Evolution and Economics

|Peter Boettke|

Don Lavoie published a book in 1985 that is underappreciated (mainly due to inattention) by the current generation in my opinion, National Economic Planning: What is Left?, and I hope that an online version will be made available either by CATO (the original co-publisher) or Liberty Fund in the not too distant future so a new generation will get to read this book.  Of the many novel perspectives pushed in that book, Lavoie tried to develop a close analogy between the work of E. O. Wilson on ant colonies and the information processing that takes place in a modern economy.  "Human mass communication takes place where an individual engages in the dual process of actively influencing other by secreting 'money pheromones' in particular directions, thereby bidding up prices in those avenues, and of passively responding to the prices resulting from the money issuing from other individuals." (p. 70)  The students of Don sometimes joked about Don and his insects and at other times were completely enamored by his efforts.  Heck Gordon Tullock also was studying insects so there must be something to it, I remember thinking as I read a rough draft  manuscript copy of Tullock's Cooperation Without Command.  This was after I had a wonderful conversation with Tullock one afternoon outside the Center for Study of Public Choice about the ant hill that was forming on the side-walk in front of the building.

Lavoie was the first person who ever told me about sociobiology, and Tullock is the first person I ever heard use the term bioeconomics.  The evolutionary metaphor was of course also used by Hayek in his writings, and it was also used by another of my professors -- Kenneth Boulding.  In fact, my first serious effort at journal publishing was a paper entitled "Evolution and Economics: Austrians as Institutionalists," Research in the History of Economic Thought & Methodology (6) 1989 [a paper I actually wrote in my first year of graduate school, and which served along with a paper by Warren Samuels as the centerpieces for a symposium in the journal].  During this time I tried to read everything I could get my hands on that related to evolution and economics from Veblen to Boulding to Hayek; from Alchian to Nelson and Winter, and Loasby, etc..  I also appreciated the criticisms of evolutionary explanations that one could find in Rothbard and Kirzner from a Misesian human actor perspective.  In fact, what I tried to do in that original paper was to reconcile Misesian methodological individualism with an emphasis on the evolution of institutions that one read in the works of Veblen to Boulding.

Fast forward 20 years, and the issue of evolution and economics is still hotly debated.  David Sloan Wilson has established a website that is dedicated to discussing the various versions of evolutionary economics.*  He actually has two wonderful installments on Lin Ostrom, one basically introducing her and her work, and the other discussing her recipe for success in institutions that govern the commons. 

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*See Todd Zywicki's review essay of Wilson and Sober's Unto Others.

Comments

[David]

More ants:

http://www.econ.brown.edu/fac/Peter_Howitt/publication/Middlebury.pdf

[Greg Ransom]

Of course, the idea of evolution originates in the social sciences as much as anywhere, and even the term "genetic" gets it start outside of biology in the language developed to understan social and human phenomena.

"Evolution" in other words is not a methor taken from biology, it's a concept with an original legacy within the human/social domain, as a descriptive and explanatory concept.

[Troy Camplin]

Of course, everyone knows that Darwin got many of his ideas from economics, so it is only right that things should come full circle. Aside from the common-sense observation that humans are a biological species, so we ought to understand humans as such in order to understand the social systems we create through our interactions.

[Roger Koppl]

A couple of volumes of Advances in Austrian Economics relate pretty closely to this discussion. First, volume 7, 2005, "Evolutionary Psychology and Austrian Economics." It is webbed here:
http://www.emeraldinsight.com/books.htm?issn=1529-2134&volume=7

Contributors included David Sloan Wilson, Brian Loasby, Paul Rubin with Evelyn Gick, and Todd Zywicki. It has a symposium on group selection in which Glen Whitman wrote the target article and Todd and others commented. Independently of the D. S. Wilson contribution, Sober & Wilson comment on Glen's paper. Their comment and Glen's reply are *well* worth reading IMHO.

Bill Butos should comment on his volume, #13, on Hayek's The Sensory Order.

[Andrew M. Larson]

The descriptor "evolution" seems to be inconsistent with Mises's praxeology. People act with purpose and intent. Even ants construct ant hills with some instinctive intent. Birds build nests; we don't say the nest evolves. So, I suggest the need for a new term to replace evolution such as:

praxemotion or praximotion

Etymology: latin praxis + english motion = the movement (over time)of (human) action

def: the sequence of purposeful human action incrementally revealed through the advance of time. Example: As a result of praxemotion, Thomas Edison invented the lightbulb.

For instance, why did GE name their ultra-modern locomotive "Evolution"? It is really a good example of praxemotion.

And so we have a new title for this blog entry:
Praxemotion and Economics.

Andrew M. Larson

[Steve Horwitz]

There is nothing inconsistent with using concepts of evolution to describe social processes and Mises's praxeology. Humans aren't ants or amoeba. The "mutation" that occurs in human society is caused by human action. The key is that each "mutation" comes into contact with other "mutations" and the eventual society-wide result of those interactions is a pattern/order that none of those responsible for the mutations intended or designed.

Spontaneous order/social evolution is *the product of human action, but not human design.* And it was those same Scots who first talked in evolutionary terms.

[fundamentalist]

While I appreciate what Austrians are trying to accomplish with the evolution metaphor, I have a few problems with it. Chief is the connotation. That metaphor was used in the late 1800’s and socialists today remember it well. It portrays the market as a bloody, brutal struggle for survival of the fittest. Where is the cooperation that Austrian economics emphasizes? I realize that Austrians focus on the spontaneous nature of evolution, but socialists will extend the metaphor and make it an ugly thing.

Also, unless you hold to punctuated equilibrium, evolution is a gradual thing that required no conscious thought on the part of anyone. It just happened. History didn’t happen like that. There was no gradual, steady improvement in lifestyles. People in 1800 lived pretty much like people in 2,800 BC. Almost nothing changed until roughly the 16th century when the industrial “revolution” began in the Dutch Republic. Then economic develop exploded throughout Western Europe, but nowhere else. People are bound to ask why Western Europe evolved while the rest of the world didn’t.

Finally, socialists are bound to draw the conclusion that socialism is the ultimate end of social evolution. That was Marx’s main point, wasn’t it? Yes, people society evolved through several stages. Capitalism was one. But just as humans went through the ape stage, so society went through capitalism. Socialism is to society what humanity is to apes.

[Steve Horwitz]

Fundamentalist,

I think you need to read Herbert Spencer (again). You've bought into the critics' wrong reading of him - there's plenty about cooperation there. "Social Darwinism" was really the product of the race-obsessed folks, not the classical liberals, despite what people believe today. The CLs of the time never used the language of evolution that you are attributing to them.

[azmyth]

Andrew M. Larson:
The lightbulb was first created 45 years before Edison was born. Edison did not invent the lightbulb - he evolved it. The motive to create the lightbulb was praxeological, but his creative method was evolution. He applied variation to the designs done by his predecessors and provided selection in the form in intense scientific testing. Inheritance comes from the incorporation of elements from successful lightbulbs in new designs. Human knowledge does not spring fully formed into the mind of the inventor, but instead emerges over time as people work with one another to share ideas and build upon designs that work. Inventions become more efficient, cheaper and more useful over time because of the continuous evolutionary processes applied to them.

Economic evolution is not the bloody survivalist evolution of biology. It is an evolution of ideas and institutions. Entrepreneurship and scientific experimentation provide the variation and selection fuel. Inheritance comes from the profit motive and scientific evaluations of hypotheses.

[Troy Camplin]

Darwin was no Social Darwinist. If the fittest are those who best peacefully trade with each other and best cooperate, then they will survive. "Nature red in tooth anc claw" isn't Darwin -- it's Tennyson, 15 years before Darwin published Origin.

Also, when you have exponential growth, you will have a long lead-in that appears to be flat, but in fact is not. And when things take off, it looks like it came out of nowhere. Which isn't to say that free markets didn't help.

[Roger Koppl]

Alain Marciano has argued that Darwin had a theory of social evolution that Hayek's theory of social evolution pretty much lines up with that of Darwin.
Volume 71, Issue 1, July 2009, Pages 52-61
"Why Hayek is a Darwinian (after all)? Hayek and Darwin on social evolution"

His article was published on the 200th anniversary of Darwin's birth and the issue of JEBO in which is appears is a special issue on Darwin.

Alain's conclusion says:
The purpose of this paper is to show that Hayek's theory of cultural evolution can indeed be considered Darwinian. To reach this conclusion, in contrast to the usual perspectives on Hayek and Darwin, we have compared Hayek's and Darwin's theories of social evolution. It then appears that both theories belong to the same philosophical or ontological tradition, that of the Scottish Enlightenment. Furthermore, they both take into consideration the specificities of cultural evolution with regard to biological evolution: both Hayek and Darwin consider that selection takes place at the group level, and both of them argue that acquired characteristics are transmitted. The latter element is interesting since it helps to clarify the differences that exist between Hayek and Darwin, on one side, and Lamarck, on the other side, the major difference being that Hayek and Darwin envisage the transmission of acquired characteristics from the perspective of spontaneous order where Lamarck views this feature as taking place in a teleological process.

[Lee Kelly]

It seems to me that Hayek's later works can only be understood as that of an evolutionary epistemologist. Like Popper, who agreed with on most matters of philosophy (see The Fatal Conceit), Hayek saw evolution as a knowledge creating process -- the tacit knowledge of plants and animals, the myths of our primitive ancestors, the highest achievements of science, are all part of a continuum of trial and error. What Hayek focused on was the tacit knowledge of higher level systems, like cultures and economies.

[Roger Koppl]

Good point, Lee. Personally, I think there are some differences between Hayek and Popper, differences which come out in connection with Poppser's critique of Hayek's theory of mind. But Hayek is still very much an evolutionary epistemologist and critical rationalist.

Jack Birner insists upon the differences, though mutual influencing, of Popper and Hayek in different places. Here is an example:

http://www.the-rathouse.com/2007/JB-Prague-07.html

I suppose the #1 cite for Hayek as evolutionary epistemologist would be:
http://books.google.com/books?hl=en&lr=&id=QnFiTrCzg5oC&oi=fnd&pg=PR15&dq=hayek+%22evolutionary+epistemology%22&ots=c7x_kRqePN&sig=rEG86aztFKmyK_Zl4op4DHmkJoI

You could also look at
http://www.cato.org/pubs/wtpapers/hayekee.html

and

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=950592

[Lee Kelly]

Thanks for the links, Roger!

Of course, I didn't mean to imply that Popper and Hayek agreed on ALL matters of philosophy--that would be almost impossible for such independent thinkers. Personally, since everyone is wrong about something, I make it a policy to never agree with anyone entirely! Maybe that's one reason I like Hayek and Popper.