronomical instruments, however, reveals connections to Western science but with instructive differences. The rings of the armillary sphere are divided into 360 degrees — a European tradition adopted from Mesopotamian geometry — instead of 365.25 daily segments, as found in purely Chinese instruments. The celestial globe presents the Milky Way galaxy in dimpled metal; rough-cut metallic stars mark the familiar constellation Orion, including the unmistakable belt stars, brilliant Sirius, giant Betelgeuse and Rigel. Even the Orion nebula is visible below the belt.

But something is amiss: Orion is backwards. Betelgeuse should be in the upper left corner of the constellation, not the right, and Sirius should be to the left of the belt stars. The sky is inside out. According to archaeoastronomer Ed Krupp, all celestial globes are constructed from the “transcendental eye’s view” of an outsider looking in. It turns out that this celestial globe (along with the rest of the instruments) was built in 1673 during the Qing dynasty by a Belgian Jesuit named Ferdinand Verbiest and, in Krupp’s words, “blends a clearly Western pedigree with representations of traditional Chinese constellations.”

Such celestial precision was not needed for any scientific reasons in these early centuries. Rather, as Krupp explains in his insightful book on the politics of astronomy, Skywatchers, Shamans, and Kings, “as a truthful mirror of nature, astronomy was official business, a tool in the service of the social and political agenda of the state.” Astronomical accuracy was “celestial certification of imperial power.” The emperor was supposed to be the son of the celestial god Shang Di, and thus state-sponsored astronomy validated his link to the highest order and solidified the connection he represented between heaven and earth, sacred and profane, macrocosm and microcosm. China was the “middle land,” the center of the world, with the Tiananmen “Gate of Heavenly Peace” leading into the Forbidden City (itself aligned by the cardinal directions), followed by the “Hall of Supreme Harmony” (due north on the cosmic axis), where the emperor held audiences to announce the calendar, new year and winter solstice.

In parallel fashion, during the conference on science communication, a delegation of representatives from Chinese and American scientific organizations had an audience with one of the top ministers of the Chinese government, which amounted to little more than a bureaucratic formality of tea and polite dialogue. As we patiently listened to the translation, I was struck by the symbolism: because science is now the connection between the sacred and the profane in a secular scientific society, it must be part of official state business — a certification of political power, be it monarchical Europe and imperial China, or capitalist America and communist China. Whereas some East-West comparisons, such as the Eightfold Way of physics, are chimerical, others are not, particularly those of a political nature, for, as another ancient philosopher, this one from the West, observed: “Man is by nature a political animal.”