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Revolutionizing Economics by Evolutionizing It

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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

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

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