Transcript Evolution and Economics

Natural selection and the invisible
hand
• Model for Darwin and Wallace’s theory of
natural selection was the “dog eat dog”
world of emerging industrial capitalism
• Struggle for survival seemed natural
• “survival of the fittest” – Herbert Spencer
not Darwin
Bernard Mandeville (1670-1733)
• 1705 Fable of the Bees: Private vices and
Public Virtues
• Well before Adam Smith had the idea that
greed and selfishness may promote the
common social good – selfish struggle
promoted “fitness”
• forerunner of ideas about the invisible
hand, order out of chaos, optimization
from an apparently chaotic process
Malthus and evolutionary theory
• The “Malthusian Law” – population, if left
unchecked, increases geometrically while
at most the food supply increases
arithmetically
• Very important new concepts (R. Young)
• 1. Humans and the environment were not
necessarily in harmony
• 2. Humans are animals are part of the
natural world
Malthus influence was enormous
• Malthusianism played a central role in a
debate in which biological and social ideas
were part of a common intellectual context
• Influence on Darwin and Wallace
• Influence on social Darwinism
William Paley
• Natural Theology (1802)
• “The distinctions of civil life are apt enough
to be regarded as evils, by those who sit
under them; but, in my opinion, with very
little reason.”
• The distribution of money, power and
social status are a natural product of the
Malthusian Law
Rev. Thomas Chalmers
• “It is quite vain to think that positive relief
will ever do away with the wretchedness of
poverty. Carry the relief beyond a certain
limit, and you will foster the diseased
principle which gives birth to poverty...The
remedy against the extension of
pauperism does not lie in the liberalities of
the rich; it lies in the hearts and habits of
the poor.” (1811)
“Social Darwinism”
• Who is rich and who is not is an outcome
of the struggle for survival and the
“survival of the fittest” (term coined by
Herbert Spencer)
• Helping those who are less fit is a violation
of the laws of nature
• In economics the “marginal productivity
theory of distribution” is a mathematical
formulation of this theology
Herbert Spencer (1820-1903)
• Published a book on evolution in 1852
• He popularized the term “evolution” and coined
the term “survival of the fittest”.
• Had a huge influence on economists. Alfred
Marshall wrote that he eagerly awaited
Spencer’s books and would read them to his
wife during hikes in the Austrian alps.
• Alfred Russel Wallace named his son Herbert
Spencer Wallace
William Graham Sumner
• “The Forgotten Man”
• Sumner and economic theory – the
marginal productivity theory of value
• What is the purpose of human society? To
produce things.
• Well-being “utility” as consumption
• Forerunner of Potential Pareto
improvement and efficiency as the only
important economic goal
The Forgotten Man
• “Capital, however, as we have seen, is the force
by which civilization is maintained and carried
on…Every bit of capital which is given to a
shiftless and inefficient member of society, who
makes no return for it, is diverted from a
reproductive use; but if it was put into
reproductive use, it would have to be granted in
wages to an efficient and productive laborer.
Hence the real sufferer by that kind of
benevolence which consists in an expenditure of
capital to protect the good-for-nothing is the
industrious laborer.”
Social Darwinism in economics
• Charity for the poor diverts resources from their
best use - increasing economic output
Consumption goods
↑
Investment
↑
Society’s resources
→
Charity for the undeserving
More Forgotten Man
• “Almost all legislative effort to prevent vice
is really protective of vice, because all
such legislation saves the vicious man
from the penalty of his vice. Nature’s
remedies against vice are terrible. She
removes the victims without pity. A
drunkard in the gutter is just where he
ought to be, according to the fitness and
tendency of things.”
“In Defense of Free Enterprise”
• “Private property, also, which we have seen to
be a feature of society organized in accordance
with the natural conditions of the struggle for
existence produces inequalities between
men…Nature is entirely neutral; she submits to
him who most energetically and resolutely
assails her. She grants her rewards to the finest,
therefore, without regard to other considerations
of any kind…Let it be understood that we cannot
go outside this alternative: liberty, inequality,
survival of the fittest; not liberty, equality,
survival of the unfittest.”
Survival of the fittest
• The expression has long been an
embarrassment to biologists but still holds
sway in economics.
• Sometimes it’s called a tautology (those
that survive are the fittest) but it really isn’t
even that. There are problems with both
“survival” and “fittest”
Survival
• Are we talking about individuals, groups,
or genes?
• Are we talking about the long run or the
short run?
• If a species evolves into another, quite
different species, has it survived? What if
there are 10 subspecies and only one
survives? Has the species survived?
Fitness
• How do we measure fitness?
• Ernst Mayr points out that an animal is most fit
just before it becomes extinct
• In economics the causality goes from
“competition” to “efficiency in production” to
“profit maximization” to “survival” (Friedman)
• But research seems to show that profit
maximizing firms are not the most likely to
survive (Dutta and Radner 1999)
The tenets of Walrasian economics
arose out of the evolution of
commercial society
• Marshall Sahlins argues that the roots of
contemporary economics lies deep within
Christian cosmology
• In Christian cosmology man was put on
earth destined to a life of misery trying to
satisfy desires that even when filled only
led to further misery. (original sin)
• But………
Sahlins 1996
• “Still, God was merciful. He gave us Economics.
By Adam Smith’s time, human misery had been
transformed into the positive science of how we
make the best of our eternal insufficiencies, the
most possible satisfaction from means that are
always less than our wants. It was the same
miserable condition envisioned in Christian
cosmology, only bourgeoisified, an elevation of
free will into rational choice, which offered a
more cheerful view of the material opportunities
afforded by human suffering. The genesis of
Economics was the economics of Genesis.”
Ancient ideas
• Evolution toward a natural order
• Human nature as only greedy and self
centered
David Hume (1739)
• “Of all the animals with which this globe is
peopled, there is none toward whom
nature seems, at first sight, to have
exercised more cruelty than towards man,
in the numberless wants and necessities
with which she has loaded him, and in the
slender means which she affords of
relieving those necessities.”
Lionel Robbins (1952)
• “We have been turned out of paradise. We have
neither eternal life nor unlimited means of
gratification. Everywhere we turn, if we choose
one thing we must relinquish others which,
indifferent circumstances, we would wish not to
have relinquished.”
• In Sahlins’ words, every act of consumption
becomes an act of deprivation.
Basic ideas are “in the air” within
particular cultures
• Idea of the individual struggle for existence
• Idea of “harmony” through the actions of
selfish individuals
• God put humans on the earth to choose
among all the other pieces of creation