Economics

What Paul Krugman Needs to Know About Evolutionary Economics

Standard economics meets evolutionary theory

Share with your friends










Submit
More share buttons
Share on Pinterest

By David Sloan Wilson

After complaining that economic soul searching taking place since 2008 ignores evolutionary theory, I was made aware of Paul Krugman’s 1996 address to the European Association for Evolutionary Political Economy. I had read it before but upon refreshing my memory I see that it provides an excellent opportunity to reflect upon changes that have taken place in my own field of evolutionary science during the last two decades.

Krugman’s address, which is reprinted here with his permission, was titled “What Economists Can Learn from Evolutionary Theorists”. He begins by acknowledging that his audience might know more than he does about evolution in relation to economics, but then demonstrates an impressive command of the evolutionary literature, including major figures such as George C. Williams, William D. Hamilton, John Maynard Smith, Richard Dawkins, and Stephen Jay Gould. He confesses to being an “evolution groupie”, even to the point of reading the primary literature and not just popular accounts.

What is the take-away message of evolutionary theory for Krugman? Mostly, that it affirms “standard economics”, at least in the form that he practices. In his own mind, he is “a maximization-and-equilibrium kind of guy” who has “pushed the envelope, but not broken it”. He identifies four components of standard economics:

1) It’s about what individuals do. “Methodological individualism is of the essence”.

2) The individuals are self-interested.

3) The individuals are intelligent and maximize their self-interested utilities.

4) Economists are concerned with the interaction of such individuals, especially the invisible hand conjecture that the intelligent pursuit of self-interest benefits the common good.

Krugman saw evolution as a “sister field” in these regards except for the third component: “The main difference between evolutionary theory and economics is that while economists routinely suppose that the agents in their models are very smart about finding the best strategy…evolutionists have no qualms about assuming myopic behavior. Indeed, myopia is of the essence of their view.”

In my view, Krugman got many things right and a few things wrong in his assessment of mainstream evolutionary science in 1996. He was right that self-interest was treated as a grand explanatory principle. He was also right that evolutionary theorists make use of equilibrium and optimization models, just like economists. The biggest thing that he got wrong concerned the fourth component. Economists assume that when self-interested individuals interact, they are led, as if by an invisible hand, to benefit the common good. Most evolutionary theorists in 1996 would have called this assumption “naïve group selection”.

Get Evonomics in your inbox

Darwin realized that selection among individuals within groups seldom resulted in behaviors that would benefit the group as a whole, which required selection at the group level. In his 1966 book Adaptation and Natural Selection, George C. Williams agreed with Darwin’s assessment and added that between-group selection, while possible in principle, is almost invariably weak compared to within-group selection. As a result, Williams strongly asserted that group-level adaptations do not, in fact, exist. There is no invisible hand that permutes self-interest into the common good. Instead, life’s a bitch and then you die. Or, as Williams once put it, “Mother Nature is a Wicked Old Witch”.

Inclusive fitness theory and reciprocal altruism offer an assessment that is only a little less bleak. They explain how cooperation can extend to genetic relatives and unrelated individuals trading favors at a small scale, but can’t explain how larger single-species societies or multi-species ecosystems evolve to function as corporate units.

The idea that functional organization exists at lower levels of a biological hierarchy, such as individual organisms, but then ceases to exist at higher levels, such as social groups and ecosystems, was deeply antithetical to the Christian worldview, which assumed that a universe created by God must be harmonious from top to bottom. While Darwin was somewhat muted on this theme, his bulldog Thomas Huxley gave it full throated expression in his essay on Evolution and Ethics published in 1893. Huxley was emphatic that evolution doesn’t make everything nice and that ethical human society must be cultivated, in the same way that gardens must be cultivated to keep out the objectionable species. It is not a coincidence that a 1989 edition of Huxley’s essay included a long commentary by George C. Williams.

If the sister disciplines of economics and evolution part company on the third component identified by Krugman, that’s relatively minor—but parting company on the fourth component is huge. Mainstream evolutionary theory in 1996 provided no warrant for the assumption that “decisions reached individually will, in fact, be the best decisions for an entire society”, as the ecologist Garrett Hardin described the principle of laissez faire in his classic 1968 essay on the tragedy of the commons1.

So much for mainstream evolutionary theory in 1996. Has anything noteworthy happened since? Absolutely, although the new developments have long histories as heterodox views. Let’s begin with cell biologist Lynn Margulis, who proposed in the 1970s that nucleated cells did not evolve by small mutational steps from bacterial cells, but rather as symbiotic communities of bacterial cells that became so functionally integrated that they qualified as higher-level “superorganisms” in their own right. This idea was generalized in the 1990’s by John Maynard Smith and Eors Szathmary and became known as “major evolutionary transitions”—the conversion of groups of organisms into groups as organisms. In addition to the major transition identified by Margulis, other major transitions possibly include the origin of life as groups of cooperating molecular reactions, the first cells, multi-cellular organisms, social insect colonies—and human societies.

Maynard Smith sided with Williams in the rejection of group selection during the 1960s but changed his mind for major evolutionary transitions. The basic idea is that the balance between levels of selection is not static but can itself evolve. A major transition occurs when mechanisms evolve that suppress the potential for disruptive forms of within-group selection, so that between-group selection becomes the dominant evolutionary force. Note that his formulation admits the existence of forms of within-group selection that are good for the group, which would be favored by group-level selection along with traits that are more overtly cooperative.

Other noteworthy developments include a reassessment of the plausibility of between-group selection (including Unto Others, my 1998 book with Elliott Sober) and the beginning of a theoretical framework for the study of cultural evolution (including the 1985 book Culture and the Evolutionary Process by Robert Boyd and Peter Richerson). Maynard Smith and Szathmary were somewhat timid in speculating about human evolution as a major transition, but subsequent authors have become bolder. To the best of our current knowledge, the key event in human evolution was the ability to suppress disruptive self-serving behaviors within groups, so that between-group selection became the predominant evolutionary force. Most distinctive human traits such as cooperation among non-relatives, maintaining a shared inventory of symbols, and transmitting learned information across generations are forms of cooperation (broadly defined) that evolved by between-group selection. Group selection is an exceptionally strong force in human cultural evolution, regardless of how strongly it operates in genetic evolution. A selection of books conveying these themes will be listed at the end of my essay.

Let’s revisit Krugman’s four components of economics in the light of these developments in evolutionary theory.

1) It’s about what individuals do. “Methodological individualism is of the essence”. Not any more. The late social psychologist Donald Campbell, an early pioneer of the current developments, said this about methodological individualism in 19942: “Methodological individualism dominates our neighboring field of economics, much of sociology, and all of psychology’s excursions into organizational theory. This is the dogma that all human social group processes are to be explained by laws of individual behavior—that groups and social organizations have no ontological reality—that where used, references to organizations, etc. are but convenient summaries of individual behavior.” This dogma might be theoretically justified in cases where selection takes place entirely within groups (in which case group-level effects are coincidental byproducts), but not when groups are the unit of selection. Or, if you prefer, groups become the individuals when selection operates at the group level.

2) The individuals are self-interested. Not any more, at least not entirely. In my newest book, Does Altruism Exist?, I stress that altruism must defined separately in terms of action vs. thoughts and feelings and that a complex relationship exists between the two. When altruism is defined in terms of action and in terms of relative fitness within and among groups, humans are altruistic much of the time.

3) The individuals are intelligent and maximize their self-interested utilities. Krugman already identified a gap between economic and evolutionary theory for this component in 1996. On the economic side, behavioral economists have been closing the gap by calling attention to the many ways that people depart from the assumptions of Homo economicus, although most behavioral economists do not use evolution as a guide to understand the nature of Homo sapiens, as I stressed in my previous essay.

4) Economists are concerned with the interaction of such individuals, especially the invisible hand conjecture that the intelligent pursuit of self-interest benefits the common good. Ironically, and in contrast to mainstream evolutionary theory in 1996, the new developments provide theoretical justification for the concept of the invisible hand, although different than the received economic version. The two criteria of the invisible hand concept are: 1) A society functions well as a unit; and 2) members of the society do not have its welfare in mind. Multi-cellular organisms and social insect colonies offer spectacular examples of the invisible hand concept in nature. They function well as units and their members—cells in the case of multi-cellular organisms and single insects in the case of social insect colonies—don’t even have minds in the human sense of the word. Instead, they behave in ways that have been winnowed by higher-level selection to be good for their group. Put another way, higher-level selection is the invisible hand and if it doesn’t operate, there’s no theoretical warrant for expecting groups to function well as units. The economist John Gowdy and I develop this theme in an academic article3 titled “Human Ultrasociality and the Invisible Hand: Foundational Developments in Evolutionary Science alter a Foundational Concept in Economics”.

In short, all of the components of economic theory that made Krugman regard evolutionary theory as a “sister field” in 1996 require foundational changes in economic theory in 2016.

Get Evonomics in your inbox

I hope that Krugman remains an evolution groupie and wonder if he has kept up with these developments. Either way, I am pleased to provide a short list of books that reflect the developments for anyone who wants to join the action.

I end my reflection with a comment on open-mindedness. It’s easy to lapse into primordial us/them thinking in controversies of this kind. I occasionally yield to the temptation myself (it feels so good!). Krugman’s address to the European Association for Evolutionary Political Economy provides a model of cordial open-mindedness among people exploring different perspectives. The need for that has not changed between 1996 and 2016.

Hardin, G. (1968). The Tragedy of the Commons. Science, 162, 1243–1248.

Campbell, D. T. (1994). How individual and face-to-face-group selection undermine firm selection in organizational evolution. In J. A. C. Baum & J. V Singh (Eds.), Evolutionary dynamics of organizations (pp. 23–38). New York: Oxford University Press.

Wilson, D. S., & Gowdy, J. M. (2014). Human ultrasociality and the invisible hand: foundational developments in evolutionary science alter a foundational concept in economics. Journal of Bioeconomics, 17(1), 37–52. http://doi.org/10.1007/s10818-014-9192-x

Suggested readings:

Evolution as a General Theoretical Framework for Economics and Public Policy. 2013 special issue of the Journal of Economic Behavior and Organization. Note: JEBO is generously making the lead article of the special issue open access for a 6-month period (go here)

Boehm, C. (2011). Moral Origins: The Evolution of Virtue, Altruism, and Shame. New York: Basic Books.

Jablonka, E., & Lamb, M. J. (2006). Evolution in Four Dimensions: Genetic, Epigenetic, Behavioral, and Symbolic Variation in the History of Life. Cambridge, MA: MIT Press.

Haidt, J. (2012). The Righteous Mind: Why Good People are Divided by Politics and Religion . New York: Pantheon.

Henrich, J. (2015). The Secret of Our Success: How culture is driving human evolution, domesticating our species, and making us smarter. Princeton: Princeton University Press.

Nowak, M., & Highfield, R. (2011). SuperCooperators: Altruism, Evolution, and Why We Need Each Other to Succeed. New York: Free Press.

Paul, R. A. (2015). Mixed Messages: Cultural and Genetic Inheritance in the Constitution of Human Society. Chicago: University of Chicago Press.

Richerson, P. J., & Boyd, R. (2005). Not by genes alone: how culture transformed human evolution. Chicago: University of Chicago Press.

Turchin, P. (2015). Ultrasociety: How 10,000 years of war made humans the greatest cooperators on earth. Storrs, CT: Baresta Books.

Wilson, D. S. (2015). Does Altruism Exist? Culture, Genes, and the Welfare of Others. New Haven, CT: Yale University Press and Templeton Press.

Wilson, E. O. (2012). The Social Conquest of Earth. New York: Norton.

2016 January 20


Donating = Changing Economics. And Changing the World.

Evonomics is free, it’s a labor of love, and it's an expense. We spend hundreds of hours and lots of dollars each month creating, curating, and promoting content that drives the next evolution of economics. If you're like us — if you think there’s a key leverage point here for making the world a better place — please consider donating. We’ll use your donation to deliver even more game-changing content, and to spread the word about that content to influential thinkers far and wide.

MONTHLY DONATION
 $3 / month
 $7 / month
 $10 / month
 $25 / month

ONE-TIME DONATION
You can also become a one-time patron with a single donation in any amount.

If you liked this article, you'll also like these other Evonomics articles...




BE INVOLVED

We welcome you to take part in the next evolution of economics. Sign up now to be kept in the loop!