Evolutionary Psychology and Economic Theory: Volume 7

The modern revival of “Austrian economics” dates to the South Royalton conference of 1974 (Vaughn, 1994, pp. 103–111). At that time, neoclassical orthodoxy excluded evolutionary concepts. It was, in Ludwig Lachmann’s memorable phrase, “late classical formalism” (1977, p. 35). Opposition to neoclassical orthodoxy was part of the definition of Austrian economics. It formed part of our identity. Today it is no longer clear what “orthodoxy” is or whether current mainstream economics is “neoclassical” at all (Colander et al., 2004). One of the more salient changes in mainstream economics over the last 30 years is the introduction of evolutionary ideas. Mainstream economics is rich with evolutionary concepts. Evolutionary game theory, for example, is certainly a part of today’s standard toolbox. Thirty years ago, it did not even exist.¹ Some of the evolutionary ideas entering mainstream economics are similar or identical to ideas from the Austrian tradition. In this situation, it is no longer clear what the Austrian differentiae are. I hope this volume will help to sort out some of the issues relating to Austrian economics and one group of evolutionary ideas, namely, those of evolutionary psychology.

Evolutionary psychology² starts from two simple assumptions: The human mind is best understood not as a general purpose computer but as a set of specialized software modules, each designed to deal with a particular subset of problems. Those programs have been designed by Darwinian evolution to produce reproductive success in our environment of evolutionary adaptiveness – the hunter-gatherer environment in which our species spent most of its species history.Researchers in evolutionary psychology, starting with these assumptions, have generated and tested predictions ranging from differences in male and female special abilities to the timing of morning sickness.

In this paper, we propose that the “powerful and privileged” sustain their way of life through greed and they sustain the lives of others through trickledown sharing. Greed provides the powerful and privileged a buffer against famine. Trickledown sharing provides them a buffer against predation or war. The inspiration for this integration of greed and trickledown sharing as self-preservation strategies is a multi-selection model called skew selection. According to skew selection, when perennial organisms are subjected to cycles of famine and predation, greed and trickledown sharing increases the organism’s survival relative to a greed-only strategy. Skew selection is extended to explain greed and trickledown sharing among humans through the introduction of mogul games. The results of mogul games reported herein suggest that inequality is an emergent property of self-organizing systems and potentially an essential precursor to the evolution of social behavior. In the future, it is our hope that mogul game simulations will be employed by others to explore the effect of variation in cycles of predation and resource abundance on the rules of greed (resource acquisition) and trickledown sharing (resources redistribution).

Friedrich Hayek, Ludwig von Mises, Ludwig Lachmann and George Shackle upheld that investigations of the causes of purposes, preferences, beliefs or behaviors by the social scientist were unwarranted. Shackle proposed that human agency is an “uncaused cause.” Others admitted that human volitions and actions are caused, but ruled out explanations of these causes from social science. By considering Darwinian insights from modern evolutionary psychology, this essay criticizes the view that causal investigations of human volitions and actions are beyond social science. These insights also point to the role of habit and instinct in human behavior.

Hayek was a firm believer in the effect of evolution on human behavior. This was a real advance since he wrote in a time when most social scientists believed in the “blank slate” (Pinker, 2002) and denied the influence of biology on human actions. Moreover, Hayek got the basic outline of the problem right. Most of human existence has been spent in small groups (25–250 members) and many of our tastes and preferences have evolved in that setting. These tastes and preferences are not always adapted for modern mass societies with market economies and extensive division of labor and exchange. However, evolutionary science and particularly its applications to human beings have advanced since Hayek wrote, and some of the details of his analysis are no longer consistent with current theories.

“It is now becoming widely recognised that many of the central unresolved problems in economics turn on questions of knowledge” (Loasby, 1986, p. 41). Nearly twenty years after that was written, it may be appropriate to take a (necessarily selective) look at ideas about human knowledge and to suggest some implications for the practice of economists. The ideas with which we shall begin long predate the observation that I have just recalled; and the delay in recognising their implications indicates how the growth of knowledge is dependent on the formation of appropriate linkages – which of course are not recognised as appropriate until they have been formed. Adam Smith, Alfred Marshall and Friedrich Hayek were all confronted with the uncertain basis of knowledge before they began their study of economics; and what their responses have in common is not only a theoretical focus on the process by which people develop what we call “knowledge” but also a reliance on similar kinds of process, which result in the formation of connections within particular domains. Each author recognises the impossibility of demonstrating that any such process can deliver proven truth; instead each envisages sequences of trial and error within particular contexts, leading to the preservation of what seems to work – until it no longer does, when a new sequence of trial and error begins. In other words, they all offer evolutionary theories, Marshall and Hayek explicitly so, while Smith, directly and indirectly, had a major influence on the development of Darwin’s ideas.

The awarding in October of 2002 of the Nobel Memorial Prize in Economics 1 Technically the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, established in 1968.1 to Daniel Kahneman and Vernon Smith might have profound implications for the survival of Homo economicus, which has long occupied a privileged place in the minds of economists and decision-making theorists. The species has endured many challenges and proven quite adaptable, changing to accommodate a cascade of findings inconsistent with its original conception. Homo economicus now faces a potentially more serious challenge: the resurgence of Homo sapiens, a more coherent and biologically grounded model for human decision-making, informed by theory and data from across the scientific spectrum.

The methodological individualism and subjectivism of the Austrian tradition in economics is often associated with a methodological dualism, i.e. the claim that the nature of its subject matter, namely purposeful and intentional human action, requires economics to adopt a methodology that is fundamentally different from the causal explanatory approach of the natural sciences. This paper critically examines this claim and advocates an alternative, explicitly naturalistic and empiricist outlook at human action, exemplified, in particular, by the research program of evolutionary psychology. It is argued that, within the Austrian tradition, a decidedly naturalistic approach to subjectivism can be found in F. A. Hayek’s work.

Darwin’s theory of natural selection, which explains how individual organisms can become exquisitely adapted to their environments, does not explain the evolution of adaptive societies with equal ease. To understand the nature of the problem, imagine a mutant individual who behaves in a way that increases the survival of everyone in her society, including herself, to an equal degree. Such a “no-cost public good” might not appear very feasible (and will soon be amended), but is useful for illustrative purposes. By increasing the fitness of everyone, the mutant trait will not increase in frequency within the society (other than by drift, which can equally cause a decrease in frequency). This example illustrates the elementary fact that natural selection is based on relative fitness. It’s not enough for a mutant trait to increase its own survival and reproduction; it must do so more than alternative traits in the population. The relative nature of fitness makes the evolutionary forces within a population insensitive to the welfare of the population as a whole.

Various authors allege that the theory of group selection is inconsistent with methodological individualism, and therefore analysts must reject at least one of these principles. The present article argues for their compatibility. The meaning of methodological individualism is clarified, and the new version of group selection (articulated by Wilson & Sober, 1994, 1998) is explained. The two principles are then incorporated into a single methodological approach. Group selection affects the assumptions made about the kind of individuals who populate social scientific models, while methodological individualism requires models’ conclusions to follow from the actions and interactions of those individuals.

According to Whitman, Hayek’s conception of MI pertains just to the relationship of individual psychology and the social sciences, and is neutral on broader questions about reductionism in other scientific domains. Since hypotheses of group selection frequently concern organisms that are taken to be mindless (e.g. viruses and social insects), it is clear that they do not come into contact with MI thus construed. And even when group selection hypotheses make claims about human evolution, as do the hypotheses we discuss in Chapters 4 and 5 of Unto Others, there is, once again, a relationship of mutual irrelevance. The reason is that MI addresses what biologists call the question of proximate mechanism, whereas hypotheses about natural selection are part of the project of ultimate explanation (Mayr, 1961). An example used in Unto Others helps to illustrate this distinction. If one asks why sunflowers turn towards the sun, there are two ways in which this question might be understood. One might wish to understand how the machinery inside of each plant causes the plant to exhibit phototropism. Or one might want to understand the evolutionary processes that caused this behavior to evolve. Both types of understanding are important, and there is no conflict between them. By the same token, when a human society exhibits some property – e.g. the type of egalitarianism among adult males that Boehm (1999) argues is characteristic of nomadic hunter-gatherers – we might seek both a proximate and an ultimate explanation of that arrangement. MI constrains the former problem; it asserts that a group’s having that property must be understood in terms of the beliefs and desires of the individuals in the group (with properties of the physical environment brought in where necessary). But even if the question of proximate mechanism gets answered in the way that MI insists, the question is left open as to whether the group phenotype is the result of natural selection, and if it is, whether group selection was involved. MI says nothing about the form that an evolutionary explanation must take; it concerns proximate explanation only.

My compliments to Glen Whitman on a carefully argued paper that makes an important point: methodological individualism is not what you think it is; and, contrary to what many have argued, methodological individualism is not in conflict with the notion of group selection in the theory of cultural evolution. Of course, part of the reason I like Whitman’s paper so much is that, as some of his footnotes hint, I have been saying many of the same things for a long time¹ (Langlois, 1983, 1985, 1986).

Methodological individualism underpins economic analysis. In his paper in this volume, however, Douglas Glen Whitman demonstrates that group selection can be reconciled with methodological individualism. This essay extends Whitman’s analysis in two ways. First, it summarizes and restates the necessary conditions for group selection to play a role in the evolution of human preferences and societies. Second, it discusses the role of group selection in Hayek’s thought, with a particular focus on the role of group selection in the evolution of legal rules and the rule of law. The viability of group selection is demonstrated to be an empirical question.

Whitman argues that group selection is consistent with methodological individualism. He begins by defining a weak form of methodological individualism in which agents are not necessarily self-interested or rational and shows that this form is consistent with Sober and Wilson’s model of group selection. However, Sober and Wilson’s group selection is also consistent with a methodological individualism in which the individuals are rational and self-interested, and consistent with individual selection as well. A version of group selection similar to what Hayek may have had in mind when he talked about groups out-competing other groups is presented, however, this is not a version of group selection that is compatible with methodological individualism.

Langlois agrees with my position – or perhaps I should say, given the order of our publications, that I agree with his. I accept his taxonomy of methodological positions and agree that position two is correct.