Stephan WehnerBlog and Homepage

August 19, 2010

Couple of thoughts about evolution and economics

Filed under: economics,systems — sw @ 9:19 am

I saw a documentary about Charles Darwin a few months ago. I think it was part  of David Suzuki’s The Nature of Things.

Evolution and natural selection are of course endless topics with many different and interesting aspects. So I’m writing here about a few thoughts that occurred to me while watching the documentary. Please leave corrections or pointers to related articles in the comments, if I got something wrong or missed something!

So, I used to think this was a good way to think of natural selection: Let’s say your eating potato chips, then towards the end, the bag has only small chips − the big ones are more likely to be pulled out. I’m sure this corresponds with your personal experience. Pretty intuitive isn’t it?

Well, watching the documentary, I realized that it’s not that easy. The potato chips example is primitive in the way that the chips don’t change over the time. They don’t interact while you’re eating. This simplicity might make it a good example, but it really doesn’t capture enough of the phenomenon.

The curious thing to me about evolution and economics is that I got the picture that people learned about evolution and what marvelous creatures are produced by simply letting natural selection do its work. Just around that time (late 19th century) it became popular to think: Why not build society on this principle? Let the best survive, why bother with the inferior (apply to employees/products/politicians/strategies)

And in as much as the theories that evolved (it might be fair to say this thinking led to neoclassical  economics) may be behind a lot of amazing features and products of modern society, I think overall there is also a sense of profound failure.

So what I wanted to write about here, is that in fact, these economic theories did not actually copy over the findings of evolutionary studies.

You see, there is  this distinction that biologists make between sexual and asexual reproduction. What biologists are telling us is that sexual reproduction can produce better organisms, better in the sense that they are more likely to survive, or better in the sense that they fill the available “space” more completely, are bigger, stronger, and more complex overall. (In general, what makes natural selection so general is that what “better” means is very open, and cannot be preconceived)

(Usually you think of sexual reproduction as it involving a male and a female producing offspring. A simpler variation of asexual reproduction may be that it simply takes two, instead of just one organism, to reproduce.)

Sexual reproduction can be viewed as unfair on an individual level, but also as a bad idea on a species level. After all, its form is: if a pair of individuals have the same sex, then they cannot mate, they cannot have any offspring; no matter what, and there are no exceptions. Who cares how superior they are, and even if they are the two best individuals of the species: tough luck.

So here’s a question: what would be the analogous set up of sexual reproduction in economics?

Here is one way: you divide the economic population (people + organizations) into red and blue people.  Red people can only work for blue people, and vice versa. Red people can only buy from blue people, and vice versa. What on earth would that look like? I really don’t know. At first glance, you might call this a sophisticated variation of racism—horror. However, biologists are hinting this might be a better system. Overall, the population is going to have a stronger economy; individuals get to follow their rational preferences,  maximize their utilites, while companies maximize profits, and everyone just acts independently on the basis of full and relevant information.

However, since I already mentioned neoclassical economics, I think the form of sexual reproduction, with its strong “You cannot mate” can also be found in the big pain point of the corporate world: regulations. After all regulations put constraints on what corporations can do. You have probably often personally heared about complaints from the business world. (In fact do they complain about anything else, besides taxes?) However, what we see in natural selection is that even the most basic, and brutally unfair, rule such as we find in sexual reproduction can actually work out.

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