One of the earlier advocates of using evolutionary biology in economics was Jack Hirshleifer, a professor of economics at the University of California, Los Angeles. Hirshleifer was author of The Dark Side of the Force: Economic Foundations of Conflict Theory, which includes evolutionary analysis of cooperation and conflict, and some discussion of the unification of law, economics and evolutionary biology. The subject of this post is his 1997 article Economics from a Biological Viewpoint from the Journal of Law and Economics. Coming on the heels of E.O. Wilson’s Sociobiology, Hirshleifer states that there is no argument about the utility of using sociobiology in economics. The only open question is how much utility can be gained.

Unlike Becker’s 1976 article linking economics and sociobiology, Hirshleifer does not draw the parallels and then imperialistically march economics into evolutionary biology. Hirshleifer focuses on the message that sociobiology has for economics, not on “how we can set the biologists straight”.

Hirshleifer is scathing of the disinterest of economists in understanding the foundation of tastes and preferences. Hirshleifer asks if economists are waiting for someone in another field to do the work, and suggests that since it is not being done, economists will need to take on this role. Hirshleifer considers that preferences are governed by how they affect fitness, and adopts a strong version of this approach. He prefers to explain the apparently fitness-reducing actions of modern humans on the basis that the fitness benefits are simply not apparent to us, and not that they might be maladaptive.

Most of Hirshleifer’s discussion of preferences focuses on altruism, where he is critical of Becker’s approach. Hirshleifer points out that Becker gives the agents arbitrary levels of altruism, with altruistic behaviour emerging as long as there is one altruist. Becker is not using evolutionary biology to look at what the tastes might be, but is trying to supplant an evolutionary explanation of why altruism emerges.

Hirshleifer does note a benefit of Becker’s approach in his discussion of cheating, as Becker’s rotten kid theorem shows that altruism on only one side of the transaction may be enough to prevent it. Hirshleifer also discusses how honest signals can evolve to reduce cheating, but the absence of the handicap principle (only just proposed in 1975) from the discussion highlights why the principle is so important in understanding how signals work.

Hirshleifer is sympathetic to group selection arguments and covers some of the classic group selection models, although he does not subject them to serious analysis as to whether they might be the right explanation. He also relies on what appears to be a version of multilevel selection theory to argue that mixed levels of altruism and free riding can exist in a population, whereby reassortment allows altruists to continue to survive despite their fitness disadvantage relative to free-riders in the same group.

The most novel part of the paper (to me) was Hirshleifer’s discussion of specialisation. Specialisation limits competition, but there is a dichotomy between the competitive and cooperative division of labour. In competitive specialisation, species try to avoid direct competition by choosing a narrow niche, while cooperative specialisation allows for gains from trade. Hirshleifer argues that biologists have more subtle understanding of specialisation as they recognise the variety of dimensions across which it occurs.

One dimension of specialisation is the distinction between “K-strategies” that make superior use of resources in constrained environments and “r-strategies” that pioneer and settle unfilled environments. Hirshleifer sees selection between these strategies as having had an effect in American history:

[H]uman individuals, families, races etc. are biological entities which may be regarded as choosing competitive strategies. Martial races may concentrate on success through politics, conflict, or violence (“interference strategy”); others may have proliferated and extended their sway through high birth rates; others through lower birth rates but superior efficiency in utilizing resources (“exploitation strategy”). The r-strategist pioneering human type was presumably selected for in the early period of American history – a period long enough for genetic evolution, though cultural adaptation may have been more important. This type was not entirely antisocial; altruist “pioneer” virtues such as mutual defense and sharing in adversity can emerge under r-selection. In the present more crowded conditions the preferred forms of altruism represent “urban” virtues of a negative rather than positive sort: tolerance, nonaggressiveness, and reproductive restraint. Even today it seems likely that a suitable comparison of populations in environments like Alaska on the one hand and New York City on the other would reveal differential genetic (over and beyond merely cultural) adaptations.

One other interesting point that Hirshleifer covers is teleology. Biologists generally consider evolution to be directionless, in contrast to the economic story of the invisible hand leading to positive outcomes. Hirshleifer argues that the imperfections in nature are largely due to a lack of property rights founded on law and government. As a result, there is more chance of an optimal outcome in human economies than in nature. However, Hirshleifer is not naive, and he notes that the institutions that provide the rule of law and government may also be used to steer outcomes away from optimality.

There is plenty of other material in the article worth reading, although some of it feels dated. This includes a section of the article on the evolutionary economics of Alchian, Nelson and Winter, which Hirshleifer terms “quasi-biological” and is worth reading for the discussion of whether businesses actually maximise.

Links this week:

1. An excellent review of Paleofantasy (which is still on my reading pile and likely to stay there for at least a few more weeks).
2. Ross Douthat in the New York Times on the marriage premium, and Bryan Caplan’s thoughts. When the debate popped up a year ago, I wrote this piece.
3. A few months ago, Andrew Gelman wrote a blog post on Ashraf and Galor’s paper on genetic diversity and economic development (the comments are worth reading). Gelman has extended that post for publication in Chance.
4. The Society for the Evolutionary Analysis in Law (SEAL) has a few interesting speakers lined up for their annual conference next week.

Underlying much of Ashraf and Galor’s analysis of genetic diversity and economic development is a Malthusian model of the world. The Malthusian model, as the name suggests, originates in the work of Thomas Malthus (pictured). Malthus had the misfortune of providing an excellent description of the world across millennia, just at the point at which the model (apparently) lost much of its predictive power.

The Malthusian model rests on the assumption that any increase in income generates population growth. This ultimately prevents increases in technology from translating into increases in living standards. The greater resource productivity must now be  shared between more people. Of course, the reason people state that the Malthusian model no longer applies is that since 1800 many parts of the world have experienced substantial increases in per person income as population growth did not match technological progress.

The Malthusian model generates a couple of important predictions. First, any increase in productivity will generate population growth, not income growth. Secondly, differences in productivity between regions will be reflected in different population densities, not income differences.

This last point is important. It allows economists to use population density as a measure of technology and productivity in a Malthusian world. Since measuring technology is difficult but we have many measures of population density across time and societies, the Malthusian model provides a basis for conducting comparative economic analysis between countries and regions for times before 1800.

Ashraf and Galor use population density as a measure of technology for most of their analysis of genetic diversity and economic development, following a long line of economists who have done the same. But until recently, whether population density is a reasonable measure had not been properly tested.

In 2009, Ashraf and Galor published in the American Economic Review (ungated version here) an empirical examination of this hypothesis for the period 1 to 1500 CE (originating from Ashraf’s PhD thesis, as did the paper on genetic diversity and economic growth). The problem they faced was how to untangle population and technology when the two are so closely intertwined. Economists use the population density measure because technology is hard to measure and each flows directly into the other (more people leads to more ideas).

To untie the two, Ashraf and Galor use the timing of the onset of the Neolithic Revolution in different regions as a proxy for technology. The Neolithic Revolution occurred when populations moved from hunting and gathering to agricultural activities. If we accept Jared Diamond’s thesis that countries with favourable biogeographical factors gained a technological head start through the advent of agriculture that they maintain through to today, the timing of the Neolithic Revolution in different societies could be a proxy for technology and productivity.

Using this proxy, Ashraf and Galor found that, consistent with Malthusian theory, technology and productivity had a positive effect on population density, but no effect on per person income levels for the period 1 to 1500 CE. The result is robust to a range of controls including geographic and climactic factors, and holds when they use a more direct (but possibly less reliable) measure of technology.

There are two particularly interesting observations that Ashraf and Galor draw from their work. The first is that despite income stagnation, pre-Industrial times could be very dynamic. It is just that the Malthusian dynamics mask the effect of technological changes.

Secondly, their finding can be interpreted as supporting Jared Diamond’s hypothesis (or at least, it is not inconsistent with it). Those societies that first experienced the Neolithic Revolution had the highest population densities, suggesting a persistent advantage to an early start.

However, this support for the Malthusian model is not a ticket to use any population density data as a measure of technological progress. One of the more interesting points in the critique of Ashraf and Galor’s genetic diversity work published in Current Anthropology was the way some of the population density estimates used by Ashraf and Galor were developed.

McEvedy and Jones (1978:292) argue that the total population in Mexico in 1500 CE was no more than 5 million. They do so based on data from Rosenblat (1945, 1967), a source that uses problematic postconquest records. In fact, scholars contemporary with McEvedy and Jones (1978) proposed estimates in the 5–6 million range for the area corresponding only to the Aztec empire (e.g., Sanders and Price 1968). The Aztecs controlled a territory that covered no more than one quarter of contemporary Mexico and that excluded all of northwest Mexico and the Yucatan. Even while, at the time McEvedy and Jones (1978) were writing, other estimates for Mexico’s population were set at around 18–30 million (Cook and Borah 1971), McEvedy and Jones (1978: 272) discredit those estimates on the puzzling claim that they were not in line with those of other populations at “comparable levels of culture.”

Given that McEvedy and Jones are allowing the level of culture to colour their population estimates, those population estimates cannot be considered a sound basis for measuring technology. Population data shaped by the Malthusian model is not ideal to use as a measure of development. I don’t expect that changing the population density numbers substantially change Ashraf and Galor’s results (although the data is online if you want to check this), but we should use the numbers with some caution.

My posts on Ashraf and Galor’s paper on genetic diversity and economic growth are as follows:

1. A summary of the paper methodology and findings
2. Does genetic diversity increase innovation?
3. Does genetic diversity increase conflict?
4. Is genetic diversity a proxy for phenotypic diversity?
5. Is population density a good measure of technological progress? (this post)
6. What are the policy implications of the effects of genetic diversity on economic development?
7. Should this paper have been published?

Earlier debate on this paper can also be found here, here, here and here.

In another great section from the The Genetical Theory of Natural Selection, R.A. Fisher argues that the free exchange of goods and private property rights are triumphs of human organisation:

[F]rom the earliest times of which we have knowledge, the hereditary proclivities, which undoubtedly form the basis of man’s fitness for social life, are found to be supplemented by an economic system, which, diverse as are the opinions which different writers have formed about it, appears to the writer to be one of the unconscious triumphs of early human organization. The basis of the economic system consists in the free interchange of goods or services between different individuals whenever such interchange appears to both parties to be advantageous. It is essential to the freedom of such agreements that the arbitrary coercion of one individual by another shall be prohibited, while, on the other hand, the coercive enforcement of obligations freely undertaken shall be supported by the public power. It is equally essential that the private possession of property, representing, as in this system it must do, the accumulation of services already performed to other members of the society, and the effective means of calling upon equivalent return services in the future, shall be rigorously protected.

In this system, success is rewarded and those who do not perform socially advantageous actions may perish.

In the theory of this system each individual is induced, by enlightened self-interest, to exert himself actively in whatever ways may be serviceable to others, and to discover by his ingenuity new ways or improved methods of making himself valuable to the commonwealth. Such individuals as succeed best in performing valuable services will receive the highest rewards, including, in an important degree, the power to direct the services of others in whatever ways seem to them most advantageous. Those, on the contrary, who fail most completely to perform socially advantageous actions have the least claim upon the wealth and amenities of the community. In theory they may perish of starvation, or may become indebted up to the amount of the entire potential services of the remainder of their lives, or of the lives of their children.

Fisher notes that while this economic system is not the sole basis by which we operate, it provides protection against the proliferation of the unproductive.

It need scarcely be said that this economic system has never formed the exclusive basis of social co-operation in man. It has at most been partially established in compromise with social instincts already in being, founded during the existence of less closely cooperative societies. Nevertheless, it bears a sufficient resemblance, both to the theory of rationalistic economists, and to the practice of various ancient civilizations, to indicate that we have presented, in an abstract and ideal form, a real and effective factor in human social organization. The biological importance of this factor lies in the safeguard which it appears to provide that intra-communal selection in human societies shall not favour the multiplication of unproductive or parasitic types, at the expense of those who exert themselves successfully for the common good. On the contrary, it seems to insure that those who produce the best goods or provide the most valuable services shall be continually augmented in each succeeding generation, while those who, by capacity or disposition are unable to produce goods equivalent to what they consume, shall be continually eliminated.

This selection extends to the way people consume and engage in trade.

Nor is this beneficial selection confined to individuals in their capacity of producers. In consumption and distribution an equally beneficial selection would seem to be in progress. The individual who, by reason of his imperfect instincts, is tempted to expend his resources in ways which are not to his biological advantage, the individual who from prejudice favours a bad market, or who is temperamentally incompetent in striking a bargain, is equally at an economic and, it would seem, at a selective, disadvantage. This selection of the consumer provides in an important respect the theoretical completion of the individualistic economic system, for it supplies a means by which the opportunities of gaining wealth by the provision of illusory benefits, shall become ever narrower, until all substantial sources of profit are confined to the provision of real public benefits. The population produced by such a system should become ingenious and energetic industrialists, shrewd and keen in the assessment of social value, and with standards of well-being perfectly attuned to their biological and reproductive interests.

The logical (thought not necessarily realised) outcome of this selection might be to evolve such that wealth accumulation is the ultimate moral pursuit.

To complete the picture, at the expense of anticipating a little a subsequent argument, our economic Utopians must be endowed with consciences which recognize the possession of wealth, at least as a means to reproduction, as the highest good, and its pursuit as the synthesis of all virtuous endeavour. To them the wealthy man would enjoy not only the rewards, but also the proofs of his own virtue, and that of his forbears; he would be in some sort a saint, to co-operate in whose virtuous proceedings would be a supreme felicity. Upon such men, no public honour could be bestowed more noble than a direct cash payment, and to purchase other honours for money would seem not so much corrupt as insane. Charity, in the sense of the uneconomic relief of poverty, would evidently be a vicious weakness, although there would be some virtue in shrewdly backing for mutual advantage the capable, but accidentally unfortunate.

However, we have not achieved this “utopia”.

[T]he instinctive feelings and prejudices of social man do not seem at all to have developed in the direction of a more strictly economic and less’ sentimental’ basis for social institutions.

Links this week:

1. Ed Yong on Swarms.
2. The New York Times on whether the decline of two-parent households has caused the decline in male incomes. It still astounds me that some academics can discuss this without mentioning selection effects.
3. Greg Cochran on J.B.S. Haldane.
4. A critical review by Miki Ben-Dor of Marlene Zuk’s Paleofantasy. On the flipside, Christina Warinner “Debunking the paleo diet“.

I’m excited that I can finally announce the Cooperation and Conflict in the Family Conference.

First announcement

The Cooperation and Conflict in the Family conference will be held at UNSW in Sydney, Australia from February 2-5 2014.

We will bring together leading economic and evolutionary researchers to explore the nature of conflict and cooperation between the sexes in the areas of marriage, mating and fertility.

The conference provides an opportunity for researchers to discuss the economic and evolutionary biology approaches to these issues, explore common ground and identify collaborative opportunities.

CONFIRMED SPEAKERS

David Barash, University of Washington
Monique Borgerhoff Mulder, University of California Davis
Lena Edlund, Columbia University
Joe Henrich, University of British Columbia
Michael Jennions, Australian National University
Hillard Kaplan, University of New Mexico
Hanna Kokko, Australian National University
Jason Potts, Royal Melbourne Institute of Technology
Paul Seabright, Toulouse School of Economics

We hope you will join us in beautiful Sydney for an exciting meeting of disciplines.

Conference Organisers

Jason Collins & Rob Brooks

Please spread the word.

Rafe Sagarin blogs at the Harvard Business Review:

All of Earth’s successful organisms have thrived without analyzing past crises or trying to predict the next one. They haven’t held “planning exercises” or created “predictive frameworks.” Instead, they’ve adapted. Adaptability is the power to detect and respond to change in the world, no matter how surprising or inconvenient it may be.

While there’s much chatter in the management world about the need to be adaptable, only a few creative companies and innovative managers have probed the natural world for its adaptability secrets. But when they have, they’ve been remarkably successful. A study of nature offers straightforward guidance through four key practices of adaptable systems.

Sagarin’s four practices are decentralisation, redundancy, symbiotic relationships and recursive processes.

I’m sympathetic to the idea that businesses might benefit by experimenting more (small failures) and taking advantage of the collective wisdom of their employees. But there is one fundamental difference between a business wanting to be adaptable and the operation of natural selection in nature. Evolution does not work through each organism surviving no matter what the circumstances. Rather, a few selected organisms that are more adapted to the current environment will have higher fitness and form the population of the future. Each individual organism does not actually adapt. This concept was the part of Tim Harford’s Adapt that I thought was done particularly well.

As a result, carrying a costly trait on the possibility that it might be required in the future is perilous in evolutionary terms. Even though we see some organisms carrying redundant features, evolution tends to eliminate costly traits if they are not required, or more particularly, those individuals still possessing the costly traits.

Thus, when Sagarin suggests that if a business want to be “adaptable” it needs to “make multiple copies of everything and modify the copies to hedge against uncertainty”, we need to consider the costs. What happens when the business with built-in redundancy runs into the lean business that ignores all of Sagarin’s advice but hits on the right answer?

Consider Silicon Valley, with thousands of start-ups experimenting with various ideas. Some succeed, most fail. This is natural selection in action. For a large tech player, there is no way to replicate the massive experimentation that these startups are conducting. If they do experiment and cover all possible bases, they are carrying much larger costs than the single company that lucks onto the right idea. By carrying those costs, will the experimenting company be able to beat the experimentation of the broader market in the long-run?

As a result, Sagarin’s advice to build in redundancy is no guarantee of success. Businesses could learn from nature, and becoming more adaptable may yield benefits. But nature also suggests that, ultimately, a business will fail (as have over 99 per cent of species that have been on this earth) as it simply cannot efficiently replicate the experimentation of the broader market place.

Links this week:

1. Razib Kahn encourages academics to get on the blogging bandwagon (and, my post on my experience).
2. David Barash on “evolutionary existentialism”, my favourite piece this week.
3. Paleo or not, we all get heart disease. Also on the paleo front, Peter Turchin reviews Paul and Shou-Ching Jaminet’s Perfect Health Diet; and John Hawks reviews Marlene Zuk’s Paleofantasy.
4. I’ve spent a lot of time over the last year or two reading material on Nowak, Tarnita and Wilson’s paper The Evolution of Eusociality, the trigger for the latest round of the group selection wars. It might be a couple of years old, but this excellent discussion by Chris Jensen is the most useful I have found. Jensen also blogs on Nowak’s work here.

In a paper in Economic Letters (ungated version here), Ying Bai and James Kung test Spolaore and Wacziarg’s hypothesis on genetic distant and economic development:

Since 1949, trade and economic ties as well as the physical movement of people between Taiwan and the Chinese mainland had been banned. Given this disconnection, one would naturally expect the relative genetic distance – operating presumably via the diffusion of technology or institution – from Taiwan to have no effect on the income differences among provinces in the Chinese mainland. The ending of this cross-Strait “cold war” in 1987 has however drastically changed this situation. Indeed, by comparing the coefficients of relative genetic distance before and after 1987, we show that, with the removal of the restrictions previously placed upon personal exchange in 1987, the effect of relative genetic distance from Taiwan has increased, even though absolute genetic distance – which is highly correlated with the relative genetic distance from China’s technological frontier – has not changed significantly. This implies that relative genetic distance affects income difference through the channel of enhanced communication and economic exchanges.

The greater correlation of relative genetic distance than absolute genetic distance with income differences matches the theoretical and empirical findings of Spolaore and Wacziarg’s paper. However, I’m not convinced about what underlies this result, so am cautious about taking it as evidence that Spolaore and Wacziarg are on the right track.

In the light of the recent flurry of debate about Ashraf and Galor’s paper on genetic diversity (which should be distinguished from genetic distance) and economic development, it seems that Spolaore and Wacziarg had a rather smooth passage on the release of their paper. Spolaore and Wacziarg placed a much heavier emphasis on genetic factors being a proxy than did Ashraf and Galor, but I would be interested in seeing their work critiqued by those taking on Ashraf and Galor.

Over the last year I have seen several blog posts and articles discussing the merits of being an academic blogger, most recently this piece by Patrick Dunleavy and Chris Gilson (HT: John Hawks). Having been blogging on my research interest – the intersection of economics and evolutionary biology – for around two years now, I thought I would offer an interim assessment.

I am a PhD student at the University of Western Australia, studying an area that no-one in Australia (as far as I am aware) specialises in. Beyond my supervisors, who themselves have not researched in the area before, I am relatively isolated from a community of colleagues and collaborators. There is no shortage of people at UWA who are interested in the topic, but the task of finding people who are both interested and engaged enough to spend the time critiquing my ideas has been difficult. One of the primary reasons I started the blog was to build that a group of virtual supervisors who could do just that. While I could have (and did) engage with some people by email, blogging about my material and ideas has allowed me to find a small a network of people who are willing to comment on my papers, give advice and to engage with ideas. Most of them I would not have found through other means.

Beyond the narrow interest of producing my PhD thesis, this network has led to a few opportunities that would never have otherwise arisen. One great outcome is a conference bringing together economists and evolutionary biologists (announcement not too far away I hope) that I am now involved in planning. The idea emerged completely through a contact made via this blog.

Blogging is also part of my commitment to openness. I release my working papers before publication, and it is exposure through the blog that leads to them being read. I like the idea of publishing my work in open access journals and intend to publish in them where I can, but that is unlikely to happen regularly before I am happily ensconced in a tenured academic position. But through blogging and public release of my working papers before I submit them for publication, my ideas are readily available, even if the final product is behind closed doors.

On the negative side, blogging has slowed down my rate of writing for other purposes. Partly that is because I am heavily time constrained – I work four days a week and am a part-time PhD student with a goal of submission at the end of this year (making it four and a half years for completion). My evenings and weekends are precious and an hour of blogging is one hour less of paper writing. But with my blogging, my writing is of higher quality and, importantly, is being read. That said, much of my blogging often finds its way back into my other work. When I need a short summary of a paper, I often have one at hand. Blogging is also a major source of ideas. Most items on my list of new paper ideas have come from development of a blog post.

My favourite part about blogging, however, is the way it sharpens my thinking. I want to put ideas out into the public domain, debate them, have them swatted down at times, and see them become stronger and more robust. When I am putting together a post, I think about the people who read the blog and I imagine how they will critique it. Many times I have written something and realised I didn’t believe it or couldn’t justify it, and didn’t post it. It’s a realisation you may not come to if you simply play with the ideas in your head. Of course, many times my posts have still been swatted down. But it is more efficient to have ideas knocked down in the blogging stage than during peer review.

I have also found blogging particularly useful in analysing other people’s work. As an example, I’d been aware of Ashraf and Galor’s paper on genetic diversity and economic growth for a few years, but I never understood the building blocks of their argument until I decided to put together my series of posts on the paper.

From here, my intention is to keep blogging, but I have not decided what form it will take. This largely reflects the uncertainty of what I will be doing beyond completion of my PhD at the end of this year. However, I like to think that as long as I am actively researching, I will be putting that material into the public sphere through a blog.