ECONOMICS AND 'NATURAL LAWS'?
BEACON Researchers at Work: The Invisible Hand of Evolution
This week’s BEACON Researchers at Work blog post is by MSU postdoc Jeff Morris. HERE
“Adam Smith, an 18th century Scottish philosopher, was struck by how economics obeyed natural-like laws despite the often capricious and irrational behavior of economic actors. Smith envisioned an intrinsic interrelation between producers and consumers that pulled economic behavior toward certain norms as if “led by an invisible hand.” The net result of many financial actors behaving selfishly is a well-regulated, self-organized system: the parts don’t have any intention of working together, but screw up and do it anyway.
… The chief problem with evolving cooperation is the tragedy of the commons. Briefly, if cooperation has a cost, then a non-cooperator that can still get the benefits of cooperation will always have a fitness advantage over cooperators. Theoretically, this advantage will always exist even if the breakdown of cooperation totally trashes the environment. We know the tragedy doesn’t always happen because we see organisms in nature working together – but how does evolution escape it?
“Bill Hamilton proved that self-sacrifice could evolve by natural selection if the recipients of the sacrifice were related to the sacrificer – something we’ve come to call kin selection. In the microbial world, kin selection can happen when microbes live in close physical association with each other.”
An interesting and readable article by a newly appointed Assistant Professor of Biology, of which subject I know little but I read in related fields. My recent reading included Edward O. Wilson: ‘The Social Consquest of Earth’, Norton, 2012.
Inter alia, Wilson reports Bill Hamilton’s classic demonstration that self-sacrifice for near relatives is an overstated assertion among biologists. I cannot and do not claim to adjudicate on such matters, but I do know that co-operation and wilful exchange of benefits occurs across nature including where near relatives are not involved. Edward O. Wilson’s theory of eusociality is a better general explanation for these behaviours.
But let me focus on Adam Smith and Darwinism.
“Smith was struck by how economics obeyed natural-like laws despite the often capricious and irrational behavior of economic actors.”
Obeying “natural-like laws” is contentious. The fraility of the generalisation lies precisely in the “often capricious and irrational behavior of economic actors.” “Laws” that are not universally obeyed seem short of “natural”. Moreover, whereas atoms and such like act alike across the universe in identical manners, which can claim to be explained as “natural laws”, human beings act in mutlitudes of ways and multitudes of mixtures and combinations of possible ways, well outside any description of singular “natural-like laws”.
Humans are self-directed in their behaviours. The benefits of co-operation were not instinctive; they had to be learned and other elements of co-operation had also to be learned; both evolved over time, though not universally nor simultaneously.
The “tragedy of the commons’, such as found in over-grazing a pasture or over-fishing a lake or ocean is explained not solely as “over population” - the original obsession of Garrett Hardin’s assertions - but of the absence of property rights and its management. In the absence of property, a human adaptation from nature - animals have a sharp sense of the defence of their ‘property’ from rival intruders and over-exploitation by humans was and is common. In the deep past until recently by vast spaces and very low human population densities (Europeans recently ‘discovered’ forgotten peoples that had migrated to the Americas via north-east Siberia and to Australia via south-east Asian island chains).
This whas not a case of humans learning to “pull” economic behavior towards certain norms, as if ‘led by an invisible hand’. Jeff Morris reports this as a tension between “co-operators’ and ‘non-co-operators’, with the former accepting the costs and the latter seeking to avoid the costs. The evolution of co-operation among humans took tens of thousands of years (and their Hominin predecessors that took millions of years) and not from just a few meetings, nor some formal agreements.
Jeff’s urge to link the long evolutionary processes of co-operation to the instantly recognisable “invisible hand”, used as a metaphor by Adam Smith (though for a distinctly different metaphoric purposes) and as a simile by Jeff, is unfortunate. Social scientists and biologists even, should look where they tread when entering another domain in case they cause are misled.
There is no “invisible hand in the human domain”. Co-operation among human kind was present as a possibility from the beginning. In Nature, lions, tigers, hyenas and dogs (and insects too) sometimes hunt in packs (co-operation) and after the kill, they compete for their share of it. Humans from the beginning of their speciation also faced the possibilities of hunting or gathering alone (with some degree of risk to their safety) or acting in groups. Before then they were dependent entirely upon what they found in rude nature, just as they found it, as was the case for all animals, whose bodily functions were suitable for their limited purposes, and always in competition with other living creatures. Humans learned from their intelligence to adapt the fruits of nature to their different needs. Groups that adapted did better over the millennia than other humans that did not.
Economics as a science is not a finished product. Attempts to find its natural laws are flawed. Know-all assertions of ‘natural’ laws that ‘explain’ economic behaviours in the same manner as they may be stated in the natural sciences are idealistic. When used to predict the future they are pernicious. The best we can do is to approach an understanding of the recent past which may help us to explain the present. But as a predictive science economics remains dissappointing.
The fact that there are multiple ‘schools’ of economics nowadays - some going back to the 18th and 19th centuries - all fighting for the supremacy of their ‘schools’ over the multiple alternatives, suggests to me at least (I am in a school of one!) that a degree of modesty is required when speaking of economic certainties about the real world.
Perhaps its different in biology? Read Jeff Morris and see what you think.