If economics is the problem, is evolution the solution?

“You can’t ask a good “how” question if you’re not asking the right “why” question." - David Sloan Wilson et al.

I want to start by saying the discipline of economics is in crisis. I want to say that its core models make indefensibly unrealistic assumptions about human nature, that its fixation with mathematical modelling and disregard for the real world is causing significant harm to three dimensional people, and its failure to foresee the financial crisis should have been the nail in the coffin for a discipline that is often characterised, not entirely unfairly, as an ideology masquerading as a science.

I want to say all these things but hesitate to do some emphatically, because what's the alternative? Writers like Steve Keen and Ha Joon Chang(and many, many more) or organisations like the New Economics Foundation (and many more) are often extremely convincing about the limitations of existing economic models, but typically much less convincing about fully thought out alternatives. Sometimes that lack of conviction relates to a lack of practical tests of ideas, or the complexity of simulating the economy as a whole, but often it is due to a lack of persuasive theoretical grounding.

One possibility for a new theoretical grounding for economics came to my attention several months ago when the RSA were approached by The Evolution Institute. I remember their President, Professor David Sloan Wilson, opening the conversation with myself and our CEO Matthew Taylor by saying something like: "So, we're experts in evolution interested in public policy and you're experts in public policy interested in evolution...so we wanted to explore how we might work together." It was an engaging and congenial meeting, as a result of which we are mentioned as a partner on their website, and I am one of their many informal advisors who enjoys perusing their updates. To be honest though, The Evolution Institute has been off my radar for a while, mostly because we didn't see any tangible next moves.

Evolution bounced back to salience when I read the following piece "A Good Social Darwinism" in Aeon Magazine, which is a good and informative read in itself, but seems to have been written mostly to promote a recent edition of The Journal of Economic Behaviour and Organisation, which is summarised here where you can also download all the articles. In the Aeon piece the core issue is framed as follows:

"The current economic paradigm owes its dominance in part to its prestige as a formal mathematical theory. Everything else in economics seems like a mish-mash of ideas by comparison. The strongest challenge to the dominant model comes from behavioural economists, who call for economic theory and policy based on H. sapiens, not H. economicus. But, so far, behavioural economists have merely compiled a list of ‘anomalies’ and ‘paradoxes’ that are anomalous and paradoxical only against the background of the general equilibrium model, like satellites that cannot escape the orbit of their mother planet. They have not put forth a general theory of their own."

If the aim to create a new paradigm in thinking about economics and public policy through evolution does not sound immediately compelling, perhaps that's mostly because we have lots of assumptions about evolution and the uses of evolution that may not be valid or useful. The general tone of The Evolution Institute is considered, discerning, open and scholarly rather than ideological or hubristic, and while there is a slight elision between applications to public policy in general and economics in particular, in most cases the two are so closely related so it doesn't matter. They are not particularly hostile to religion, and they are keen to highlight that evolution emphasises our cooperative nature as much if not more than competition, as is often assumed.

I haven't read every article in the new journal, but from what I have considered I want to commend the work very strongly. They have clearly made a great deal of progress:

First, they have clarified the existing problems relating to economic thought as it stands, including a clear critique of Walrasian equilibrium theory (see the Aeon piece, paragraphs 3-6 for an overview) from an evolutionary perspective:

"As an instructive example, the Walrasian core of neoclassical economics is based on the assumption that individuals maximize their absolute utilities. Natural selection favors traits that maximize relative fitness, which cause individuals to survive and reproduce better than others, not in any absolute sense. The choice of assumptions is not arbitrary; if people are motivated to increase their relative welfare rather than their absolute welfare,then this must be reflected in economic theory and policy. Walras and his contemporaries had no way of knowing that one of their foundational assumptions was at odds with evolutionary theory. Subsequent economists operating within the neoclassical paradigm could have questioned one of their foundational assumptions on their own, but for the most part they didn’t. Only recently have economists such as Frank (2011)begun to challenge the assumption of absolute utility maximization at a foundational level by employing an explicitly evolutionary perspective."

Second, They have unpacked what they mean by 'evolutionary perspective' by linking it to the work of  Niko Tinbergen, who suggests that an evolutionary approach is a kind of tool kit comprising four questions we should ask of any given phenomena/behaviour/tendency: what is the function of a trait, what is the evolutionary history of a trait, what is the mechanism of the trait and how did the trait develop?  (see pages 54-56 of the leading article in the journal). I was quite struck by how this approach appears to generate explanatory power.

Third: They have acknowledged and addressed four of the main counter-arguments (p54) that question the value of the evolutionary approach. At the slight risk of oversimplifying, their counter to these arguments boils down to:  “You can’t ask a good “how” question if you’re not asking the right “why” question. And you can’t ask the right “why” question without seriously consulting evolutionary theory.” (P58)

What’s good for me is not necessarily good for my family. What’s good for my family is not necessarily good for my clan. What’s good for my clan is not necessarily good for my nation. What’s good for my nation is not necessarily good for the global environment or economy."

Fourth: They have started looking at particular case studies, addressing topics that have always been at the heart of economics and public policy, such as the efficacy of groups, the nature of institutions, self-organization, trust, discounting the future, and risk tolerance. Their claim is that economics is caught in a tug-of-war between two ideas: the idea that we need market processes to proceed unhindered and the idea that a healthy economy requires regulation (i.e. Is Keynes v Hayek ad infinitum really the best we can do?). They believe evolution is needed to escape this impasse.

Two main points shine out here. 1) The debate changes when your models are grounded in people pursuing relative utility with respect to their social reference points (as the evolutionary perspective would indicate) rather than absolute utility (which standard economic models tend to wrongly assume as the norm). 2) The debate changes when you factor in layered interests. I really liked the following expression of this idea:

"The traits that maximise the advantage of an individual, relative to the members of its group, are typically different from the traits required for the group to function as a coordinated unit to achieve shared goals. What’s good for me is not necessarily good for my family. What’s good for my family is not necessarily good for my clan. What’s good for my clan is not necessarily good for my nation. What’s good for my nation is not necessarily good for the global environment or economy."

There is much here that I like and that intrigues me, but also much that still felt too abstract or less than fully persuasive. For instance (from the Aeon piece) "The disciplines that comprise the biological sciences are even more diverse than those comprising the human-related sciences, but they are much better integrated, thanks to the common theoretical framework provided by evolutionary theory.There is nothing preventing the human-related disciplines from becoming integrated in the same way." 

Really? Biology is to evolution as psychology or sociology or economics or anthropology or politics or social policy is to....evolution? That doesn't sound right to me at all. Perhaps I am missing something, but it feels like there is a category error here. The common theoretical framework mentioned stems from a shared ontology in the biological realm that typically won't apply in the social, cultural, economic, semiotic, psychological realms. Sure, in all cases evolved humans are central, but there are emergent properties from human behaviour and interaction in each case that do not connect to each other, or to evolution, in the same way.

However! The good news is that having read some of their recent outputs, when I raise that kind of doubt, I am almost certain they will already have considered it seriously and have the beginnings of an answer ready. More generally my impression is that this while there is still cause for scepticism and caution, this perspective is now sufficiently well developed to be worth taking very seriously indeed.