Why are free market-based systems the optimal framework for an economy? One way to understand it is through the brain's evolutionary composition.
That means the brain was also designed to achieve goals because a problem by definition generally needs a solution. Once upon a time, those goals were shelter, food, mating and general survival. Today, those same mechanisms are used for much different and complex conundrums, but they're the same mechanisms.
Natural selection goes on even today. If we don't have nature or wild beasts to contend with, then we begin contending with each other for resources. We compete for mates; we compete for jobs, for the best house, and so on. When evolution moves from physical modification to the mental software of the mind, it's called a "cognitive arms race." We're literally in a perpetual "war" with our fellow man, based on natural selection, for the best and greatest amount of resources. This insight was gleaned by renowned psychologist Stephen Pinker. (We'd recommend just about anything he's written for investors who want to know more about why people behave the way they do: http://pinker.wjh.harvard.edu/.)
If you don't believe it, see how a brash, spiky-haired young man puffs his chest and makes jokes to the pretty girl at the bar as he buys her a drink. He may not know it consciously, but he's competing with all the other men in the room by showing off his youth, his means, his wit, his intellect—all to "win" her over another suitor.
And she's no innocent. The coquette stands by, batting her eyelashes, her face painted in makeup highlighting the features of good genes, and clothing that does the same. She's trying to get him as much as he's trying for her.
From a psychologist's point of view, happiness is relative. It's been proven many times that we're happy or depressed relative to our standing in our community. If we've got more than our peers, then we're winning the cognitive arms race and that means we're content.
For example, America's poor live better than the average French citizen. The average poor American lives with 1/3 more living space than the average Japanese, 25% more than the average Frenchman, 40% more than the average Greek and 4 times more than average Russian. Yet, because of the cognitive arms race, we view our "poor" as destitute because it's relative to our society.
By Christopher Lingle, TCS Daily
However, because we're always in competition and we're always seeking goals, we're not likely to ever be satisfied. It's also been shown that progression is a key to happiness. If a person does not do more, make more, or achieve some new success over the last one, feelings of despair are prevalent. Happiness is progression; despair is stasis.
Here's another example: There's so much affluence in the US, being a millionaire doesn't bring happiness…because it's relatively much more common, and because hitting an echelon of income only impels us to make more! (Of course, some of that has to do with the effects of inflation.) It's not "greed" as such, it's the biology of accomplishment.
Being A Millionaire Just Isn't The Same These Days
By Staff, CNN Money
It's for these reasons socialism cannot work. No matter how idealistic, we are ultimately incapable of betraying what we're deeply made of. Capitalism is by far the most worthwhile system because it's consistent with human nature. We can never—ever—just all agree on how resources are allocated and live happily in a community where everyone's role is defined and our jobs are set for us. The imperatives, deep within our DNA, of evolution and natural selection are far too strong for that. We must seek goals, we must compete.
The idea of happiness is very precarious because it resides on relativism and progression. And since we know that we're wired to compete, it's much better to tout human freedom, classical liberalism, as the ultimate virtue, and not some mandated system of resource allocation. It's better to strive and participate in the progress of human civilization. Corporations will always be "going concerns," markets will always look to the future, and investors will invest because it's in our DNA.
Happiness is, by design, something that's always within our reach but exceeds our grasp. But this is no dire prescription for us. Instead, perhaps it's better to throw out the metaphor of happiness and take joy in the journey. After all, what bliss is gleaned from any book, film…any story? It's the conflict; the problem. Once that's solved, so is the story. Resolution means ending. Just so, it's precisely "Life, Liberty, and the pursuit of happiness" that is tantamount, not the end goal. We must be free to pursue such things, and capitalism is the greatest mechanism by which we can.
I cannot rest from travel: I will drink
Life to the lees: All times I have enjoy'd
Greatly, have suffer'd greatly, both with those
That loved me, and alone, on shore, and when
Thro' scudding drifts the rainy Hyades
Vext the dim sea: I am become a name;
For always roaming with a hungry heart
Much have I seen and known…
To strive, to seek, to find, and not to yield.
- Ulysses, Alfred Lord Tennyson
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.