This article was published in Scientific American’s former blog network and reflects the views of the author, not necessarily those of Scientific American
Economics is in our nature. But not the narrowly self-interested kind. We evolved to survive collaboratively. Models of us that exclude our interdependence are fatally flawed. “Darwin’s wedge” can provide fitter models.
Evolution gave us a rich set of traits, tools, and rules for organizing collaborative production as our means of survival. And for solving the allocative problems it brings. Nowadays, we call that economics.
Our hunter-gatherer ancestors, likely 10,000 generations ago, evolved to use division of labor. And the sustainable division of profits it requires. Today’s hunter-gatherers still practice egalitarian economics. They’re eternally vigilant against free riding and exploitation, threats as dangerous as any predator. They universally use “counter-dominant coalitions” to prevent the strong from overexploiting their status.
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Evolutionary economist Ulrich Witt notes that we face the same basic issue of coordination in today’s economies. Further complicated by the (evolutionarily recent) rise of agriculture, cities and industrialization, which created opportunities for un-egalitarian accumulation of assets. But as Robert Frank points out, Darwin understood that “individual incentives often lead to wasteful arms races,” where relative rather than absolute wealth is what matters.
Frank coined the term “Darwin’s wedge” to describe how individual and collective incentives can diverge, driving added costs in competing for rank. However much is spent, (e.g. for larger antlers or fancier cars) 50% end up above the median. Though economists have long preached that competition creates efficiency, as if it were a law of nature, nature’s competitions regularly create waste. For example tree trunks are standing monuments to futile competition.
Competitive overheads could be minimized by coordinating for mutual benefit. Such coordination of joint interests is rational. We can set intelligent limits on unfruitful competition. Markets needn’t be as dumb as trees. Uncoordinated individualistic reasoning often creates poor collective results, as in Prisoner’s Dilemma or the tragedy of the commons.
Our survival has long required a mix of self-interest and cooperation, balanced by the interests of others, and by collective goals. Faith in the ethical alchemy of free-markets to automatically transmute base self-interest into the golden “greatest good for all” is misplaced utopianism (though “fewtopian” seems more apt). Even ardent free-marketeers like Alan Greenspan have been “shocked” by “flaws“in their model. Our ancestors understood that excessive self-interest can become self-harming. As Hillel put it being “only for myself” is un-human.
The “laws” of economics are not generally like those of physics. They’re bylaws, behavioral rules and norms that we can change. It’s irrational to ignore the foreseeably undesirable effects of current economic rules. We must reconnect rational self-interest to collective self-preservation. Delegating responsibility for our interdependent futures to mindless “market forces,” and their dumb coordination, isn’t rational. We can coordinate better than the invisible hand’s invisible brain.
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
It Is in Our Nature to Need Stories
We Fit Nature To Us: Evolutions two way street
Behavioral Telescope Shows How Cooperation Works
Selfish Genes Also Must Cooperate
Game Theory And The Golden Punishment Rule
Revolutionizing Economics by Evolutionizing it.