The Basic Laws of Human Stupidity

In a different world (tumult of the ’70s), a pamphlet was published by one of the better-known economic historians of the ancient and medieval world that summarized why people make irrational decisions and how some countries recover and grow and yet others fail. It was written by the late Carlo Cipolla, an economic historian from Berkeley. The title (unlikely to be acceptable these days) was “The Basic Laws of Human Stupidity”, where he divided people into four brutal Forrest Gump type categories: “the helpless, the intelligent, the bandit and the stupid.” In an economic sense, the classification is based on whether they and others gain or lose from their actions. The “helpless” gain little or nothing, though others may profit from their actions; the intelligent gain from what they do, but so do others; the bandits gain when others lose; finally, the “stupid” gain nothing or suffer losses as they harm the rest. Cipolla’s conclusion was that while “bandits” are not good, their actions follow self-interest logic that allows others to understand their motives and defend against. In his view, “stupid” are the most dangerous, as they are irrational and unpredictable, suffering from losses for no gain for themselves, and thus impoverish societies. He argues there is an even distribution of “stupid”, while the composition of “intelligent” and “bandit” varies between societies. It is this shifting balance that determines recovery (intelligent offset bandits) or collapse. However, in times of stress, “bandits” might unite with “stupid” (believing erroneously that they control them) to benefit from upheavals. The same applies to “intelligent”, as they also think that they are in control, but unlike bandits, they want to build a new order. A similar and more conventional concept was later developed by Acemoglu and North, discussing evolution of “extractive vs inclusive” institutions and transitions between two states.

Revolutions: When, Why and How?

13 February 2025

Viktor Shvets

Macquarie Global Strategy