Evolution and Economics

“How humans became intelligent”

Human neurons are simple, but they are organised in a complicated and functional structures, which comes from a Darwinian natural selection:beneficial mutations are preserved and harmful ones weeded out. Thus there’s the “competence without comprehension”: rationale of behaviour is implicit in the creatures’ design (default in nature) but not represented in their minds. The human intelligence and consciousness, on the other hand, have been enhanced by a process of cultural evolution operating on memes (copyable behaviour like words), in which some gave humans powerful new competences (like an app) and thus are adapted by human brain, leading to a co-work of genetic and memetic evolution.

Please, Not Another Bias! The Problem with Behavioral Economics – An evolutionary take on behavioral economics

“Behavioural economics has some similarities to the state of astronomy in 1500 – it is still at the collection of deviation stage. There aren’t 165 human biases. There are 165 deviations from the wrong model. So what is this unifying theory? I suggest the first place to look is evolutionary biology. Human minds are the product of evolution, shaped by millions of years of natural selection.”

A hierarchy of decision making: place evolutionary biology in a hierarchy of possible ways to consider the mind
1. perfectly rational decision maker, homo economicus: unbounded rationality.
→ If you have been to enough behavioural economics presentations, you have already seen this model beaten to death.
2.a model of decision making under constraints – a model provided by economists in response to some of the behavioural critiques: add costs to information search + possibly some limits to computational power
→ even less realistic version of how people actually think
3. heuristics and biases program of behavioural economics
→ the search for “cognitive illusions” (Gigerenzer)
4. ecological rationality
→ is very similar to an evolutionary approach, minus one important feature

Goldstein, D. G., & Gigerenzer, G. (2002). Models of ecological rationality: the recognition heuristic. Psychological review, 109(1), 75.Goldstein, D. G., & Gigerenzer, G. (2002). Models of ecological rationality: the recognition heuristic. Psychological review, 109(1), 75.

Smith, V. L. (2003). Constructivist and ecological rationality in economics. The American Economic Review, 93(3), 465-508.Smith, V. L. (2003). Constructivist and ecological rationality in economics. The American Economic Review, 93(3), 465-508.

Todd, P. M., & Gigerenzer, G. (2012). Ecological rationality: Intelligence in the world. OUP USA.

“Gigerenzer’s approach to be superior to the biases and heuristics or “cognitive illusions” approach, but it still leaves open the question of where these heuristics and other decision making tools come from.”
5. evolutionary rationality: the toolbox that we use today has been honed by millennia of natural selection. ++ humans are cultural and well as biological creatures.
→ That we have a range of universal instincts and preferences shaped by natural selection does not say that culture is not important. What we see is a combination of evolved preferences, social norms, technologies and the like, each interacting with and shaping the others.

“evolution shapes proximate mechanisms that lead to that ultimate goal (survival or reproduction). And consumer preferences are manifestations of our innate needs and preferences.”

“Our evolved traits and preferences were shaped in times vastly different to today. … This backfiring of our evolved traits and preferences is known as mismatch. Our evolved traits do not always match the new modern environment – and this is something that makes Gigerenzer’s model of looking at the interaction of the decision making tools with the environment such a useful tool for analysis. Sometimes the tool works. Sometimes it doesn’t.”

(Are Modern Businesses a Mismatch?: More than 99% of human evolution took place within small scale societies – egalitarian hunter-gatherer groups of 50-150 individuals that roamed the savannahs looking for food and safety. These were societies without laws, institutions, and complex technology. Behaviors were guided by habits, cultural norms, and informal leaders. Only since the agricultural revolution that took place some 10,000 years ago – the last 1% of human evolution – did our societies grow in scale and complexity. The Industrial Revolution that paved way for the modern business environment is even more recent. → multi-layered decision-making hierarchies, formal rules of conduct, evolved trust and cooperation based from frequent face-to-face interactions to  … )

“the most important findings in evolutionary psychology – our decision-making changes with the immediate context. Evolution has not shaped an all-knowing computer, but rather a modular computer for making different decisions based on different contexts.”

“Costly signalling: … But in the mid-1970’s an evolutionary biologist, Amotz Zahavi, proposed that signals such as peacock tails can be a trusted as they handicap the bearer. Only a high quality peacock can bear the cost. … This handicap principle also applies to human signalling. When humans are seeking a mate, you want to know as much as you can about them. … The most obvious example of this type of signalling is conspicuous consumption. Conspicuous consumption is a signal of resources and the traits required to acquire those resources. …Of course, signalling involves far more than conspicuous consumption. We don’t only signal resources, but want to signal intelligence, conscientiousness, agreeableness or other features. … Importantly, good signals are difficult to fake.the handicap is what makes the signal reliable.”

“So when a man sees a billboard with an attractive woman on a billboard, it gets attention. And from an evolutionary perspective, this is exactly the sort of thing that would draw attention. In our evolutionary past, an attractive woman would have been right there – you might think you are in with a shot.”

To sum up
1] Obviously, to understand humans you need to understand our evolutionary past.
2] a large part of our evolved behaviour involves our desire to signal important traits and qualities to potential mates, allies and rivals.
3] our evolved minds are sometimes out-of-sync with our modern environments. Use Gigerenzer’s framework (or Herbert Simon’s scissors) – what are the decision making tools we have evolved to use, what is the environment we intend to use them in, and what is the resulting decision?

 

 

Cosmides, L., & Tooby, J. (1994). Better than rational: Evolutionary psychology and the invisible hand. The American Economic Review, 84(2), 327-332.Cosmides, L., & Tooby, J. (1994). Better than rational: Evolutionary psychology and the invisible hand. The American Economic Review, 84(2), 327-332.

 

The Invisible Hook: How Pirate Society Proves Economic Self-Interest Wrong

“Hayek pioneered the concept of economic systems as products of cultural group selection … serious updating is required … into alignment with the best of our current knowledge of cultural multilevel selection.”

“When I read The Invisible Hook … the overarching theme that everything can be explained as a form of self-interest … it meant that every nuance of pirate behavior—their fairness toward each other, their highly selective cruelty toward their victims, even the Jolly Roger as a costly signal, can be explained as a form of profit maximizing behavior … For me, the central lesson to be learned is that the concept of individual self-interest is incoherent. That is arguably the major problem with economics and the major contribution that Multilevel Selection Theory can make in providing a more coherent alternative.”

 

 

——————————————————————————————————————————

What is Evolutionary Economics? /  What is an economy?

Evolutionary Economics is a field which looks at the economy as an evolutionary system, not a system constantly in or tending toward equilibrium.Evolutionary Economics is a field which looks at the economy as an evolutionary system, not a system constantly in or tending toward equilibrium.

Witt, U. (2008). What is specific about evolutionary economics?. Journal of Evolutionary Economics, 18(5), 547-575.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s