Evolution ... and economists

The following is the text of a letter from Terry McDonough carried in today's Irish Times:
Michael Casey, reviewing The Company of Strangers: A Natural History of Economic Life (Business, July 26th), reads that evolutionary theorists believe the murder of 20 million Congolese by Belgian colonists was not down to imperialism but due to an evolutionary failure to develop sufficient trust in strangers. And yet the remainder of that day’s business pages are replete with the most touching examples of misplaced trust. We learn from Wolfgang Munchau that the strategy behind the recently completed stress tests (grade inflation for banks) was premised on the assumption of an innocent trust in the results by investors and the public, validated apparently by your reports of a positive response from “the markets”.

We are informed by Tony Jackson that pension funds are still too trusting of the private equity industry despite a report on the opposite page that this industry has “underperformed stockmarkets, taken excessive risks, and overcharged investors”. We find out that despite rising losses at Aras Sláinte, “the group continues to have the solid support of its bankers and shareholders” (one of whom is reported to be a private equity firm associated with Anglo-Irish bank). Speaking of Anglo-Irish bank, we find that after the NAMA process, it lent a developer a further €25 million and entrusted him with a line of credit for over €353 million. Still on NAMA, a survey finds that 66 per cent of Irish chief financial officers think NAMA will improve credit availability.

Finally, in what is perhaps the most moving example, we are told that, in response to queries over royalty payments to executives, director Ivan Yates is reassured because management has said its lawyers and auditors approved the controversial payments. According to the scientists, all of this would seem to violate basic human nature. On this evidence, evolutionary psychologists would appear to be no more worthy of trust than say . . . economists.

Posted in: Economics

Tagged with: economists