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 Published by
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UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE

Library of Congress Cataloging-in-Publication Data

Names: Lehalle, Charles-Albert, editor. | Laruelle, Sophie, editor.
Title: Market microstructure in practice : 2nd edition / [edited by]
Charles-Albert Lehalle (Capital Fund Management, France & Imperial College London, UK),
Sophie Laruelle (Université Paris-Est Créteil, France).
Description: Second Edition. | New Jersey : World Scientific, [2018] | Revised edition of
Market microstructure in practice, [2014] | Includes bibliographical references and index.
Identifiers: LCCN 2017045429 | ISBN 9789813231122
Subjects: LCSH: Capital market. | Finance. | Stock exchanges.
Classification: LCC HG4523 .M2678 2018 | DDC 332/.0415--dc23
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January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page v

Foreword

Robert Almgren, President and Cofounder of Quantitative

Brokers
Fragmentation, the search for liquidity, and high-frequency traders:
These are the realities of modern markets. Traditional models of
market microstructure have studied the highly simplified interaction
between an idealized market-maker or specialist and a stream of
external orders that may come from noise traders or informed
traders. In the modern marketplace, the market itself is replaced
by a loosely coupled network of visible and hidden venues, linked
together by high-frequency traders and by algorithmic strategies.
The distinction between market-makers who post liquidity and
directional traders who take liquidity no longer exists. All traders are
searching for liquidity, which may be flickering across many different
locations with varying latencies, fill probabilities, and costs. That is
the world this book addresses, treating these issues as central and
fundamental rather than unwelcome complexities on top of a simple
framework.
This market evolution is the farthest one in equity markets,
thanks in large part to their size, social prominence as indicators
of corporate value, and large variety of active traders from retail
investors to sophisticated proprietary operations and large funda-
mental asset managers. Regulation has also been most active in
equity markets, most importantly Reg NMS in the US and MiFiD in
Europe. Other asset markets, such as foreign exchange, futures, and
fixed income, are further back along this pathway, but it is clear that

v
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page vi

vi Market Microstructure in Practice

the direction of evolution is toward the landscape treated in this book

rather than back to simpler times. Regulation will continue to shape
further development of all these markets, and all market participants
have an interest in increasing their as well as the regulators’ broad
understanding of the underlying issues.
The central focus of the book is liquidity: Loosely speaking, the
ease and efficiency with which large transactions can be performed.
For any real user of the market, this is the primary concern,
although academic researchers may focus on other aspects. Thus,
fragmentation and high-frequency trading are addressed from this
point of view. Throughout the book, the emphasis is on features of
the marketplace that are of tangible and pressing concern to traders,
investors, and regulators.
The authors have extensive personal experience of the develop-
ment of the European equity markets as traders and as participants
in conversations with regulators and other interested parties. They
bring this experience to bear on every aspect of the discussion as well
as deep quantitative understanding. The resulting book is a unique
mixture of real market knowledge and theoretical explanation. There
is nothing else out there like it, and this book will be a central resource
for many different market participants.

Bertrand Patillet, Deputy Chief Executive Officer of CA

Cheuvreux until April 2013
MiFID I removed the freedom of national regulators to maintain
the secular obligation to concentrate orders on historical markets. In
this way, the regulation, without a doubt, lifted the last regulatory
obstacle preventing Europe from experiencing — for better or for
worse perhaps — the macro and microstructural changes already at
work on North American markets. This complete shift in paradigm
was to render obsolete our savoir-faire and knowledge of how equity
markets work.
We needed to observe, analyse, understand, and, to a certain
extent, anticipate and foresee the consequences of the transforma-
tions underway that would drastically change the structure of inter
and intramarket liquidity and thus the nature of the information
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page vii

Foreword vii

conveyed by order books, the right reading of which is vital to

obtaining the best price for our clients. Only then could we redefine
our approach to best execution and adapt our behaviour and our
tools.
We could not have achieved this task without resources, hitherto
the monopoly of certain hedge funds or derivatives desks, but
unknown to agency brokers, namely, profiles capable of extracting
useful information from market data in order to better model
new behaviours, validate or invalidate intuitions and ultimately
provide our traders with buy or sell decision-making tools in these
exceedingly complex markets. This is why, as early as 2006, we
decided to form a team of quantitative analysts with strong links
to the academic world, and headed by Charles-Albert, newly hired
at Crédit Agricole Cheuvreux. This move was to transform our
execution practices beyond our expectations and place us among
the leaders.
Before MiFID II imposes new rules for structuring financial mar-
kets, this book provides a point of view, far from the preconceived
ideas and pro domo pleas of such and such a lobby, on market
microstructure issues — the subject of impassioned, fascinating,
and as yet unclosed debate — which will interest all those who,
in one respect or another, are concerned with improving how equity
markets work.

Philippe Guillot, Executive Director, Markets Directorate,

Autorité des marchés financiers (AMF)
When Charles-Albert asked me to write a foreword for his book on
market microstructure, in which many of the topics are reminiscent
of the uncounted hours spent discussing them while we were at
Cheuvreux, he specifically asked for one (alas, only one) of the many
analogies I use to help people getting a grasp on microstructure. A
good proportion comes from comparing the electronics markets to
aviation, with a big difference worth noting: At the beginning of
aviation, as Igor Sikorsky said, the chief engineer was almost always
the chief test pilot, which had the fortunate result of eliminating poor
engineering at an early stage in aviation (could we do something
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page viii

viii Market Microstructure in Practice

similar for algos?). When comparing the two today, what is probably
missed the most in the market microstructure is common sense.
How can this be illustrated through MiFID? At first glance, one
clear beneficiary of MiFID is Mr. Smith. When he bravely buys 500
shares of Crédit Agricole, the reduction in tick sizes that occurred
in the previous years means that rather than having to pay 6.95
per share when he crosses the spread, he now buys them at 6.949
(he still crosses the spread but, because his dealing size remained
smaller than the Average Trade Size, he still buys from the best offer)
and saves a whopping 0.5 every times he deals. Unfortunately,
whenever he does so, he is never sure that the price he has dealt at
is the one he has seen on his screen nor that the marketplace where
he has dealt is the one in which he was looking at the price. Add to
that some literature on HFT, predatory strategies and flash crashes:
No wonder the markets have lost Mr. Smith’s confidence. Where is
the analogy with aviation?
When today’s engineers build an Airbus A380, they could really
simplify the problems by building it without windows when only
one out of six passengers sits next to one of them. The body of the
plane would not have to be reinforced around the panels and a lot
of weight would be saved. Add to that the reduction of drag when
flying and you could expect that some of these savings would be
passed to the passengers, maybe 0.5 every time he buys a plane
ticket.
Sadly, Mr. Smith and many of his fellow travellers are not yet
ready to fly in a windowless plane for a 0.5 saving (you may also
have noticed that on automatic tube lines, there is always a huge
windowpane at the front of the train in the unlikely event that there
is a risk of a head on crash with another train). Even if it is technically
possible today to fly a plane without a pilot, even if every serious
accident that occurred in this century has a human error to its origin,
the plane industry has realised how important it is to keep the trust
of the customers.
Today, the markets have lost the trust of their most precious
customer, the most humble link in the markets ecosystem: the
uninformed trader. The ecosystem is damaged and repairing it will
be our biggest challenge in the coming years. Although politicians
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page ix

Foreword ix

may decide to make big bold changes, technicians and regulators

have to carefully use their considerable weight on the delicate levers
of market microstructure.
Charles’ and Sophie’s book on market microstructure will
improve our knowledge and consequently help us to tweak these
potentiometers. In promoting better education, this book is at the
roots of restoring trust in the markets.

Albert J. Menkveld, Professor of Finance at VU University

Amsterdam and Research Fellow at TI-Duisenberg School
of Finance
We go to markets to buy and sell. Perhaps, the oldest market still
around is the farmer’s market. Even New York City has them with
farmers driving their vans out to Manhattan to sell their wares at the
local square amid high-rises. It is a pleasant experience to go out on
a sunny day and buy your veggies fresh from the farmer.
That seems a far way off from modern securities markets.
Exchanges have moved from floor trading to servers that match
incoming buy and sell orders. These orders, in turn, were submitted
through electronic channels after traders typed them into their
terminals. Better yet, it seems that even the ’typing’ is increasingly
left to robots to gain speed. So, in today’s markets, decisions are
taken and trades go off at sub-millisecond speed. The clock speed of
a human brain is about 100 ms.
The market place itself changes at a speed that is hard to keep up
with. Practitioners, academics, and regulators all wonder whether
these new electronic markets are better. But what is the appropriate
measure? To an economist, securities markets should get the assets
in the hands of those who have highest value for them (given budget
constraints). The assets should be allocated optimally. Furthermore,
an important byproduct of trading is “price discovery”. Prices
reveal information about the fundamental value of a security. They
help shareholders discover poor management and take appropriate
action.
This book provides a perspective on today’s markets. It reviews
institutional changes, discusses them, and provides color through
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January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page x

x Market Microstructure in Practice

real-world examples. It focuses mostly on European securities

markets. This does not make it less relevant in a global context as the
issues are very similar outside of Europe.
This perspective is an important contribution to the public
debate on modern markets. In the end, we might have gained from
automated markets as costly human intermediaries are replaced by
computers. And when a robot monitors the market for us, we will
have more time to go out and enjoy the farmer’s market.
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xi

Preface

Preface of the editors to the second edition

The last four years have seen some changes in market microstructure.
We took the occasion to publish an augmented edition of “Market
Microstruture in Practice”. First of all, a new wave of regulations,
driven by MiFID 2 in Europe, is coming. They give a better view on
what regulators and the industry have in mind. More electronization,
and hence more transparency and less information asymmetry, and
more regulation of some important parameters of the microstructure
(like the tick size, the trade reporting process, or circuit breakers). The
main assumptions we took in the first edition of this book went into
these directions, hence it is not necessary to modify what we wrote
four years ago, just to be more accurate.
Moreover, progresses have recently been made on the under-
standing of market microstructure, and they deserved to be included
in this book. Mainly: Orderbook dynamics (or simply intraday liq-
uidity dynamics), and optimal trading (the science of slicing a large
metaorder to minimize its impact while taking care of the market
risk). In between these two topics lies market impact; here again
academic studies, using big databases of metaorders, offer a better
understanding of the action of the pressure of large orders on the
price formation process. Orderbook dynamics were not addressed in
the first edition, it is documented in this edition; optimal trading was
in the first edition, but we added some useful technical developments
in the mathematical appendix, and we augmented the explanation of
market impact of large orders in accordance with recent convincing

xi
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xii

xii Market Microstructure in Practice

academic papers. Some illustrations have been updated too because

adding four years of data can be useful.
This book is clearly centered on equity markets, simply because
the migration to electronic trading for equities has been well docu-
mented and understood. It seems clear other markets (especially the
fixed income market) are following a similar story. When needed, we
added some specific comments on the bond market and on options.
The reader should be able to apply what we understood on equities
to other asset classes, but it is too early to give figures and to draw
conclusions on these other markets.
Once again, this book is the product of a common work and not
just by the two main editors. Stéphanie Pelin and Matthieu Lasnier
have been of great help for this second edition.

Charles-Albert Lehalle, Senior Research Advisor at Capital

Fund Management and former Global Head of Quantitative
Research at Crédit Agricole Cheuvreux
This book results from the conjunction of recent academic research
and day-to-day monitoring of the equity market microstructure evo-
lutions. Academic research simultaneously targeted the emergence
of a scientific framework to study the impact of market design and
agent behaviours on the price formation process (see [Lehalle et al.,
2010b, Lehalle, 2012]) and to model and control the execution costs
and risks in such an ecosystem (see [Lehalle, 2008, 2009], [Guéant
et al., 2012a, 2012b], [Bouchard et al., 2011]). This book aims to keep its
content not too technical. Readers interested in a deeper quantitative
approach will find more details and pointers in the appendix.
Market microstructure monitoring has been motivated by
brokerage-oriented business needs. One of the roles of an interme-
diary is to provide unbiased advices on available investment instru-
ments; an execution broker should provide independent analyses on
the price formation process. It sheds light on the market valuation
of financial instruments. This is one of the reasons why this book
owes a lot to Crédit Agricole Cheuvreux’ Navigating Liquidity series
([Lehalle and Burgot, 2008, Lehalle and Burgot, 2009a, 2009b, Lehalle
and Burgot, 2010, 2010a, 2012]). Moreover, internal discussions at
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xiii

Preface xiii

CA Cheuvreux (mainly with Bertrand Patillet and Philippe Guillot)

as well as intense debates with regulators and policy-makers (like
Laurent Grillet-Aubert and Kay Swinburne) on the consequences of
recent evolutions of the microstructure required us to merse these
academic and practical viewpoints to find at least partial answers.
Academics usually do not answer questions that broadly. They
choose one specific case or one market context and try to model
and explain it as much as they can. It does not mean that they
have no intuition. But they cannot afford to claim anything without
strong evidence, and the never-ending fluctuations of regulations
and market conditions do not help. Interactions with academics
are nevertheless of paramount importance in making progresses to
answer regulators and policy-makers’ questions.
Public lectures are no less crucial to mature the outcome of
the dialog with academics — especially when attendees are smart,
talented students. It was my luck that Nicole El Karoui and Gilles
Pagès gave me the opportunity to teach market microstructure
and quantitative trading in their famous Master of Arts Program
in Mathematical Finance since 2006, and a few years later that
Bruno Bouchard suggested I address the same topics in front of
students of University Paris Dauphine. My understanding of market
microstructure, adverse selection, and optimal trading progressed
a lot thanks to passionate discussions with experts like Robert
Almgren, Thierry Foucault, Albert Menkveld, and Ivar Ekeland. The
latter invited me to give a one-week lecture at a summer school at
the MITAC-PIMS (University of British Columbia), giving birth to
challenging exchanges about statistics of high-frequency processes
and stochastic control with Bruno Bouchard, Mathieu Rosenbaum,
and Jérôme Lebuchoux.
Conferences play an important role in the maturation of ideas.
The 2010 Kolkata Econophysic Conference on Order-driven Markets
enriched my viewpoints on the study of market structure thanks to
Frederic Abergel, Fabrizio Lillo, Jim Gatheral, and Bernd Rosenow.
The CA Cheuvreux TaMS (Trading and MicroStructure) workshop
at the Collège de France and the FieSta (Finance et Statistiques)
seminar at École Polytechnique, driven by Mathieu Rosenbaum,
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xiv

xiv Market Microstructure in Practice

Marc Hoffman, and Emmanuel Bacry, contributed to create a small

group of researchers in Paris focused on the topics of this book. It has
been strengthened by the organization of the 2010 and 2012 “Market
Microstructure: Confronting Many Viewpoints” Paris Conferences,
under the auspices of the Louis Bachelier Institute.
The collaborative process giving birth to academic papers
demands to confront one’s viewpoints with co-authors. It is a strong
source of new ideas and breakthroughs. This book hence owns a
lot to Ngoc Minh Dang, Olivier Guéant, Julien Razafinimanana,
Mauricio Labadie, Joaquin Fernandes-Tapia, Weibing Huang, Jean-
Michel Lasry, Pierre-Louis Lions, Aimé Lachapelle, Gilles Pagès, and
Sophie Laruelle. The day-to-day work in an algo trading quant team
is made of debates to sharpen a common understanding of the price
formation process. Not only the co-authors of this book, but Edouard
d’Archembaud, Dana Croize, Nicolas Joseph, Matthew Rowley, and
Yike Lu took part in this wonderful adventure. Yike had enough
energy and a wide enough knowledge to read the last version of this
book, giving us last minute comments, correcting our English and
helping us in clarifying some points.
Last but not least, the tone of this book owns a lot to my previous
life in automotive and aerospace industry, during which Robert
Azencott taught me how to use applied mathematics to discover
relationships on the fly inside high-dimensional datasets. It is worth
while to mention the similarity between the realtime control of the
combustion of an automotive engine (with the need to inject enough
fuel to produce the desired energy, taking care not to inject too
much fuel to avoid pollution and degradation of the combustion
process) and the optimal trading of a large order (buying or selling
fast enough to extract the expected alpha of the market, but not too
fast to avoid market impact, disturbing the price formation process
at its own disadvantage). These proximity may be why eight years
ago, when I considered to switch to the financial industry, Jean-
Philippe Bouchaud told me I would find it interesting to study
market microstructure and optimal execution; I thank him a lot
for that.
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xv

Preface xv

Sophie Laruelle, Assistant Professor at Paris-Est Créteil

University (UPEC) in the Laboratory of Analysis and Applied
Mathematics (LAMA)
How did I come to be concerned about market microstructure? The
answer to this question begins with the answer to how I come to be
concerned about financial mathematics.
I began a course at Rouen University in 2002 in mathematics
and in 2004, with the enforcement of the reform about university
autonomy in France, I started a bachelor’s degree in applied math-
ematics with economics and finance. As I liked these new fields, I
decided to continue my course in this way with a master’s degree
in actuaries and mathematical engineering in insurance and finance
still at Rouen university, then in Paris at UPMC (Paris VI university)
with the so-called Master “Probabilities and Finance” in 2007 and
finally with a Ph.D. in 2008 under the supervision of Gilles Pagès
on numerical probabilities applied to finance because I wanted to
extend my knowledge in this field.
I began to work on stochastic approximation theory and I met
Charles-Albert Lehalle in 2009 owing to Gilles Pagès; we started
to work together on our first paper on optimal split of volume
among dark pools. I discovered in this way market microstructure,
starting with the different types of trading destinations and their
associated characteristics. Then I collaborated with Charles to do the
practical work associated with his course on quantitative trading in
the Masters course “Probabilities and Finance” in 2010: We used a
market simulator to teach students the implementation of trading
strategies in front of real market data. Then we worked on optimal
posting price of limit order with Gilles and Charles (our second
paper), still using stochastic approximation algorithm to solve this
execution problem.
In parallel, I attended several conferences on market micro-
structure and I talked at some of them. I found the community
interested in this subject is diversified: Economists, mathematicians,
physicists, etc. Confronting these different viewpoints is very enrich-
ing and compatible.
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xvi

xvi Market Microstructure in Practice

The market microstructure gives academics and professionals

new problems to deal with in modeling, mathematical and com-
putational viewpoints: Which price model to use (the dynamics in
high-frequency data is not the same as on a daily basis), how to
take into account the price discretization (tick size), which statistics
to use (problems like signature plot and Epps effect), which model
will take into account the market impact, how to take into account
the market fragmentation (Lit Pools, Dark Pools), how to model the
limit order book, how to model the interactions between the different
market participants, how to build optimal trading strategies (optimal
control or forward optimization) and how to implement them, how
to understand the impact of trading strategies on the market (like the
flash crash in May 6, 2010), etc. This list is not exhaustive and there
are lots of other questions that the study of market microstructure
produces. There is still work to be done to better understand and
model all its characteristics with both empirical studies and academic
contributions while discussing too with regulators. The mixing of
different kinds of studies and people make market microstructure
a rich and active environment. We tried in this book to deliver the
keys to understand the basis of all these questions in a quantitative
yet accessible way.
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xvii

About the Editors

Currently Senior Research Advisor at

Capital Fund Management (CFM),
Charles-Albert Lehalle is an interna-
tional expert in market microstruc-
ture and optimal trading. Formerly
Global Head of Quantitative Research
at Crédit Agricole Cheuvreux and Head
of Quantitative Research on Market
Microstructure in the Equity Brokerage
and Derivative Department of Crédit
Agricole Corporate Investment Bank, he has been studying the
market microstructure since regulatory changes in Europe and in
the US took place. He provided research and expertise on this topic
to investors and intermediaries from 2006 to 2013. He was also a
member of the Scientific Committee of the French regulator (AMF).
His is a prominent voice often heard by regulators and policy-
makers such as the European Commission, the French Senate, the
UK Foresight Committee, etc.

xvii
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xviii

xviii Market Microstructure in Practice

Currently Assistant Professor at Univer-

sité Paris-Est Créteil (UPEC) and Asso-
ciate Researcher at École Polytechnique
(Paris), Sophie Laruelle did her Ph.D. in
December 2011 under the supervision of
Gilles Pagès on the analysis of stochastic
algorithms applied to Finance. She is
a contributor to market microstructure
academic research, notably on optimal
allocation among dark pools and on
machine learning for limit orderbooks. She previously worked at
École Centrale Paris on agent-based models and now continues to
work on applications of stochastic approximation theory, market
microstructure, machine learning on big data, and statistics of
stochastic processes.
January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xix

About the Contributors

Romain Burgot graduated from ENSAE in 2006, and he started to

get curious about market microstructure during his time at ENSAE.
He worked directly in this field as a quant analyst and consequently
observed the establishment of whole equity trading fragmentation in
Europe. He took part in the first stages of building a team of efficient
researchers in the domain. He helped in market data processing,
visualization, modeling and robust statistical estimations for bench-
marked agency brokerage execution algorithms. His main interests
include volume volatility spread joint dynamics, the influence of
tick size on trading and helping regulators get an understanding in
equity trading evolutions.

Stéphanie Pelin works as a Quant Analyst in the Quantitative

Research team of Kepler Cheuvreux. For the past seven years, she has
published reports where pertinent issues in financial markets were
investigated, in particular with regard to trading and execution (e.g.
Journal of Trading, Fall 2016). She also conducted quantitative analysis
on Corporate Brokerage strategies, focusing on stocks’ liquidity
characterization or price guaranteed interventions. Stéphanie
graduated with a B.Sc. from Paris Dauphine University, majoring
in Applied Mathematics and Financial Markets, and recently passed
Level I of the CFA exam. She started her professional experience by
studying energy products in an Asset Management firm.

xix
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January 2, 2018 8:50 Market Microstructure in Practice 9in x 6in b3072-fm page xx

xx Market Microstructure in Practice

Matthieu Lasnier was admitted at the École Normale Superieure

in Lyon and he graduated as an engineer from ENSAE. He holds
the Master of Science in Financial Mathematics at the University
Denis Diderot-Paris 7. Currently, a quantitative analyst at Kepler-
Cheuvreux, Matthieu Lasnier’s fields of expertise include the study
of the price formation process with a focus on market impact
questions. He has been working with the quantitative research team
of CA Cheuvreux in New York and in Paris since 2009. His core
field is financial mathematics, in particular, statistical analysis of
high-frequency financial data. The questions he faces overlap with
the design of statistical arbitrage strategies, the optimization of
execution trading algorithm, as well as the study of the market
impact. In the context of raising fragmentation of the European
equity markets, he is a contributor to Navigating Liquidity.
January 2, 2018 10:52 Market Microstructure in Practice 9in x 6in b3072-fm page xxi

Contents

Foreword by v
Robert Almgren . . . . . . . . . . . . . . . . . . . . . . . . v
Bertrand Patillet . . . . . . . . . . . . . . . . . . . . . . . vi
Philippe Guillot . . . . . . . . . . . . . . . . . . . . . . . . vii
Albert J. Menkveld . . . . . . . . . . . . . . . . . . . . . . ix

Preface by xi
Charles-Albert Lehalle . . . . . . . . . . . . . . . . . . . . xii
Sophie Laruelle . . . . . . . . . . . . . . . . . . . . . . . . xv

About the Editors xvii

About the Contributors xix

Introduction 1

1. Monitoring the Fragmentation at Any Scale 33

1.1 Fluctuations of Market Shares: A First Look at
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . 33
1.1.1 The market share: A not so obvious
liquidity metric . . . . . . . . . . . . . . 33
1.1.2 Phase 1: First attempts
of fragmentation . . . . . . . . . . . . . . 39
1.1.3 Phase 2: Convergence towards a
European offer . . . . . . . . . . . . . . . 50

xxi
January 2, 2018 10:52 Market Microstructure in Practice 9in x 6in b3072-fm page xxii

xxii Market Microstructure in Practice

1.1.4 Phase 3: Apparition of broker crossing

networks and dark pools . . . . . . . . . 54
1.2 SOR (Smart Order Routing), A Structural
Component of European Price Formation
Process . . . . . . . . . . . . . . . . . . . . . . . . . 62
1.2.1 How to route orders in a fragmented
market? . . . . . . . . . . . . . . . . . . . 62
1.2.2 Fragmentation is a consequence
of primary markets’ variance . . . . . . 71
1.3 Still Looking for the Optimal Tick Size . . . . . . . 74
1.3.1 Why does tick size matter? . . . . . . . . 74
1.3.2 How tick size affects market
quality . . . . . . . . . . . . . . . . . . . 77
1.3.3 How can tick size be used by trading
venue to earn market share? . . . . . . . 91
1.3.4 How does tick size change the
profitability of the various participants
in the market? . . . . . . . . . . . . . . . 97
1.3.5 The value of a quote . . . . . . . . . . . 100
1.4 Can We See in the Dark? . . . . . . . . . . . . . . . 102
1.4.1 Mechanism of dark liquidity pools . . . 102
1.4.2 In-depth analysis of dark liquidity . . . 105

2. Understanding the Stakes and the Roots

of Fragmentation 117
2.1 From Intraday Market Share to Volume Curves:
Some Stationarity Issues . . . . . . . . . . . . . . . 117
2.1.1 Inventory-driven investors need fixing
auctions . . . . . . . . . . . . . . . . . . . 119
2.1.2 Timing is money: Investors’ optimal
trading rate . . . . . . . . . . . . . . . . . 129
2.1.3 Fragmentation and the evolution of
intraday volume patterns . . . . . . . . 139
2.2 The Four Main Liquidity Variables: Traded
Volumes, Bid–Ask Spread, Volatility and Quoted
Quantities . . . . . . . . . . . . . . . . . . . . . . . 143
January 2, 2018 10:52 Market Microstructure in Practice 9in x 6in b3072-fm page xxiii

Contents xxiii

2.3 Does More Liquidity Guarantee a Better Market

Share? A Little Story About the European Bid–Ask
Spread . . . . . . . . . . . . . . . . . . . . . . . . . 148
2.3.1 The bid–ask spread and volatility move
accordingly . . . . . . . . . . . . . . . . . 150
2.3.2 Bid–ask spread and market share are
deeply linked . . . . . . . . . . . . . . . 153
2.3.3 Exchanges need to show
volatility-resistance . . . . . . . . . . . . 156
2.4 The Agenda of High Frequency Traders: How Do
They Extend their Universe? . . . . . . . . . . . . 158
2.4.1 Metrics for the balance in liquidity
among indexes . . . . . . . . . . . . . . . 159
2.4.2 A history of coverage . . . . . . . . . . . 161
2.4.3 High-frequency traders do not impact all
investors equally . . . . . . . . . . . . . 163
2.5 The Link Between Fragmentation and Systemic
Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
2.5.1 The Spanish experiment . . . . . . . . . 170
2.5.2 The Flash Crash (May 6, 2010) in NY:
How far are we from systemic risk? . . . 177
2.5.3 From Systemic Risk To Circuit Breakers 187
2.6 Beyond Equity Markets . . . . . . . . . . . . . . . 189

3. Optimal Organizations for Optimal Trading 193

3.1 Organizing a Trading Structure to Answer
a Fragmented Landscape . . . . . . . . . . . . . . 193
3.1.1 Main inputs of trading tools . . . . . . . 194
3.1.2 Components of trading algorithms . . . 197
3.1.3 Main outputs of an automated trading
system . . . . . . . . . . . . . . . . . . . 198
3.2 Market Impact Measurements: Understanding the
Price Formation Process from the Viewpoint of
One Investor . . . . . . . . . . . . . . . . . . . . . 203
3.2.1 Market impact over the trading period . 204
January 2, 2018 10:52 Market Microstructure in Practice 9in x 6in b3072-fm page xxiv

xxiv Market Microstructure in Practice

3.2.2 Market impact on a longer horizon: Price

anticipation and permanent market
impact . . . . . . . . . . . . . . . . . . . 209
3.3 The Price Formation Process and Orderbooks
Dynamics . . . . . . . . . . . . . . . . . . . . . . . 215
3.3.1 Information reaching orderbooks . . . . 217
3.3.2 Understanding via conditioning . . . . . 219
3.3.3 Conclusion on orderbook
dynamics . . . . . . . . . . . . . . . . . . 226
3.4 Optimal Trading Methods . . . . . . . . . . . . . . 227
3.4.1 Algorithmic trading: Adapting trading
style to investors’ needs . . . . . . . . . 227
3.4.2 Liquidity-seeking algorithms are no
longer nice to have . . . . . . . . . . . . 233
3.4.3 Conclusion on optimal trading . . . . . 244

Appendix A: Quantitative Appendix 247

A.1 From Entropy to FEI (Fragmentation Efficiency
Index) . . . . . . . . . . . . . . . . . . . . . . . . . 247
A.2 Information Seeking and Price Discovery . . . . . 250
A.3 A Simple Model Explaining the Natural
Fragmentation of Market Microstructure . . . . . 253
A.3.1 A toy model of SOR dynamics . . . . . . 255
A.3.2 A toy model of the impact of SOR activity
on the market shares . . . . . . . . . . . 256
A.3.3 A coupled model of SOR-market shares
dynamics . . . . . . . . . . . . . . . . . . 257
A.3.4 Simulations . . . . . . . . . . . . . . . . 258
A.3.5 Qualitative analysis . . . . . . . . . . . . 259
A.4 Kyle’s Model For Market Making . . . . . . . . . 260
A.5 A Toy Model of the Flash Crash . . . . . . . . . . . 261
A.5.1 A market depth-oriented model . . . . . 262
A.5.2 Impact of the Flash Crash on
our model . . . . . . . . . . . . . . . . . 263
A.6 Harris Model: Underlying Continuous Spread
Discretized by Tick . . . . . . . . . . . . . . . . . . 266
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case? This inquiry has been but partially answered in the course of
the foregoing argument.
Many specialities of the reproductive process are manifestly due
to the natural selection of favourable variations. Whether a creature
lays a few large eggs or many small ones equal in weight to the few
large, is not determined by any physiological necessity: here the only
assignable cause is the survival of varieties in which the matter
devoted to reproduction happens to be divided into portions of such
size and number as most to favour multiplication. Whether in any
case there are frequent small broods or larger broods at longer
intervals, depends wholly on the constitutional peculiarity that has
arisen from the dying out of families in which the sizes and intervals
of the broods were least suited to the conditions of life. Whether a
species of animal produces many offspring of which it takes no care
or a few of which it takes much care—that is, whether its
reproductive surplus is laid out wholly in germs or partly in germs
and partly in labour on their behalf—must have been decided by that
moulding of constitution to conditions slowly effected through the
more frequent preservation of descendants from those whose
reproductive habits were best adapted to the circumstances of the
species. Given a certain surplus available for race-preservation, and
it is clear that by indirect equilibration only, can there be established
the more or less peculiar distribution of this surplus which we see in
each case. Obviously, too, survival of the fittest has a share in
determining the proportion between the amount of matter that goes
to Individuation and the amount that goes to Genesis. Whether the
interests of the species are most subserved by a higher evolution of
the individual joined with a diminished fertility, or by a lower
evolution of the individual joined with an increased fertility, are
questions ever being experimentally answered. If the more-
developed and less-prolific variety has a greater number of
survivors, it becomes established and predominant. If, contrariwise,
the conditions of life being simple, the larger or more-organized
individuals gain nothing by their greater size or better organization;
then the greater fertility of the less evolved ones, will insure to their
descendants an increasing predominance.
But direct equilibration all along maintains the limits within which
indirect equilibration thus works. The necessary antagonism we have
traced, rigidly restricts the changes that natural selection can
produce, under given conditions, in either direction. A greater
demand for Individuation, be it a demand caused by some
spontaneous variation or by an adaptive increase of structure and
function, inevitably diminishes the supply for Genesis; and natural
selection cannot, other things remaining the same, restore the rate
of Genesis while the higher Individuation is maintained. Conversely,
survival of the fittest, acting on a species that has, by spontaneous
variation or otherwise, become more prolific, cannot again raise its
lowered Individuation, so long as everything else continues constant.

§ 364. Here, however, a qualification must be made. It was

parenthetically remarked in § 327, that the inverse variation between
Individuation and Genesis is not exact; and it was hinted that a
slight modification of statement would be requisite at a more
advanced stage of the argument. We have now reached the proper
place for specifying this modification.
Each increment of evolution entails a decrement of reproduction
which is not accurately proportionate, but somewhat less than
proportionate. The gain in the one direction is not wholly cancelled
by a loss in the other direction, but only partially cancelled: leaving a
margin of profit to the species. Though augmented power of self-
maintenance habitually necessitates diminished power of race-
propagation, yet the product of the two factors is greater than
before; so that the forces preservative of race become, thereafter, in
excess of the forces destructive of race, and the race spreads. We
shall soon see why this happens.
Every advance in evolution implies an economy. That any increase
in bulk, or structure, or activity, may become established, the life of
the organism must be to some extent facilitated by the change—the
cost of self-support must be, on the average, reduced. If the greater
complexity, or the larger size, or the more agile movement, entails
on the individual an outlay that is not repaid in food more-easily
obtained, or danger more-easily escaped; then the individual will be
at a relative disadvantage, and its diminished posterity will
disappear. If the extra outlay is but just made good by the extra
advantage, the modified individual will not survive longer, or leave
more descendants, than the unmodified individuals. Consequently, it
is only when the expense of greater individuation is out-balanced by
a subsequent saving, that it can tend to subserve the preservation of
the individual, and, by implication, the preservation of the race. The
vital capital invested in the alteration must bring a more than
equivalent return. A few instances will show that, whether the
change results from direct equilibration or from indirect equilibration,
this must happen. Suppose a creature takes to performing some act
in an unusual way—leaps where ordinarily its kindred crawl, eludes
pursuit by diving instead of, like others of its kind, by swimming
along the surface, escapes by doubling instead of by speed. Clearly,
perseverance in the modified habit will, other things equal, imply
that it takes less effort. The creature’s sensations will ever prompt
desistance from the more laborious course; and hence a congenital
habit is not likely to be diverged from unless an economy of force is
achieved by the divergence. Assuming, then, that the new method
has no advantage over the old in directly diminishing the chances of
death, the establishment of it, and of the structural complications
involved, nevertheless implies a physiological gain. Suppose, again,
that an animal takes to some abundant food previously refused by
its kind. It is likely to persist only if the comparative ease in
obtaining this food, more than compensates for any want of
adaptation to its digestive organs; so that superposed modifications
of the digestive organs are likely to arise only when an average
economy results. What now must be the influence on the creature’s
system as a whole? Diminished expenditure in any direction, or
increased nutrition however effected, will leave a greater surplus of
materials. The animal will be physiological richer. Part of its
augmented wealth will go towards its own greater individuation—its
size, or its strength, or both, will increase; while another part will go
towards more active genesis. Just as a state of plethora directly
produced enhances fertility; so will such a state indirectly produced.
In another way, the same thing must result from those additions
to bulk or complexity or activity that are due to survival of the fittest.
Any change which prolongs individual life will, other things remaining
the same, further the production of offspring. Even when it is not,
like the foregoing, a means of economizing the forces of the
individual, still, if it increases the chances of escaping destruction, it
increases the chances of leaving posterity. Any further degree of
evolution, therefore, will be established only where the cost of it is
more than repaid: part of the gain being shown in the lengthened
life of the individual, and part in the greater production of other
individuals.
We have here the solution of various minor anomalies by which
the inverse variation of Individuation and Genesis is obscured. Take
as an instance the fertility of the Blackbird as compared with that of
the Linnet. Both birds lay five eggs, and both usually have two
broods. Yet the Blackbird is far the larger of the two, and ought,
according to the general law, to be much less prolific. What causes
this nonconformity? We shall find an answer in their respective foods
and habits. Except during the time that it is rearing its young, the
Linnet collects only vegetal food—lives during the winter on the
seeds it finds in the fields, or, when hard pressed, picks up around
farms; and to obtain this spare diet is continually flying about. The
result, if it survives the frost and snow, is a considerable depletion;
and it recovers its condition only after some length of spring
weather. The Blackbird, on the other hand, is omnivorous. While it
eats grain and fruit when they come in its way, it depends largely on
animal food. It cuts to pieces and devours the dew-worms which,
morning and evening, it finds on the surface of a lawn, and, even
discovering where they are, unearths them; it swallows slugs, and
breaking snail-shells, either with its beak or by hammering them
against stones, tears out their tenants; and it eats beetles and
larvæ. Thus the strength of the Blackbird opens to it a store of good
food, much of which is inaccessible to so small and weak a bird as a
Linnet—a store especially helpful to it during the cold months, when
the hybernating snails in hedge-bottoms yield it abundant provision.
The result is that the Blackbird is ready to breed very early in spring,
and is able during the summer to rear a second, and sometimes
even a third, brood. Here, then, a higher degree of Individuation
secures advantages so great, as to much more than compensate its
cost. It is not that the decline of Genesis is less than proportionate
to the increase of Individuation, but there is no decline at all.
Comparison of the Rat with the Mouse yields a parallel result.
Though they differ greatly in size, yet the one is as prolific as the
other. This absence of difference cannot be ascribed to their unlike
degrees of activity. We must seek its cause in some facility of living
secured to the Rat by its greater intelligence, greater power and
courage, greater ability to utilize what it finds. The Rat is notoriously
cunning; and its cunning gives success to its foraging expeditions. It
is not, like the Mouse, limited mainly to vegetal food; but while it
eats grain and beans like the Mouse, it also eats flesh and carrion,
devours young poultry and eggs. The result is that, without a
proportionate increase of expenditure, it gets a far larger supply of
nourishment than the Mouse; and relative excess of nourishment
makes possible a larger size without a smaller rate of multiplication.
How clearly this is the cause, we see in the contrast between the
common Rat and the Water-Rat. While the common Rat has
ordinarily several broods a-year of from 10 to 12 each, the Water-
Rat, though somewhat smaller, has but 5 or 6 in a brood, and but
one brood, or sometimes two broods, a-year. But the Water-Rat lives
on vegetal food, and it lacks all that its bold, sagacious, omnivorous
congener gains from the warmth as well as the abundance which
men’s habitations yield.
The inverse variation of Individuation and Genesis is, therefore,
but approximate. Recognizing the truth that every increment of
evolution which is appropriate to the circumstances of an organism,
brings an advantage somewhat in excess of its cost; we see the
general law, as more strictly stated, to be that Genesis decreases not
quite so fast as Individuation increases. Whether the greater
Individuation takes the form of a larger bulk and accompanying
access of strength; whether it be shown in higher speed or agility;
whether it consists in a modification of structure which facilitates
some habitual movement, or in a visceral change that helps to utilize
better the absorbed aliment; the ultimate effect is identical. There is
either a more economical performance of the same actions, internal
or external, or there is a securing of greater advantages by modified
actions, which cost no more, or have an increased cost less than the
increased gain. In any case the result is a greater surplus of vital
capital, part of which goes to the aggrandizement of the individual,
and part to the formation of new individuals. While the higher tide of
nutritive matters, everywhere filling the parent-organism, adds to its
power of self-maintenance, it also causes a reproductive overflow
larger than before.
Hence every type which is best adapted to its conditions, (and
this on the average means every higher type), has a rate of
multiplication that insures a tendency to predominate. Survival of the
fittest, acting alone, is ever replacing inferior species by superior
species. But beyond the longer survival, and therefore greater
chance of leaving offspring, which superiority gives, we see here
another way in which the spread of the superior is insured. Though
the more-evolved organism is the less fertile absolutely, it is the
more fertile relatively.
 CHAPTER XII.
MULTIPLICATION OF THE HUMAN RACE.

§ 365. The relative fertility of Man considered as a species, and

those changes in Man’s fertility which occur under changed
conditions, must conform to the laws which we have traced thus far.
As a matter of course, the inverse variation between Individuation
and Genesis holds of him as of all other organized beings. His
extremely low rate of multiplication—far below that of all terrestrial
Mammals except the Elephant, (which though otherwise less evolved
is, in extent of integration, more evolved)—we shall recognize as the
necessary concomitant of his much higher evolution. And the causes
of increase or decrease in his fertility, special or general, temporary
or permanent, we shall expect to find in those changes of bulk, of
structure, or of expenditure, which we have in all other cases seen
associated with such effects.
In the absence of detailed proof that these parallelisms exist, it
might suffice to contemplate the several communities between the
reproductive function in human beings and other beings. I do not
refer simply to the fact that genesis proceeds in a similar manner;
but I refer to the similarity of the relation between the generative
function and the functions which have for their joint end the
preservation of the individual. In Man, as in other creatures that
expend much, genesis commences only when growth and
development are declining in rapidity and approaching their
termination. Among the higher organisms in general, the
reproductive activity, continuing during the prime of life, ceases
when the vigour declines, leaving a closing period of infertility; and
in like manner among ourselves, barrenness supervenes when
middle age brings the surplus vitality to an end. So, too, it is found
that in Man, as in beings of lower orders, there is a period at which
fecundity culminates. In § 341, facts were cited showing that at the
commencement of the reproductive period, animals bear fewer
offspring than afterwards; and that towards the close of the
reproductive period, there is a decrease in the number produced. In
like manner it is shown by the tables of Dr. Duncan’s recent work,
that the fecundity of women increases up to the age of about 25
years, and continuing high with but slight diminution till after 30,
then gradually wanes. It is the same with the sizes and weights of
offspring. Infants born of women from 25 to 29 years of age, are
both longer and heavier than infants born of younger or older
women; and this difference has the same implication as the greater
total weight of the offspring produced at a birth, during the most
fecund age of a pluriparous animal. Once more, there is the fact that
a too-early bearing of young produces on a woman the same
injurious effects as on an inferior creature—an arrest of growth and
an enfeeblement of constitution.
Considering these general and special parallelisms, we might
safely infer that variations of human fertility conform to the same
laws as do variations of fertility in general. But it is not needful to
content ourselves with an implication. Evidence is assignable that
what causes increase or decrease of genesis in other creatures,
causes increase or decrease of genesis in Man. It is true that, even
more than hitherto, our reasonings are beset by difficulties. So
numerous are the inequalities in the conditions, that but few
unobjectionable comparisons can be made. The human races differ
considerably in their sizes, and notably in their degrees of cerebral
development. The countries they inhabit entail on them widely
different consumptions of matter for maintenance of temperature.
Both in their qualities and quantities the foods they live on are
unlike; and the supply is here regular and there very irregular. Their
expenditures in bodily action are extremely unequal; and even still
more unequal are their expenditures in mental action. Hence the
factors, varying so much in their amounts and combinations, can
scarcely ever have their respective effects identified. Nevertheless
there are a few comparisons the results of which may withstand
criticism.
 § 366. The increase of fertility caused by a nutrition that is greatly
in excess of the expenditure, is to be detected by contrasting
populations of the same race, or allied races, one of which obtains
good and abundant sustenance much more easily than the other.
Three cases may here be set down.
The traveller Barrow, describing the Cape-Boers, says:—“Unwilling
to work and unable to think,” ... “indulging to excess in the
gratification of every sensual appetite, the African peasant grows to
an unwieldy size;” and respecting the other sex, he adds—“the
women of the African peasantry lead a life of the most listless
inactivity,” Then, after illustrating these statements, he goes on to
note “the prolific tendency of all the African peasantry. Six or seven
children in a family are considered as very few; from a dozen to
twenty are not uncommon.” The native races of this region yield
evidence to the same effect. Speaking of the cruelly-used Hottentots
(he is writing a century ago), who, while they are poor and ill-fed,
have to do all the work for the idle Boers, Barrow says that they
“seldom have more than two or three children; and many of the
women are barren.” This unusual infertility stands in remarkable
contrast with the unusual fertility of the Kaffirs, of whom he
afterwards gives an account. Rich in cattle, leading easy lives, and
living almost exclusively on animal food (chiefly milk with occasional
flesh), these people were then reputed to have a very high rate of
multiplication. Barrow writes:—“They are said to be exceedingly
prolific; that twins are almost as frequent as single births, and that it
is no uncommon thing for a woman to have three at a time.”
Probably both these statements are in excess of the truth; but there
is room for large discounts without destroying the extreme
difference. A third instance is that of the French-Canadians. “Nous
sommes terribles pour les enfants!” observed one of them to Prof.
Johnston, who tells us that the man who said this “was one of
fourteen children—was himself the father of fourteen, and assured
me that from eight to sixteen was the usual number of the farmers’
families. He even named one or two women who had brought their
husbands five-and-twenty, and threatened ‘le vingt-sixième pour le
prêtre.’” From these large families, joined with the early marriages
and low rate of mortality, it results that, by natural increase, “there
are added to the French-Canadian population of Lower Canada four
persons for every one that is added to the population of England.”
Now these French-Canadians are described by Prof. Johnston as
home-loving, contented, unenterprising; and as living in a region
where “land and subsistence are easily obtained.” Very moderate
industry brings to them liberal supplies of necessaries; and they pass
a considerable portion of the year in idleness. Hence the cost of
Individuation being much reduced, the rate of Genesis is much
increased. That this uncommon fertility is not due to any direct
influence of the locality, is implied by the fact that along with the
“restless, discontented, striving, burning energy of their Saxon
neighbours,” no such rate of multiplication is observed; while further
south, where the physical circumstances are more favourable if
anything, the Anglo-Saxons, leading lives of excessive activity, have
a fertility below the average. And that the peculiarity is not a direct
effect of race, is proved by the fact that in Europe, the rural French
are certainly not more prolific than the rural English.
To every reader there will probably occur the seemingly-adverse
evidence furnished by the Irish; who, though not well fed, multiply
fast. Part of this more rapid increase is due to the earlier marriages
common among them, and consequent quicker succession of
generations—a factor which, as we have seen, has a larger effect
than any other on the rate of multiplication. Part of it is due to the
greater generality of marriage—to the comparative smallness of the
number who die without having had the opportunity of producing
offspring. The effects of these causes having been deducted, we
may doubt whether the Irish, individually considered, would be
found more prolific than the English. Perhaps, however, it will be said
that, considering their diet, they ought to be less prolific. This is by
no means obvious. It is not simply a question of nutriment absorbed.
It is a question of how much remains after the expenditure in self-
maintenance. Now a notorious peculiarity in the life of the Irish
peasant is, that he obtains a return of food which is large in
proportion to his outlay in labour. The cultivation of his potatoe-
ground occupies each cottager but a small part of the year; and the
domestic economy of his wife is not of a kind to entail on her much
daily exertion. Consequently the crop, tolerably abundant in quantity
though innutritive in quality, possibly suffices to meet the
comparatively-low expenditure, and to leave a good surplus for
genesis—perhaps a greater surplus than remains to the males and
females of the English peasantry, who, though fed on better food,
are harder worked.
We conclude, then, that in the human race, as in all other races,
such absolute or relative abundance of nutriment as leaves a large
excess after defraying the cost of carrying on parental life, is
accompanied by a high rate of genesis.[66]

§ 367. Evidence of the converse truth, that relative increase of

expenditure, leaving a diminished surplus, reduces the degree of
fertility, is not wanting. Some of it has been set down for the sake of
antithesis in the foregoing section. Here may be grouped a few facts
of a more special kind having the same implication.
To prove that much bodily labour renders women less prolific,
requires more evidence than has at present been collected.
Nevertheless it may be noted that De Boismont in France and Dr.
Szukits in Austria, have shown by extensive statistical comparisons,
that the reproductive age is reached a year later by women of the
labouring class than by middle-class women; and while ascribing this
delay in part to inferior nutrition, we may suspect that it is in part
due to greater muscular expenditure. A kindred fact, admitting of a
kindred interpretation, may be added. Though the comparatively-low
rate of increase in France is attributed to other causes, yet, very
possibly, one of its causes is the greater proportion of hard work
entailed on French women, by the excessive abstraction of men for
non-productive occupations, military and civil. The higher rate of
multiplication in England than in continental countries generally, is
not improbably furthered by the easier lives which English women
lead.
That absolute or relative infertility is commonly produced in
women by mental labour carried to excess, is more clearly shown.
Though the regimen of upper-class girls is not what it should be,
yet, considering that their feeding is better than that of girls
belonging to the poorer classes, while, in most other respects, their
physical treatment is not worse, the deficiency of reproductive power
among them may be reasonably attributed to the overtaxing of their
brains—an overtaxing which produces a serious reaction on the
physique. This diminution of reproductive power is not shown only
by the greater frequency of absolute sterility; nor is it shown only in
the earlier cessation of child-bearing; but it is also shown in the very
frequent inability of such women to suckle their infants. In its full
sense, the reproductive power means the power to bear a well-
developed infant and to supply that infant with the natural food for
the natural period. Most of the flat-chested girls who survive their
high-pressure education, are incompetent to do this. Were their
fertility measured by the number of children they could rear without
artificial aid, they would prove relatively very infertile.
The cost of reproduction to males being so much less than it is to
females, the antagonism between Genesis and Individuation is not
often shown in men by suppression of generative power consequent
on unusual expenditure in bodily action. Nevertheless, there are
indications that this results in extreme cases. We read that the
ancient athletæ rarely had children; and among such of their
modern representatives as acrobats, an allied relation of cause and
effect is alleged. Indirectly this truth, or rather its converse, appears
to have been ascertained by those who train men for feats of
strength—they find it needful to insist on continence.
Special proofs that in men great cerebral expenditure diminishes
or destroys generative power, are difficult to obtain. It is, indeed,
asserted that intense application to mathematics, requiring as it does
extreme concentration of thought, is apt to have this result; and it is
asserted, too, that this result is produced by the excessive emotional
excitement of gambling. Then, again, it is a matter of common
remark how frequently men of unusual mental activity leave no
offspring. But facts of this kind admit of another interpretation. The
reaction of the brain on the body is so violent—the overtaxing of the
nervous system is so apt to prostrate the heart and derange the
digestion; that the incapacities caused in these cases, are probably
often due more to constitutional disturbance than to the direct
deduction which excessive action entails. Such instances harmonize
with the hypothesis; but how far they yield it positive support we
cannot say.

§ 368. An objection must here be guarded against. It is likely to

be urged that since the civilized races are, on the average, larger
than many of the uncivilized races; and since they are also
somewhat more complex as well as more active; they ought, in
conformity with the alleged general law, to be less prolific. There is,
however, no evidence to prove that they are so: on the whole, they
seem rather the reverse.
The reply is that were all other things equal, these superior
varieties of men should have inferior rates of increase. But other
things are not equal; and it is to the inequality of other things that
this apparent anomaly is attributable. Already we have seen how
much more fertile domesticated animals are than their wild kindred;
and the causes of this greater fertility are also the causes of the
greater fertility, relative or absolute, which civilized men exhibit
when compared with savages.
There is the difference in amount of food. Australians, Fuegians,
and sundry races that might be named as having low rates of
multiplication, are obviously underfed. The sketches of natives
contained in the volumes of Livingstone, Baker, and others, yield
clear proofs of the extreme depletion common among the
uncivilized. In quality as well as in quantity, their feeding is bad. Wild
fruits, insects, larvæ, vermin, &c., which we refuse with disgust,
often enter largely into their dietary. Much of this inferior food they
eat uncooked; and they have not our elaborate appliances for
mechanically-preparing it, and rejecting its useless parts. So that
they live on matters of less nutritive value, which cost more both to
masticate and to digest. Further, to uncivilized men supplies of food
come very irregularly. Long periods of scarcity are divided by short
periods of abundance. And though by gorging when opportunity
occurs, something is done towards compensating for previous
fasting, yet the effects of prolonged starvation cannot be neutralized
by occasional enormous meals. Bearing in mind, too, that
improvident as they are, savages often bestir themselves only under
pressure of hunger, we may fairly consider them as habitually ill-
nourished—may see that even the poorer classes of civilized men,
making regular meals on food separated from innutritive matters,
easy to masticate and digest, tolerably good in quality and adequate
if not abundant in quantity, are much better nourished.
Then, again, though a greater consumption in muscular action
appears to be undergone by civilized men than by savages; and
though it is probably true that among our labouring people the daily
repairs cost more; yet in many cases there does not exist so much
difference as we are apt to suppose. The chase is very laborious;
and great amounts of exertion are gone through by the lowest races
in seeking and securing the odds and ends of wild food on which
they largely depend. We naturally assume that because barbarians
are averse to regular labour, their muscular action is less than our
own. But this is not necessarily true. The monotonous toil is what
they cannot tolerate; and they may be ready to go through as much
or more exertion when it is joined with excitement. If we remember
that the sportsman who gladly scrambles up and down rough hill-
sides all day after grouse or deer, would think himself hardly used
had he to spend as much effort and time in digging; we shall see
that a savage who is the reverse of industrious, may nevertheless be
subject to a muscular waste not very different in amount from that
undergone by the industrious. When it is added that a larger
physiological expenditure is entailed on the uncivilized than on the
civilized by the absence of good appliances for shelter and protection
—that in some cases they have to make good a greater loss of heat,
and in other cases suffer much wear from irritating swarms of
insects; we shall see that the total cost of self-maintenance among
them is probably in many cases little less, and in some cases more,
than it is among ourselves.
So that though, on the average, the civilized are probably larger
than the savage; and though they are, in their nervous systems at
least, somewhat more complex; and though, other things equal,
they ought to be the less prolific; yet other things are so unequal as
to make it quite conformable to the general law that they should be
more prolific. In § 365 we observed how, among inferior animals,
higher evolution sometimes makes self-preservation far easier, by
opening the way to resources previously unavailable: so involving an
undiminished, or even an increased, rate of genesis. And similarly
we may expect that among races of men, those whose slight further
developments have been followed by habits and arts which
immensely facilitate life, will not exhibit a lower degree of fertility,
and may even exhibit a higher.

§ 369. One more objection has to be met—a kindred objection to

which there is a kindred reply. Cases may be named of men
conspicuous for activity, bodily and mental, who were also noted,
not for less generative power than usual, but for more. As their
superiorities indicate higher degrees of evolution, it may be urged
that such men should, according to the theory, have lower degrees
of reproductive activity. The fact that here, along with increased
powers of self-preservation, there go increased powers of race-
propagation, seems irreconcilable with the general doctrine.
Reconciliation is not difficult however.
The cases are analogous to some before named, in which more
abundant food simultaneously aggrandizes the individual and adds
to the production of new individuals: the difference between the
cases being, that instead of a better external supply of materials
there is a better internal utilization of materials. Creatures of the
same species notoriously differ in goodness of constitution. Here
there is some visceral defect, showing itself in feebleness of all the
functions; while here some peculiarity of organic balance, some high
quality of tissue, some abundance or potency of the digestive juices,
gives to the system a perpetual high tide of rich blood, which serves
at once to enhance the vital activities and to raise the power of
propagation. Such variations, however, are independent of changes
in the proportion between Individuation and Genesis. This remains
the same, while both are increased or decreased by the increase or
decrease of the common stock of materials.
An illustration will best clear up any perplexity. Let us say that the
fuel burnt in the furnace of a locomotive steam-engine, answers to
the food which a man consumes. Let us say that the produced
steam expended in working the engine, corresponds to that portion
of absorbed nutriment which carries on the man’s functions and
activities. And let us say that the steam blowing off at the safety-
valve, answers to that portion of the absorbed nutriment which goes
to the propagation of the race. Such being the conditions of the
case, several kinds of variations are possible. All other circumstances
remaining the same, there may be changes of proportion between
the steam used for working the engine and the steam that escapes
by the safety-valve. There may be a structural or organic change of
proportion. By enlarging the safety-valve or weakening its spring,
while the cylinders are reduced in size, there may be established a
constitutionally-small power of locomotion and a constitutionally-
large amount of escape-steam; and inverse variations so produced,
will answer to the inverse variations between Individuation and
Genesis which different types of organisms show us. Again, there
may be a functional change of proportion. If the engine has to draw
a considerable load, the abstraction of steam by the cylinders greatly
reduces the discharge by the safety-valve; and if a high velocity is
kept up, the discharge from the safety-valve entirely ceases.
Conversely, if the velocity is low, the escape-steam bears a large
ratio to the steam consumed by the motor apparatus; and if the
engine becomes stationary the whole of the steam escapes by the
safety-valve. This inverse variation answers to that which we have
traced between Expenditure and Genesis, as displayed in the
contrasts between species of the same type but unlike activities, and
in the contrasts between active and inactive individuals of the same
species. But now beyond these inverse variations between the
quantities of consumed steam and escape-steam, which are
structurally and functionally caused, there are coincident variations,
producible in both by changes in the quantity of steam supplied—
changes which may be caused in several ways. In the first place, the
fuel thrown into the furnace may be increased or made better. Other
things equal, there will result a more active locomotion as well as a
greater escape; and this will answer to that simultaneous addition to
its individual vigour and its reproductive activity, caused in an animal
by a larger quantity, or a superior quality, of food. In the second
place, the steam generated may be economized. Loss by radiation
from the boiler may be lessened by a covering of non-conducting
substances; and part of the steam thus prevented from condensing,
will go to increase the working power of the engine, while part will
be added to the quantity blowing off. This variation corresponds to
that simultaneous addition to bodily vigour and propagative power,
which results in animals that have to expend less in keeping up their
temperatures. In the third place, by improvement of the steam-
generating apparatus, more steam may be obtained from a given
weight of fuel. A better-formed evaporating surface, or boiler tubes
which conduct more rapidly, or an increased number of them may
cause a larger absorption of heat from the burning mass or the hot
gases it gives off; and the extra steam generated by this extra heat
will, as before, augment both the motive force and the emission
through the safety-valve. And this last case of coincident variation, is
parallel to the case with which we are here concerned—the
augmentation of individual expenditure and of reproductive energy,
that may be caused by a superiority of some organ on which the
utilizing or economizing of materials depends.
 Manifestly, therefore, an increased expenditure for Genesis, or an
increased expenditure for Individuation, may arise in one of two
quite different ways—either by diminution of the antagonistic
expenditure, or by addition to the store which supplies both
expenditures; and confusion results from not distinguishing between
these. Given the ratio 4 to 20, as expressive of the relative costs of
Genesis and Individuation; then the expenditure for Genesis may be
raised to 5 while the expenditure for Individuation is raised to 25,
without any alteration of type, merely by favourable circumstances
or superiority of constitution. On the other hand, circumstances
remaining the same, the expenditure for Genesis may be raised from
4 to 5, by lowering the expenditure for Individuation from 20 to 19:
which change of ratio may be either functional and temporary, or
structural and permanent. And only when it is the last does it
illustrate that inverse variation between degree of evolution and
degree of procreative dissolution, which we have everywhere seen.

§ 370. There is no reason to suppose, then, that the laws of

multiplication which hold of other beings, do not hold of the human
being. On the contrary, there are special facts which unite with
general implications to show that these laws do hold of the human
being. The absence of direct evidence in some cases where it might
be looked for, we find fully explained when all the factors are taken
into account. And certain seemingly-adverse facts prove, on
examination, to be facts belonging to a different category from that
in which they are placed, and harmonize with the rest when rightly
interpreted.
The conformity of human fertility to the laws of multiplication in
general, being granted, it remains to inquire what effects must be
caused by permanent changes in men’s natures and circumstances.
Thus far we have observed how, by their exceptionally-high
evolution and exceptionally-low fertility, mankind display the inverse
variation between Individuation and Genesis, in one of its extremes.
And we have also observed how mankind, like other kinds, are
functionally changed in their rates of multiplication by changes of
conditions. But we have not observed how alteration of structure in
Man entails alteration of fertility. The influence of this factor is so
entangled with the influences of other factors which are for the
present more potent, that we cannot recognize it. Here, if we
proceed at all, we must proceed deductively.

[Note.—From among the publications of the American Academy of

Political and Social Science, there was sent to me some years ago an
essay entitled “The Significance of a Decreasing Birth Rate” by
(Miss) J. L. Brownell, Fellow in Political Science, Bryn Mawr College.
This essay contains a number of elaborate comparisons drawn from
the vital statistics of the tenth United States Census. The results of
these comparisons are thus summed up:—
“1. Whether or not it be true that the means spoken of by Dr.
Billings, M. Dumont, M. Levasseur, and Dr. Edson has become an
important factor in the diminishing birth-rate of civilized countries, it is
evident that it is not the only factor, and that, quite apart from
voluntary prevention, there is a distinct problem to be investigated.
This is shown by the fact that the white and the colored birth-rate
vary together.
“2. Mr. Spencer’s generalization that the birth-rate diminishes as
the rate of individual evolution increases is confirmed by a comparison
of the birth-rates with the death-rates from nervous diseases, and
also with the density of population, the values of agricultural and
manufactured products, and the mortgage indebtedness.”
Of course multitudinous differences of race, class, mode of living,
occupation, locality, make it difficult to draw positive inferences from
the data; but the inferences above drawn are held to remain
outstanding after allowing for all the qualifying conditions.]
 CHAPTER XIII.
HUMAN POPULATION IN THE FUTURE.

§ 371. Any further evolution in the most highly-evolved of

terrestrial beings, Man, must be of the same nature as evolution in
general. Structurally considered, it may consist in greater
integration, or greater differentiation, or both—augmented bulk, or
increased heterogeneity and definiteness, or a combination of the
two. Functionally considered, it may consist in a larger sum of
actions, or more multiplied varieties of actions, or both—a larger
amount of sensible and insensible motion generated, or motions
more numerous in their kinds and more intricate and exact in their
co-ordinations, or motions that are greater alike in quantity,
complexity, and precision.
Expressing the change in terms of that more special evolution
displayed by organisms; we may say that it must be one which
further adapts the moving equilibrium of organic actions. As was
pointed out in First Principles, § 173, “the maintenance of such a
moving equilibrium, requires the habitual genesis of internal forces
corresponding in number, directions, and amounts to the external
incident forces—as many inner functions, single or combined, as
there are single or combined outer actions to be met.” And it was
also pointed out that “the structural complexity accompanying
functional equilibration, is definable as one in which there are as
many specialized parts as are capable, separately and jointly, of
counteracting the separate and joint forces amid which the organism
exists.” Clearly, then, since all incompletenesses in Man as now
constituted, are failures to meet certain of the outer actions (mostly
involved, remote, irregular), to which he is exposed; every advance
implies additional co-ordinations of actions and accompanying
complexities of organization.
Or, to specialize still further this conception of future progress, we
may consider it as an advance towards completion of that
continuous adjustment of internal to external relations, which Life
shows us. In Part I. of this work, where it was shown that the
correspondence between inner and outer actions which under its
phenomenal aspect, we call Life, is a particular kind of what, in
terms of Evolution, we called a moving equilibrium; it was shown
that the degree of life varies as the degree of correspondence.
Greater evolution or higher life implies, then, such modifications of
human nature as shall make more exact the existing
correspondences, or shall establish additional correspondences, or
both. Connexions of phenomena of a rare, distant, unobtrusive, or
intricate kind, which we either suffer from or do not take advantage
of, have to be responded to by new connexions of ideas, and acts
properly combined and proportioned: there must be increase of
knowledge, or skill, or power, or of all these. And to effect this more
extensive, more varied, and more accurate, co-ordination of actions,
there must be organization of still greater heterogeneity and
definiteness.

§ 372. Let us, before proceeding, consider in what particular ways

this further evolution, this higher life, this greater co-ordination of
actions, may be expected to show itself.
Will it be in strength? Probably not to any considerable degree.
Mechanical appliances are fast supplanting brute force, and
doubtless will continue doing this. Though at present civilized
nations largely depend for self-preservation on vigour of limb, and
are likely to do so while wars continue; yet that progressive
adaptation to the social state which must at last bring wars to an
end, will leave the amount of muscular power to adjust itself to the
requirements of a peaceful regime. Though, taking all things into
account, the muscular power then required may not be less than
now, there seems no reason why more should be required.
Will it be swiftness or agility? Probably not. In savages these are
important elements of the ability to maintain life; but in civilized men
they aid self-preservation in quite minor degrees, and there seems
no circumstance likely to necessitate an increase of them. By games
and gymnastic competitions, such attributes may indeed be
artificially increased; but no artificial increase which does not bring a
proportionate advantage can be permanent; since, other things
equal, individuals and societies that devote the same amounts of
energy in ways which subserve life more effectually, must by and by
predominate.
Will it be in mechanical skill, that is, in the better-co-ordination of
complex movements? Most likely in some degree. Awkwardness is
continually entailing injuries and deaths. Moreover the complicated
tools which civilization brings into use, are constantly requiring
greater delicacy of manipulation. All the arts, industrial and æsthetic,
as they develop, imply a corresponding development of perceptive
and executive faculties in men: the two act and react.
Will it be in intelligence? Largely, no doubt. There is ample room
for advance in this direction, and ample demand for it. Our lives are
universally shortened by our ignorance. In attaining complete
knowledge of our own natures and of the natures of surrounding
things—in ascertaining the conditions of existence to which we must
conform, and in discovering means of conforming to them under all
variations of seasons and circumstances; we have abundant scope
for intellectual progress.
Will it be in morality, that is, in greater power of self-regulation?
Largely also: perhaps most largely. Right conduct is usually come
short of more from defect of will than defect of knowledge. For the
right co-ordination of those complex actions which constitute human
life in its civilized form, there goes not only the pre-requisite—
recognition of the proper course; but the further pre-requisite—a
due impulse to pursue that course. On calling to mind our daily
failures to fulfil often-repeated resolutions, we shall perceive that
lack of the needful desire, rather than lack of the needful insight, is
the chief cause of faulty action. A further endowment of those
feelings which civilization is developing in us—sentiments responding
to the requirements of the social state—emotive faculties that find
their gratifications in the duties devolving on us—must be acquired
before the crimes, excesses, diseases, improvidences, dishonesties,
and cruelties, that now so greatly diminish the duration of life, can
cease.
Thus, looking at the several possibilities, and asking what
direction this further evolution, this more complete moving
equilibrium, this better adjustment of inner to outer relations, this
more perfect co-ordination of actions, is likely to take; we conclude
that it must take mainly the direction of a higher intellectual and
emotional development.

§ 373. This conclusion we shall find equally forced on us if we

inquire for the causes which are to bring about such results. No
more in the case of Man than in the case of any other being, can we
presume that evolution has taken place, or will hereafter take place,
spontaneously. In the past, at present, and in the future, all
modifications, functional and organic, have been, are, and must be,
immediately or remotely consequent on surrounding conditions.
What, then, are those changes in the environment to which, by
direct or indirect equilibration, the human organism has been
adjusting itself, is adjusting itself now, and will continue to adjust
itself? And how do they necessitate a higher evolution of the
organism?
Civilization, everywhere having for its antecedent the increase of
population, and everywhere having for one of its consequences a
decrease of certain race-destroying forces, has for a further
consequence an increase of certain other race-destroying forces.
Danger of death from predatory animals lessens as men grow more
numerous. Though, as they spread over the Earth and divide into
tribes, men become wild beasts to one another, yet the danger of
death from this cause also diminishes as tribes coalesce into nations.
But the danger of death which does not diminish, is that produced
by augmentation of numbers itself—the danger from deficiency of
food. Supposing human nature to remain unchanged, the mortality
hence resulting would, on the average, rise as human beings
multiplied. If mortality, under such conditions, does not rise, it must
be because the supply of food also augments; and this implies some
change in human habits wrought by stress of human needs. Here,
then, is the permanent cause of modification to which civilized men
are exposed. Though the intensity of its action is ever being
mitigated in one direction by greater production of food, it is, in the
other direction, ever being added to by the greater production of
individuals. Manifestly, the wants of their redundant numbers
constitute the only stimulus mankind have to obtain more
necessaries of life. Were not the demand beyond the supply, there
would be no motive to increase the supply. And manifestly, this
excess of demand over supply is perennial: this pressure of
population, of which it is the index, cannot be eluded. Though by the
emigration that takes place when the pressure arrives at a certain
intensity, temporary relief is from time to time obtained; yet as, by
this process, all habitable countries must become peopled, it follows
that in the end the pressure, whatever it may then be, must be
borne in full.
This constant increase of people beyond the means of subsistence
causes, then, a never-ceasing requirement for skill, intelligence, and
self-control—involves, therefore, a constant exercise of these and
gradual growth of them. Every industrial improvement is at once the
product of a higher form of humanity, and demands that higher form
of humanity to carry it into practice. The application of science to the
arts, is the bringing to bear greater intelligence for satisfying our
wants, and implies continued progress of that intelligence. To get
more produce from the acre, the farmer must study chemistry, must
adopt new mechanical appliances, and must, by the multiplication of
processes, cultivate both his own powers and the powers of his
labourers. To meet the requirements of the market, the
manufacturer is perpetually improving his old machines and
inventing new ones; and by the premium of high wages incites
artizans to acquire greater skill. The daily-widening ramifications of
commerce entail on the merchant a need for more knowledge and
more complex calculations; while the lessening profits of the ship-
owner force him to build more scientifically, to get captains of higher
intelligence and better crews. In all cases pressure of population is
the original cause. Were it not for the competition this entails, more
thought and energy would not daily be spent on the business of life;
and growth of mental power would not take place. Difficulty in
getting a living is alike the incentive to a higher education of
children, and to a more intense and long-continued application in
adults. In the mother it prompts foresight, economy, and skilful
house-keeping; in the father, laborious days and constant self-denial.
Nothing but necessity could make men submit to this discipline; and
nothing but this discipline could produce a continued progression.
In this case, as in many others, Nature secures each step in
advance by a succession of trials; which are perpetually repeated,
and cannot fail to be repeated, until success is achieved. All mankind
in turn subject themselves more or less to the discipline described;
they either may or may not advance under it; but, in the nature of
things, only those who do advance under it eventually survive. For,
necessarily, families and races whom this increasing difficulty of
getting a living which excess of fertility entails, does not stimulate to
improvements in production—that is, to greater mental activity—are
on the high road to extinction; and must ultimately be supplanted by
those whom the pressure does so stimulate. This truth we have
recently seen exemplified in Ireland. And here, indeed, without
further illustration, it will be seen that premature death, under all its
forms and from all its causes, cannot fail to work in the same
direction. For as those prematurely carried off must, in the average
of cases, be those in whom the power of self-preservation is the
least, it unavoidably follows that those left behind to continue the
race, must be those in whom the power of self-preservation is the
greatest—must be the select of their generation. So that, whether
the dangers to existence be of the kind produced by excess of
fertility, or of any other kind, it is clear that by the ceaseless exercise
of the faculties needed to contend with them, and by the death of all
men who fail to contend with them successfully, there is ensured a
constant progress towards a higher degree of skill, intelligence, and
self-regulation—a better co-ordination of actions—a more complete
life.[67]

§ 374. The proposition at which we have thus arrived is, then,

that excess of fertility, through the changes it is ever working in
Man’s environment, is itself the cause of Man’s further evolution; and
the obvious corollary here to be drawn is, that Man’s further
evolution so brought about, itself necessitates a decline in his
fertility.
All future progress in civilization which the never-ceasing pressure
of population must produce, will be accompanied by an enhanced
cost of Individuation, both in structure and function; and more
especially in nervous structure and function. The peaceful struggle
for existence in societies ever growing more crowded and more
complicated, must have for its concomitant an increase of the great
nervous centres in mass, in complexity, in activity. That larger body
of emotion needed as a fountain of energy for men who have to
hold their places and rear their families under the intensifying
competition of social life, is, other things equal, the correlative of
larger brain. Those higher feelings presupposed by the better self-
regulation which, in a better society, can alone enable the individual
to leave a persistent posterity, are, other things equal, the
correlatives of a more complex brain; as are also those more
numerous, more varied, more general, and more abstract ideas,
which must also become increasingly requisite for successful life as
society advances. And the genesis of this larger quantity of feeling
and thought, in a brain thus augmented in size and developed in
structure, is, other things equal, the correlative of a greater wear of
nervous tissue and greater consumption of materials to repair it. So
that both in original cost of construction and in subsequent cost of
working, the nervous system must become a heavier tax on the
organism. Already the brain of the civilized man is larger by nearly
thirty per cent. than the brain of the savage. Already, too, it presents
an increased heterogeneity—especially in the distribution of its
convolutions. And further changes like these which have taken place
under the discipline of civilized life, we infer will continue to take
place. But everywhere and always, evolution is antagonistic to
procreative dissolution. Whether it be in greater growth of the
organs which subserve self-maintenance, whether it be in their
added complexity of structure, or whether it be in their higher
activity, the abstraction of the required materials implies a
diminished reserve of materials for race-maintenance. And we have
seen reason to believe that this antagonism between Individuation
and Genesis, becomes unusually marked where the nervous system
is concerned, because of the costliness of nervous structure and
function. In § 346 was pointed out the apparent connexion between
high cerebral development and prolonged delay of sexual maturity;
and in §§ 366, 367, the evidence went to show that where
exceptional fertility exists there is sluggishness of mind, and that
where there has been during education excessive expenditure in
mental action, there frequently follows a complete or partial
infertility. Hence the particular kind of further evolution which Man is
hereafter to undergo, is one which, more than any other, may be
expected to cause a decline in his power of reproduction.
The higher nervous development and greater expenditure in
nervous action, here described as indirectly brought about by
increase of numbers, and as thereafter becoming a check on the
increase of numbers, must not be taken to imply an intenser strain—
a mentally-laborious life. The greater emotional and intellectual
power and activity above contemplated, must be understood as
becoming, by small increments, organic, spontaneous, and
pleasurable. As, even when relieved from the pressure of necessity,
large-brained Europeans voluntarily enter on enterprises and
activities which the savage could not keep up even to satisfy urgent
wants; so, their still larger-brained descendants will, in a still higher
degree, find their gratifications in careers entailing still greater
mental expenditures. This enhanced demand for materials to
establish and carry on the psychical functions, will be a constitutional
demand. We must conceive the type gradually so modified, that the
more-developed nervous system irresistibly draws off, for its normal
and unforced activities, a larger proportion of the common stock of
nutriment; and while so increasing the intensity, completeness, and
length of the individual life, necessarily diminishing the reserve
applicable to the setting up of new lives—no longer required to be so
numerous.
Though the working of this process will doubtless be interfered
with and modified in the future, as it has been in the past, by the
facilitations of living which civilization brings; yet nothing beyond
temporary interruptions can so be caused. However much the
industrial arts may be improved, there must be a limit to the
improvement; while, with a rate of multiplication in excess of the
rate of mortality, population must continually tread on the heels of
production. So that though, during the earlier stages of civilization,
an increased amount of food may accrue from a given amount of
labour, there must come a time when this relation will be reversed,
and when every additional increment of food will be obtained by a
more than proportionate labour: the disproportion growing ever
higher, and the diminution of the reproductive power becoming
greater.

§ 375. There now remains but to inquire towards what limit this
progress tends. So long as the fertility of the race is more than
sufficient to balance the diminution by deaths, population must
continue to increase. So long as population continues to increase,
there must be pressure on the means of subsistence. And so long as
there is pressure on the means of subsistence, further mental
development must go on, and further diminution of fertility must
result; provided that the actions and reactions which have been
described are not artificially interfered with. I append this qualifying
clause advisedly, and especially emphasize it, because these actions
and reactions have been hitherto, and are now, greatly interfered
with by governments, and the continuance of the interferences may
retard, if not stop, that further evolution which would else go on.
I refer to those hindrances to the survival of the fittest which in
earlier times resulted from the undiscriminating charities of
monasteries and in later times from the operation of Poor Laws. Of
course if the competition which increasing pressure of population
entails, is prevented from acting on a considerable part of the
community, such part, saved from the needed intellectual and moral
stress, will not undergo any further mental development; and must
ever tend to leave a posterity, and an increasing posterity, in which
none of that higher individuation which checks genesis takes place.
Such State-meddlings with the natural play of actions and reactions
produce a further evil equally great or greater. For those who are not
self-maintained, or but partially self-maintained, are supplied with
the means they lack by the better members of the community; and
these better members have thus not only to support themselves and
their offspring, but also to support or aid the inferior members and
their offspring. The under-working of one part is accompanied by the
over-working of the other part—by a working which at each stage of
progress exceeds that which the normal conditions necessitate, and
results sometimes in illness, premature age, or death, or in lessened
number of children, or in imperfect rearing of children: the bad are
fostered and the good are repressed.
It does not follow that the struggle for life and the survival of the
fittest must be left to work out their effects without mitigation. It is
contended only that there shall not be a forcible burdening of the
superior for the support of the inferior. Such aid to the inferior as the
superior voluntarily yield, kept as it will be within moderate limits,
may be given with benefit to both—relief to the one, moral culture to
the other. And aid willingly given (little to the least worthy and more
to the most worthy) will usually be so given as not to further the
increase of the unworthy. For in proportion as the emotional nature
becomes more evolved, and there grows up a higher sense of
parental responsibility, the begetting of children that cannot be
properly reared will be universally held intolerable. If, as we see,
public opinion in many places and times becomes coercive enough to
force men to fight duels, we can scarcely doubt that at a higher
stage of evolution it may become so coercive as to prevent men
from marrying improvidently. If the frowns of their fellows can make
men commit immoral acts, surely they may make men refrain from
immoral acts—especially when the actors themselves feel that the
threatened frowns would be justified. Hence with a higher moral
nature will come a restriction on the multiplication of the inferior.
In brief, the sole requirement is that there shall be no extensive
suspension of that natural relation between merit and benefit which
constitutes justice. Holding, then, that this all-essential condition will
itself come to be recognized and enforced by a more evolved
humanity, let us consider what is the goal towards which the
restraint on genesis by individuation progresses.

§ 375a. Supposing the Sun’s light and heat, on which all

terrestrial life depends, to continue abundant for a period long
enough to allow the entire evolution we are contemplating; there are
still certain changes which must prevent such complete adjustment
of human nature to surrounding conditions, as would permit the rate
of multiplication to become equal to the rate of mortality. As before
pointed out (§ 148), during an epoch of 21,000 years each
hemisphere goes through a cycle of temperate seasons and seasons
extreme in their heat and cold—variations which are themselves
alternately exaggerated and mitigated in the course of far longer
cycles; and we saw that these cause perpetual ebbings and flowings
of species over different parts of the Earth’s surface. Further, by slow
but inevitable geologic changes, especially those of elevation and
subsidence, the climate and physical characters of every habitat are
modified; while old habitats are destroyed and new are formed. This,
too, we noted as a constant cause of migrations and of resulting
alterations of environment. Now though the human race differs from
other races in having a power of artificially counteracting external
changes, yet there are limits to this power; and, even were there no