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Revolutionizing Economics by Evolutionizing It

The views expressed are those of the author and are not necessarily those of Scientific American.


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Economics will soon be revolutionized, by being evolutionized, again. This time with fewer unnaturally selective ideas. Scholars, like those working with the Evolution Institute, are adapting the assumptions, methods, and goals of economics to better fit empirically observed humans. Our survival foreseeably requires it.

Economics and evolution have always been deeply related. Natural selection crystallized for Darwin because of a Thomas Malthus essay on economics. More recently Richard Dawkins overstretched gene selfishness—committing the fallacy of composition—to claim that everything that evolves “should be selfish,” thereby spuriously lending the shield of science to a “naturally” selfish economics.

Conventional economics presumes we’re rational and greedy, and that markets make optimal equilibria. These assumptions are empirically testable. And they’re often false. Daniel Kahneman says it’s “self evident that people are neither fully rational nor completely selfish,” and complains that economists model a “different species.” Kahneman created behavioral economics by using empirical psychology and more biologically coherent assumptions. But it mostly keeps the same “rationally” self-interested methods and goals as un-behavioral economics.

Self-interest in evolution is different from self-interest in economics. Lessons about limits and dependency from one can improve the other.

The appetites and capacities of everything in biology are physiologically limited. Beyond some satiety level, more isn’t better—it’s often unhealthy and counterproductive. By contrast, self-interest in economics is considered limitless. Every extra dollar gained is better. But that’s a numerical illusion. An extra dollar’s benefit varies by circumstances (an idea used only peripherally, e.g. in diminishing returns). Unlimitedness is deeply unnatural. It ignores the foreseeable capacities of systems we depend on.

Evolutionary self-interest is mostly dumb. It leads predators to overhunt their prey, destroying themselves (and their dumb self-interest-maximizing genes). Somehow economic self-interest has become equally unintelligent. It’s often self-undermining, as in Prisoner’s Dilemma games, and in the global climate “tragedy of the commons.”

Natural selection is dumb. It has no foresight. But we evolved to have intelligent foresight—and should see the logic of this universal principle of dependency: Nature ultimately eliminates anything that damages what it depends on.

Dawkins distinguished replicators—genes—from the vehicles—bodies—they need to survive. Despite his desire to see genes (and all built by them) as ruthlessly selfish, each gene must also cooperate with every other gene its vehicle depends on . Same goes for social animals and the others they depend on. We’ve been team survivors for 10,000 generations, since group hunting out-produced going solo. And team survival required punishing excessive self-interest that threatened group stability.

We are likely the first species to know all this. And we ignore it at our peril. Limits, intelligent foresight, self-deficiency, interdependent coordination, and relational rationality are in our nature. They should all be in our economics. And in our rational self-interest, rightly understood. Economics needn’t be as dumb as trees or as self-harming as over-hunters.

Illustration by Julia Suits, The New Yorker Cartoonist & author of The Extraordinary Catalog of Peculiar Inventions.

Previously in this series:

It Is in Our Nature to Be Self-Deficient
Inheriting Second Natures
Our Ruly Nature
It Is in Our Nature to Need Stories
Tools Are in Our Nature
We Fit Nature To Us: Evolutions two way street
Justice Is In Our Nature
Behavioral Telescope Shows How Cooperation Works
Selfish Genes Also Must Cooperate
Game Theory And The Golden Punishment Rule

Jag Bhalla About the Author: Jag Bhalla is an entrepreneur and writer. His current project is Errors We Live By, a series of short exoteric essays exposing errors in the big ideas running our lives, details at www.errorsweliveby.comwww.errorsweliveby.com. His last book was I'm Not Hanging Noodles On Your Ears, a surreptitious science gift book from National Geographic Books, details at www.hangingnoodles.comwww.hangingnoodles.com. It explains his twitter handle @hangingnoodles Follow on Twitter @hangingnoodles.

The views expressed are those of the author and are not necessarily those of Scientific American.

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Comments 6 Comments

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  1. 1. DuFarle 12:22 pm 07/12/2013

    If I may “intelligent foresight” presupposes an understanding of the second law of thermodynamics. Malthus saw food, land, disease and war limited population. Nitrogen fertilizer solved food. Antibiotics and vaccinations solved disease. Cities solved land. War not yet. This is still a Stage One Civilization. But on the way to a Stage Two. If evolution has no future sense, it has precise knowledge of the past. Cooperation still has to obey the Second Law. Not to put too fine a point on the whole thing: “There ain’t no such thing as a free lunch!”

    PS intelligence is just grok misspelled.

    Link to this
  2. 2. DuFarle 12:26 pm 07/12/2013

    Sorry, my BAD.
    Type II Civilization.
    http://en.wikipedia.org/wiki/Kardashev_scale

    Link to this
  3. 3. shorewood 4:49 pm 07/12/2013

    If the author has any economics education at all, he surely read different books than I did.

    Beating down straw men is no great accomplishment.

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  4. 4. Scienceisnotagenda 7:03 pm 07/12/2013

    All akin to a fuzzy Coca Cola commercial. Let’s all cooperate and move forward.

    Evolution doesn’t have an end purpose. It just ‘is”.

    Please, no more articles about we will all perish, unless….that’s silly filler resorted to when an author doesn’t have the skills or knowledge to sum up his article.

    Link to this
  5. 5. Cramer 4:44 am 07/13/2013

    DuFarle, who claimed a free lunch?
    Shorewood, what straw man?
    Scienceisnotagenda, who claimed evolution has a purpose?

    Link to this
  6. 6. jtdwyer 7:51 am 07/13/2013

    DuFarle,
    “Nitrogen fertilizer solved food. Antibiotics and vaccinations solved disease.”

    Those ‘solutions’ appear to be reaching a point of diminishing returns. New solutions are needed, quickly – those only enabled the subsequent geometric expansion of the human population…

    Link to this

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