A reader sent in the following question:
Are there any economic implications from natural selection? If so, what are they?
I haven’t thought much about this. I assume Michael Shermer talked about this in The Mind of the Market: How Biology and Psychology Shape Our Economic Lives, but I haven’t gotten around to reading it yet.
So what do you think? Are there economic implications from natural selection?
I don’t know about economic implications from natural selection, but I was just reading a history of thought by Peter Watson that sought to describe the influence of economic theory on the development of the theory of natural selection. Specifically, the notion of economic specialization had a powerful intellectual impact upon Darwin, such that he thought that if specialization in markets led to competitive advantage and more efficient utilization of energy and resources, that maybe a similar mechanism of specialization for competitive advantage was in play in biological ecosystems.
I think there are two questions here:
1) Does the theory of natural selection also explain how markets work? I would say no, because there are no well-defined parallels for genes in markets. You can’t fully map the concept of an ecosystem to the concept of a market. But both are self-organizing systems so insights about how one works may still yield insights about the other.
2) Does the theory of natural selection dictate which rules we should apply to regulate markets? I would say no. Natural selection is a ruthless process and should not be used as a model to organize a society.
The fact that there is something like gravity doesn’t mean we shouldn’t try to fly.
The fact that there is something like natural selection and evolution doesn’t mean we should model our economy or society accordingly.
@wcoenen
With regard to your first point, I think that evolutionary theory can tell us something of how markets should work. Economics is about scarcity, and scarcity increases competition, right?
But economic theory might have better ideas about why they don’t work that way.
Or possibly psychology, considering that people often make poor choices in their financial lives which, taken over several generations, might be seen as reducing the fitness of their bloodlines.
Whoops–posted early.
Regarding the second point: Evolution isn’t consciously invoked in drafting our parking laws, divorce laws, etc … So I don’t feel we should do so in our economic lives.
Interesting. While I don’t see any economic implication of natural selection, I see ‘economy’ as one of the factor determining natural selection in some modern socities.
Think gold-diggers. Men and women would prefer richer members of the opposite sex, all other factors being the equal.
Okay I just realised how ridiculous this theory sounds.
[Anyways I have a blog on atheism and economics (unrelated with each other though!) at http://bigotblog.wordpress.com/2009/02/21/religion-was-progressive/ This post is about how RELIGION WAS PROGRESSIVE.]
If natural selection is the means by where “weakness” is weeded out of the gene pool why shouldn’t we allow the same in our economic system. Natural selection has done a “miraculous” job in bringing about the order and complexity we see in the universe, why not encourage the same thing in the market. More specifically why prop up the institutions that are failing within our economy, obviously they haven’t adapted to the global economy or have made poor decisions concerning basic economic principles. Either way we are artificially holding back progress by subsidizing these failed ventures.
The natural counter is that if we allow this to happen then many people will be hurt and many lives destroyed. But hasn’t this been the course of evolutionary history, as earlier hominids were replaced by competition by later hominids, I’m sure the ones being exterminated didn’t enjoy the experience. Natural selection may be a ruthless process as wcoenen said, but if has been the means for bringing about our world no one can doubt it’s been a successful one.
I would say “no”, not in any meaningful sense.
In some general hand-waving sense one could argue that rewarding excessive risk-taking results in more excessive risk-taking which is what led to our current crisis. But this actually has little to do with selection or evolution. There are no good analogues for genes, inheritance or replication, traits aren’t fixed and even success or survival is hard to quantify. We certainly don’t have anything like a generation or offspring in economics. There simply isn’t anything for an economic equivalent of selection to work upon and nothing to be preserved.
If we save the “weak” or “diseased” banks (or whatever analogy you wish), we aren’t preserving bad genes and we aren’t necessarily ensuring that the bad traits will be preserved. We can change the regulation of derivatives, we can remove the existing management or destroy shareholder equity as punishment, and we can reduce the leverage available to banks, all of which will influence all banks and traders simultaneously. There’s nothing like that in natural selection.
I haven’t read Shermer’s book either but from interviews & reviews I think he’s using it as a platform to endorse his version of Libertarianism rather than strictly following the evidence. It sounds like a huge stretch.
Jeopardy Game Show…
Truth (category) for a $1000..Alex
Alex Trebek…(daily double!)”this mysterious and ancient condition is sorely lacking today and is the chief culprit for our current economic woes”
*the contestants all look around perplexed*
Hmm, uhh, zssz…geez…BEEP, times up…
What is….????????????? (hint…# of question marks equal to the # of letters in the answer)
Any guesses?
Of course — as a matter of fact – survival of the fittest was orginally an economic term… From Wikipedia: “Survival of the fittest” is a phrase which is shorthand for a concept relating to competition for survival or predominance. Originally applied by Herbert Spencer in his Principles of Biology of 1864, Spencer drew parallels to his ideas of economics with Charles Darwin’s theories of evolution by what Darwin termed natural selection.
I’m thinking more practically-
Biotechnology certainly has impacted our economic situation. We use selection principles every time we engineer a virus. An engineered virus may cure genetic disorders one day.
Also, ecologically, as species die out, this may affect various markets (the one that comes to mind involves food). As the climate changes, foods we eat may become less common and more expensive.
Speaking as an economist: I don’t think it’s a sensical question. There are too many ways to subdivide it, and almost all of those are more interesting questions. Can general equilibrium and natural selection be linked? Yes, absolutely, by the metaphor of emergent complexity, that is what Michael Shermer tries to do and there is an interesting history between Darwin and Smith, as other commentors have pointed out. Likewise convergent evolution and stable equilibria. There is also an interesting question about the effects of evolution on the assumptions of economics. This is where evolutionary psychology and behavioral economics become intertwined, and don’t leave experimental economics out either! But this is the only way I can think offhand that our knowledge of natural selection should influence the way we write about economics.
In the long run, evolution is about conformity to previous structures. This is interesting in anthropology studies but there are many economic models showing that “a little change at a time” will still be inefficient.
If not the natural selection itself, the idea of ‘selfish gene’ has strong application in behavioral economics in game theory.
Swimmy-
I’m interested in learning more about how complex systems behave. Can you recommend some reading material that I can access on line or through the economics literature (which I can access through my university)?
@tyro
I guess my feeling is that the analogy isn’t strictly the same but the principle still applies. In the rewarding or at least protecting of banks and institutions that have poor economic policy we encourage more of the same as you note. But isn’t behaviour one aspect of natural selection. If take care of myself physically and my progeny follow my lead improved health becomes apparent within the genetics passed along and can’t be attributed merely to environment. I think the converse has been shown to be plausible with studies on obesity and its effects on traits passed along to children.
So strictly speaking there may not be a one to one correlation between genes and economic entities, but I still think the general principles still apply. Scarcity and demand ensure that the strong survive to pass genes along within a biological community. Why isn’t it the same on a higher level. Scarcity and demand are the key features of economic theory, and if we allow the diseased entities or policies to continue it will become a drain on the population as a whole.
So from a materialistic perspective I’d have to disagree with Aniket, why would I want to live in a less perfect society? I don’t know what the equilibrium may be, but at some point we will reach it and altruism goes out the door. Altruism stands in the way of progress if done at the cost of the health of a population. At the end of the day rewarding bad behavior is like rescuing the sick gazelle from the lion. You feel better and the gazelle is saved, but all you’ve done is weaken natural order on the whole.
To me, the answer to this question is an obvious yes. I tend to see natural selection and evolution not as simply a biological force but as an emergent, generalized concept that describes the behavior of any complex, competitive system.
The SPECIFICS differ, but the same general principles apply. There are parallels in economics, in politics, and in sociological behavior. Because genetic mutation is involved in biological evolution, it is one of the slowest moving of evolving systems. But biological evolution is merely a special case in generalized evolution.
@Elemenope
Everything you’ve said is true as far as the human race has received benefits of those that have been deemed to be weak. I would agree with you that yes some people learn their lessons from the mistakes they’ve made and go on to be very successful.
My point is that from a materialistic perspective, that the tool that has brought us this far thus is being held in check by our policies. You’ve pointed out exceptions to the rule, but the reality is that this isn’t the first time we’ve gotten into a mess through poor economic policy and it won’t be the last when we reinforce those behaviours. People are creatures of habit and who’s to say that the proposed benefits of the exceptions outweigh the cost to increased prosperity of population on the whole.
Your right many are the gazelle, maybe you and I would be, but natural selection is without emotion and if it’s true so should we. I don’t know exactly what you believe when it comes to morality, but I respect your opinions and thinking on these matters, you’ve thought through the implications. But many here hold natural selection on the one hand and our basis for morality to be the betterment of humanity on the other, and then shrink from the consequences of holding both at the same time. They inject emotion in a way that they wouldn’t for the demise of an ant hill, and yet we humans are just one big hill.
Daniel,
The applications of evolution to economics is actually something I blog about. Here’s an example of how evolutionary theory can be applied to modern economics:
http://petertanham.com/2009/02/growth-reproduction-generations-and-the-recession/
I like the way architects and scientists use biomimmicry to inspire design and function, by looking to nature for mechanisms that have been fine tuned by evolution over eons. In a similar way, I think evolution can inform modern economics if we look at Evolutionary strategies and systems.
If you’re interested, I plan to write more on the topic and tag it here http://petertanham.com/tag/evolution/
“Are there any economic implications from natural selection? If so, what are they?”
It seems likely. We’ve evolved various attitudes relating to things like fairness, value and so on. I would argue that these things are the economic implications of natural selection and what I assumed the question was on about.
Natural selection is essentially the basis of capitalism, right? The whole idea is that each individual (or firm) acts in its self interest (tries to survive, reproduction doesn’t make much sense in the economic interpretation), and that the individuals and firms that do the best are the ones with the best survival strategies.
People above seem to limp around the analog for genes in the comments above. To me, it’s pretty obviously decision matrices (for individuals) and policies (for firms). Poor decision making strategies or poor policies will result in inefficiency and ultimately, less money. Successful decision makers write books and give talks on their decision making strategies and others buy the books and adopt those strategies. Less successful or newer companies try to adopt the better policies of successful companies, and firms are always trying out new policies and either succeeding or failing.
In Snow Crash, Neal Stephenson points this out with the notion of the three-ring binders being the “DNA” for the Uncle Enzo’s Pizza and similar companies in the book. The collection of policies are the instructions on how the entity should react in various situations.
For those who don’t think the analogy is apt because of altruism, consider the notion that altruism and cooperation are very good survival strategies. This accounts for why the market includes both individuals and firms instead of just individuals. This criticism of natural selection as applied to markets also neglects the fact that developing treatments for diseases, delivering care for the chronically ill, etc., is a productive use of capital, so that it is not even strictly altruism.
Ultimately, the economy is too complex to be explained completely through natural selection. So is evolution. Natural selection is a mechanism that is at work in both phenomena, but doesn’t come close to describing either fully.
It’s always good to find like-minded people. Thanx and I’m going to add you to my RSS feed.
It’s a good idea, though, when you’re building your flying machine, to keep gravity in mind.
I think evolution can and ought to inform our understanding of economics, even if it definitely should not dictate its application.
I agree.
Communism was an attempt at Intelligent Design, which was something similar to attempt flying with disregard to gravity.
Cut-throat competition of Free Markets is other extreme of modeling a society firmly grounded in gravity of Natural Selection.
The answer is somewhere in the middle and we’ll get better at finding it in crude experimentation of trial and error. :)
Is it not worth it to attempt to reduce the human cost of progress? What good is “progress” to the guy who got steamrolled to get there?
When a company is “weeded out” then the managers and employees who made the mistakes don’t curl up and die. More likely they will find a new job in another company where they can make the same mistakes again. The analogy with genes being weeded out seems flawed.
Natural Selection is passive but brutal authoritarian rule of the nature.
Hypothetically speaking, if we could have true free markets (it is hypothetical, because so called free markets of libertarian dream do not exist) and if we let such free markets play the role of nature, the weak will get wiped out. Sure, the surviving society may possess better qualities, but let’s not forget that this quality is achieved only by constantly eliminating those who could not compete.
If I am given a choice, either to live in a less perfect society where haves let some of what they ‘have’ go for those who do not have anything or to live in such a perfect society where free market competition has eliminated have-nots and is continuously eliminating the bottom of the pyramid, where even the achievers live in constant fear of possible eliminations and where the brutal reality of life is – kill or get killed, which of these two societies I’d rather live in?
I’d prefer the imperfect, but more altruistic society.
Perhaps the proper analog for “genes” in an economic metaphor is not people but firms.
Genes encode for the production of specific proteins.
Firms “encode” a particular algorithm (inputs, process, output specifications) for production of specific products.
A gene is selected against if another gene can produce the same protein more efficiently or more quickly or closest to the amounts needed.
A firm is selected against if another firm can produce the same product more efficiently or more quickly or closest to the aggregate demand for the product.
In natural selection, it’s the specific combination of alleles of genes which selection acts upon. It’s hard to imagine how selection is supposed to work when the entities being selected are single genes. And, as I’ve said, these “genes” change and adapt as do their products, outputs, staff, leadership, and even market sector. Where is the mixing of genes? If one gene is successful, how does that gene spread through the population? In your scenario it sounds like it would become a monopoly which isn’t evolution but some sort of social darwinism – kill off the weak.
If you want to construct a metaphor, you need to have a genetic pool with many genes, individuals with various alleles (specific instances of these genes), reproduction & new generations and death and some process which favours individuals with certain mixes of alleles. Having entities with only one allele, no reproduction, no generations, no variation and very little death sounds like too much of a stretch.
Firms don’t operate in a vacuum in an economy, either. There are both system-wide pressures, niche-wide pressures, and individual firm pressures.
If one gene is successful, how does that gene spread through the population?
A CEO or manager writes a book about how a certain change saved their company. Or he becomes a consultant, and shows other companies how to adopt what he discovered. It’s quite a growth industry, I understand.
If you want to construct a metaphor, you need to have a genetic pool with many genes, individuals with various alleles (specific instances of these genes), reproduction & new generations and death and some process which favours individuals with certain mixes of alleles. Having entities with only one allele, no reproduction, no generations, no variation and very little death sounds like too much of a stretch.
Firms have discrete processes for producing a product, managing personnel, public relations, legal compliance, R&D, etc.. Each of these could be a “gene” insofar as each discrete process produces a certain effect in the “organism” (firm). Different firms may differ in any of these areas, generate mutations ([Vice-president of finance dies] “hey, let’s try having two vice-presidents instead of three!”), and mix-and-match strategies in an attempt to optimize and survive.
And firms die all the damn time in the marketplace. I don’t know where you’d get the idea that they don’t.
why would I want to live in a less perfect society?[...]At the end of the day rewarding bad behavior is like rescuing the sick gazelle from the lion. You feel better and the gazelle is saved, but all you’ve done is weaken natural order on the whole.
Because chances are for any given person, they are more likely by far to be a gazelle than a lion.
The disincentive toward perfect competition is that most of us would be losers, including most that argue for the imposition of the competition.
Put another way, we can identify values higher than *efficiency* as worthy goals of social existence. Often, as we have on the whole become more compassionate, we have found that those who have obvious disadvantages, such that we in fact have to spend a great deal more resources than average upon to sustain their existence, have other boons to give the social order. Without compassion there would be no Steven Hawking (ALS), FDR (Post-polio or possibly Addison’s), or Van Gogh (cyclothemia). Making allowances for maladaptation in one area allows us to take advantage of possibly obscured specialization advantages in others.
We have come to realize that some disadvantages, such as genetic predisposition to Sickle-cell Anemia, in fact confers advantages in fighting malaria. The same genetic “defect” that seems to play a role in schizophrenia also plays a role in genius-level intuitive aptitude. If we allowed schizophrenics to be “selected against” out of the population, rather than spending resources on treatment and social integration, there is a good reason to believe the resulting humanity would be diminished.
This works well through the economic looking glass, as well. A person at one point in their lives may make poor economic choices, extend themselves beyond their means, and go broke. If there is no mechanism for them to become solvent again, we as a society have acted to foreclose any possibility that that person will again contribute. The list of geniuses who at one point or another had to live off of charity or assistance is breathtakingly long.
Economists too often try to break things down into mathematical models and try to explain interaction that way. For a book that uses very little math and only a few phase diagrams, you can try Micromotives and Macrobehavior by Thomas Schelling. It’s mostly about coordination problems.
The problem with books about complex interaction is that they tend to be way too simple (Turtles, Termites, and Traffic Jams) or too technical (Emergent Macroeconomics, free here if you thinkyou’re up for it: http://www.dea.unian.it/gallegati/Emergent_Macroeconomics.pdf )
but natural selection is without emotion and if it’s true so should we.
Why?
Natural selection didn’t make *us* without emotion. Emotion is part of how we got here and how we survived. We would be foolish to not use all the tools we have. IMO it is a false choice you present.
Thanks!