The Making of “Rethinking the Theoretical Foundation of Economics”

Discussion between authors of a revolutionary new article

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March 24, 2022

By David Sloan Wilson and Dennis J. Snower

Note from the editor:

An article titled “Rethinking the Theoretical Foundation of Economics” has been published as a discussion paper in a new section of the e-journal Economics titled Economics as an Evolutionary Science. According to the open review policy of Economics, articles are made available to the public as discussion papers while they are still under review. Anyone can submit a review, along with the reviewers chosen by the editor, and all of the reviews are made public upon final publication of the article.

This might not seem like big news. The need to rethink economics is widely appreciated, the e-journal is not one of the “big five” economic journals from which a major statement might be expected, and the article isn’t even formally accepted yet. But the status of the authors of this article suggests that something newsworthy is afoot. Dennis J. Snower is a prominent economist, well-known as a contributor to labor and macroeconomic theory and policy as well as advisor to governments and international organizations, past-president of the Kiel Institute for the World Economy, current President of the nonprofit Global Solutions Initiative, and currently active at the Hertie School of Governance in Berlin, The New Institute in Hamburg, the Blavatnik School of Government and the Institute of New Economic Thinking in Oxford, and Brookings in Washington DC.  David Sloan Wilson is one of the world’s foremost evolutionary scientists who authored a major article with his colleague Edward O. Wilson in 2007 titled “Rethinking the Theoretical Foundation of Sociobiology”.

Snower is uniquely positioned to critique his own profession from within. Wilson is uniquely positioned to articulate evolutionary science as a paradigmatic alternative. The article was written over a two-year period and reflects an extensive integration of their backgrounds and perspectives. And an open-access e-journal reflects the inclusive and trans-disciplinary ethos of the new paradigm much better than an elitist economics print journal. is pleased to feature a conversation between Snower and Wilson describing how their collaboration came about and how they plan to build upon the publication of their article in the near future. readers are encouraged to read the discussion paper and consider submitting a review to

DSW: Greetings, Dennis! I look forward to discussing the backstory of our article. Let’s begin with how we met, which says a lot about the need for paradigmatic change. It was a workshop organized by a major foundation to explore how to go beyond neoclassical economics. The participants were drawn from a number of academic disciplines such as law, political science, and sociology in addition to economics. Each discipline had its own table, so the layout of the room reflected the siloed nature of the disciplines. I was the only person with evolutionary training, so I was assigned to the sociology table. That’s ironic, because sociology is even further behind economics in embracing evolutionary science.

I learned a lot from the workshop, including how much the neoclassical paradigm has influenced law in addition to economics. But by the end I became depressed, as table after table reported that this kind of transdisciplinary endeavor would not be career-enhancing within their respective disciplines. It was clear that the siloed nature of the human-related academic disciplines was not going to break down anytime soon, no matter how much money was thrown at it.

Then, at a break between sessions, you sat next to me. I did not know of you previously and was surprised that you already appreciated the importance of evolutionary science in general and multilevel selection theory in particular. That was the beginning of our collaboration and the most impactful outcome of the whole workshop as far as I can tell. What is your recollection of the workshop and our first meeting?

DS: I remember that the workshop focused on the problem of inequality and the role of  neoliberal ideology in generating this problem. This subject sounded interesting to me, since the economics profession commonly views inequality as a purely economic problem, to be tackled through purely economic policy instruments. But this conference gave hope of being a quest for more: insight into the way a worldview can shape dysfunctional social relations, from which inequality can emerge as a symptom.  That at least was the expectation that brought me to the conference.

Though there were some interesting presentations at the workshop, my expectation was disappointed. Not only was inequality viewed through the prism of material things, but neoliberalism was also given a strictly economic interpretation. We were left with a picture of an economy existing largely in isolation from social, cultural, political and environmental influences. Though neoliberalism was criticized, it was a critique from within the existing economic paradigm, leading to the standard debates between the left- and right-wingers.

But this turned into one of the most productive workshops I have ever attended, for a reason that I did not anticipate. From the other end of the room, I heard you commenting on a paper. I had never met you before, but had read some of your books and realized that the time had come for me to practice “enlightened niche construction” or, as you would put it, “managed cultural evolution.” In a break between two sessions, I took my name card from my table, walked across the room, and placed it next to your name card. That was all it took to start an initial exchange of ideas.

DSW: Right! One of the great benefits of workshops is to get people together like that, quite apart from the objectives of the workshop. Let’s broaden the view more generally to discuss why the neoclassical paradigm became the dominant school of thought in economics and why it has remained entrenched until now, despite widespread criticism and efforts to foster new economic thinking. With your inside knowledge of the profession, there is no one better qualified than you to offer this assessment.

DS: The neoclassical paradigm became the dominant school of economic thought for many reasons, which most economists are blind to: The neoclassical paradigm can be understood as a narrative about the economy that induces us to focus on particular empirical phenomena, particular causal relationships and particular policy tools. Such a narrative is not meant to be “true” (in the sense that it explains more economic phenomena better than other narratives), since it is a simplification. Without simplifying reality, we could not begin to understand what is going on. So a narrative is adopted when it carries conviction. And conviction arises when the narrative is simple and can be applied to many different practical situations. Then economists are able to share their narrative with policymakers and the public. The more widely the narrative is shared, the more convincing it becomes.

Another reason that the neoclassical narrative is adopted is that it appears well reasoned (economists are meticulous in deducing predictions from their assumptions) and has the blessing of countless professional economists (who have become respectable economists by learning to reason through this narrative). Many people believe this narrative because it ties in with the beliefs of others and thus is an entry ticket into countless validating social relationships.

Beyond that, the neoclassical narrative is fiendishly difficult to falsify, since most contrary evidence can be explained away through adjustments of the narrative’s components (utility functions, production functions and so on). Furthermore, the contrary evidence pertains to the phenomena that economists have chosen as the subject matter of the economic discipline. When people’s economic activity is shown to depend on psychological factors (such as fear and anger) and social factors (such as xenophobia and racism), then these factors are deemed to lie outside the realm of economics, thereby becoming irrelevant to economic analysis. This methodological strategy is pursued even when the psychological and social factors have both economic causes and economic effects.

On this account, the neoclassical paradigm is much more difficult to displace than the astronomical paradigm of Ptolemy. After Copernicus’s breakthrough, it became undeniable that the heliocentric paradigm was simpler and had greater explanatory power than the geocentric one. Astronomers were unable to claim that unless you focused only on the fraction of astronomical data that was easy to explain through the Ptolemaic theory, you weren’t a proper astronomer. By contrast, economists routinely claim that unless you believe that economic behavior is generated by means-end rationality and utility maximization, you aren’t a proper economist. Economics is perhaps the only academic discipline that requires the adoption of particular methodologies.

When economic predictions misfire — a common occurrence in both macro- and microeconomics — economists are always able to say that their predictions depend on “exogenous variables” (to be explained outside economics) and that these exogenous variables changed in ways that lie beyond economics. Or they can say that “tastes” have changed (also to be explained outside economics). Or they can “recalibrate” their models, which means changing the numerical values of their parameters so that the resulting predictions are in accord with what happened. Or they can detect “structural breaks,” requiring adjustments of their parameters in the course of their sample period. The possibilities are endless.

So anyone who proposes a new paradigm for economics should expect an uphill battle.

DSW: Thank you! This is a complex system view of the neoclassical paradigm, which includes pragmatic and sociological factors in addition to an intellectual critique of the assumptions of the rational actor model. Let’s spend a little time on the concept of paradigms. As we say in our article, the word dates back to the 15th century but today is associated primarily with the philosopher Thomas Kuhn. For Kuhn, a paradigm is an internally coherent system of thought that results in useful insights but also finds it difficult to escape its own assumptions.  This is close to the concept of a basin of attraction in complex system theory; a locally stable equilibrium that resists change unless you can push it far enough to enter another basin of attraction. The phrase “uphill battle” captures this nicely. There can be pragmatic and sociological basins of attraction in addition to intellectual basins of attraction.

The upshot is that to truly escape the gravitational pull of the neoclassical paradigm, you need to construct a different basin of attraction. A new paradigm is required—not just tinkering with the old paradigm. The theoretical foundation for the new paradigm is a combination of complex systems science and evolutionary science.

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Over a two-year period, we first deconstructed orthodox economics, then presented the new paradigm, and then showed how the new paradigm could be put to use in real-world settings. This resulted in a monster article that we eventually broke into three parts, changing the order so that the presentation of the new paradigm came first. In this conversation, however, let’s stay with the original order.

Our deconstruction of the old paradigm includes an attack on the entire intellectual tradition of individualism. How would you describe this tradition, including its historical roots?

DJS: The intellectual tradition of individualism, in the form that it reached neoclassical economics, involves locating “abilities” and “preferences” in the individual, rather than in the natural milieu or in the social groups to which individuals belong. The knowledge and agency that underlie the individual’s abilities are also to be located in the individual. In other words, the individual is the only instrument for the acquisition and storage of knowledge, and the only source of intentions and of the capacity to act on them. Thus the individual is the only domain in which skills can be acquired.

Each individual is conceived as a purposive being, who uses one’s abilities to satisfy one’s preferences (i.e. one’s objectives, covering one’s needs, wants and values). In fact, the individual in economics is defined by one’s abilities and preferences. There are no other characteristics whereby an individual in economics can be defined. The individual is assumed to be integrated and temporally coherent entity, that is, one that has stable abilities and preferences (i.e. abilities and preferences that are either assumed constant or sufficiently gradually so that an individual is identifiable.

An individual’s preferences are assumed to be “revealed” through one’s economic choices: by observing what the individual chooses to consume at various prices of goods and services, the individual’s consumption preferences can be inferred. This is the essence of the theory of “revealed preference,” one of the pillars of neoclassical economics. An important implication of this theory is that preferences must be assumed to remain constant at least for long enough in order that the revealed preference observations to be accumulated.

Such a conception of the individual as source of knowledge, agency and goals can be traced back to the ancient Greek philosophers. Protagoras famously declared that “man is the measure of all things.” But it was in the European Enlightenment that this vision came to full bloom. Individualism was a central pillar of the Enlightenment, focusing on the intrinsic significance, autonomy, sovereignty, self-sufficiency and objectivity of the individual. This must be understood as a reaction to the feudal and clerical worldviews preceding the European Enlightenment, which commonly involved the instrumentalization of individuals in the interests of those in power. This was an important advance in our social and ethical development, but it ultimately led to a growing blindness with regard to our collective identities and goals.

DSW: Collective goals have gradually crept back into economics, under the influence of behavioral economics, identity economics, institutional economics and other departures from neoclassical economic theory. On this account, some economists may mistake our paradigm as merely an elaboration of these departures. How would you explain why this attribution is indeed a mistake? To what degree can behavioral economics be viewed as part of the old paradigm, and where might aspects of behavioral economics fit more comfortably into our paradigm than into the old paradigm?

DJS: Some aspects of behavioral economics would indeed be more at home in our paradigm. In particular, “social preferences” are more readily understood within our paradigm, since the latter explains how these preferences arise through our social interactions. In the context of the old paradigm, by contrast, social preferences are portrayed as exogenously given tastes, without any account of why they could exist. Much of behavioral economics, however, is more akin to the old paradigm than the new. Richard Thaler, the Nobel Laureate commonly considered the father of behavioral economics, writes: “The rise of behavioral economics is sometimes characterized as a kind of paradigm-shifting revolution within economics, but I think that is a misreading of the history of economic thought. It would be more accurate to say that the methodology of behavioral economics returns economic thinking to the way it began…”[1]

He continues by focusing on behavioral economics’ main critique of neoclassical economic theory: “On the theory side, the basic problem is that we are relying on one theory to accomplish two rather different goals, namely to characterize optimal behavior and to predict actual behavior. We should not abandon the first type of theories as they are essential building blocks for any kind of economic analysis, but we must augment them with additional descriptive theories that are derived from data rather than axioms.”[2] To illustrate this point, he explains, “Expected utility theory [the cornerstone of neoclassical economics] remains the gold standard for how decisions should be made in the face of risk. Prospect theory [the most prominent theory of behavioral economics] is meant to be a complement to expected utility theory, which tell us how people actually make such choices.”[3]

This characterization makes clear why behavioral economics is not to be regarded as a new economic paradigm. It shares the conviction of neoclassical economics that homo economicus describes “optimal behavior”, that is, it describes how people would behave if they had “infinite cognitive abilities (or, put another way, are as smart as the smartest economist) and infinite willpower since they choose what is best, not what is momentarily tempting.[4] And what, one may ask, underlies this “optimal behavior”? Richard Thaler gives us the answer: “(i) Agents have well-defined preferences and unbiased beliefs and expectations. (ii) They make optimal choices based on these beliefs and preferences… (iii) Although they may act altruistically, especially towards friends and family, their primary motivation is self-interest.”

In other words, behavioral economics agrees that people would behave as neoclassical economic theory says, provided that they were smart and strong enough. This approach stands in sharp contrast to our approach, the multilevel paradigm, which claims that no matter how smart and strong people might be, they still don’t act like selfish maximizers of well-defined, temporally stable preferences. We claim that there is nothing “optimal” about the neoclassical depiction of economic behavior: it ignores some of the most important capacities of human beings – capacities that have made us so successful in the evolutionary process, namely, our capacity to cooperate with one another (often in large numbers) and our capacity to innovate, enabling us to find unpredictable solutions to the challenges we face.

The first capacity implies that we humans are capable of operating at higher levels of functional organization than the individual. The second capacity implies that we are able to change the environment in which we live in ways that cannot be predicted probabilistically. In other words, our behavior generates “uncertainty” (events that are unknowable in advance) rather than the “risk,” which is the focus of behavioral economics.

Furthermore, we claim that it is not sufficient to build descriptive models of economic behavior from an account of observed behaviors. To build a new paradigm, we need to understand why these observed behaviors have manifested themselves. We must answer this question from both a “proximate” perspective (in terms of the existing physiological, psychological, social and environmental factors that humans face) and an “ultimate” perspective (in terms of how these factors have evolved). Only then can we be confident that we have some understanding of what is going on.

But I am jumping ahead of our story. Before we discuss our multilevel paradigm, built on evolutionary science, could you explain why evolutionary economics – as it has been developed so far – does not provide a new economic paradigm either?

DSW: Thanks for introducing the concepts of proximate and ultimate causation, which are foundational in evolutionary theory and lacking from the neoclassical paradigm. Evolutionary economics has been a school of thought since Richard R. Nelson and Sidney G. Winter’s 1982 book “An Evolutionary Theory of Economic Change”. It has been critiqued by Geoffrey Hodgson in a 2019 monograph titled “Evolutionary Economics: It’s Nature and Future[5]”. Hodgson reminds us that Charles Darwin was not the first person to use the word “evolution”. His specific insight (shared by Alfred Russell Wallace) was to identify the trio of variation, selection, and replication as the mechanism of evolution. A modern definition of Darwinian evolution is any process that includes this trio, including but not restricted to genetic evolution (e.g., cultural evolution, antibody evolution, computer evolutionary algorithms).

Against this background, Hodgson shows that the evolutionary economics literature is not grounded in Darwinian evolution. The term “evolution” is used more broadly and there is no conceptual center. Most self-described evolutionary economists do not reside in economics departments. And, perhaps most worrisome, the literature is not very transdisciplinary. In contrast, what we describe in part II of our article (in the original order) is based on Darwinian evolution and is richly transdisciplinary.

Our comments on behavioral economics and evolutionary economics are not intended to be disrespectful. Much fine work has been done within these schools of economic thought, but we stand firm that they are not capable of escaping the gravitational pull of the neoclassical paradigm. Now let’s proceed to Part II of our article, which begins by redefining the very definition and purpose of economics. Why is this necessary?

DJS: The mainstream depiction of economics – encountered by all economics students in their introductory year – involves the so-called “circular flow of income and product”. In the first instance, the economy is divided into households and firms. The households are the owners of labor and capital, which they sell to the firms. The firms, in turn, use these factors of production to produce commodities. Some of these commodities flow to the households to be consumed, others flow to the households as owners of capital, to be added to the stock of capital. In this way, the economy is pictured as a circular flow of commodities and factor services, moving endlessly between households and firms. Households’ behavior is explained in terms of the maximization of their utilities, and firms’ behavior is explained by profit maximization.  To this picture, the government is added: its expenditures are classified as an “injection” into the circular flow and its taxes are a “leakage”. International trade receives similar treatment: exports are an “injection” into the circular flow and imports are a “leakage.”

When seen in this light, the economy is entirely self-subsistent, whose workings are understandable quite independently of society or the political system. Introductory students usually find this depiction puzzling, since they recognize that jobs are a source of status, many consumption goods also signal one’s social standing, one’s social and political allegiances often shape the popular support for economic policies such as deregulation or redistribution. This puzzlement is viewed as a sign of immaturity by most professional economists, an inability to “think like economists.” It usually takes several years of relentless exposure to economic textbooks before students are able to relinquish their qualms and embrace the idea that economies are domains completely dissociated from other aspects of human life. People’s norms and values, their status seeking, and their identities are simply incorporated into households’ “preferences,” to be understood as predetermined tastes, which can be considered constant and which are to be explained by other social science disciplines.

Within this circular flow framework, economic activity can be observed as a mechanical process – much like observing planets orbiting around the sun. It is as if social relations remain frozen in time, translated into unchanging individual “preferences,” while economic activities unfold gradually. It is as if we were trying to understand the workings of a human organ – such as the liver or heart – without reference to the rest of the body. The analogy is striking, because we are generally embedded in social networks that enable us to cooperate in large numbers. This is what has made Homo sapiens so successful in the evolutionary process. Some of our social interactions take the form of economic transactions; others are purely social. We buy and sell apples, but we generally avoid buying and selling human organs. Most of our economic transactions are governed by social rules, such as proscriptions against cheating and stealing. From such considerations, it becomes amply clear that our economic activities are embedded within our social interactions. So the introductory students were right to have qualms about thinking of economies as self-subsistent.

Within the circular flow framework, there is little latitude to think about what the purpose of economics might be. When we observe planets orbiting around the sun, post-Enlightenment scientists do not ask about their purpose. Planets follow their orbits because that is what they do. Similarly, households maximize their utility and firms maximize their profit because that is what they do. In this framework, only the government can be construed as pursuing a purpose, and this purpose is surprisingly limited: it primarily involves determining how many public goods to provide and how much income to redistribute. In short, government policy is primarily about the size of the economic pie (to be achieved primarily by letting economic markets work without interference) versus the division of the pie among the citizens (usually achieved at the expense of efficiency).

In this context, it is natural for students to be told that economics is about the allocation and distribution of scarce resources. The most famous definition of economics is that proposed by Lionel Robbins, namely, that economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses” (Robbins (1935, p.16).

Once we abandon the circular flow framework, however, and recognize the economies are embedded in value-laden societies, our values come to play a central role in understanding the purpose of economics. Just as societies are human constructs that are meant to serve the individual and collective needs of their members, so economies should serve these needs as well. In this light, economics can be reconceived as the discipline that explores how resources, goods and services can be mobilized in the pursuit of wellbeing in thriving societies, now and in the future.

Now economics becomes a purposeful discipline, rather than something based on dispassionate observation of mechanical systems.

DSW: Right! If that’s not a paradigm change, what would be?!  I look forward taking my turn describing the theoretical foundation of the new paradigm, but first, I’m interested to know how evolutionary theory in general and multilevel selection in particular first appeared on your radar screen.

DJS: It took a long time for evolutionary theory to take shape on my radar screen, although I had been searching for something beyond the circular flow framework for most of my professional life. For decades I was troubled by a simple observation: Some of the most important things in people’s lives are interpersonal relationships with others, such as friends and family; these are often far more important than the goods and services we consume. But these interpersonal relationships are absent in economics, where people’s objectives are driven entirely by goods and services.

Economists may respond to this criticism by claiming that interpersonal relationships lie outside economics, relating to economic activities only insofar as they affect people’s preferences for goods and services. And since the interpersonal relationships lie outside economics, the economists claim to be justified in holding preferences constant. But there is something dreadfully wrong with this response. First, preferences reside in the individual, whereas relationships reside between people; they relate to our collective goals. Second, relationships change in predictable ways, often in response to people’s past economic activities and influencing people’s future economic activities. So: preferences are not an adequate depiction of relationships and holding preferences constant while economic activities vary makes no sense.

In neoclassical economics, preferences are individualistic; it is as if our preferences – in terms of what bundles of goods and services were prefer to what other bundles – are hard-wired in our brains. One reason why this is nonsensical is that people often see themselves as members of social groups – political, gender-based, ethnic, religious, class-based and more. We participate in the wellbeing our our groups and suffer their losses. Our cooperation within our groups enables us to achieve far more than we could possibly have achieved individually. Just imagine what life would be like if we had to grow or kill all our own food, produce all our clothing and shelter, and similarly for all other necessities.

I had in fact studied cooperation within groups when I developed the insider-outsider theory of employment and unemployment with Assar Lindbeck back in the 1980s. In this theory, workers are divided into two groups: “insiders,” whose positions are protected by labor turnover costs (such as the costs of hiring and firing) and “outsiders,” who do not enjoy that protection. Outsiders who are unemployed may wish to underbid the insiders, i.e. offer to do the same work at a lower wage. But insiders can prevent this underbidding by creating labor turnover costs, which discourage employers from replacing them. For example, the insiders may cooperate with one another in producing goods and services but refuse to cooperate with outsiders who gained employment through underbidding. Since employers usually cannot monitor such cooperation objectively, insiders are thereby able to raise their productivity relative to outsiders. Here insiders acted as a group to keep outsiders from threatening their livelihoods. Although this group behavior rested entirely on the exploitation of labor turnover costs, I realized that there are a variety of psychological and social costs that could serve similar purposes. In the last year of his life, I worked on a series of papers with Assar Lindbeck that extended the insider-outsider theory into these new domains. 

Such thoughts drove me towards seeking a multi-disciplinary understanding of economic activities. Clearly, sociology, psychology, anthropology and other social sciences had a role to play in explaining how economies work. For many years I studied psychology (inspired by my wife, Judith, who had become a psychotherapist) and sociology (inspired by George Akerlof, whom I was fortunate to have as a friend). Then, over a period of five years, a team of my researchers teamed up with a research team of Tania Singer, a well-known social neuroscientist, to explore new foundations of economic decision making, built on strong psychological and neurological principles.

Gradually, I came to ask myself, What makes our psychologies and social relations what they are? Are there some underlying principles that help us understand why we are the way we are? I realized these questions were analogous to the questions evolutionary biologists were asking, but since they were focused on genetic evolution, which moves much more slowly than the cultural processes I was exploring, the evolutionary approach appeared irrelevant to me.

Then, by sheer accident, I came across your book with Elliot Sober, “Unto Others.” That changed everything for me. I could have kicked myself for not having read the book the many years ago when it had been published. That led me to the literature on cultural evolution, which I also could have read a long time ago, had I understood its significance. In any case, by the time I met you at the conference in Seattle, I was primed and ready to go.

DSW: Your own story speaks volumes about the history of evolutionary science, which in turn explains why the paradigm change we call for is only now taking place. Darwin knew nothing about genes. For him, the “replication” part of the trio variation, selection, and replication referred to any mechanism whereby the traits of organisms are transmitted across generations. This made Darwin fearless about including all aspects of humanity as within the purview of his theory, along with the rest of life.

With the advent of genetics in the early 20th century, however, the study of evolution became largely confined to genetic evolution, as if the only way that offspring resemble their parents is by sharing the same genes. This is patently false when stated that way, but it essentially describes what became known as the modern synthesis. The study of cultural evolution was relegated to the human-related disciplines, which developed into sophisticated bodies of knowledge, but not in reference to evolution and sometimes in perceived opposition to it.

Social Darwinism is often mentioned as a reason why evolutionary theory earned a bad reputation in the human social sciences, but the real history of Darwinian thinking in relation to human affairs is more complicated and interesting. Socialists such as Peter Kropotkin and progressive social activists such as William James and John Dewey were inspired by Darwin, along with “nature red in tooth and claw” types. The indefatigable Geoffrey Hodgson has a great article on this subject, where he tracks down every usage of the term “Social Darwinism” in the Anglophone literature. Another resource is a series of essays titled “Truth and Reconciliation for Social Darwinism”, which I organized with the science historian Eric Michael Johnson.

For the purposes of our conversation, the bottom line is that evolutionary scientists walked away from the study of cultural evolution and the human-related disciplines did not develop any kind of conceptual unity on their own. That’s why you found your sampling of the human-related disciplines unsatisfying. Only during the last quarter of the 20th century did evolutionary scientist start to go back to basics by defining Darwinian evolution as any process that combines the trio of variation, selection, and replication—no matter what the mechanism of replication. Only during this period did terms such as evolutionary psychology, evolutionary anthropology, and evolutionary economics become coined, reflecting the need to rethink whole disciplines from an evolutionary perspective. My book with Elliott Sober—published in 1998 and reflecting a collaboration that began ten years earlier—was part of that trend.

Another trend worth stressing for this conversation is that individualism had as large an impact on my field of evolutionary science as on economics. What was labelled “the theory of individual selection” by George C. Williams in 1966 and rebranded “selfish gene theory” by Richard Dawkins in 1976 had the same aura of triumphalism as rational choice theory, as if everything could be explained by selfish individuals maximizing the fitness of their genes. Group selection—the theory that explains group-level functional organization at face value—became thoroughly taboo, sociologically in addition to intellectually. The convergence of economic and evolutionary theory was regarded as a great generality—the main difference being that individual fitness maximization had a more specific meaning than economic utility maximization. Only with hindsight can we see that the two bodies of theory had merely converged upon individualism.

Against this background, the revival of multilevel selection (MLS) theory that I am known for, working with distinguished colleagues such as Elliott Sober and Edward O. Wilson, can be seen as a recovery from individualism in all its forms. MLS theory is not axiomatic about the unit of functional organization. The unit might be the individual, but it might also be a social group or even a multi-species ecosystem (e.g., our microbiomes). It all depends on selection differentials among units nested within larger units: genes within individuals, individuals within social groups, species nested within ecosystems, and so on. This is encapsulated in the final passage of my 2007 article with Ed Wilson titled “Rethinking the Theoretical Foundation of Sociology”: Selfishness beats altruism within groups. Altruistic groups beat selfish groups. Everything else is commentary.

Not only does MLS theory make sense of units of functional organization in nature, but also in human life, starting with our origin as a species. Nearly everything distinctive about us, compared to our closest primate relatives, is a form of cooperation. That includes our capacity for symbolic thought, which became a separate cultural inheritance mechanism that operates alongside our genetic inheritance mechanisms (dual inheritance theory). Cultural multilevel selection accounts for the increase in the scale of cooperative human societies over the course of human history and also accounts for variation among current societies at multiple scales, from small groups to whole nations. This is nothing less than a unification of human-related knowledge from an evolutionary perspective, comparable to the unification of biological knowledge that took place during the 20th century and of course continues. As I put it in my 2019 book This View of Life: Completing the Darwinian Revolution, the explanatory scope of evolutionary science has expanded to explain everything associated with the words “human”, “culture” and “policy” in addition to the word “biology”.

This is the conceptually unified and richly transdisciplinary foundation for the new economic paradigm that we describe in part II of our article[i]. We make a crucial distinction between two meanings of the key term “complex adaptive system”: The first meaning is a complex system that is adaptive as a system (CAS1). The second meaning is a complex system composed of agents following their respective adaptive strategies (CAS2). The key insight of MLS theory is that CAS2 systems do not robustly self-organize into CAS1 systems. Special conditions are required: namely, the whole system must be the unit of selection. Otherwise, lower-level selection forces take over, in the same way that cancers destroy the functional organization of multicellular organisms.

This reveals the falsehood of the metaphor of the invisible hand, which is the central metaphor of the neoclassical paradigm. It is profoundly untrue that the lower-level pursuit of self-interest robustly benefits the higher-level common good. MLS theory tells us very clearly that there can be no system-level adaptation without a process of system-level selection. That goes for cultural evolution no less than genetic evolution.

There is a legitimate concept of the invisible hand, but it is different than the received version. We must operate in two capacities: As designers of whole systems and as participants in the systems that we design. As designers, we must have the welfare of the whole system explicitly in mind. This is the opposite of the invisible hand metaphor. As participants, however, we do not need to have the welfare of the whole system in mind. Think of a well-designed system for coordinating traffic in a city. It is impressively designed at the whole-system level but individual drivers need only take their local driving needs into account. This is consistent with the invisible hand metaphor. Put another way, the invisible hand is system-level selection, which winnows the lower-level behaviors that function well for the whole system from the much larger set of lower-level behaviors that do not.

By system-level selection, we do not mean the kind of top-down planning associated with socialist nations and command-and-control corporations. That kind of selection seldom works because most human social systems are too complex to be comprehended by any group of experts. Instead, system-level selection must actually be a process of cultural evolution in which the targets of selection, variation oriented around the targets, and the replication of better practices, are carefully orchestrated at multiple scales. The closest that economic thinking comes to this is the concept of polycentric governance associated with Vincent and Elinor Ostrom. Elinor shared the Nobel prize in economics in 2009 but that doesn’t mean that she has had much of an impact on the economics profession.

DJS: Yes, it would be hard to find an economics Nobel Laureate who has had a lesser influence on the profession. The reason is not hard to find.

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In mainstream economics, humans are depicted as “unicentric” creatures. In other words, each person is assumed to be centered on his or her own preferences. Preferences are the characteristic whereby individuals can be distinguished from one another. These preferences are viewed as specific to each individual.

In practice, however, humans pursue not just individual goals, but collective ones as well. Their actions are driven not just by their self-interest or by their innate social regard, but also by their participation in their social groups. In this sense, people are actually “polycentric”; that is, they have more than one center around which their goals are organized. Jonathan Haidt has claimed that “We are 90 percent chimp [individualistic] and 10 percent bee [groupish].”[6] This statement aims in the right direction, but does not highlight the most remarkable aspect of our groupishness. We are extremely versatile in our group formation capacities. Whereas honey bees single-mindedly work for the benefit of their particular hives, each person can belong to a wide variety of social groups. Different groups have different claims on a person’s identity. Within one social context, a particular group allegiance may be salient, whereas in another context, a different allegiance can come to the fore. People are able to form new social groups simply by creating new narratives that make the relevant social connections.

Chimps and honey bees are far less flexible in their allegiances. Furthermore, we are not 90 percent chimp and 10 percent bee, since our group allegiances are context-dependent. If we spend more of our time in cohesive groups, we are more groupish; if we spend time on our own, we are more individualistic. It is the flexibility and multifacetedness of our group affiliations that is responsible for the extraordinary success of the human species over the last millennia.

Mainstream economics focuses entirely on the unicentric individual as decision-making entity. This individual is either a single person or an aggregate – such as a household, a firm or a government – that acts consistently as a single, decision maker. The most important questions we should be asking ourselves, by contrast, are quite different: What are the circumstances in which we act as individuals versus the circumstances in which we participate as members of our social groups? What determines the creation and maintenance of our social groups? What shapes their evolution through time? In short, we should be studying the nature of our polycentricity.

This is the core of our new multilevel paradigm. The first central feature is that we humans have flexible, multiple levels of functional organization. When we act individualistically, the individual is the unit of selection: we compete as individuals with other individuals. When we act as members of our groups, the group is the unit of selection: we compete as groups with other groups. Since we are capable of forming many different kinds of social groups and since we can move often seamlessly from one group to another, our levels of functional organization are multiple and flexible.

The second core feature of our paradigm is the primacy of our social relations. We are social creatures, embedded in complex social networks. These represent the sum total of all our interactions with other people. Some of these interactions are sufficiently anonymizable to be turned into economic transactions, such as the purchase and sale of apples. Other interactions are non anonymizable at all, such as expressions of love. Yet others we may not wish to anonymize, such as the purchase and sale of human organs. And yet others are anonymizable, but involve a strong dose of purely social glue, such as noncontractual transactions in which delivery of the commodity occurs at a time remote from the delivery of payment, so that they involve substantial trust.

In any case, our social networks are the soil from which the fruits of our economic activities are taken. Without understanding the soil from which they are taken, the meaning and implications of most economic transactions cannot be understood. But it is precisely this that mainstream economics has attempted to do.

The third core feature involves understanding that our physical and social environment is far too complex for us to understand fully. On this account, we must remain cognizant of our radical uncertainty. From the trillions of possible connections that the neurons in our brains can make to the further trillions of connections that people can make in their social environments to the nameless mysteries in our physical environment, we must realize that the world we inhabit is not just largely unknown, but is furthermore intrinsically unknowable. In addition to all the interactions among living and nonliving things that we have not yet explored, our world is continually changing. Our knowledge of our world is one of the factors that makes the world change. Every significant expansion of our knowledge leads to a change in our behavior, which leads to changes in our interactions with one another and the physical world.

In mainstream economics, our ignorance is viewed as risk: we know the events that can occur and we know their probabilities, but we don’t know the realization of these probabilities. It is as if the world were like rolling dice: we know the numbers that can come up and we know their probabilities, but we don’t know what number will come up the next time we roll. Our multilevel paradigm denies the validity of this analogy in most walks of life. Once we understand that our ignorance is usually not risk, but uncertainty, we gain a new appreciation of the role of theory in economics (and elsewhere). Theories are just simple mental models that are meant to help us understand what is going on in our world and thereby help us navigate our environment. There is usually no such thing as a “correct” model of the “real world.” There are only simplistic attempts that may be useful under some circumstances, but that we must be willing to abandon as soon as they no longer serve as good navigational guides. In choosing our models – whether they be closed-form analytical models or complex adaptive ones – we should be concerned with their robustness (their ability to guide us under a variety of different construals of the world) and our adaptability (our ability to choose flexibly among different models that are all consistent with some evidence, but have different predictive implications).

The fourth core feature of our paradigm is the recognition that human wellbeing is multi-faceted and context-dependent. We derive wellbeing from many sources. Which source of wellbeing happens to be salient at any particular point in time depends on the physical and social contexts we find ourselves in. When we fear that our lives are in danger, we seek succour and safety; when we comfort our infants, we draw from the wellsprings of giving; when we compete at politics or in business, we seek status; and so on. Some sources of wellbeing are individualistic, such as a meal when we are hungry; other sources are collective, such as when  we cheer our football team or pledge allegiance to our flag. For any given context, these sources of wellbeing are not substitutable for one another. On this account it is not sensible to combine all our sources of wellbeing into a single, time-invariant unit of measurement. That, however, is what mainstream economic theory does by ascribing a utility function to each individual.

In the neoclassical economic paradigm, progress is generally measured in terms of the rate of economic growth: the faster GDP grows, the better off we are assumed to be. Though material goods and services are doubtlessly relevant to our wellbeing, it would be foolish to overlook our other needs and purposes, particularly, our need for social belonging and personal empowerment. These sources of wellbeing can be measured and it can be shown that they are not closely correlated with economic growth.

Our paradigm, by contrast, understands progress in terms of variation, selection and replication. Our capacities for innovation drive much useful variation in our environment. Since we are a cooperative species, we are often able to choose the level of selection appropriately to address the level of our needs. Individual short-term needs can be addressed by narrow self-interest. Individual long-term needs can be satisfied through “enlightened self-interest,” enabling us to use the forces of social norms, reciprocity and reputation to meet our individualistic goals. Beyond that, collective needs can be met through compassion, lovingkindness and benevolence, going well beyond our enlightened self-interest. Whenever we vote in national elections, donate anonymously to charities, or risk our lives to save children who are not our own, we act beyond our enlighten self-interest in this sense.

Accordingly, economic progress should be understood as involving the mobilization of our creative faculties, our identification of selection levels that are appropriate to the challenges we face (individual and collective), and replicating the actions and creating contexts that promote our needs and purposes, for the current generation and future ones.

This polycentric approach to our lives is quite in line with Ostrom’s thinking on polycentric governance, but stands in marked contrast to the current neoclassical economic paradigm.

DSW: We should add that Lin studied the governance of single groups in addition to polycentric governance. In particular, she identified eight core design principles (CDPs) that enable groups to manage common-pool resources—avoiding the famous “tragedy of the commons”– without the need for privatization or top-down management. My collaboration with Lin will help to segue from Part II to Part III of our article, which is titled “Putting the New Paradigm to Work”[ii].

I met Lin at a workshop in 2009, a few months before she was awarded the prize. I was moderately familiar with her work but spending time with her made me realize how much her CDP and polycentric governance approach mapped onto MLS theory. I worked with her and her postdoctoral associate Michael Cox (now a professor of environmental studies at Dartmouth University) up until her death in 2012. The main output of our collaboration was a 2013 article titled “Generalizing the Core Design Principles for the Efficacy of Groups”, which shows that the CDPs are needed for all forms of cooperation, not just the management of common-pool resources. Put another way, cooperation is itself a common-pool resource that can always be exploited unless protected by the CDPs. Implementing the CDPs suppresses disruptive self-oriented behaviors within the group, causing the group to become the primary unit of selection. As you have nicely put it, when a group is strongly governed by the CDPs, its members are “all bee” and “no chimp”.

It is important to stress that the common-pool resource groups studied by Lin did not universally implement the CDPs. Instead, the varied in their implementations, with corresponding variation in their collective efficacy. This too can be generalized to any kind of purpose-oriented group. Unlike the neoclassical paradigm, which assumes that groups such as households, firms, and states are efficacious utility maximizers, the multilevel paradigm assumes that this is usually not the case and that there is often room for improvement.

Also, the CDPs are needed to govern relations among groups in a polycentric system, in addition to relations among individuals within each group.

In short, the CDPs provide a set of governance principles that can be applied across all contexts and scales. This means that they can be used as a practical framework for helping groups assess and improve their efficacy, no matter what their specific purpose. My nonprofit organization Prosocial World (a recent spinoff from my previous nonprofit The Evolution Institute) is dedicated to making this possibility a reality.

In part III of our article, we apply this general framework across multiple contexts and scales. We identify small functionally oriented groups as a fundamental unit of human society, required for both individual wellbeing and efficacious action at larger scales. This is a missing link of governance in many real-world social environments and is almost entirely obscured by the neoclassical paradigm. Then we describe some of the best examples of collective governance at the level of corporations, cities, and nations, ending with the prospect of global governance. At every successive level, we stress that the establishment of good governance is more challenging but is not different in kind from the lower levels. This conceptual unification can help to meet the challenges of implementation.

When it comes to actually working toward change, we stress that two approaches won’t work and only one approach can work. Laissez-faire won’t work because the metaphor of the invisible hand is profoundly untrue. Centralized planning won’t work because the world is too complex to be comprehended by any group of experts. The only thing that can work is a carefully orchestrated process of cultural multilevel selection, which involves identifying targets of selection, orienting variation around the targets, and replicating better practices with context-sensitivity in mind.

This pragmatic experimental approach to social change is hardly new. Because it is the only thing that can work, it is the only thing that ever has worked throughout history and in the present. As expected for convergent cultural evolution, it has been reinvented and described in a thousand different ways. Much as Elinor Ostrom’s work remained siloed within the discipline of political science and topic area of common-pool resource groups, however, examples of positive cultural evolution remain siloed within their particular contexts and unknown beyond their borders. There is a tremendous added value in a general theoretical framework that can be applied across all contexts and scales.

Please add your thoughts on part III and then let’s finish up with our plans for the near future.

DJS: There is an enormous amount of work to be done in systematically investigating what “a carefully orchestrated process of cultural multilevel selection” means for economic policy. In the current paradigm, the aim of policy is threefold: (i) to “correct” for inefficiencies due to “externalities” that arise from the pursuit of self-interest in free markets,  (ii) to “correct” for inequities due to an inappropriate distribution of resources across the population and (iii) to “stabilize” business cycles and promote economic growth through macroeconomic policy. This approach creates the impression that the pursuit of self-interest in free markets does an excellent job of making people as well off as they can be, but needs to be tweaked in the exceptional cases where things go wrong.

Our multilevel paradigm suggests that this approach is profoundly misguided. Since humans are social creatures pursuing both individual and collective goals, they are profoundly and ubiquitously interdependent. Since economic interactions are embedded within a wider framework of social interactions, “externalities” (costs and benefits that are not compensated through monetary transactions) are the norm, not the exception. Many of the inefficiencies and inequities that economists are worried about don’t exist, because people aren’t single-mindedly selfish. Nevertheless, we live in a vast ocean of “externalities” that require policy initiatives involving social groups at diverse levels of aggregation. Some inefficiencies and inequities arise at the local level, some at regional and national levels, and others at the global level. Economic policy needs to address the social groups and the constellations of groups at the levels at which the inefficiencies and inequities arise. This requires a close coordination of micro-, meso- and macroeconomic policy, operating within the framework of the relevant social, political and environmental systems.

In the existing paradigm, however, social groups are ignored and economics is divided into “microeconomics” (dealing with individuals) and “macroeconomics” (dealing with national aggregates of individuals). Consequently economic policy is divided into “microeconomic policy” and “macroeconomic policy,” with no consistent, coherent interaction between them. Clearly, it is impossible to pursue “a carefully orchestrated process of cultural multilevel selection” within this intellectual framework. The existing division of government responsibilities across entities that deal separately with macroeconomic policies (fiscal and monetary policies) and microeconomic policies (housing, education, health, etc. policies), in addition to a separation of economic and social policies in different ministries, is inappropriate as well.

In short, there is a lot of work that remains to be done. The multilevel paradigm is merely a statement of basic principles to guide a new understanding of economic activities and policies. Now the arduous process of collecting more of the relevant data, modeling economic activities as multilevel evolutionary processes, and designing policies that manage cultural evolution in the public interest needs to be set in motion.

DSW: I certainly agree that the new paradigm is a work in progress! That includes better integration of complex systems science and evolutionary science. For example, the crucial distinction between CAS1 (a complex systems that is adaptive as a system) and CAS2 (a complex system composed of agents following their respective adaptive strategies) is not yet widely appreciated among complex system scientists.

Even at its early stage, however, the new paradigm can result in rapid improvements. Every symbolic meaning system, no matter whether it is called a paradigm, theory, religion, or worldview, enables a limited repertoire of action. Going beyond this repertoire requires a change in the symbolic meaning system. This is what Einstein meant when he said that the theory decides what we can be observed. Adopting the multilevel economic paradigm therefore results in an immediate transformation of what “makes sense”, no matter how preliminary. In this spirit, let’s end our conversation with the final passage of our article. It’s not as pithy as the final passage of my “Rethinking the Theoretical Foundation of Sociobiology” article with Ed Wilson (“Selfishness beats altruism within groups. Altruistic groups beat selfish groups. Everything else is commentary”), but it does convey our sense of optimism for the future.

Imagine, if you can, the evolutionary paradigm becoming the consensus view among politicians, corporate heads, and public policy experts of all stripes. Every important action would be evaluated with the global system in mind. In many cases, what takes place at a lower scale will be benign at larger scales and the time-honored principle of subsidiarity (the authority of lower-level units unless causing problems at higher scales) applies. If lower-level activities do cause problems at higher scales, then this will be recognized as wrong and in need of adjustment. The corrective need not be harsh or morally disapproving. Just as in an automobile assembly plant, there simply needs to be a swarm of activity to solve a systemic problem. But there must also be a capacity to oppose willfully predatory practices. And prosociality at all scales should be showered with the benefits of having a good reputation, in addition to correctives for behaving wrongly.

We submit that if this conceptual sea change took place, there would be a quantum jump of good governance at all scales, including the global scale, and further improvements would take place over the longer term as institutional and procedural shortcomings are addressed with the welfare of the whole earth system clearly in mind. Human cultural evolution in the near future can be just as fast as it has already become, but this time resulting in a CAS1 system rather than merely a CAS2 system.


Haidt, Jonathan (2013), The Righteous Mind, London: Allen Lane.

Robbins, L. (1935), An Essay on the Nature and Significance of Economic Science, London:Macmillan.

Thaler, R. (2016), “Behavioral Economics: Past, Present and Future,” American Economic Review, 106(7), 1577-1600.

[1] Thaler (2016, p.1577).

[2] Thaler (2016, p.1577).

[3] Thaler (2016, p. 1591).

[4] Thaler (2016, p. 1578).

[5] Hodgson, G. M. (2019). Evolutionary Economics: Its Nature and Future. Cambridge University Press.

[6] Haidt (2012).

[i] This became part 1 of our three-part series.

[ii] This became part 2 of our three-part series.

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