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Source link: http://archive.mises.org/7603/evonomics/

Evonomics

January 1, 2008 by

From Scientific American Magazine – January 2008:

Evolution and economics are both examples of a larger mysterious phenomenon

…As with living organisms and ecosystems, the economy looks designed—so just as humans naturally deduce the existence of a top-down intelligent designer, humans also (understandably) infer that a top-down government designer is needed in nearly every aspect of the economy. But just as living organisms are shaped from the bottom up by natural selection, the economy is molded from the bottom up by the invisible hand.

The correspondence between evolution and economics is not perfect, because some top-down institutional rules and laws are needed to provide a structure within which free and fair trade can occur. But too much top-down interference into the marketplace makes trade neither free nor fair. When such attempts have been made in the past, they have failed—because markets are far too complex, interactive and autocatalytic to be designed from the top down. In his 1922 book, Socialism, Ludwig von Mises spelled out the reasons why, most notably the problem of “economic calculation” in a planned socialist economy. In capitalism, prices are in constant and rapid flux and are determined from below by individuals freely exchanging in the marketplace. Money is a means of exchange, and prices are the information people use to guide their choices. Von Mises demonstrated that socialist economies depend on capitalist economies to determine what prices should be assigned to goods and services. And they do so cumbersomely and inefficiently. Relatively free markets are, ultimately, the only way to find out what buyers are willing to pay and what sellers are willing to accept.

Evonomics helps to explain how Yanomamö-like hunter-gatherers evolved into Manhattan-like consumer-traders. Nineteenth-century French economist Frédéric Bastiat well captured the principle: “Where goods do not cross frontiers, armies will.” In addition to being fierce warriors, the Yanomamö are also sophisticated traders, and the more they trade the less they fight. The reason is that trade is a powerful social adhesive that creates political alliances. One village cannot go to another village and announce that they are worried about being conquered by a third, more powerful village—that would reveal weakness. Instead they mask the real motives for alliance through trade and reciprocal feasting. And, as a result, not only gain military protection but also initiate a system of trade that—in the long run—leads to an increase in both wealth and SKUs.

More from Michael Shermer: The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics (my thanks to Franklin Harris).

{ 22 comments }

Franklin Harris January 1, 2008 at 11:55 pm

Although the article doesn’t say for sure, it looks like Michael Shermer adapted it from his new book, “The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics,” which references Mises, Bastiat, and Hayek frequently. I even noticed a reference to Bohm-Bawerk in the index when browsing through the book at the bookshop. My own copy should arrive in the mail tomorrow.

Keith January 2, 2008 at 6:27 am

This article is little more than a single token within a magazine that has long ago stopped being about science and become a mouthpiece for the environmental lobby.

david January 2, 2008 at 7:16 am

thanks for this – I have placed my order for the book and can’t wait to get started reading it.

Inquisitor January 2, 2008 at 8:10 am

Excellent article, but I agree with Keith. Does anyone know if this books makes reference to Karl Polanyi, who tried to refute the spontaneous order arguments of Hayek? Another similar work, for those interested, is Bionomics, though it contains scarce references to Austrians.

kisanri January 2, 2008 at 11:13 am

“But just as living organisms are shaped from the bottom up by natural selection, the economy is molded from the bottom up by the invisible hand.”

The economy is molded from the bottom up by the myriad of rational choises made by free agents based on percieved self-interest (inteligent designers). In fact, “the economy” or “the market” is nothing but that.

fundamentalist January 2, 2008 at 12:36 pm

“But just as living organisms are shaped from the bottom up by natural selection, the economy is molded from the bottom up by the invisible hand.”

We have to keep in mind that Smith assumed the existence of certain institutions, such as the rule of law, equality before the law, relatively free markets, property rights, etc. The invisible hand only works in a setting in which these institutions protect and guide it. Without them, that same hand gets stomped on and knuckles broken. Those institutions are recent developments in the history of mankind and are also rare on the planet.

Evolution is guided by survival of the fittest, capitalism by human created institutions. So as the author wrote “The correspondence between evolution and economics is not perfect…” I would argue that it’s not even close.

Spontaneous order in capitalism happens because humans are intelligent and can make rational decisions. It that sense it is designed by intelligent beings. The institutions that guide the invisible hand are human designed and the decisions that individuals make are human designed. The difference with socialism is that the decision making process is decentralized. Spontaneous order in evolution is pure accident.

In other words, the spontaneous order in capitalism comes about by the choices made by intelligent, rational people. Spontaneous order in evolution is pure random chance. The similarities are quite small.

This reminds me of the supposed 99% similarity in genetic code between chimps and humans. That may be true, but that remaining 1% difference sure accounts for a lot of visible differences.

Deregulator666 January 2, 2008 at 1:58 pm

While I agree with Shermer on the similarity of the spontaneous order between evolution and economics, I find it perplexing that most people don’t. Socialists tend to believe in the spontaneous order brought on by evolution, but think there needs to be command and control for the economy to work. Social conservatives tend to buy into laissez-faire economics, but believe in the intelligent design of nature.

Bradford Young January 2, 2008 at 3:09 pm

I hope the opening ellipsis hides some conditional statement along the lines of “Far too many intellectually lazy observers have noted … as with living organisms…” and on into the body of the quote.

Observations that humans naturally deduce and animals do not are the kind that lead people toward the intelligent designer thesis. The boldest even dare to call him God. That same omniscient presence provides the natural law that leads men to arrive at definitions of freedom and exchange which support human action.

Socialism denies the omniscient presence his proper role, which is why it fails. The mechanics of how it fails may be an inadequate price discovery process.

When the omniscient presence with eternal judgment power is removed from the equation, we have no objective standard by which to measure behavior. We are reduced to animalistic standards of power and survival strategy. The socialistic distribution of economic goods and services fails because it is not fair, something we intrinsically understand despite our discomfort with the revelatory nature of that understanding. The socialistic distributor invariably ends up abusing his position of power, yet he rarely pays a personal price. The freedom of Adam Smith’s invisible hand came with accountability. The microeconomic transactions allowed bets to be made and won or lost so that the aggregate utility was maximized. When the socialist/Keynesian sought to skip the microeconomic transactions to reach maximum aggregate utility in one fell swoop, he found (if he was honest) he could not. Capital is misallocated on a grand scale with repercussions on an equally grand scale.

Many libertarian thinkers are uncomfortable with religion. This is regrettable, for the author of religion is also the author of reason, peace, freedom, truth, and every other good thing. In fact, freedom is best defined as submission to the truth, the right order of things. It is license, a refusal to submit to the right order of things, that leads to all forms of aggression, be they political, military or economic.

Person January 2, 2008 at 3:15 pm

Just a reminder: the calculation argument does not in any way apply to cases where entrepreneurs are considering using scarce means to discover new ideas. The fact that pursuing new ideas must be weighed against using the scarce means for other things, doesn’t matter at all.

Why? Because Mises said so, and that’s all that matters.

Inquisitor January 2, 2008 at 6:23 pm

Why not reproduce Mises’ entire argument on calculation Person? In fact, quote him and interpret him. You seem to fancy yourself an expert on him.

Inquisitor January 2, 2008 at 6:28 pm

Fundamentally, socialists commit the same error evolutionists often accuse religious individuals of making – they view human action deterministically, just as evolutionists argue that religious individuals view the natural world teleologically.

Curt Howland January 2, 2008 at 6:43 pm

Evolution is not purely random. The mutations are, but the selection criteria is very stringent: fitness. Demonstrated fitness, not “chosen” fitness.

The Socialists think they can choose for others what is “fit”, the god types think fitness is chosen or rejected by the gods.

In a free market, I can choose what is fit for me.

Hey, Person, haven’t you heard? Mises wasn’t a Misian. From what I’ve read of his opinions, he would reject our taking his work for granted even if it was in his favor. So your sarcasm fails on many levels.

fundamentalist January 2, 2008 at 9:28 pm

Curt: “The mutations are, but the selection criteria is very stringent: fitness.”

But what determines if an animal is fit or not? Random mutations. The criteria is stringent, but still randomly based.

David January 3, 2008 at 1:44 am

Fundamentalist said:

‘Curt: “The mutations are, but the selection criteria is very stringent: fitness.”

But what determines if an animal is fit or not? Random mutations. The criteria is stringent, but still randomly based.’

(sigh) Curt is right on the button here. Besides, I sense a knee-jerk hostility to the very concept of randomness. Whats wrong with it, other than its conceptual threat to the primitive (and long since disproved) Platonic belief in Ideal Forms and an unchanging, fixed cosmos filled with predictable regularities. Random organic change is a required necessity for life to keep in step with the changes inherent in a complex, dynamic world. Life couldn’t sustainably persist across the generations any other way.

If organisms are to remain fitted to an unpredictably-changing environment, it follows that each generation needs to throw up a vareity of morphological or behavioural differences – making a range of differences between one another and between them and their parents. Those whose differences get them a slightly more efficient fit to the current environment are selected by the only criterion that matters – the optimality of their dovetailing with their surroundings. (btw, when the phrase ‘survival of the fittest’ was first coined by Herbert Spencer, the word ‘fit’ did not have the toothsome, muscular, fighting connotations we associate it with today – his use of the term was in the sense of a key ‘fitting’ a lock).

And, if you dont believe that human actions display random or unpredictable outcomes when aggregated across millions of individual decisions, you are missing an essential aspect of economics too. ( Have a look at either of Nassim Taleb’s books ‘fooled by randomness’ or ‘the black swan’for an insight into the inherent unpredictability randomness of human affairs – each individual’s person’s decisions might be teleological, but millions of independent decisions together must lead to fundamentally unpredictable, hence random, outcomes). Oh yes, theres a lot of commonality inherent in that lovely neologism ‘evonomics’.

I see very little difference between the evolutionary nature of an ecology, and the evolutionary nature of a human economy – indeed, it could well be said that economics is merely the human branch of ecology! And I am convinced that each discipline has much to learn from the other: just as economic modelling can be brought to bear on an ecological understanding of the interactions between the organisms in a forest or a tropical reef, the insights gained from these species interactions in any ecology can, and does, shed light on human economic questions.

And as for the percieved difference between chimpanzee and human implicit in that 1% differnece in DNA, you seriously underestimate mammalian commonality (in the same way as an alien might mistake a Great Dane and a spaniel as being 2 completely different kinds of animal – a superficial overestimation of morphological differences).

It is abundantly clear that all us living things are made of the same stuff – our differences are a matter of degree, not substance. And when it comes to our closest living relatives (btw, that’s the bonobo, pan paniscus, not the chimp, pan troglodites), whether at the levels of morphology, metabolism, cognition, or even social interaction, the things that we have in common vastly outweigh the things that make us different.

david January 3, 2008 at 3:03 am

Bradford said:

Many libertarian thinkers are uncomfortable with religion. This is regrettable, for the author of religion is also the author of reason, peace, freedom, truth, and every other good thing. In fact, freedom is best defined as submission to the truth, the right order of things. It is license, a refusal to submit to the right order of things, that leads to all forms of aggression, be they political, military or economic.’

Response: this is so far off-beam it can’t pass without comment

1. There is no single ‘author’ of religion – only a ‘subject’ or ‘subjects’ which may or may not even exist in any real sense outside the consciousness of individual humans. As for ‘authors’, there were thousands of them, spread over millennia, many contradict one another, and none even today can even agree on the interpretation or meaning of the various doctrines some of them share. Looking at them from outside, there are no meaningful criteria by chich we can determine which ones are right, if indeed any are.

2. ‘reason, peace, freedom, truth, and every other good thing’, to the extent they have emerged, seem to have done so IN SPITE OF religion, whose record of intolerance, oppression, suppression of reason, war, genocide, torture, and persecution, has been nothing short of appalling, in this or any other age. If theres one thing Ive learnt from the actions and words of those professing faith these last 2 millennia, is that doctrine always trumps both compassion and freedom. That makes them all purveyors of evil in my book.

3. ‘freedom is best defined as submission to the truth, the right order of things’.

whose ‘truth’, and whose definition of the ‘right order’ of things? These values do not submit to any objective universal standard, they are inherently subjective. I suspect you will find Mises would have agreed.

4. ‘It is license, a refusal to submit to the right order of things, that leads to all forms of aggression, be they political, military or economic.’

quite the reverse, frankly – these forms of aggression by and large follow attempts to impose one view of the ‘right order of things’ on others who do not subscribe to that view.

If there is to be any freedom at all, it requires each to recognise that his opinion of what is right may not be forcibly imposed on another. Freedom requires that one’s view of right .

Bradford, do you not recognise that your statement is, in substance if not detail, a near-paraphrase of the ideology of just about every despotic dictator in history, from the popes of th eholy roman empire, through the excessive zealots of the Reformation, to the atheistic but no less ideological Stalins, Hitlers and Lenins and Maos of the 20th century.

Each thought he was right , and made a policy of killing those who disagreed. why should anyone else ‘submit’ to your version of the ‘truth’?

To sum up: A couple of nice quotes:

‘WIth or without religion, good people will do good things and bad people will do bad things. But for good people to do bad things, that takes religion’ – Steven Weinberg.

‘Men never do evil so completely and cheerfully as when they do it from religious conviction’ – Blaise Pascal.

fundamentalist January 3, 2008 at 8:27 am

David: “‘reason, peace, freedom, truth, and every other good thing’, to the extent they have emerged, seem to have done so IN SPITE OF religion, whose record of intolerance, oppression, suppression of reason, war, genocide, torture, and persecution, has been nothing short of appalling, in this or any other age.”

It wasn’t religion, but atheism, that killed 100 million people in the 20th century. Anti-religious people seem to have a convenient amnesia in that regard. As for the development of reason, historians of science credit the Christian emphasis on reason for the rise of modern science. Atheists contributed virtually nothing to science until the late 1800′s.

TLWP Sam January 3, 2008 at 9:06 am

Bleh! I wouldn’t mind a scorecard for different types of reasons why people snuffed out large numbers of people. Maybe how many people were snuffed out for being witches, werewolves, heretics, possessed, etc., would be interesting.

David January 3, 2008 at 9:07 am

Fundamentalist

‘It wasn’t religion, but atheism, that killed 100 million people in the 20th century. Anti-religious people seem to have a convenient amnesia in that regard. As for the development of reason, historians of science credit the Christian emphasis on reason for the rise of modern science. Atheists contributed virtually nothing to science until the late 1800′s.’

Response: If by ‘killed 100 million’ you mean the actions of depots like Hitler, Mao, stalin et al, you forget that

- hitler was himself a Christian, as were most of the Germans who actively supported Nazism.
example: ‘I believe that I am acting in accordance with the will of the Almighty Creator: by defending myself against the Jew, I am fighting for the work of the Lord’ – from Mein Kampf.

- the Marxist atheism espoused by the Soviets was merely incidental to their ideology, (itself a quasi-religion), leading to the same predictable results. The details of religious belief are beside the point, doctrine is doctrine and brooks no dissent. The only religious leader I know of who explicitly eschews doctrine as a source of wisdom, and who is on record as saying that if the scriptures are refuted by the discoveries of science, it is the scriptures that must be changed, is the Dalai Lama, and being Buddhist, is himself technically an atheist, because buddhism does not distinguish a creator god as such.

to say that atheism killed 100 million people is akin to sayhing that Henry Ford killed x million people by virtue of every subsequent road accident involving a Ford since. And besides, lets not forget the many lesser despots of the 20th century who were christians, but whose depredations were incidental to their christianity.

And in repsect of modern science, I suppose that Rome’s treatment of Galileo’s work, (endorsing the earlier work of Copernicus), is based on reason?

It does not stretch credulity to surmise that many of the rational scientists during the Enlightenment had private doubts about the existence of any god, but feared voicing these views out of the very real fear of torture, death, or exile. Even Spinoza went to extraordinary lengths to couch his atheism in such terms as to present his pantheistic ‘worship’ of Nature itself as a sort of god. And even then he was courting the displeasure of the clergy.

The power of the Church, whether in Rome or the many offshoots of the reformation, was uncompromising, absolute , quite bloody, and went on for centuries. Religious people seem to have a convenient amnesia in that regard.

fundamentalist January 3, 2008 at 10:29 am

David: “hitler was himself a Christian…”

I expected that. Your whole post is nothing but the typical knee jerk dodges that atheists make in order to avoid historical facts. Hitler was not a Christian by any definition of the term. The atheism of the Soviets was true atheism; you can make it a religion only by twisting the definition of words into meaninglessness. If I had to ignore historical facts and torture words in order to remain an atheist, I would wonder about my sanity.

David: “And in repsect of modern science, I suppose that Rome’s treatment of Galileo’s work, (endorsing the earlier work of Copernicus), is based on reason?”

Was Galileo an atheist? I didn’t know.

David: “The power of the Church, whether in Rome or the many offshoots of the reformation, was uncompromising, absolute , quite bloody, and went on for centuries.”

In some cases you’re right, but religious people will never be able to match the level of murder committed by blood-thirsty atheists of the 20th century. BTW, which century do you think professional historians have chosen as the bloodiest in the history of mankind? The 20th century, the century of atheism.

IMHO January 4, 2008 at 1:02 am

Fundamentalist,

It upsets me when people choose to ignore the fact that it was the administrators of the various Christian sects who were responsible for the bloodshed and not Christ himself. Nowhere in the New Testament do I recall Christ ever saying anything about shedding the blood of another in His name.

david January 4, 2008 at 4:59 am

fundamentalist:

just for the record, I am not an atheist. I am a (devout) agnostic. There is an important difference.

furthermore, IMHO too makes an important point that I heartily endorse. When it comes to the depradations of organised religion, the evils that result are exclusively the work of men, not the god(s) they profess to follow. And the root cause of that is the simple desire of some to forcefully impose their value judgments on others. which is in principle no different from the socialist prescription (Ill say it again: Stalin’s swather of destruction wasn’t driven by his atheism per se, it was driven by his adherence to an ideology. Which makes his regime no different to, say, the Spanish inquisition or the Anabaptists. This form of coercion is the foundation on which most human misery is built.

This was well recognised by the likes of Von Mises, (who was himself a Christian), and it is of course a cornerstone of Austrian thought. To the extent that religion ( any religion) informs individual behavioural choices on moral grounds, it is inoffensive and probably beneficial, but the moment it crosses the line and imposes itself on others by force, it becomes malignant. Id venture to suggest that the majority of adherents to the majority of monotheistic faiths have yet to understand the importance of this difference in application, and tend to say ‘ We believe XYZ is wrong. Therefore it is my Christian duty to stop other people from doing it’.

while this criticism applies to most absolutist faiths, Ambrose Bierce put it rather pithily, if cynically, in the Christian context:

‘Christian (n): One who believes that the New Testament is a divinely inspired book admirably suited to the spiritual needs of his neighbour.’

anyhow, this thread has drifted so far beyond the realm of economics that to carry it forward here is a disservice to the other users.

IMHO January 4, 2008 at 5:57 pm

David,

I’ll be glad to end it here; however, I may have given you the impression that I am against any and all individuals who are involved with religion. For example, someone like Mother Theresa devoted her entire life to improving the lives of the poor. Hers was a charitable life filled with many good works. I worked with nuns in a private school. They were extremely kind to me.

Christian churches in modern times are doing many wonderful things for the poor. And if people had more money left in their paychecks each week, I suspect that charities would be the recipients of larger donations and would be able to accomplish much more.

Quite frankly, the terrible wrongs that were committed hundreds of years ago by various churches pale in comparison to the atrocities committed by the socialists in recent history. Let’s face it…we are far more sophisticated than those who lived in Medieval times, and I therefore think it is appropriate for us to have had higher expectations of those who lived in the 20th Century.

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