Links this week:

1. Peter Turchin on Ibn Khaldun and the rise and decline of corporate empires.
2. Another critique of p-values.
3. John McNamara proposes that we need to move to a richer evolutionary game theory. The article focuses on biology, but many of the same comments could be made of economics. I’ll post on the article in coming weeks.
4. Tyler Cowen on scarcity of mental bandwidth. And another take by Emily Badger.
5. The ongoing Evolution: This View of Life series of interviews On the Origins of Human Behavior And Evolution Society moves to William Irons.

Although most of my interest in integrating evolutionary biology into economics concerns treating people as evolved (or evolving) animals, 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. 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.

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
6. Design principles for the efficacy of groups – a post of David Sloan Wilson, Elinor Ostrom and Michael E. Cox’s article Generalizing the core design principles for the efficacy of groups

Adam Smith’s concept of the invisible hand is one of the more abused ideas in economics. Mentioned only once in The Wealth of Nations, and only then in the context of preferring domestic to foreign industry, the invisible hand has come to represent the idea that self-interest can improve the common good. The following phrase from The Wealth of Nations nicely captures the idea of the invisible hand (although it is not located with Smith’s use of the term):

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

The invisible hand has taken on a life of its own since Smith’s nuanced book, with caricatured versions espoused and attacked along the political spectrum. In that context, the invisible hand is the second Western cosmology tackled by Gowdy and colleagues 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 (I covered the first cosmology – the rational man – in an earlier post).

The first point they make is that the invisible hand operates in a context of human sociality and morals. Smith would not have disagreed with that claim, with any self-interested actions constrained by the norms of the group and the morals of the individual. But as for the first Western cosmology they considered – the rational man – Gowdy and colleagues suggest that selection at a higher level is required to explain these constraints.

In arguing this point, Gowdy and colleagues draw a distinction between social and non-social behaviours. They suggest that nonsocial behaviours that do not harm others can evolve through individual level selection. However, given that adaptations at a given level require selection at that level, social behaviours that increase the fitness of someone (or their genes) should not be expected to increase the fitness of the group. For that to occur, group adaptations such as group norms are required.

There are a few of points of interest this argument, although it is not clear to me how much these are due to framing rather than substance. First, consider two people who decide to trade with each other. Each has an object the other wants, they engage in the trade and both are better off as a result. Is this a social behaviour that has increased the fitness of the group? Using a multilevel selection framing, the two traders are a group, and their group is clearly better off. One of the traders may have gained an advantage over the other due to a larger gain from the trade, so within that group, one of the traders could be considered “weakly altruistic”. So, do we consider the trade a social behaviour and the group the two traders? And if so, can I also frame this as a simple self-interested action of each party to trade for something that they want more? That is of course a feature of the multilevel selection framework – the ability to frame it in inclusive fitness terms.

A second point is the distinction between fitness and economic outcomes. In an evolutionary sense, anything that increases your fitness decreases the fitness of others. Fitness is defined in relative terms. In an economic sense, actions can make everyone absolutely better off, as in the trading example above. So when Gowdy and colleagues state that social behaviours that increase the fitness of someone should not be expected to increase the fitness of the group, this does not necessarily rule out increasing the economic benefits obtained by the group. Of course, we could also measure economic benefits in relative terms, but that is not typically what modern advocates of the invisible hand concept mean when they talk of the group benefits of selfish actions.

From their argument that group selection is involved, Gowdy and colleagues seek to resuscitate the concept of the invisible hand by suggesting that the invisible hand is selection at the level of the group. Thousands of generations of group selection (both genetic and cultural) have shaped our psychological dispositions so that now there is no need to have any conception of the group in mind when we pursue our self-interest. Our group selection shaped self-interest tends to lead to group benefits, with these self-interested actions a very narrow subset of all the varieties of self-interest, most of which do not benefit the common good.

This is an interesting argument, although I’m not sure that I buy it. I agree that the set of actions that we can undertake to advance our own self-interest are constrained by other people, social norms and institutional frameworks. For example, in many societies, uncooperative behaviour can have severe costs. Further, we exhibit many constrained behaviours even when we are not actually constrained. But as I asked in my last post, if multilevel selection and inclusive fitness are just different ways of framing the same question, what does it actually mean to say that group selection was required? If it is simply a statement that if we use a multilevel selection framework and classify the groups in a particular way, most of the action will be at the group level, then it is a relatively controversial statement. But as I read the paper, I feel that the authors mean more than this, and are actually pointing to group selection in the older sense (see my last post on the rational man for some more discussion of this distinction). In other words, for the authors, this is more than just a question of framing.

The distinction between genetic and cultural group selection is also important. Cultural group selection is less vulnerable to critiques about the mixing in human populations that genetic group selection is subject to (although it still has plenty of critics), and these need to be addressed if they are implying older concepts of group selection.

Gowdy and colleagues close the article with the suggestion that the mix of self and other-regarding attitudes of humans, as shaped by individual and group selection, allow the division of labour and exchange to occur that drives economic activity. This regulation of competition and self-interest are the invisible hand that leads to the common good.

This is the practical implication of their article – the invisible hand requires constraint. Previously provided by group selection, constraint now needs to be provided by regulation. Gowdy and colleagues do not offer further detail on this point, but this is the ultimate purpose of this evolutionary foray into economics and where some interesting debates are going to occur.

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 (this post) – a second post on Economic cosmology and the evolutionary challenge 
5. Economic cosmology – Equilibrium – a third post on Economic cosmology and the evolutionary challenge
6. Design principles for the efficacy of groups – a post on David Sloan Wilson, Elinor Ostrom and Michael E. Cox’s article Generalizing the core design principles for the efficacy of groups

 

Links this week:

1. Noah Smith on maths in economics. Responses from Paul Krugman, Arnold Kling, Robin Hanson and Bryan Caplan.
   
2. Malcolm Gladwell defends the 10,000 hour rule.
3. Gary Becker and Richard Posner discuss population.
4. And finally, an interview with Martin Daly as part of the “On the Origin of HBES: An Oral History Project”, from Evolution, This View of Life.

 

The social sciences have recently become a common battleground for debates about group selection. From Jonathan Haidt’s use of group selection to explain “groupish” traits in humans, to some of the recent rumblings about cultural group selection (as expressed in a debate triggered by Steven Pinker), and even at last years Consilience Conference, group selection has undergone a revival in the social sciences.

One social science in which group selection has re-emerged is economics, with the most recent occurrence in the Journal of Economic Behavior & Organization special issue, Evolution as a General Theoretical Framework for Economics and Public Policy.

In that special issue, group selection is one of the central threads of an article by John Gowdy and colleagues, who take apart three Western “cosmologies” that the authors consider have influenced economic thought. These cosmologies are that “natural man” is a rational, self-sufficient and egotistical individual, that competition between individuals can lead to a well-functioning society, and that there exists an optimal state of nature (equilibrium). I will deal with each of these three cosmologies in separate posts, with this post on the nature of “natural man”.

Gowdy and colleagues hint at some of the previous debate over whether man is purely self-interested, pointing to the origins of the cosmology in work by Pareto, Jevons and Walras, along with critiques of this view by Edgeworth, Veblen and some modern writers. However, the bulk of the argument developed in the paper relates to the nature of groups.

Their opening argument is that group level phenomena can affect individual behaviour, which can then affect the economic system as a whole. This is a fair point, and was one of the central themes of An Economic Theory of Greed, Love, Groups and Networks that I recently reviewed. Humans are highly social and highly responsive to group-level incentives.

This point, however, leads Gowdy and colleagues to group or multilevel selection. As they frame the question:

How can natural selection favor traits that are “for the good of the group” when they are selectively disadvantageous within groups? The answer is, by a process of between-group selection. Groups of solid citizens outcompete other groups, even if solid citizens are not selectively advantageous within their own groups.

The authors note the arguments of George Williams and friends of the 1960s, who generally considered that while group level selection can theoretically occur, between group selection was invariably weak as there was too much mixing between groups. Selfish individuals within a group undermine any potential for group selection. At this point, however, Gowdy and colleagues rewrite history when they suggest that the second of these points – the weak potential for group selection – has been overturned. They go as far as stating that:

The consensus among evolutionists that humans are a highly group-selected species (as conceptualized within multi-level selection theory) challenges the individualistic assumption of economics at its core.

This is where I need to be careful with language, particularly given the mention of multilevel selection theory.

The phrase “group selection” is often used in reference to selection between populations, and this was the context for the debates between Wynne-Edwards, Williams, Maynard Smith, Dawkins and others. In the mid to late 1970s, David Sloan Wilson (one of the authors of the paper the subject of this post) developed a different conception of group selection, generally termed multilevel selection, which looks at the development of individual traits within group structured populations. The groups are not population size groups, but are rather “trait groups” within populations that occur through non-random assortment of altruistic genes. These are not groups in the sense that people typically use the word. For example, when I engage in a trade with someone, we could be considered a group under this multilevel selection framework.  (I have written extended posts explaining the concept of multilevel selection here and here.)

In multilevel selection theory, selection occurs at all levels and the multilevel selection framework allows you to partition the selection effects between these levels. Importantly, multilevel selection theory is generally accepted as a different way to conceptualising the same evolutionary processes as are captured by the concept of inclusive fitness (kin selection). Gowdy and colleagues hat tip to this concept by noting that altruistic actions can be made to appear selfish by altering the frame of comparison.

But when Gowdy and colleagues flick back and forth between the group and multilevel selection terms, and particularly in their reference to Wynne-Edwards and Williams, I become confused about which group selection concept they are talking about. Are they talking about the old group selection concept as debated in the 1960s? If so, then their statement that evolutionary biologists accept that humans are a highly group selected species would be wrong. That idea appears as contested today as it ever was.

But what of the newer multilevel selection theory? Yes, biologists would agree that multilevel selection occurs in humans, although they differ in their opinion as to its usefulness as a frame of analysis. But since it is just a frame of analysis, what does it mean to say that humans are a group selected species? By using the other frame of reference, are we also a highly kin selected species?

The ability to change the frame of comparison can be seen in the examples of traits they use to illustrate that humans are a highly group selected species. We are other-regarding as to kin. There are clear benefits to self through having a social brain and the theory of mind to put ourselves in others’ shoes. And there can be huge personal benefits to being cooperative (particularly with kin).

Now, this is not to say that I do not agree with the authors’ overarching point. Despite many occasions where other-regarding considerations have been included in economics analysis (economics is a huge field with many practitioners), it does not happen as often as it possibly should. Pressures within groups, our social natures and our “groupish” traits have major effects on our actions.

But I am not certain that the multilevel selection approach is the optimal way to sell the concept that these groupish, social traits need to be considered in economic analysis. If evolutionary biologists tend to disagree on that point, are you going to be able to sell it to the economists? A starting point would be to at least get the nature of those traits on the table, present the design process from both frames of reference, and make it clear that it is not the old group selection concept that you are talking about.

As an end note, the papers in the special issue are easy to read and are not full of the usual mathematical signalling contained in economics journals. I recommend reading them yourself.

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 (this post) – 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
6. Design principles for the efficacy of groups – a post on David Sloan Wilson, Elinor Ostrom and Michael E. Cox’s article Generalizing the core design principles for the efficacy of groups

Links this week:

1. Sean Roberts on spurious correlations over at Replicated Typo.
2. Some babble on the neuroscience bubble.
3. Why do Jews succeed? Noah Smith throws some reasons out there, but I expect Smith’s explanations would do a poor job of explaining ultra-success in the form of, say, Nobel prizes. And here’s Noah Millman’s take.
4. And finally, below, an interview with Leda Cosmides (HT: Douglas Kenrick).

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 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 reason 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 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.

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
6. Design principles for the efficacy of groups – a post on David Sloan Wilson, Elinor Ostrom and Michael E. Cox’s article Generalizing the core design principles for the efficacy of groups

Links this week:

1. Aaron Sell rants about some recent papers on whether there are sex differences in the willingness to have casual sex.
2. Robert Kurzban (who I seem to be linking to a lot recently) posts on one of my favourite Gerd Gigerenzer papers.
3. Alex Tabarrok comments on fat animals.
4. “Derek” fathers over 500 children filling in for shellshocked husbands.
5. Do we need more pharmaceutical advertising to enhance the placebo effect?
6. Finally, after catching some tweets about Iain Couzin’s talk at Behaviour 2013, I was perusing his website and found a lot of interesting bits and pieces, including the below video. I’m convinced that work on herding and swarming has a lot to offer economics (as Andrew Oswald argues).

 

In my recent post reviewing Paul Frijters and Gigi Foster’s An Economic Theory of Greed, Love, Groups, and Networks, I flagged that they considered their new theoretical contribution to be “the love principle”. In this post, I want to pull the idea apart. I’m not going to offer a perfect alternative to the love principle, but I hope that by giving it a good going over I can possibly understand it better.

Frijters and Foster state the love principle as follows:

Love derives from the attempt of the unconscious mind to bargain with something that is believed to be capable of fulfilling desires and that is perceived to be too powerful to be possessed by direct means.

The starting point for how the love principle works is a person who believes that an entity can deliver to them something that they want. This entity could be a family member, a stranger or an abstraction such as a god. The person then considers whether they can take what they want from the entity (i.e. they can dominate it) and if so, they take it (greed).

If they cannot take what they want through dominating the entity, their unconscious mind seeks to bargain with this entity (now the love object) in the hope that emotional investment will lead to them getting what they want. Frijters and Foster liken this response to (among other things) submission, although it is a more complete form of submission as there is an internal change in self-image. The person becomes partially “one” with their love object. They internalise the wellbeing of the love object into their own wellbeing and are willing to make transfers toward this love object.

Given that the love-greed response depends on whether a person can dominate an entity, the trigger for love is the nature of the power relationship. People will tend to love entities more powerful than themselves. This might appear to create difficulties where two people love each other, but Frijters and Foster try to make it work. As an example, they suggest that a young child wields power over their parents before birth through the costs that the mother must bear (hence, fathers are snared by children to a lesser degree). Conversely, children love their parents as they are initially helpless, and do not realise that they will have power later on.

As I foreshadowed in the last post, I am not a huge fan of the love principle for a few different reasons. The first is that their description of the agent becoming “one” with the love object is, in one particular case, more accurate than they suggest. Consequently, this groups together what I would argue are several different phenomena. The model that Frijters and Foster present at the end of the book is a useful tool to illustrate this point.

In this model, an agent lives for two periods and seeks to maximise his utility in both periods of his life. This completely naive individual (incorrectly) believes that an emotional investment in a love object will yield a more consumption in the first period. What the agent does not realise is that in the second period the agent’s utility function changes to incorporate the love object. Frijters and Foster do this by making the agent positively weight the love object’s utility in the agent’s own utility function, with the level of incorporation of the love object’s utility an increasing function of the agent’s initial level of emotional investment.

As consumption by the love object in the second period increases the agent’s utility, the agent transfers consumption goods to the love object. The net result of this action is that the agent consumes the same amount in the first period irrespective of their level of emotional investment, as the emotional investment does not actually increase their consumption. The agent consumes less in the second period due to their transfer to the love object. Their utility is higher in the second period, however, as they have now gained utility from the love object’s utility.

From an evolutionary standpoint, I’m not sure how this system could evolve as an agent that does not love would consume more. There would need to be some other advantage to love not incorporated into the model. Frijters and Foster hint at a few possibilities, such as confidence and signalling, but for some of the examples they consider, there is an important option – kin selection. It is easy to incorporate kin selection into the model, as the weighting given to the love object by the agent would be the degree of relatedness. This turns the utility equation in the second period into a modified form of Hamilton’s rule, with the asymmetry of transfers between parent and child based on the lower reproductive value of the parents.

By making the love object kin, the love object would be part of the agent from the perspective of the relevant unit of selection, the gene. To the extent there is any internalisation going on due to the triggers or primes that lead to children and parents loving each other, evolution shapes it so that people internalise kin according to their relatedness.

This approach creates a simpler explanation for some of the love relationships Frijters and Foster describe. Children and parents love each other as they share genes. Mothers love more than fathers as the mother is more sure that the child is hers, and a father can produce many more love objects in a lifetime to which he can give his love. As Frijters and Foster note, this love of kin is not automatic and involves priming before and after birth. They point to the power relationship as triggering this love, and suggest that children do not love machines because machines have no power. But there are alternative explanations to this, such as having a type of object (e.g. a human face) that they are susceptible to be primed with.

Of course, this approach does not extend to the cases where two non-kin love each other, which relates to the problem that I raised above. Love of kin has different evolutionary forces shaping it to love of partners, groups or gods. As a result, I’m not sure they should be grouped together, even if there are some common neurological or biological factors.

For these non-kin cases I take a different reading of the process leading to “love”. I like the build up to the love principle – decide what you want, see if you can take it, take it if you can. But I lose them at the point where the person decides they cannot dominate the love object. I would state the process as being that after someone assesses that they cannot get what they want by domination, they come up with a different strategy. Those strategies are complex and varied, but many of them are not love in the sense felt between kin, or even loyalty as it is usually defined (Frijters and Foster group love and loyalty together). Accordingly, many of the so-called battles between love and greed described in the book are simply assessments of the costs and benefits of different actions under varying constraints.

Consider this in the context of another example they give, a reasonably well matched couple. If each has what the other wants but they can’t simply take it, love will flow both ways. Social conditions may affect that power balance, such as the social stigma associated with one of the couple receiving services from elsewhere. There may be similar neurological and biochemical processes associated with this form of love to those that occur with children. But the relationship is different – reciprocal rather than becoming one. An indication of the difference is the likelihood that love between a couple will fade if conditions change, such as the male gaining more wealth and resources, which is markedly different to the usual case with children.

I’ve never come across a completely convincing evolutionary explanation for love outside of kin relationships, but lean towards love being a bootstrapped evolutionary solution to providing a commitment device. As argued by Robert Frank, love results in behaviour that honestly signals commitment to the other party. Or, my generally preferred explanation, it simply focuses the loving parties on the actions that will maximise their reproductive success.

Although the evolutionary biology approach doesn’t offer a perfect answer, it does work for the out-of-sample predictions. Power is an aphrodisiac, as a woman wants a powerful man’s genes and resources. As a person becomes more powerful, love fades as they simply have more opportunity or resources. Parental investment theory provides a basis for sex differences in the response to power.

When we move to love in groups (which is probably closer to loyalty as traditionally defined), Frijters and Foster describe the love that the submissive members of the group feel. In their examination of the evolutionary benefits of the love program, they suggest that love prevents stress as it allows internalisation of the success of the dominant group members (although the Whitehall and other experiments suggest low ranked people still experience stress – and if stress was costly, why do people feel stress?). They also point to survival of a long period of subordination through avoiding possibly harmful conflict. But I am not sure that these strategies are loyalty or love. The submissive member may be implementing kleptogamy, where lower status males within the group try alternative ways of accessing females (or as John Maynard Smith termed it, the “sneaky f*&%er” strategy – and if someone knows an authoritative source giving John Maynard Smith credit for this phrase, please let me know). They may form smaller coalitions, such as banding with other beta males, with the resulting reverse-dominance hierarchy keeping the highest status male from taking too many spoils for himself, lest he be stabbed in the night or overthrown. These are strategic relations, with greed at their heart. We don’t need a love principle to explain the fact that a weak male chooses to avoid conflict in the short-term and bide his time.

The one element of the love principle that seems strongest to me (and for which this evolutionarily informed approach is weakest) is for love of abstractions and symbolic expenses, such as sacrifices to gods. There are potential explanations such as signalling, maladaptation, spandrel or strengthened bonds in a group through the shared abstraction, but they are not completely satisfying. The love concept is neat in that it directly addresses this phenomena, but I am not convinced.

As I flagged in the last post, when Frijters and Foster turn to the applications of their theories, I become more strongly of the view that what they are calling love is simply constrained greed. For example, they note the victory of love in the lack of trade barriers, but under the process described in the book, it is the greed of politicians and economists within their own groups that brought trade barriers down. They are responding to the internal incentives of the group, and I am not sure the economists are feeling much love. Rather, it seems that they are labelling positive results for groups as love, even if no-one specifically feels love.

This points comes out further in their view on the balance between love and greed over time. In the short-term, they suggest we decide with our heart. However, evolutionary factors mean that we have to effectively be greedy in the medium term to avoid being eliminated, so in the medium term greed wins. In the longer-term, they suggest that love is winning out, as if we look at the level of nations, history tends towards institutions that recognise greed but constrain it for the common good. Is this a subtle shift in what they mean by love? I’m happy to call this love, but it may not directly relate to the love principle, as it does not require that people have become one with any love objects, and could simply be the result of constrained greed (which is what their evolutionary analysis of the medium term would suggest).

So, to pull a rather long post together, I’m not convinced about the mechanism behind the love principle, that the full scope of love and loyalty covered by the principle should be grouped together, and whether many of the actions labelled as love are anything but constrained greed. I’m open to being convinced on many of these points, but I’m struggling to accept the whole package. Still, its a pretty neat idea to pull apart some interesting issues.

My assessment of An Economic Theory of Greed, Love, Groups, and Networks by Paul Frijters with Gigi Foster varies with the objective I assess it against. On the one hand, Frijters and Foster seek to supplement what they call the “mainstream economic” view to give an enhanced perspective of how society works. Although they sometimes talk this objective down, it is inherently ambitious and encompasses a significant expansion of core economic theory. Against this benchmark, I am not convinced they have succeeded.

On the other hand, if you removed the paragraphs that hint at the authors’ loftier intentions and simply took the book as an interesting analysis of three areas – love, groups and networks – that many economic questions could benefit from incorporating in their analysis, the book is clearly a success. Although not the easiest read, I enjoyed it. It is dense with ideas and is one of the more stimulating books I have read for a while.

Frijters and Foster’s basic argument is that while “mainstream economics” has great value in many spheres of analysis, it requires supplementation with perspectives on love, groups and networks to provide an explanation for a range of phenomena that mainstream economics doesn’t quite capture. They structure the book around this approach, with an overview of the mainstream economic foundation of “greed” in the opening chapter, followed by chapters on love, groups (and power) and networks. They close by discussing some applications of this enhanced framework, and if you are feeling ambitious, a theoretical appendix containing models on some of the core concepts.

The love chapter is based on what they call “the love principle”, which they suggest is the one new theoretical contribution of the book (the novelty of the book otherwise being the way they bring together many other strands of thought). They state the love principle as follows:

Love derives from the attempt of the unconscious mind to bargain with something that is believed to be capable of fulfilling desires and that is perceived to be too powerful to be possessed by direct means.

Love (or loyalty) is the result of power relations. When someone has a desire, they assess whether someone (who may not necessarily by a physical entity) can provide it and whether it can be obtained from that entity by dominating it (greed). If not, this is where Frijters and Foster suggest love comes in. Love is a submission strategy, whereby the person unconsciously makes a “love bargain” and the individual starts to recategorise themselves to become one with the entity that they have submitted to.

This love principle is a tough concept, and each time I think about it, I am not sure if I fully understand it. To the extent I do, I am not a fan of the idea. The difficulty in grasping the concept is illustrated by the general absence of a clear description of the love principle in the book’s promotional material, including interviews with Foster and Frijters. It is not soundbite material. To give it the time it deserves, I have written a separate post pulling the love principle apart.

The chapter on groups was, to my reading, the most important chapter and the concept upon which Frijters and Foster build most of their applications. They describe five types of groups – small hierarchies, small circles of reciprocity, large hierarchies, large circles of reciprocity, and networks. The smaller groups are nested within larger groups, with most people being members of many different types of groups. For example, a large company is a large hierarchy, but it sits within a large circle of reciprocity (a nation) and within it has many small hierarchies and small circles of reciprocity. When we are analysing an economic question, knowing which group a person is in and how they respond to the norms within the group (and how others enforce those norms) provides a layer of analysis

I enjoyed the analysis of groups, although there were points I kept thinking “what about [X]?”. One that kept popping into my mind was reverse-dominance hierarchies – although this point comes back to love and dominance, so I’ll explore it in more depth in my next post.

The chapter on networks was interesting, being a topic I know little about (and hence I have little to add here), although I enjoyed it as the chapter appealed to my preference for thinking about the interactions in an economy as occurring between heterogeneous agents. The basic idea in the chapter is that an economy consists of a series of contacts between people. New technologies or shocks to the system (such as the collapse of communism) destroy many of the contacts, with the recovery from that shock reflecting the number of contacts destroyed and how quickly new contacts can be established.

The last chapter consists of a series of examples of where these perspectives on love, groups and networks can add to the mainstream view. Issues they cover include the high level of tax compliance despite the low chance of being caught cheating, voting behaviour where a single vote will almost never count, symbolic expenses such as gifts to a god, and the way competition regulation occurs. This was the point where I expected to see more tying together of the main concepts, or a stronger demonstration of their power. But, as they point out, the analysis is often not particularly different from the mainstream economic view. Where it was different, it strongly hinged on the concepts of groups, whereas love (apart from symbolic expenses) and networks had smaller roles. In many ways it felt like a sophisticated public choice type analysis, examining all the players and looking at how the nature of the groups they are part of shape their incentives. I like that way of thinking, although it usually feels as though greed and self interest are the most important factors within those groups.

One issue that led me to struggle to buy into Frijters and Foster’s broader objective was the manner of presenting many of the arguments. At  beginning of the book, we are told that the concepts of love, groups and networks were chosen by a process of trial and error, and that there is no point in “regurgitating all of the mental activity that led to this book”. That may be fair enough, but it makes it difficult for the reader to take the intellectual journey that the authors have. Similarly, most sections ended with what were called “out-of-sample” predictions, but given the way that the authors developed their arguments, they are only out-of-sample based on the authors’ out-of-sight thought processes. It’s hard to buy into this framework when you are only shown the result, not the process.

In another year or so I’ll give the book a re-read and see if I respond differently having have stewed on the components a bit longer. But even if I don’t buy into the broader framework, there is more than enough interesting material for a second visit.