biology in economics

Genes and socioeconomic aggregates

In April, a Conference on Genetics and Behaviour was held by the Human Capital and Economic Opportunity Global Working Group at the University of Chicago.

The videos for the conference are now up, so as I watch through them, I’ll post links and some brief thoughts. The first session, with videos linked below, was on Genes and Socioeconomic Aggregates. The video and audio are average at times, and you might want to get the slides (links provided where available) as they are hard to read in the video at times. However, there are some good bits in all of the presentations.

Gregory Cochran: Genetics and Society (slides)

Cochran laid out some ideas that should be in the minds of economists, although he does not focus much attention on selling the ideas. Unfortunately, the questions at the end got derailed by epigenetics (my views approximate Cochran’s). One interesting argument by Cochran is that human environments tend be variable, as, in a Malthusian world, good times (when people breed like mad) tend to be followed by bad (too many people) which tend to be followed by good (people died in the bad). As a result, epigenetic transmission based on the current environment may be a poor strategy.

When Cochran posted this video on his blog, some interesting discussion followed in the comments – they are worth checking out.

Enrico Spolaore: Ancestry and the Diffusion of Economic Development: Facts and Questions (slides)

Spolaore touches on his work concerning genetic distance and the diffusion of development (I have posted about it here, here and here). He is extending this work to look at the diffusion of fertility reduction from France (where the demographic transition first occurred), and is getting similar results.

Steven Durlauf: Two Remarks on the Inference of “Macro” Genetic Effects (slides)

I did not get much from Durlauf’s presentation, although some of the questions were interesting. Steve Hsu deflates the “it’s all too hard” message when he points out that animal breeding is now using genetic data.

Henry Harpending: Some Quantitative Genetics Approaches

Harpending discusses his work on how assortative mating can mimic strong selection. I sense this presentation might be difficult to follow if you aren’t familiar with his work (a link to that is here). Not much value in the question session, which gets derailed by issues concerning scaling when estimating heritability.

Aldo Rustichini: Determinants of Inequality and Intergenerational Mobility (slides)

A tough presentation to follow – you need to use the slides to have a chance of getting across it – and not recommended for those not mathematically inclined. The highlight is Greg Cochran trying not to jump out of his chair between the 7 and 8 minute mark due to some comments about heritability. Cochran also deflates the idea that there is a high level of false paternity in humans – for more on that, check out this post by Razib Khan.

Becker on evolution and economics

Gary Becker was one of the first economists to seriously contemplate the role that evolutionary biology could play in economics. In 1976, he wrote:

I have argued that both economics and sociobiology would gain from combining the analytical techniques of economists with the techniques in population genetics, entomology, and other biological foundations of sociobiology. The preferences taken as given by economists and vaguely attributed to “human nature” or something similar – the emphasis on self-interest, altruism toward kin, social distinction, and other enduring aspects of preferences – may be largely explained by the selection over time of traits having greater genetic fitness and survival value.

Over the last two days, a couple of people have classed him as the greatest social scientist of the last 50 years. I am happy to grant the title of greatest economist over that period, but I’ll reserve the social scientist title. Becker broke down a lot of barriers in other fields, but I am not sure that many of his applications will outlast approaches grounded in biology. In the long-run, E.O. Wilson and his groundbreaking work starting with Sociobiology might be the more important piece.

In the meantime, below are links to some posts over the last few years I have written about Becker’s work:

  1. Rotten kids and altruism.
  2. Altruists and the knowledge problem.
  3. Consumption and fitness.
  4. Deriving the demand for children.
  5. The evolution of happiness.

Cooperation and Conflict in the Family Conference wrap

Over the past year I have posted several times about the Cooperation and Conflict in the Family Conference, which was held in Sydney this week. It turned out to be a great conference, and I am very pleased with how it panned out.

The conference has increased my optimism about the potential for more work to be carried out at the inter-disciplinary boundaries between economics, evolutionary biology, anthropology, psychology and so on. When I compare it to the Social Decision Making: Bridging Economics and Biology conference I attended almost three years ago (an excellent conference), we managed to drag in a broader range of economists and other social scientists to this event. I suspect this is evidence for increasing interest on the part of social scientists in how sciences such as biology can add to the social science toolkit.

As a result, I hope this conference is the first of a continuing series (although hopefully with a wider group of organisers). An interesting challenge for the next iteration will be to pick an appropriate theme. In this case, the Cooperation and Conflict in the Family theme was useful in pulling together people who may not have necessarily considered that there were useful insights in other disciplines. We would not have gotten such an interesting mix of people if we had pitched the topic specifically around the integration of disciplines.

It was interesting to see the different presentation styles across disciplines, and I have to say that the biologists (on average) have the edge in presenting their work in an easy to understand way – particularly in relation to the submitted presentations. Us economists are still too tied to our equations to dump them. This was best illustrated in the presentations of two plenary speakers – Michael Jennions and Hanna Kokko – who used simple cartoons and illustrations to describe their models. If you go to their papers (particularly the supplementary materials), there can be some relatively hefty math behind them. Yet they are able to present the ideas without relying on the equations. And maybe this should also be taken as an indication for how economists write their papers – more of the math in the supplementary appendix, more time in the (shorter) main paper on the important intuition. And then dump the math when we intend to communicate our ideas verbally.

The conference also reminded me of how hard it is to work across disciplinary boundaries without full immersion in both sides (or having someone from both sides engaged in the work). Again turning the Michael Jennions presentation, he talked about Bateman’s gradient and the operational sex ratio, and about what each of them actually show (the paper on this is here). I thought I knew what each were about, but am now revisiting my understanding.

Finally, we recorded most of the plenary and submitted presentations and are exploring ways to make sure that the outputs of the conference do not disappear into the ether. When we do put some material together and post it online, I’ll put a note here and on the conference website.

Economic cosmology – Equilibrium

Although most of my interest in integrating evolutionary biology into economics concerns treating people as evolved (or evolving) animals, I consider that economists can also learn a lot from the dynamic analysis of biological systems. This thought is shared by John Gowdy and colleagues and is the subject of their third economic cosmology, equilibrium, in their article Economic cosmology and the evolutionary challenge from the Journal of Economic Behavior & Organization special issue, Evolution as a General Theoretical Framework for Economics and Public Policy (the first two cosmologies, the rational man and the invisible hand, are the subject of two earlier posts).

As Gowdy and colleagues put it, ecosystems are complex, often out of equilibrium and rarely tend towards an equilibrium state. It was not always seen that way and some of the equilibrium mind-state remains (particularly in common conceptions), but an equilibrium view of ecosystems has been abandoned. That is not to say that individual agents or groups within an ecosystem should never be treated as tending toward an equilibrium (say, a gene moving to fixation), but as a whole, ecosystems do not maximise anything.

Gowdy and colleagues suggest that economic concepts of equilibrium should be seen in the same way, and discarded as was the concept of harmonious natural order in biology. I am sympathetic to their argument, although Gowdy and colleagues pick some interesting points with which to make it.

Their first relates to Milton Friedman’s The Methodology of Positive Economics (worth a read), in which Friedman argued that inefficient firms will be driven out of business, leaving only the efficient profit maximising firms in the competitive market. This allows firms to be treated as pure profit maximisers. Gowdy and colleagues suggest that the problem with Friedman’s approach is not that it is evolutionary, but rather that it is not evolutionary enough. This is a fair enough point, as adaptionist hypotheses such as this require testing to move beyond a ‘just-so’ story. For example, Gowdy and colleagues refer to studies suggesting that firms that are narrowly focussed on profit are more likely to go out of business. However, this might not be evidence that profit maximisation does not lead to firm success, and could point more to the complexity of running a business in a modern economy. Gowdy and colleagues highlight this complexity when they relate Nelson and Winter’s important point that firms shape the environment themselves, adding a further layer of complication to any strategic consideration.

More importantly, however, what does this mean for the concept of equilibrium? Even though an ecosystem may not maximise anything, the individuals within it may do. In studying them, the biological agents are often treated as maximisers. Similarly, an economy doesn’t maximise, but treating firms as maximisers may serve some purposes. This allows us to get to the more substantial point. In a complex, shifting landscape, as firms struggle to maximise profits with varying strategies and degrees of success, changing the environment as they go, there is no guarantee that they will maximise profits across the economy at any time. A strategy that maximises profits at one moment may not the next. And even if profits tend to be maximised, what of general wellbeing or other economic measures?

The flip side to this observation is the massive increases in wealth of the last 200 years. Even though there is no guarantee that an economy will tend towards an equilibrium that maximises wellbeing, modern economic structures have done a pretty good job of creating stable upward growth.

Gowdy and colleagues focus more attention on the policy implications of overturning the concept of equilibrium than they do for the other two cosmologies. They note that although there has been a marked increase in material prosperity driven by market competition, there has been increased risk taking such as environmental degradation and resource depletion. Myopia, biased time preferences or other behavioural anomalies may drive that risk-taking, with Gowdy and colleagues noting that markets have not yet constrained them.

Further, they consider that evolutionary theory may be of use in managing threats to prosperity. This could be through an understanding of how small groups interact (a subject of a later article in the special issue) and of the constraints that must be applied to self-interest to achieve the common good. It is on this point that I am more skeptical. While we should take the lesson of biology that equilibrium is a shaky concept, the lack of equilibrium does not immediately point to the benefit of economic interventions. After all, if firms can’t even maximise their own profits, we need to be humble about our ability to control higher level outcomes. Our experience in trying to manage ecosystems suggests that ‘managing’ an economy is a difficult task.

John M. Gowdy, Denise E. Dollimore, David Sloan Wilson, & Ulrich Witt (2013). Economic cosmology and the evolutionary challenge Journal of Economic Behavior & Organization, 90S DOI: 10.1016/j.jebo.2012.12.009

My series of posts on the Journal of Economic Behavior & Organization special issue, Evolution as a General Theoretical Framework for Economics and Public Policy, are as follows:

  1. Social Darwinism is back – a post on one of the popular press articles that accompanied the special issue, a piece by David Sloan Wilson called A good social Darwinism.
  2. Four reasons why evolutionary theory might not add value to economics – a post on David Sloan Wilson and John Gowdy’s article Evolution as a general theoretical framework for economics and public policy
  3. Economic cosmology – The rational egotistical individual – a post on John Gowdy and colleagues’ article Economic cosmology and the evolutionary challenge 
  4. Economic cosmology – The invisible hand – a second post on Economic cosmology and the evolutionary challenge 
  5. Economic cosmology – Equilibrium (this post) – a third post on Economic cosmology and the evolutionary challenge

I will extend the list and put up links to the other posts as I develop them.

Four reasons why evolutionary theory might not add value to economics

In the lead article to a recent Journal of Economic Behavior & Organization special issue, Evolution as a General Theoretical Framework for Economics and Public Policy, David Sloan Wilson and John Gowdy examined four potential reasons why someone may not need to consult an evolutionary framework in examining economic and policy questions. The four arguments are riffs on the same theme, but the distinctions between them are worth making.

The first claim is that smart people will come to similar conclusions even if they use different approaches. Wilson and Gowdy note that this argument does not hold because people do not always come to the same conclusion. The neoclassical view of absolute utility maximisation differs from the evolutionary measure of relative fitness, and this relative measure should be reflected in economists’ utility curves. Smart economists have not come to the same conclusions as people using evolutionary theory.

This possibility of drawing different conclusions is why I am a fan of the evolutionary approach, although I would offer a different example, that of behavioural economics (or as I am becoming more inclined to call it, behavioural science). Many behavioural and neoclassical economists haven’t come to the same conclusions. And given the lack of theory in behavioural science (giving an observed bias a name is not theory), not only have people come to different conclusions, but they lack a theoretical basis to reconcile them.

The second reason provided by Wilson and Gowdy relates to design. If an object or process is well designed, it does not matter what process designed it – be that evolution or god. But as Wilson and Gowdy point out, knowing the design process will tell you if there actually is design. And if you don’t know if there is design, you may come to the wrong conclusions about causative processes. As an example, if you see that children resemble their parents, what is the causative process? By not knowing about the evolutionary design process, you may miss a major pathway by which this resemblance occurs.

The third reason has some truth. Why speculate with evolutionary theory when you can study the real thing? An example that I have posted about before is that estimates of time preference from evolutionary models tend not to reflect empirical measures. So why spend time finding the basis when you can measure the actual trait? Essentially, there are limits to what can be achieved without theory. Wilson and Gowdy ask us to imagine trying to examine adaptations in a bird by just looking at the brain. The behavioural science example also provides an illustration. Studying the real thing has gotten behavioural science to a certain point, but theory is likely needed to pull the list of heuristics and biases into something coherent. And even if theory has not generated rates of time preference that reflects empirical estimates, theory is likely required to deal with observations such as preference reversals.

Finally, Wilson and Gowdy take on an argument that I regularly hear, being that we don’t need to consult every branch of the sciences all the time. Biologists don’t consult with quantum physicists on a regular basis. Wilson and Gowdy’s response to this question is nice, and reflects a theme through the article that for many economists it makes sense not to have an evolutionary framework as part of their analysis. But the problem arises if every economist does not have an evolutionary framework, or if those economists who do use an evolutionary framework never have their work incorporated across the broader field. In that case, there is potential for simply coming to the wrong conclusion (see point one) as the foundation block of the analysis is wrong. As an example, most people don’t consider the basis of their utility functions – they typically use standard forms. But what is the basis of that standard form?

This point also relates to some of the recent debates I have had about obesity. Feel free to come up with an explanation that has no reference to the physical processes of weight gain, or the evolutionary processes that shaped them. But if the explanation is inconsistent with these processes, something is likely wrong with your explanation.

David Sloan Wilson, & John M Gowdy (2013). Evolution as a general theoretical framework for economics and public policy Journal of Economic Behavior and Organization, 90S DOI: 10.1016/j.jebo.2012.12.008

My series of posts on the Journal of Economic Behavior & Organization special issue, Evolution as a General Theoretical Framework for Economics and Public Policy, are as follows:

  1. Social Darwinism is back – a post on one of the popular press articles that accompanied the special issue, a piece by David Sloan Wilson called A good social Darwinism.
  2. Four reasons why evolutionary theory might not add value to economics (this post) – a post on David Sloan Wilson and John Gowdy’s article Evolution as a general theoretical framework for economics and public policy
  3. Economic cosmology – The rational egotistical individual – a post on John Gowdy and colleagues’ article Economic cosmology and the evolutionary challenge 
  4. Economic cosmology – The invisible hand – a second post on Economic cosmology and the evolutionary challenge 
  5. Economic cosmology – Equilibrium – a third post on Economic cosmology and the evolutionary challenge

I will extend the list and put up links to the other posts as I develop them.

Social Darwinism is back

A couple of weeks ago I flagged the Journal of Economic Behavior and Organization’s (JEBO) special issue Evolution as a General Theoretical Framework for Economics and Public Policy. I plan to post on some of the papers in that issue over coming weeks and months, but I thought I would open my commentary on the special issue by examining one of the popular press articles that accompanied its launch, a piece by David Sloan Wilson called A good social Darwinism.

A couple of years ago Wilson wrote a series of posts at his blog Evolution for Everyone called Economics and Evolution as Different Paradigms (maybe the blog is still alive, but there hasn’t been a new post for over a year). I wrote a series of posts in response to Wilson (hereherehere and here) setting out my issues with Wilson’s approach, particularly the caricatured version of economics. I also considered that Wilson sold the potential for evolutionary biology in economics a bit short, and was somewhat pessimistic about what might come out of the Evolution Institute (I should say that this JEBO special issue has seen the Evolution Institute exceed my expectations.)

Wilson’s latest article continues in a similar vein, with a marginally more subtle perspective on economics, although still missing some of the richness. He starts by painting economics as torn between two ideas: Adam Smith’s “invisible hand” that could lead to benevolent outcomes despite no-one intending them; and Smith’s fear of naked self interest. By going too far in either direction, there can be significant costs, which Wilson suggests includes the Industrial Revolution (surely not) and the Great Depression on the one hand, and Communism on the other.

What Wilson sees as lacking is the ability of economics to navigate between these two extremes. He points to some of the attempts of economics to traverse this middle course, in which he includes Walrasian general equilibrium and the development of homo economicus. These concepts survived critiques by the likes of Thorstein Veblen to be adopted by, among others, Milton Friedman (I addressed Wilson’s views on Friedman’s The Methodology of Positive Economics in an earlier post).

Wilson then suggests that evolutionary theory can offer something here (concur), including a less Newtonian view of the world. The most interesting part of the article, however, is Wilson’s desire to rehabilitate the idea of the invisible hand through multi-level selection – that is, selection occurring at levels higher than the individual. While lower level units of selection (say, the gene) do not have the higher level units in mind, selection of higher level units shapes the traits of the lower level units such that they contribute to the good of the group. Wilson suggests that the invisible hand can operate in human groups as selection at the level of groups has shaped us that way.

As an example of this, Wilson points to the work of Elinor Ostrom, sadly unknown among most of the economics profession until her Nobel Memorial Prize in Economic Sciences in 2009. Ostrom did fantastic work on common-pool resources (such as fisheries, farm land or water) and showed that, under certain conditions, institutional arrangements could emerge without either private ownership (a typical policy recommendation by libertarians) or government intervention. Wilson then notes work (the subject of one of the JEBO papers) which suggests that these design principles can be expanded to a broader range of groups than just those managing common-pool resources. As a result, Wilson suggests that an evolutionary approach can offer a basis for “steering an intelligent middle course between extreme laissez-faire and ham-fisted regulation that have proven so disastrous in the past.”

But this is where Wilson misses one important interpretation of Ostrom’s work. Ostrom’s work was well-known and highly regarded before her 2009 prize by some economists who researched public choice and institutional development, many of whom were libertarians (and from the Austrian school of economics in particular). The reason they cherished Ostrom’s work was that it showed that the tragedy of the commons does not always require a solution to be imposed from above. Decentralised groups develop the rules that allow a solution to the commons problem to emerge cooperatively through voluntary association. As such, Ostrom’s work could be argued to support the laissez-faire end of the spectrum (although Ostrom was not a libertarian).

While it is possible to argue that it is the group that is autonomous, not the individual, another problem arises where the specific conditions that Ostrom identified are not met, such as clear group boundaries. For many economic questions, those group boundaries simply do not exist, leaving us back where we started in trying to steer the middle ground.

It is also not clear that evolutionary theory takes us to the middle. An evolutionary view of the humans in government and bureaucracies may lead to a rather pessimistic view of the ability (or motivation) of government to address “market failures”. The recent meeting of the Mont Pelerin Society (of which none other than Milton Friedman was a founder and past president) on Evolution, the Human Sciences and Liberty saw many make the argument that human nature points to a free society as the optimal state. Paul Rubin wrote the excellent Darwinian Politics: The Evolutionary Origins of Freedom as an argument that liberal society is the best fit for our evolved human natures. It is fair to say evolutionary arguments can and have been used to support all points on the political spectrum.

But let me close with some praise for Wilson. Although I find many specific points to disagree with him, from his interpretation of the invisible hand to his use of multi-level selection arguments, I am somewhat in awe of his productivity and energy. My initial pessimism about the Evolution Institute is turning into optimism. Even though Wilson has his perspectives, he seems to have a drive to bring interesting people and ideas together to address some economic questions that could truly benefit from an evolutionary approach. I hope I can be a part of it.

My series of posts on the Journal of Economic Behavior & Organization special issue, Evolution as a General Theoretical Framework for Economics and Public Policy, are as follows:

  1. Social Darwinism is back (this post) – a post on one of the popular press articles that accompanied the special issue, a piece by David Sloan Wilson called A good social Darwinism.
  2. Four reasons why evolutionary theory might not add value to economics – a post on David Sloan Wilson and John Gowdy’s article Evolution as a general theoretical framework for economics and public policy
  3. Economic cosmology – The rational egotistical individual – a post on John Gowdy and colleagues’ article Economic cosmology and the evolutionary challenge 
  4. Economic cosmology – The invisible hand – a second post on Economic cosmology and the evolutionary challenge 
  5. Economic cosmology – Equilibrium – a third post on Economic cosmology and the evolutionary challenge

I will extend the list and put up links to the other posts as I develop them.

A week of links

Links this week:

  1. A few articles on the recent JEBO special issue on economics and evolution – Jag Bhalla in Scientific American, commented on by Mark Thoma, commented on by Mark Buchanan.
  2. Larry Arnhart has posted about the recent Mont Pelerin Society meeting in the Galapagos – Evolution, the Human Sciences, and Liberty. Here are posts on presentations by Robert Boyd, Robin Dunbar and Charles Murray. I expect more posts will follow. You can also download copies of the presentations here.
  3. Will dementia decline due to the Flynn effect?
  4. A great Econtalk on charities.
  5. Sexual Economics and the Forgotten Men by Andrea Castillo

A week of links

Links this week:

  1. The Journal of Economic Behavior and Organization has a special issue out “Evolution as a General Theoretical Framework for Economics and Public Policy”. You can also access the papers through the Evolution Institute website and there is a series of summary articles in Evolution: This View of Life. Many look worth a read, and I’ll post about them over coming weeks/months.
  2. David Sloan Wilson (one of the editors and authors in the JEBO special issue above) has an article in aeon magazine critiquing economics from an evolutionary angle.
  3. Also in aeon magazine, an interesting take on obesity (HT: John Hawks). It’s fair to say that a simple “calorie in-calorie out” analysis doesn’t cut the mustard anymore. (But I don’t buy the bit about lab animal food staying the same).
  4. Another article from Evolution: This View of Life that is worth a look – Daniel Hruschka on collectivism versus individualism.
  5. Support for Gregory Clark’s argument that analysis of social mobility over a single generation overestimates its extent – a child’s socioeconomic position is determined by their grandparents, not just their parents (blog post on this article to come soon).
  6. Britain is undergoing a baby boom. I expect this will be a common developed country observation over the next decade.

Deep Rationality: The Evolutionary Economics of Decision Making

Even though I consider that I am across the literature at the boundary of economics and evolutionary biology, now and then an article pops up that I somehow missed. The latest article of this type is a 2009 article by Douglas Kenrick and colleagues, titled (as is this post) Deep Rationality: The Evolutionary Economics of Decision Making (unfortunately I can’t locate an ungated copy). I found it through Dan Ariely’s reading list for his Coursera course A Beginner’s Guide to Irrational Behaviour. Kenrick has also posted on the article over at his blog

I don’t feel overly guilty about not seeing this article earlier, as the authors have not referenced a lot of the literature in economics that I would consider relevant. Regardless, there is a lot to like about this article, particularly the way that it looks to incorporate an evolutionary approach into behavioural economics. I have often posted my criticism that much behavioural economics lacks a framework, without which it is just a list of biases and heuristics. It is good to see someone trying to offer that framework.

The authors’ basic argument is that people have evolved domain specific decision rules. Decisions depend on the current environment, plus the decision maker’s sex, mating strategy and stage in the life cycle. As a result, many decisions that are called inconsistent or irrational in behavioural economics are actually “deeply rational” to the domain in which the decision is being made.

In making their case, the authors start out with a brief kick at economics by noting that most economic theorists “have remained relatively agnostic about the roots of utility.” They do note the work of Gandolfi, Gandolfi and Barash, but otherwise do not mention the wealth of articles on the evolution of preferences by the likes of Arthur Robson, Larry Samuelson and others (my economics and evolutionary biology reading list gives a taste). Thus, when they suggest that we need to go deeper than Gandolfi, Gandolfi and Barash’s approach of equating utility to fitness, they miss some literature which does just that.

Regardless, the need to go beyond “fitness equals utility” by considering factors such as life history or differences in mating strategy is important. The authors suggest that we should consider human decision making as being geared to solve recurring adaptive problems in different domains, whereby successful solutions in each are associated with increased fitness. The body of their article focuses on some examples of this approach.

In one section, they address attitudes to risk. Humans are normally risk averse, which Kenrick and colleagues suggest is consistent with empirical observations of loss aversion. Although this short-hand equating of risk aversion and loss aversion works some of the time, it sells these concepts short, along with the way that they are incorporated into Kahneman and Tversky’s prospect theory. Under prospect theory, people evaluate choices from a reference point, they show loss aversion (losses hurt more than gains) and they are risk averse when faced with two potential gains. However, in the domain of losses, they are actually risk seeking. When you combine these features with the human tendency to overweight small probabilities, you obtain the fourfold pattern of risk attitudes. When an agent faces a moderate probability of a gain or a small probability of a loss, they will be risk averse. However, when faced with a low probability of a gain or a moderate probability of a loss, they will be risk seeking.

Kenrick and colleagues do make the important point that the attitudes to risk as predicted by prospect theory will vary with evolutionarily relevant factors. Men with mating motives will be more likely to take financial risks.  Women would not respond in the same way to mating primes as women know that men give a lower value to the resources possessed by a mate. In the social domain, such as networks of friends, there tends to be loss aversion in both sexes, although this may reverse for men with mating motives.

This is a point of the article where a hat tip to the existing literature might have been most useful, as some economists have spent a lot of time considering the evolutionary foundations of attitudes to risk. For example, Rubin and Paul examined the effect of mating motives on risk preferences in 1979. They developed a model where male fitness depended on attracting a mate, which was in turn a function of their resources (income). Rubin and Paul suggested that young men who do not have a mate are likely to be risk seeking in obtaining income as they have no mate to lose. Older men who already have a mate will tend to be risk averse, particularly given the huge level of income required to attract a second mate.

In another section, Kenrick and colleagues look at the economic approach to choosing a basket of goods within a budget constraint. In this case, the weighting of various goods will depend upon the domain in which an agent is making a mate choice. For example, promotion of a colleague at work may influence status motives and accordingly, the worker’s preferences between more time in the office and leisure will shift.

They also make the interesting distinction between traits in a potential mate being necessities or luxuries. Consider a female who needs a male to have a minimal level of resources to make sure her offspring survive. Due to diminishing marginal utility (another economic concept) as the male’s resources increase, she may start to look at other traits if there are plenty of males with enough resources. The pattern of consumption will be that resources are a necessity, while other traits are luxuries. A similar pattern might emerge for male preferences, initially prioritising fertility related traits, but then considering other traits if there are plentiful fertile females. Thus, when the necessity traits are scarce, we might expect large sex differences in mate preferences as each sex focuses on obtaining their different necessities. As these traits become more plentiful, traits that are luxuries are sought. If there is overlap between the luxuries of one sex with the necessities of the other sex, we would see smaller differences between the sexes in the traits sought in mates.

One issue Kenrick and colleagues do not spend much time on is why evolution has shaped domain specific decision rules. The foundation of modular decision making is addressed in the evolutionary psychology literature, but to sell this concept to economists, you need to sell them the constrained rationality that is inherent in the modular approach. Most evolutionary analysis of economic preferences struggles to incorporate “irrationality” through constraints, often due to a view that evolution is the ultimate rationality machine (and most economists fixation, conscious or not, with rationality). Selling to economists the picture of constrained, path dependent evolution that leads to modular decision making and “deep rationality” could improve the economic endeavour considerably.

Kenrick, D., Griskevicius, V., Sundie, J., Li, N., Li, Y., & Neuberg, S. (2009). Deep Rationality: The Evolutionary Economics of Decision Making Social Cognition, 27 (5), 764-785 DOI: 10.1521/soco.2009.27.5.764

A unified behavioural theory of economic activity

John Brockman has wheeled out another good bunch of experts for the newest Edge question “What’s the question about your field that you dread being asked?

One response by Richard Thaler is particularly interesting, who fears being asked “When will there be a single unified ‘behavioral’ theory of economic activity?” For those who know Thaler’s work in behavioural economics, his reason might be surprising:

If you want a single, unified theory of economic behavior we already have the best one available, the selfish, rational agent model. For simplicity and elegance this cannot be beat. Expected utility theory is a great example of such a theory. von Neumann was no dummy! And if you want to teach someone how to make good decisions under uncertainty, you should teach them to maximize expected utility.

Obviously, Thaler knows that this model is not perfect:

The problem comes if, instead of trying to advise them how to make decisions, you are trying to predict what they will actually do. Expected utility theory is not as good for this task.

However, Thaler is not convinced that alternatives such as prospect theory are up for the task, and he suggests that there will ultimately be a multitude of theories:

Just as psychology has no unified theory but rather a multitude of findings and theories, so behavioral economics will have a multitude of theories and variations on those theories. You need to know both physics and engineering to be able to build a structurally sound bridge, and as far as I know there is no general theory of structural engineering. But (most) bridges are still standing. As economics becomes more like engineering, it will become more useful, but it will not have a unified theory.

Thaler is being overly pessimistic – and I’m not sure that there are many theories of bridge building that can ignore the unifying framework of physics. He is right that the rational agent model is simple, elegant and powerful. The problem is that while behavioural economics can pick holes in the model on the basis of predicting how people make decisions, there has been limited attempt to generate a unified theory. Prospect theory is a useful tool for predicting behaviour, but the question that is rarely asked is why people act in that way.

I am optimistic about the role that evolutionary biology will play in filling this gap. Evolution is the ultimate rationality machine, and any actions that are not rational will be ruthlessly eliminated. This is what lies behind the power of the rational agent model. But evolution can only work with the material at hand, leading to a constrained rationality. Heuristics that use less energy and time can be favoured. Many adaptations are path dependent (Robert Frank’s Passions Within Reason gives one excellent account of how path dependence might have shaped human emotions). A changed environment can result in decisions that were once rational no longer being optimal.

Thaler points to the multitude of theories in psychology as an example, but psychology is now being reconstructed by evolutionary psychology, with many of the available theories unable to withstand the light of evolutionary theory. Economics, and more particularly behavioural economics, is slowly being examined using evolutionary theory and the unifying basis of human decision-making as an evolved trait. Those theories inconsistent with our evolved past will be discarded, and the commonality between those that remain will provide considerable unification across the field.