Saturday, December 28, 2013

Sydney Newspaper Prints Good Sense on Darwinian Evolution and Self-Interest

Ross Gittins, Economics Editor, posts (28 December) on the Sydney Morning Herald – a newspaper I once worked for as an assistant proof-reader long ago in my teens – HERE  or read more HERE 
“Darwinian model of economics flawed for firms”
What can the theory of evolution tell us about how the economy works? A lot. But probably not what you think it does.
Famous economists such as Joseph Schumpeter (author of the notion of ''creative destruction'') and Milton Friedman, and the contemporary economic historian Niall Ferguson, have viewed economies as Darwinian arenas: competition among firms reflects the ruthless logic of natural selection. Firms struggle with each other, with successful firms surviving and unsuccessful ones dying.
Thus evolution seems to support three pillars of the conventional, neoclassical model of the economy. First, that ''economic actors'' are self-interested, second, that self-interest works to the good of the public (propelling Adam Smith's ''invisible hand'') and, third, that together these lead the market to deliver the community ideal outcomes (''optimisation'').
But there's a basic fault in this contention, as Dominic Johnson, of Oxford University, Michael Price, of Britain's Brunel University, and Mark van Vugt, of Amsterdam's VU University, point out in their paper, Darwin's Invisible Hand.
In conventional economics, ''economic actors'' can be either individuals or firms, although the theory tends to treat firms as though they were individuals. In reality, however, firms are groups of individuals - in the case of big national and multinational companies, thousands of them in one firm.
So if Darwinian selection applies to competitive markets, this implies that selection pressure acts on groups, not individuals. And group selection, as opposed to conventional Darwinian selection at the individual level, leads to the emergence of traits that act against self-interest.
With group selection, ''we should expect the suppression of self-interest among individuals, not its flourishing'', the authors say.
''Firms with less self-interested workers will compete more effectively and spread at the expense of firms with more self-interested workers, which will compete less effectively and decline. In other words, the model predicts nasty firms but nice people.
I am not sure that the authors of the paper Ross Gittins confronts (Dominic Johnson, of Oxford University, Michael Price, of Britain's Brunel University, and Mark van Vugt, of Amsterdam's VU University) really understand Darwinian evolution or its application to the evolution of society, or to what its “ruthless logic” amounts to.  Evolution is neither “benign” nor “ruthless” – it is moral free, blind and purposeless.  It happens, usually over long time periods.  It is about constant change.  Many sub-human species were consequences of the speciation from the common ancestor of chimpanzees and the hominine line 6-8 million years ago in East Africa, from which Homo sapiens eventually emerged some 200,000 years ago. 
All the pre-human species in the line became extinct.  In biological evolution extinction is a regular and unpredictable natural event. Nobody knows what fate awaits the human species, be it by “nature” or by the ultimate ‘unintended consequence’ of “human actions”.
Once more on the richness and boundaries of “self interest”: economists cling to the idea that self-interest is egotistically competitive.  It isn’t, at least in Adam Smith’s interpretation. No individual can reach any level of self-interest without the co-operation of many others, not all of them knowing or needing to know the ultimate beneficiaries of their co-operation.  So, as a very young teenager (before discovering a much easier, quieter and cleaner, and incidentally better paid job at £12 a week, on the Sydney Morning Herald) I worked for £5.10s a weeks as an operator of a capstan-lathe, turning out dozens of brass-fittings, drilled, scored and with threads to fit to some other machined parts for something to do with I don’t know what. I never found out what they were used for or who used them.   But without those unknown people I would not have had a job that satisfied my then self-interests of regular money.  The price of that job was my willingness to co-operate with anonymous others.
So it is in all market societies.   We cannot serve our self-interests without mediating them with the self-interests of others, as shown brilliantly in Smith’s “butcher, brewer and baker” example in Wealth Of Nations (WN I.ii.2: 26-7). The myth of a self-interest ego is, well, fantasy. True, my self-interest prompted me to move to the SMH, apart from the pay and the cleanliness of the albeit untidy, air-conditioned proofreaders’ room. There were no early morning journeys to work (12 noon beats 6.50 am and Sydney mornings at the beach beat sweaty mornings in a hot factory, in my teenager’s view; also I had time to read a lot too, including much of the paper’s contents, from which the idea formed of starting higher education in my early 20s).
Follow the link and read the full post.  Ross Gittins talks a lot of sense about Darwinian evolution and I am glad to see that the Sydney Morning Herald appears to be in safe-hands, at least for economics and evolution.
He only needs to forget modern theories of "propelling Adam Smith's ''invisible hand'' by reading Lost Legacy posts for a month or two - but, hey, let's be grateful for major steps towards agreement.


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