By David Sloan Wilson and Dennis J. Snower

April 14, 2024

Editor’s note: Whatever else one might say about neoclassical economics, it does qualify as an interlocking set of ideas, compared to countless other schools of thought that do not cohere with each other. This is one reason why the neoclassical paradigm not only dominates the economics profession, but also invades other professions such as law and academic disciplines such as sociology. 

What’s needed to go beyond neoclassical economics is another interlocking set of ideas and by far the best candidate is Darwin’s theory of evolution. This video introduces a five-part series of articles titled “Rethinking the Theoretical Foundation of Economics”, which lays a foundation for the new paradigm. 

The authors are well suited for the task. Dennis J. Snower is former president of the Kiel Institute for World Economics and current president of the nonprofit Global Solutions Initiative, which advises the G20 and G7 and organizes an annual Global Solutions Summit in Berlin. He is a professorial research fellow at the Institute for New Economic Thinking (INET) in Oxford and a non-resident fellow of the Brookings Institute in Washington DC. David Sloan Wilson is SUNY Distinguished Professor Emeritus of Biology and Anthropology at Binghamton University in New York and president of the nonprofit ProSocial World, whose mission is “to consciously evolve a world that works for all”. Wilson’s background in evolutionary science, including a 2007 review article with Edward O. Wilson titled “Rethinking the Theoretical Foundation of Sociobiology”, complements Snower’s background in economics and public policy. Together, they are capable of envisioning human nature as inherently social and economic systems as multi-level cultural constructions embedded within political, social, and environmental systems. 

The video and print transcript provides an overview of the series.

DSW: Hello, Dennis J. Snower, my friend and colleague! I am delighted to talk with you about our five-part series of articles titled “Rethinking the Theoretical Foundation of Economics”.  It has been a long time in creation, including an earlier draft that’s been circulating online and an earlier conversation between us on Evonomics.com.  Finally, part one has been published in the online open access journal Economics, with the other parts soon to follow.

I want to briefly introduce ourselves and then step through the five-part series, which we call a new paradigm–the multi-level paradigm. You need no introduction in economic circles, but for our more diverse audience, who are you, Dennis J. Snower?

DJS: Foremost, I am your friend and colleague. After that, I am president of the Global Solutions Initiative, which advises the G20 and G7 from year to year. And I am a professorial fellow at the Institute for New Economic Thinking in Oxford, a visiting professor at University College and non-resident fellow at Brookings.  And I bring the enthusiasm and also the necessary sense of critique to this project of a new way of thinking about economics.

DSW: Awesome, that’s great. Inside the profession, you are known for something called Insider-Outsider theory. I love that because you, as you have just shown, are the consummate insider, while I am the consummate outsider.  I do need an introduction in economic circles. I’m trained as an evolutionary biologist, best known for studying the puzzle of how altruism can evolve in a Darwinian world. In 2007, I wrote a review article with my great and recently departed colleague, Edward O. Wilson, titled “Rethinking the Theoretical Foundation of Sociobiology”, which applies to all social species. I think of our series as essentially an extension of the framework of that paper to human cultural evolution in all its forms, including economics and beyond.

I started studying economics per se over 15 years ago, so I’m not a newbie. That includes a collaboration with Elinor Ostrom, who shared the Nobel Prize in Economics in 2009, and whose work is central to the multi-level paradigm, as we will get to. Now I am delighted to have collaborated with you for a period of over four years, I believe, in the writing of this series.

Now let’s step through the series. I’ll take part one and then turn parts two through four over to you. Part one begins by taking the concept of paradigm seriously, as an interlocking set of ideas that makes sense of the world in some respects, but also has difficulty escaping its own assumptions. Whatever else we might say about neoclassical economics, it does qualify as a paradigm, an interlocking set of ideas, in this sense. That’s one reason why economists are so proud of their profession, setting it apart from the other social sciences and also other schools of economic thought, which are not integrated in this sense.

We call this diffuse pluralism–many islands of thought with little communication among islands.  One thousand critiques of neoclassical economics are not going to be effective unless the critiques hang together. What’s needed to replace the neoclassical paradigm is another interlocking set of ideas. We say that by far the best candidate for this is a combination of complex system science and evolutionary science. The evolutionary part is called generalized Darwinism, and it applies to all processes that combine the ingredients of variation, selection, and replication. That includes human cultural evolution and artificial intelligence, which is computerized evolutionary algorithms.

A key part of generalized Darwinism is called multi-level selection (MLS), which tells us that functional organization can evolve at any level of a multi-tier hierarchy of units, such as from small groups to global governance in human cultural systems, but only when special conditions are met. When these conditions are not met, then adaptations that evolve at smaller scales become disruptive at larger scales. So, MLS is profoundly different than the metaphor of the invisible hand, which claims that the lower-level pursuit of self-interest robustly benefits the common good.

Part one ends with a very brief historical review of evolutionary thinking in economics; from Smith, to Veblen, to Hayek, to Nelson and Winter, to Ostrom, and to the present. The bottom line is that the multilevel paradigm can inform any positive change effort, no matter what the scale or context, in economics and all other human endeavors. There is the stage broadly set and I’m delighted to pass to you for parts two through four, which apply the ideas more specifically to economics.

DJS: Without sticking to the parts themselves, but in terms of the components of our theory, functional organization is absolutely central.  It does not play as strong a role in neoclassical theory,  behavioral economics, or most other types of economics, because the functional organization is assumed to be rigid. In other words, whoever the decision makers are, those are the decision makers forever. In economics, the decision makers are households, firms, and government, and they are assumed to act like individuated decision makers, as if they are cohesive, coherent units.

In our theory, there are flexible multiple levels of functional organization. That means that you’re in a completely different world. You need to start thinking about economic agency in a different way. Who says that the economic agents are necessarily households, firms, and government?  Who the economic agents are depends on how people form social groups. And those social groups may be cohesive enough to be considered a decision-making unit at some level. And since every human being has some degree of autonomy, usually agency is shared between the individual and the groups within which you participate.

Now, in standard neoclassical theory or behavioral economics, wellbeing and skills and so on are all located in the individual. In our theory, it’s not necessarily the case. They can, but skills can be located in a group. And obviously, in the real world, most work is teamwork. You’re critically reliant on other members of your team and your skills are therefore distributed. Similarly, to say that your preferences are hardwired in your mind and you just follow them through, perhaps with limited context-dependence, is simply not making contact with reality. We know that we’re influenced by our contexts and we play a part in forming the contexts of other people. Our multilevel paradigm takes that seriously.

In neoclassical economics, you’ve got different categories. You’ve got preferences, they determine your objectives. Then you’ve got beliefs about what other people do, which is determined by rational expectations or some super rational model. Then you’ve got perceptions which are assumed to be like an imperfect mirror image of the world. In our theory, perceptions, beliefs, and objectives all form part of one package, a particular identity that gives you particular motivations. If they’re caring motivations, then you’ll have prosocial beliefs, your perceptions will be geared to your prosociality, and your objectives will be prosocial. Whereas if you live in a highly competitive cutthroat world, it’ll be very different. Your beliefs will be zero-sum thinking and your objectives will be centered more on your individual objectives rather than your participation at all. You’re in a completely different world, once you accept that what makes human beings distinctive is their ability to be flexible in their levels of functional organization. That gives us a special responsibility because if we want to live in harmony with the natural world and in harmony with each other, then we need to shape our groups, our levels and domains of functional organization, so we’re able to cooperate.

DSW: Right! Part of this, Dennis, is the concept of an embedded economy.  Economic systems are embedded in social, political, and environmental systems. When you put it that way, it goes without saying. Yet, the neoclassical paradigm encapsulates economics. Maybe you could say a little bit about that, the concept of an embedded economy as something which is integral to the multilevel paradigm, but not so much in the neoclassical paradigm.

DJS: The Neoclassical paradigm sees economics largely as self-contained. Most economic activity is explained within the variables defined by economists in particular ways. Therefore, the idea that you can’t understand economics unless you understand the social structure in which it’s embedded, what type of social relations people have, etc–that’s foreign to neoclassical economics and most of economics.

It makes sense intuitively that if we trust one another, we will have a totally different set of economic relations than if we don’t trust one another or if we’re in conflict with one another. The invisible hand of Adam Smith, where if there are gains from trade to be exploited, they will be exploited, makes a lot of assumptions about society, which society does not often manifest. So, the embeddedness within society is absolutely critical. The embeddedness within our polity is also critical because different political systems set different rules whereby you can trade. And the embeddedness within the environment is absolutely essential.  That’s not simply a matter of knowing that we get our energy from these raw materials and we dump our waste into this place. But the environment provides a context within which we make decisions. And according to the multilevel paradigm, this context dependence is ubiquitous.

Summarizing, we have functional organization and an embedded economy, which relates integrally to functional organization. A third core feature of our paradigm is uncertainty. Neoclassical and behavioral economic focus primarily on risk, based on probability distributions, but you just don’t know the realized values of whatever it is that you don’t know. In the multilevel paradigm, we take seriously the fundamental incomprehensibility of our world. We don’t understand even the workings of our own minds, not to speak of the workings of other minds in the natural world. Therefore, the best that we can do in terms of economic modeling is work in terms of small worlds, which is little mental models that we can manage and fit into our heads at the same time and communicate about. And they are likely to be wrong much of the time. Our best chance is to build those models that are likely to be right for the purposes at hand at the moment.

DSW:  This contrasts the Newtonian view of theory with the Darwinian view. When we say that we don’t know and have to experiment, we’re saying that we have to be intentional about cultural evolution. We must have systemic goals, try things out, and repeat again and again. That’s what we mean by small world models, as opposed to fundamental theorems and so on. Right?

DJS: Absolutely. So that the world is open. In economics the most important concept is efficiency. To be efficient you must know your goal, the constraints that you face, and the means at your disposal to achieve that goal. Then, to be efficient is to use the best means to achieve your goal as well as possible. But if you don’t know your constraints, you’re not clear about the world in which you operate, and your goals are evolving in response to the world, then this concept of efficiency no longer has a lot of traction. Other concepts become important that are often diametrically opposed to efficiency, like resilience, robustness, and particular adaptability.

DSW: And let me add something emphasized by our colleague, the systems engineer Guru Madhavan—maintenance!  Maintenance doesn’t get any love, no respect for maintenance, but in fact, 80% of what we do has to be maintenance. That’s true for our bodies and it’s also true for our cultural constructions. Maintenance is not just some guy with a broom! Sorry to butt in.

DJS: That’s really important, particularly if you understand that we define maintenance differently from the way it’s defined in economics, which is basically accounting for depreciation and making up for it. That is not what we are talking about. Maintaining our environment is being a responsible steward of the environment and making sure that it is able to regenerate. That is not something that an economist currently would recognize as a definition of maintenance, but it is absolutely vital for our actions in a world of uncertainty. You need the requisite humility. Even your goals that you have now, you must be aware that the goals may change if adaptability requires it. We understand this intuitively in our lives when we turn into older men as we are, David. We look back at the goals that we had in our childhood or in our 20s and we shake our heads. That doesn’t mean necessarily that we have a superior understanding of exactly where we were then, but it does mean that we’ve adapted to our environment and our goals have changed in response. And so that is really important. It’s also important to understand and critique the correspondence theory of truth, which all economics is based on; that there is an independent reality out there and our knowledge simply corresponds to that reality. As we gain more knowledge, we get a closer and closer fit with that reality. That is something that the multilevel paradigm casts aside, because while it’s true that there is a reality that exists apart from human existence, we also create our own realities, to which we adapt in a continuous reciprocal process between what we do and the contexts that we shape. That leads to the next core feature of the multilevel paradigm, which is theory pluralism.

In economics, we’re fond of theory, and when enough people jump on the bandwagon, then economics is defined in terms of that theory. Neoclassical economics has a very tight grip on the theories that are acceptable, and they define economics for neoclassical economists. Our paradigm says that you should have a plurality of theories, all of which are largely compatible with the evidence that you have but make different predictions.  As you move along and get surprised by what the world does in contrast to what your theory predicts, you then have a broader cognitive space to deal with the surprises. It’s like keeping your eyes open in the dark. It is terribly important but alien to current economic theorizing. The last two elements I can deal with very quickly together, which is multi-level decision-making and multi-level flourishing. Multi-level decision-making simply takes seriously what we’ve just been talking about, which is that we operate at the level of the individual but also participate in the wellbeing of the collectives to which we belong. Therefore, our well-being depends not just on the goods and services that we get or that we produce through the resources that we take from Mother Earth, but they also depend on our embeddedness within society, our fulfillment for social belonging, and our sense of agency, or to what degree can we shape our life through our own efforts. And it also depends on how we contribute to the natural world, to what degree we help maintain it, acting as responsible stewards of it. All that goes into our decision-making goals and also functions as guides for what gives us meaningful and fulfilling lives. This is a much broader understanding of well-being than economists’ utility functions, which depend simply on consumption and leisure.

DSW: Boy, that’s so great. If some of this seems like common sense to our listeners, especially those who do not have an economic background, it is common sense, although the whole concept of common sense depends on how you view the world. Also, some of these points have been made by many others within economics, including Nobel laureates emphasizing such things as the importance of norms and the enculturated self. But for the most part, these have been pushed to the periphery of the profession. What’s new, I think, about the new paradigm is that now the heterodox views cohere.  They become more interlocking within the multilevel paradigm than they were before. That’s what is new.

DJS: I can give one example of this. I regard identity economics as really important because it is intuitively very close to what we are talking about. It says that your behavior, objectives and goals depend on your identity, and your identity depends on the group to which you belong.

DSW: Of course, yes.

DJS: That has huge effects on how educational institutions work, how the workplace works, and so forth. The big question that is often asked of identity economics is, well, what determines identities? Where do they come from? And our answer to that question is that they evolve according to the principles of Darwinian variation, selection, replication. And how they evolve is very significantly our responsibility because we must be aware of the fact that our identities are evolving as we speak.

DSW: Yeah.  I can recount my own journey into the economics profession as the consummate outsider. Eventually I encounter a 2007 article by George Akerlof, a Nobel laureate. I think it was his presidential address in the American Economics Review titled, “The Missing Motivation in Macroeconomics”.  And the missing motivation is norms.

So I’m reading this, and I’m saying, what? Norms? It’s 2007, and economics is discovering a little thing called norms? That’s the degree to which a concept that is absolutely central to the human condition, my heavens, is now just newly being incorporated into economics. This was mind-boggling for an outsider. I’m glad that it’s happening, but with the multilevel paradigm and generalized Darwinism, that’s where you start out. You start out with individuals inherently embedded in groups that are governed by norms. It’s not what you’re trying to add on decades later. I’m letting my feelings out, but this is the kind of experience I had again and again in trying to navigate the economics profession.

DJS: One thing that I think all professions share in common is that when other professions tread on our ground we are amazed at how facile these other people think. That’s why it’s so useful to pick the low-hanging fruit between the disciplines. Extended Darwinism helps you do that by providing an integrated framework for doing so.

DSW: Yeah. What we’re offering here as a generalized version of other things. A generalized version of Ostrom. A generalized version of adaptability.  It’s not replacing the disciplines. it’s integrating the disciplines. And that’s of course what evolutionary theory did for biology long ago.  This is in many ways the kind of conceptual unity that’s already taken for granted in evolutionary biology and now newly on offer for economics and the social sciences.

Let’s finish up with part five of our series, which gets down to practical applications. We say that even though this is a new paradigm, it’s shovel ready for informing cultural change efforts of all sorts, inside and outside of economics. A foundational insight, which we’ve actually already covered, is that individuals never lived alone during our entire history as a species. We always lived in small and, for the most part, highly cooperative groups, starting at a small scale, with larger scale cooperative societies being layered on through about 10,000 years of human history.

So, whereas the starting point of neoclassical economics is the autonomous individual (Homo economicus), the starting point of the multilevel paradigm is individuals as part of something larger than themselves. That has actually been baked by genetic evolution into our brains and bodies, the trade-off decisions we make. We always are genetically factoring in our social resources in addition to our personal resources.

At the same time, groups are not automatically good. They require appropriate structure to function adaptively. The generalization we can make is that all groups need two things: A)  to be well governed; and B) to be adaptable, as you’ve already touched upon. The governance part is based on a generalized version of Eleanor Ostrom’s work, including the core design principles for governance of single groups and polycentric governance for multi-group interactions. The adaptability part is based on a generalized version of therapeutic and training methods from the applied behavioral sciences, which are highly evidence-based, with over a thousand randomized control trials demonstrating the efficacy of the methods. All of this is scale independent, as relevant for giant corporations and nations in the global village as for individuals in a real village.

As we increase the scale of our examples; from manufacturing plants, to smart cities, to nations, to global governance, we say repeatedly that the problems might be more challenging as we go up in scale, but they are not different in kind. This is an enormous conceptual simplification.  We can take the same basic set of interlocking principles and apply them at every scale and every context. I’d like to end my own contribution to this conversation by quoting the final passage of part one, which has just been published. Here’s what we say.

We submit that if a paradigm shift takes place, by changing the way we think, it will change the way we act. There will be a quantum jump of good governance at all scales, including the global scale, and further improvements will take place over the longer term as institutional and procedural shortcomings are addressed with the welfare of the whole Earth system, the ultimate unit of selection in mind.

That is what we’re working towards for the series as a whole.

DJS: One thing really worth saying is that this implies a new purpose for economics.Economics has understood itself so far as basically connecting the means and the ends. You’ve got scarce means, you’ve got predetermined ends, and you want to connect them efficiently.  Now the name of the game is first of all, how do people mobilize economic means, which could be adaptable or non-adaptable, and how could they be mobilized so as to promote flourishing both individually and collectively, now and in the future. That is a big challenge that connects us with other social sciences and the natural sciences and helps integrate the purpose of economics with the purpose of a lot of other stuff that we do.

DSW:  Yeah, that’s great. moving forward, I want to announce an online community and two physical events that will feature the new paradigm. The online community is called the New Paradigm Coalition, and we’ll provide a link so that our listeners can learn more about that. An annual event that you organize in Berlin, the Global Solutions Summit, will be taking place this year on May 6 and 7. The new paradigm will be featured there in some of the programming. And a conference on rethinking business education will take place at Fordham University in New York City, organized by our colleague Michael Pirson, on June 3 to 7. So here are opportunities to become involved, both online right away and two forthcoming offline events. And so, Dennis, I look forward to continuing to work with you and many others to catalyze the new paradigm. Catalysis means to make things happen in years rather than decades or not at all.  And I’m a big believer in catalysis.

DJS: I think it’s absolutely necessary now because everyone has the feeling that the world is out of kilter. Our environment is destabilized, our societies are fragmenting. Not only are we destroying the basis of life on which we depend, but we’re also destroying our capacities to do something about it. To use this sense of urgency to change things, to go for catalysis, is absolutely vital. Thank you.

DSW: Thank you for taking the time and I look forward to sharing this far and wide.

Global Solutions Summit: https://www.global-solutions-initiative.org/events/summit/
Fordham conference: https://www.eventbrite.com/e/transforming-business-and-education-leading-towards-flourishing-tickets-840721369247