Trade, Civility and Fairness

|Peter Boettke|

A group of evolutionary anthropologists have produced a new study that argues that the human capacity to treat strangers with fairness, rather than hostility, is learned through the engagement in trading relations.  In other words, Hayek's discussion of Katallaxy and its twin root meanings in the Greek language -- (a) exchange, and (b) transforming a stranger into friendship -- gets additional support in the evolutionary anthropology literature.  This isn't the first study that explored this link, but it is another piece of evidence on the civilizing component of trade and commerce that is often overlooked in traditional economic models that focus on allocational efficiency exclusively.

HT: Karol Boudreaux.

Comments

[Greg Ransom]

And, Hayek also seems to be right about the deep biological / primitive brain grounding of our sense of fairness, which Hayek links to evolution within the small primitive tribe:

http://www.sciencedaily.com/releases/2008/05/080528140226.htm

It also turns out that Hayek was right about a functional basis in the brain for modeling the brain / behavior patterns of other minds.

The guys .. need it be said .. was a bit ahead of his time.

[Greg Ransom]

Think of Hayek as a sort of Nostradamus of the unfolding of brain science and economic science and social science.

As Bruce Caldwell said now 25 years ago, the economics profession keeps catching up to what Hayek was thinking about 50 75 years ago ...

[Daniel Kuehn]

I'm not an evolutionary biologist, but we may have to be careful with causation here. Are these cognitive reactions "learned through the engagement in trading relations", or are those who have these cognitive reactions selected because of the advantages of trade.

It doesn't make a huge difference, but there is a difference between saying "trade civilizes people" and saying "civilized people trade and traders survive".

[Greg Ransom]

Note well that Hayek -- at a basic level -- discusses such matters in some of his technical papers on the topic. See for example Hayek's _Studies_ and _New Studies_.

I trust you'll be racing out to read these, Daniel.

Daniel writes.

"It doesn't make a huge difference, but there is a difference between saying "trade civilizes people" and saying "civilized people trade and traders survive"."

[Greg Ransom]

Daniel writes:

"It doesn't make a huge difference, but there is a difference between saying "trade civilizes people" and saying "civilized people trade and traders survive"."

Note well that even getting the _theoretical_ causal mechanism put together in such cases is a complex task with almost no incentive structure in academia for doing it.

What is more, the literature on "social biology" and "human genetic inheritance" is vast, complex and multidisciplinary.

I doubt we'll see any Ph.D. student putting his career on the line attempting to do such a thing any time soon.

[Greg Ransom]

Daniel writes:

"It doesn't make a huge difference, but there is a difference between saying "trade civilizes people" and saying "civilized people trade and traders survive"."

I've shown how a similar socialization / social selection process theoretically works in real time (without genetic inheritance selection of time) within the domain of science here:

http://hayekcenter.org/ransompapers/Thomas_Kuhn_and_Membership_Selection.html

[Petrik Runst]

i could get at the original paper. but from the description it looks as if this is not new but the famous study by henrich, fehr and others:

Henrich, Boyd, Bowls, Camerer, Fehr, Gintis, McElreath (2001) “In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies” in AER, Vol.91, No.2

[Petrik Runst]

i meant: 'could not' get at the original study.

[Mario Rizzo]

"Think of Hayek as a sort of Nostradamus..."

Please don't.

[Roger Koppl]

I love the newspaper headline: "Fairness is socially-learned, not innate, research suggests." The article didn't say that and I haven't personally read anything by Henrich et al. saying that. On the contrary, I think Henrich et al. have in mind something like the Katallaxy point. You have innate pro-social impulses within the band and innate anti-social impulses beyond. (Yes, I'm simplifying.) Henrich et al. seem to be showing us that trade causes people to apply within-band rules to strangers. That's not really the same thing as saying fairness is "socially learned."

[Peter Boettke]

Roger,

Yes, the issues are more subtle than I am letting on --- and you are right in pointing to this. But I think of the "justice as fairness" type idea that one finds as common ground between Hayek, Rawls and Buchanan. And as you put it, this is about applying in-group rules to out-group individuals. Or as Seabright argues in his very useful book, The Company of Strangers, this is how "the other" gets treated so that we may realize the gains from the social cooperation under the division of labor.

BTW, David Levy brought my attention to an earlier study that also was in Science that focused on the origin of male and female differences and they argued that even these were determined by trade and division of labor, not inherited traits. In the beginning there was trade so to speak.

I am just trying to highlight the Katallaxy point.

[Michael Wiebe]

If fairness is not innate, wouldn't that contradict Seabright's argument that humans evolved a reciprocity trait?

[Peter Boettke]

Michael,

There is some ambiguity here in the discussion --- you know, using the same words to mean different things and using different words to mean the same thing. Here the question is the meaning of "fairness". In a lot of discussions "fairness" means distribution --- a fair split (50-50, 60-40) -- whereas in others "fairness" means the rules of the game are fair and equally enforced (non-discriminatory politics and law, etc.).

The time period being discussed is prior to formal law establishing "fair rules" and yet the informal mechanism operating among in-groups to assure cooperation and coordination, are applied to out-group individuals so that trading relationships can be realized and social cooperation can be enhanced.

[Roger Koppl]

Pete,

Yes. I didn't think I was qualifying or correcting your remarks one jot or tittle. As you say, it's the Katallaxy point: turning strangers into friends.

I'd love to have the cite on Science sex paper you mention.

"In the beginning there was trade." Brilliant!

[Peter Boettke]

Petrik,

It is not the older paper, but instead a paper that was just released yesterday titled "Markets, Religion, Community Size, and the Evolution of Fairness and Punishment" and Henrich's co-authors include Jean Ensminger, etc. Mark Steckbeck just sent me the pdf, but I imagine GMU electronic library would enable you to track it down.

Pete

[Daniel Kuehn]

Greg -
I want to be clear, I'm not trying to say this can't be learned, or that genetic selection is the only sort of selection process out there. I hope you didn't take that from my comment (I'm not sure how you could).

Clearly you can learn to be more trustworthy and you can also have communities/institutions that trusting people select into (your example of selection "in real time"). I'm simply saying that the demonstration that it is learned shouldn't rule out other processes.

[Roger Koppl]

Daniel,

I'm still stumped how you could have read Henrich et al. and yet ask "are those who have these cognitive reactions selected because of the advantages of trade[?]" In their 2005 paper in Behavioral & Brain Science they say "“individual-level economic and demographic variables do not consistently explain behavior within or across groups.” So how would that be consistent with the possibility that the observations of Henrich et al. come from selection and not learning? I mean, for the species, sure there's a question of co-evolution and everything. But here we're talking about behavioral differences across the current global population. I assume you are *not* trying to suggest some sort of racial theory whereby the cooperating races get civilized. But then I just don't really "get" your comment. Thanks in advance for your clarification.

[Greg Ransom]

We are agreed on this Daniel.

Part of my point is that this domain implicates multiple specialized academic departments -- and there is no incentive structure to support such a cross-disciplinary project.

As Pete emphasizes, incentives matter -- and incentives mold and limit the range and content of "science".

Ironically, the "science of science" is one of those cross disciplinary domains not well supported by the modern university.

[Greg Ransom]

I once participated in a seminar on the general topic of "the sociobiology of ethics" with a _psych_ department guy who specialized in bird psychology and the social learning of bird songs.

I was teaching him the ABCs of the Prisoner's Dilemma and the Trolley Problems and other basics in economics departments and philosophy departments.

He was an older guy who was branching out into a domain of "human psychology", but his background understanding in ethics, economics, and even all of what goes into the mechanisms of Darwinian biology applied to human cultural inheritance was primitive.

His first "application" of his new knowledge was the "test" the Trolley Problem with survey questions for his freshman psych. students -- as any psych major knows, the "testing" of psychological theories on freshman is of course just what a "testable" / "empirical" science of psychology demands.

Such groping across the vast chasm separating academic departments is typical -- stuff like what Pete links to above is rare and encouraging.

But I still wonder if the bureaucratic and incentive structure of the university -- designed according to 19th Century conceptions of the world of "knowledge" -- is really something we should look to as a mechanism for sustaining "between the chasms" science.

[FC]

Say, has anyone tested Rawls' "veil of ignorance" claim on amnesiacs?

I just found my dissertation topic! I'll be famous! As long as I can borrow an fMRI...

[Barkley Rosser]

Many of these issues are discussed in the much-cited paper I published in JEBO in January, 2004 by Joseph Henrich, "Cultural group selection, coevolutionary processes and large-scale cooperation," which was a target article commented on by many, with Vernon Smith and coauthors sharply disagreeing with some of it. There were many other issues involved in it, with this long-hotly debated matter of multi-level selection drawing most of the fire. But many of the matters discussed here showed up.

So, an underlying issue is that it does appear that what gets labeled "the taste for fairness," which shows up most obviously in the widespread propensity for people to be willing to pay a cost to punish someone who does not offer what they consider to be a "fair offer" in the ultimatum game, is hard-wired in and evolutionarily based. There are, nevertheless, cross-cultural differences as reported in the paper above by Henrich with many coauthors from years ago, with those most likely to behave like "rationally selfish Nash equilibrium players" being the most primitive tribespeople from the Amazon rain forest, who indeed engage in very little trade. Those making the highest offers were people from whaling communities in the South Pacific, where there are large amounts of cooperation in the basic economic activity. So, this appears to be a matter of both specific cultural experiences as well as evolutionary hard wiring. Just how and when did we "learn to cooperate"?

[Richard Ebeling]

I, too, like many others, find it fascinating to "listen in" on these developments and "discoveries" in biology and sociobiology.

But I wonder if as economists, or social scientists in general, it is necessary or expedient to expect or rely upon "proofs" or "defenses" of freedom and trade from the uncovering of a "truck and barter gene." (I use this phrase merely for purposes of "poetic license.")

Is it not sufficient for our purposes to build upon and develop the more traditional logic of the origin and evolution of division of labor, trade, rules of interpersonal association (commerce, money, markets, institutional order, etc.) along the more traditional lines that many of the classical economists and then Austrians (from Adam Ferguson and Adam Smith to Menger and Hayek), have done, as the results of human action, but not of intentional design?

Drawing social conclusions from theories and "evidence" in biology led historians, economists, and political scientists down a variety of dangerous paths and dead ends in the 19th centuries.

Irving Fisher and Frank Taussig (to name just two prominent economists of the late 19th and 20th centuries) reached conclusions from biology and eugenics that many of us, today, would consider, well, "embarrassing."

Do we "need" such sociobiological supports for our understanding and "defenses" for a market order?

Richard Ebeling

[Roger Koppl]

Richard,

Maybe I don't follow you, but I don't quite see how you can really make that argument work. I mean how would respond to the charge that you're saying it would be better if economics did not trade with other disciplines? How do you avoid the charge that you're saying we can form a judgment before seeing the argument or evidence? I don't really see how that works. I think you can say that basic economic reasoning is robust to our model of man, as Vernon Smith, Gode & Sunder, and others have shown. Maybe that's what you're saying, in which case I'd agree strongly. But I don't see how you could sort of pre-screen biological arguments and rule them out of court. I don't get how that would work.

[Richard Ebeling]

Roger,

If I expressed myself badly, I apologize.

What I am suggesting that most of what economics-type social analysis is concerned with explaining, ("spontaneous order, "unintended consequences," including market institutional emergence and evolution, etc.) can be successfully pursued with the core concepts with which we traditionally do our work: scarcity, intentionality, ends/means, mutual gains from trade, "invisible hand" elaborations (such as Menger does about money, language, law, customs, traditions), with the usual Austrian-type "realistic" assumptions of imperfect knowledge, time, uncertainty, etc.

And it gets us pretty far (and further theoretical and historical application may get us over the decades much further in our understanding) without having to rely on or be dependent upon the particular methods of investigations, or the specific results of other human sciences.

These other disciplines and their productive results may complement, amplify, and serve as "suggestive" insights for the economist's own way of approaching these things. But are we reliant on these other fields for our own work?

Now, of all people, I hope you know how open I am to the insights and useful methods of some other social ways of thinking (given my own attempts to apply the sociological contributions of Weber and Schutz, and Husserl's phenomenological philosophy for thinking about theory-formation).

Now I willingly admit that time constraints and other intellectual interests have not allowed me to follow many of these developments in other fields as closely as perhaps I should.

But what I have found most "useful" in these "scientific" studies of the biologically evolved ways in what the human mind works, is that they have confirmed that the way the "Austrians" have theorized about how the human mind operates in terms of the logic and structure of action and choice is far closer to "reality" than the assumptions of the "neo-classical economic formulation.

And while the mainstream economist may sneer at it, I believe that this is why the intelligent "non-economist" finds the Austrian "story" of human action more convincing and persuasive. It is precisely due to the fact that when he uses that "taboo" method of introspection to judge the reasonableness of how the Austrians explain things, he sees a theoretical approach that "explains" things in terms of how his own mind works.

Richard Ebeling

[Current]

I think there are many consequences here for the study of religion. In the old testament God doesn't worry much about Samson's killing of philistines with the jawbone of an ass. God doesn't worry about many other atrocities concerning other groups, god is for the in-group.

But, the new testament is different, and so are many other religious documents from the same time. They consider "God" to be the God of all people. Now, I'm an agnostic and I don't agree. But, I find it interesting that the same development happened in several places. Many other religions follow the new testament in calling for tolerance to outsiders.

Perhaps if group sympathy is connected with trade then so is the monotheistic idea of God.

[Jerry O'Driscoll]

A very interesting post by Current. Rodney Stark's Discovering God would be relevant. Stark is a sociologist who applies standard social science reasoning to religious studies. The search for a monotheistic God took centuries and had many reversals.

Stark is pro-markets and pro-competition. He maintains that, among Western societies, America is so religious because we have long had a free market in religion.

[Troy Camplin]

While economics certainly doesn't have to "wait around" for the other sciences, it seems to me that economics should be more than happy to embrace all work in other disciplines that contribute to economics. Economics deals with human actions. Thus, economists should be interested in what causes humans to act, and the evolutionary origins of those actions. Evolutionary anthropology that confirms Hayek should be more than embraced. Indeed, we should not be surprised that those taking an evolutionary approach are coming upon Hayekian insights, since they are merely using approaches he was already using. Systems theory and network theory are also coming upon the same insights as Hayek. As does information theory, cybernetics, and emergence. Indeed, almost every aspect of the sciences, including the humane sciences, are converging on the same basic understanding of the world as Hayek had. And that should be embraced. Many people are having to rediscover these same things in many different fields, but convergence is occuring. Those of us who work in the spontaneous order tradition are the new paradigm.

[Daniel Kuehn]

Roger -

RE: "I'm still stumped how you could have read Henrich et al. and yet ask "are those who have these cognitive reactions selected because of the advantages of trade[?]""

I'm not sure where I ever claimed they did say this. That's what I'M saying. I agree with Henrich et al. that these reactions are and can be learned. I do, however, attribute a great deal of authenticity and explanatory power to the theory of evolution, so I would simply caution against taking a result about learned trustworthiness and priveleging that over inherited trustworthiness. And I'm not accusing Peter of priveleging the finding in that way either (before you jump to that conclusion). I'm just saying it's important to keep in mind.

[Roger Koppl]

Richard,

Ah! Now I'm with you. I had taken you to be saying something else. Sorry about that. Indeed, I had not forgotten about your Husserlian and Weberian sides. You are a pretty mean historian too, if I may say so. All the more reason for me to wonder what you could possibly have been saying.

I suppose I might be more interested than you in some of these things coming from biology, math, and other corners. Maybe there is some little difference there. But it seems we both agree with Bruce Caldwell's defense of "basic economic reasoning." Does that sound about right?

I sure support "basic economic reasoning." My SDAE address was very much on this theme. On the one hand we have all these great developments including wonderful crazy stuff like fMRI studies. On the other hand, as Duncan Foley warns, there is the danger that economics will just fade away. It should not. The real core of economics, "basic economic reasoning" is a vital achievement of the human intellect worthy of preserving.

We cannot predict which bits may be modified how, so we have to keep and open mind and seek the truth. But it's a good bet that basic economic reasoning will look about the same 100 years from now. That Adam Smith fellow was onto something. And the main gains of the "marginal revolution" seem unlikely to be simply reversed or abandoned.

[Roger Koppl]

Daniel,

I'm probably still missing the point. It seems you are saying that you wish only to make this general cautionary remark about evolution that doesn't really apply to anything Henrich et al. or Pete have said in anything related to this discussion. I'm sure that can't be right, but then I'm groping to understand the relevance of your comment that " it's important to keep in mind" the role of evolution.

[Current]

Jerry O'Driscoll"Rodney Stark's Discovering God would be relevant. Stark is a sociologist who applies standard social science reasoning to religious studies. The search for a monotheistic God took centuries and had many reversals."

Interesting. I'll check out that book when I get the opportunity.

Matt Ridley's book "The Origin of Virtue" is also relevant to this debate. That was the first book that I read that involved libertarianism and got me interested in it.

Jerry O'Driscoll: "Stark is pro-markets and pro-competition. He maintains that, among Western societies, America is so religious because we have long had a free market in religion."

He may be right about that. Much of the lack of religion in Britain seems to be because of the Church of England. Eddie Izzard did a good sketch about it:
http://www.youtube.com/watch?v=gTRjWDW3JSg

In Ireland much of the lack of religion is down to the recent history behaviour of the Catholic church.

[Bill Stepp]

Following up Jerry's comment about Rodney Stark, he co-authored (with Roger Finke) a superb book, The Churching of America, 1776-1990. If I had to make a list of my ten favorite books, that might be on it.
I'm in Richard's camp about scarcity, action, ends/means, etc. being enough to develop a sound economics.

[Greg Ransom]

Roger, this is actually a serious issue -- if you begin with overall "received view of science" which defines "science" as providing tested predictions and laws, then a serious person like Alex Rosenberg can look carefully at the facts and concludes that economics is very nearly not science at all -- and should replaced by in whole by sociobiology. The crucial fact here is that this is exactly the official picture of science which controls most of what is published and what is approved as Ph.D. work.

I believe we should in the first instance be interested in doing goods science -- where I differ with Rosenberg and the economics profession is over the nature of good science.

[Greg Ransom]

Shorter version -- economics has yet to come up with a good explanation for how "basic economic reasoning" produces a science.

I believe there is such an explanation -- there is just zero incentive in economics at this time for anyone to develop it.

[Greg Ransom]

For folks who haven't seen it or read it, Bruce Caldwell's account of "basic economic reasoning" and the fundamentals of Hayekian political economy is just outstanding:

http://hayekcenter.org/?p=2110

[Roger Koppl]

Really interesting remarks, Greg. I'm not immersed in the stuff you're referring to, so I confess to a rather fuzzy grasp of your point. But your suggestion that we still don't really know why and how basic economic reasoning is full-on "science" is really, well, suggestive. I take you would agree that it matters, but only so much. It matters because if economics fails by the received view of what "science" is, then it's easier to give the back of your hand to vital economic argument. It matters only so much, however, because we can still do good economics even when were sort of fuzzy about what makes it science. I'm sort of reminded of the mathematicians before Weierstrass and others sorted out some basic issues. They would say zero over zero could be this that or the other thing depending on context. Strictly speaking, it was incoherent. And yet the calculus somehow "worked" and they generally gave proper analyses. Anyway, I want to reflect on your comments. Thanks for that.

[Current]

For what it's worth I have debated with many leftists in the past. The argument that Economics isn't actually a science by modern standards is very common in those debates.

After encountering this argument many times my response has become to argue that modern ideas about what constitutes knowledge are insufficient and inaccurate.

[Greg Ransom]

Roger, what makes it important is that much of what dominates in academic economics is driven by the false picture of science -- I follow Hayek in pointing to how this has been bad for understanding the economic process and bad for economics as a science.

I suggest that Hayek's picture of economic coordination is superior in part because it comes out if a sound picture of causal explanation and science in the domain of complex phenomena and / or social science.

[Rafe Champion]

Perhaps to get the mainstream of academic economics in step with the Mundane Economics of cost-setting, calculation and the like, we will have to make a long march through the teaching of philosophy of science to get fallible apriorism (a la Barry Smith and Karl Popper) taught as the orthodoxy of the field in place of the various kinds of positivism that still dominate.
Some may say that there is no such thing as fallible apriorism. Fortunatley there is, and a good thing too! As Barry Smith said of Austrian economics, if it did not exist it would have to be invented.

[K Sralla]

IMHO, Richard Ebeling brings up some thoughtful points.

The intertwining of evolutionary socio-biology, economics, ethics, and religion might fit nicely into Robert H. Nelson's thesis from his book Economics as Religion: From Samuels on to Chicago and Beyond, that economists (and other social scientsts) may be engaged in an enterprise more closely related to theology (of the German higher critical kind) than to what is commonly understood by the physicist, chemist, geologist, or biologist to be science. As a qualifier, this comment comes from one who has spent his entire professional life researching the evolution of planet earth (including the history and development of primitive life). With this background, this subset of "economics" smells as theological to me as Nelson asserts. This brand of evolutionary sociology seems much closer to a message from the remnants of mainline Protestantism and the likes of Bultmann or von Harnack, than simply a dispassionate study of the emergent properties of complex non-linear systems. Sociologists, namely economists in the case on this blog, are deriving an entire system of morality and spirituality from the admiration of a specific passive property of physical reality, ie emergence. Emergence is truly a mysterious phantom with powers of all sorts ascribed to its name, but oddly possessing no
ontological substance.

[Troy Camplin]

Apparently you are unaware that emergence is described by the mathematics of catastrophe theory. Also, temperature is an emergent property of moving atoms/molecules, and cannot be described using individual atoms or molecules. So there are two examples of it having ontological status.

I would (and do, in my Diaphysics), separate biology from chemistry and physics in science. Biological science much more closely resembles economics and sociology insofar as those sciences all need and use network theory, complex adaptive systems theory, strange attractors, and, yes, emergent properties.

Another example of emergence comes from biochemsitry. What matters in a protein is its topology, which is an emergent property of both the amino acid sequence and the folding of the molecule. It turns out that one can get the same topology from a variety of sequences folding in different ways. Thus, the biologically important element of the protein -- its topology -- is an emergent property that is partially independent of sequence, or its specific chemical properties.

[Current]

Contrary to K Sralla I would welcome some spontaneous order theorising that is _less mystical_. I don't think the subject warrants the kind of mysticism that surround it. Though the positivist ideas about science must be challenged, spontaneous order theorising could be made into something much more concrete.

[Rafe Champion]

Vernon Smith's Nobel lecture had a deal to say about the evolution of formal and informal norms re trading, exchange and also fairness. He made Pete's point that fairness means so many things that it is best ignored unless it is defined and modelled as a part of the study (note 45).

Maybe this is old hat, but a decade ago Bowles and Gintis were exploring the evolution of altruism and norms of reciprocity, also the way these tend to collapse when more than about 25% of people ignore them (ripping off the system). They used experimental studies and they drew on surveys that revealed that a lot of US welfare recipients think the incentives in the system are unfair and perverse. I wonder what they think of proposed health care system?

http://bostonreview.net/BR23.6/bowles.html

[K Sralla]

Current, you misunderstand my comment. Quite contrary to your assertion, I think the very concept of emergence is the big idea. It is inexcusable that so much has been placed on the back of a concept with so much heat and so little light. Are Austrians weak emergentists or strong emergentists? If the former, then Austrians may actually comprise a distinct school of reductionism and even neo-positivism. The paper cited in this post happens to be a very reductionist and neo-positivist offering. If adherence to strong emergence characterizes the Austrian school, then the focus may be removed from individual human action, and we may indeed potentially derive mathematical rules (laws) and parameterizations that describe and perhaps even skillfully predict the macro processes, provided our specific questions are well-posed boundary value problems (with all the resulting moral questions concerning individual liberty). As much admiration as I have for the Austrian school, it seems too often that it's thinkers speak out of both sides of their mouth when it comes to spontaneous order.

[Current]

K Sralla,

I don't know what weak emergentists or strong emergentists are. But, I look forward to reading about it some day.

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