Tag Archives: evolutionary theory

Humans, not agents

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In my early morning browsing, I read a paper called ‘Time to Abandon Group Thinking in Economics’ by Sergio Da Silva (pdf). It isn’t as clear as it might be, but the line of argument concerns the unscientific status of the representative agent approach to macroeconomics. In conventional macro, he writes: “The whole is viewed as merely the sum of the parts. Of course, this would be so if the constituent individuals were homogeneous. But they are not. Despite that, macroeconomics assumes homogeneity of individuals and focuses on a “representative individual.” Rather than explaining collective behavior from the interactions between the constituent individuals, macroeconomics studies the behavior of the average individual.”

This is not justified, he continues, because the macroeconomy does not empirically exhibit the property of “self-averaging,” such that as more and more individuals were aggregated, a central limit theorem holds – or, in a Poisson distribution, the model coefficient of variation approaches zero. To put it another way, what benefits an individual need not always benefit the group – there are losers as well as gainers.

The paper goes on to advocate applying the aggregation tools of statistical physics and biology to macroeconomics. This was one of the alternatives discussed at an international macro symposium the ESRC organised in Oxford last October, presented by J.P.Bouchaud & summed up in his essayEconomics Needs a Scientific Revolution. I think almost anything would be better than conventional macro, addicted to representative agent DSGE models despite their non-compatibility with any evidence. However, there’s no consensus (not surprisingly) about the alternative, and three were presented at the ESRC symposium. The other two were network approaches and complexity approaches.

The lesson macroeconomists should take – the point of this ramble – is that the social sciences need to be consistent with the biological and human sciences. This is essential for economics to move from being “applied logic” as Da Silva describes it in the paper to an empirical science.

There are two domains of knowledge to be incorporated. One is cognitive science and neuroscience, and there has been some progress here in microeconomics, with behavioural economics and neuroeconomics. Last year I attended a fascinating workshop at the Toulouse School of Economics that asked what cognitive science could tell economists about attention and therefore economic decisions – it resulted in my conference report The Invisible Hand Meets the Invisible Gorilla (pdf).

The other is evolutionary biology and ecology –  and macroeconomists display no interest in what these domains can teach us about aggregation and group behaviour. Business economists have long used evolutionary metaphors in an intuitive way, and evolutionary economists such as Geoffrey Hodgson in, for example, [amazon_link id=”0472084232″ target=”_blank” ]Economics and Evolution[/amazon_link] have tried to formalise models of behaviour at the level of markets. But – as I found when writing about these areas for [amazon_link id=”0691143161″ target=”_blank” ]The Soulful Science[/amazon_link] – there has been scant mainstream interest.

[amazon_image id=”0472084232″ link=”true” target=”_blank” size=”medium” ]Economics and Evolution: Bringing Life Back into Economics (Economics, Cognition, & Society)[/amazon_image]

Da Silva’s paper cites plenty of natural scientists but next to no economists. This must be a mistake by our profession.

Do economists dream of electric people?

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With apologies to [amazon_link id=”0575079932″ target=”_blank” ]Philip K Dick[/amazon_link], the title for this post is inspired by turning back to a book I read some years ago, Philip Mirowski’s [amazon_link id=”0521775264″ target=”_blank” ]Machine Dreams: Economics Becomes A Cyborg Science[/amazon_link]. This in turn was prompted by reading Mary Poovey’s [amazon_link id=”0226675335″ target=”_blank” ]Genres of the Credit Economy[/amazon_link]. She traces the turn to (excessive) abstraction and rationalism in economics to the marginal revolution of the late 19th century onward, much earlier than in Mirowski’s account. For he, by contrast, blames the development of computers and the Bourbaki mathematicians in the mid-20th century.

I remembered not liking Machine Dreams when I read it. It’s heavy-going, and for my tastes too conspiracy-theorist. Still, I semi-agreed with this point in the conclusion:

“As a historian I think it would be unconscionable not to point out that every single school of economics that has ever mustered even a sparse modicum of support and something beyond a tiny coterie of developers has done so by accessing direct inspiration from the natural sciences of their own era and, in particular, from machines. The challenge for those possessing the courage to face up to that fact is to understand the specific ways in which fastening on the computer instead of the steam engine or the mechanical clock or the telephone has reconfigured our options for the development of social theory.”

Semi-agreed because I don’t think the source of inspiration needs to be physics. Biology has been a strong inspiration for certain economists – notably Malthus and Marx – and is proving so again with the interest in epidemiology and network models. Biology returns the favour, too. Darwin was famously inspired in turn by Malthus, John Maynard Smith by game theory – and, as I wrote up here, an economic model of constrained optimisation would seem the ideal model for which neurons in our brains bring what perceptual signals to our conscious attention. In fact, the interest in behavioural psychology means there is a lot of exchange between the cognitive sciences and economics right now. As for Mirowski’s basic point, that economics will always be inspired by natural science, that for me is inherently true in the claim to be scientific, and the closer economics gets to all of the natural sciences, the stronger it will be.

[amazon_image id=”0521775264″ link=”true” target=”_blank” size=”medium” ]Machine Dreams: Economics Becomes a Cyborg Science[/amazon_image]

Female talent meets male brains

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What if anything can evolutionary theory tell us about the explanation for gender disparities in the workplace? According to a fascinating new book, [amazon_link id=”B007BP3B0S” target=”_blank” ]The War of the Sexes: How Conflict and Co-operation Have Shaped Men and Women from Prehistory to the Present[/amazon_link], by Paul Seabright, a pre-historic division of labour between men and women resulted in economic inequalities that have lasted until now for two reasons.

One is that women have different preferences, having a wider set of goals in life, and choose to work fewer hours and take career breaks. “These choices have an adverse effect on women’s advancement not just in the child-rearing years but for decades afterwards.” The unfair economic penalty women pay for this difference in preferences is amplified by the fact that men are rewarded for bargaining aggressively over pay, whereas women are not. (Linda Babcock’s excellent book, [amazon_link id=”069108940X” target=”_blank” ]Women Don’t Ask[/amazon_link], also looked at this specific dilemma.)

The second is that there are small differences in the way men and women network, partly as the result of women leaving the workforce for some years, so that women less likely than equally talented men to have a connection with the powerful people in the workplace that can be exploited for advancement.

Although these disadvantages are rooted in our ancient evolutionary history and legitimised by long custom, the book is mildly optimistic (because of increased demand for skilled labour) about overcoming the ancient disadvantages of sexual selection. Not that it offers public policy recommendations. Rather, the advice is directed at individual women, with suggestions for signalling talent more clearly to even the most antediluvian employers.The bottleneck for women’s talent is the limited attention in other people’s (men’s) brains, so the key is being known and noticed. Scarce attention has been an interest of Paul Seabright’s for a while now – see his recent Princeton in Europe lecture and the earlier Toulouse School of Economics workshop (pdf) – while the linking of anthropology and evolutionary theory to economics dates back to his previous book, [amazon_link id=”0691146462″ target=”_blank” ]The Company of Strangers[/amazon_link]. Like that book, The War of the Sexes is a fascinating read. I love its interdisciplinarity. I’m just not sure that it persuades me to be even mildly optimistic about improving economic justice for women, given the record of what happens when male brains confront female talent.

[amazon_image id=”B007BP3B0S” link=”true” target=”_blank” size=”medium” ]The War of the Sexes: How Conflict and Cooperation Have Shaped Men and Women from Prehistory to the Present[/amazon_image]