A recent discussion of a post on my favorite blog dealt with the implications of smart drugs, in particular modafinil. A number of people argued that the problem with permitting such things was competition. If one person uses them, others have to use them in order to compete with him, so you end up with whatever negative side effects the drugs have—modafinil does not seem to have many, but nobody knows for sure—and everyone in the same position as before.That argument views economic competition as something like a football game, where one side wins and the other side loses—if you are not the best you are nothing. If that were true, most of the population of the world would be unemployed. Even without smart drugs, people vary in how able they are—they cannot all be the best.Suppose the use of modafinal makes me 10% better at whatever I do. The result is not that someone with the same abilities who does not take it is useless, merely that I am ten percent more useful and so can expect an income about ten percent higher, whether my salary as an employee or my earnings if I am self-employed. I can decide for myself whether the additional income, or the additional leisure if I choose to work fewer hours instead of making more money, is worth whatever I think the risks of side effects are. If many people use smart drugs, some of the benefit might to go to other people either as lower prices for what the more productive workers produce or higher returns on other inputs to production. But somebody still gets the benefit of the additional productivity.The source of the mistaken intuition is probably the analogous case of steroids in sports. There the right answer is less clear, depending on what it is that athletes produce. If what the fans care about is only relative ability, whether or not their team can beat the other team, then if everyone uses steroids the players are worse off—assuming significant negative side effects—and the fans no better off. If fans value absolute quality, enjoy watching athletes more the better they are, then the argument I have offered applies to that case as well. Not being a sports fan, I cannot offer an informed opinion on which is the case.The same confusion between economic competition and sports competition shows up in one of George Orwell's mistakes. In a very interesting joint review of The Road to Serfdom and a book by Konni Zilliacus, a left wing Labor politician, he wrote:
The trouble with competitions is that somebody wins them. Professor Hayek denies that free capitalism necessarily leads to monopoly, but in practice that is where it has led ...
Which, fortunately, is not true.[An earlier discussion of the same issues, not in the context of smart drugs]