How free exchange between people
increases prosperity and trust

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.” (continue reading…)