The Bioeconomics of Cooperation

When transactions and information are costly and exchange is non-simultaneous, ‘institutions matter’. They matter because exchange under these circumstances subjects the participants to potentially harmful behaviors by other participants, among which are: opportunistic behavior, agency, the free-rider problem, cheating, moral hazard, and adverse selection. Institutions constrain these behaviors, allowing the participants to take advantage of the gains from trade and specialization, and thereby facilitating cooperation. Individuals adhere to institutional rules because they gain by doing so. Because the individual gains are inseparable from the structure of the institutions, the institutions themselves necessarily become the focus of the analysis—as we see in the new institutional economics (NIE). The new group selection position in biology involves a similar shift in focus from the level of the individual to the group when studying the evolution of altruism. But some of the proponents of group selection go further, arguing that altruism in biology evolves because it is in the interest of the group, but not the individual. In fact, group level analysis is necessary in biology, as in the NIE, because it allows for the discovery of ‘institutions’ that constrain cheating, opportunistic behavior, etc., thereby making participation in the group in the long-run self-interest of the individual. This revised version was published online in August 2006 with corrections to the Cover Date.     

The Study of Ethnicity and Nationalism Needs Better Categories: Clearing up the Confusions that Result from Blurring Analytic and Lay Concepts

Synopsis It has been difficult to make progress in the study of ethnicity and nationalism because of the multiple confusions of analytic and lay terms, and the sheer lack of terminological standardization (often even within the same article). This makes a conceptual cleaning-up unavoidable, and it is especially salutary to attempt it now that more economists are becoming interested in the effects of identity on behavior, so that they may begin with the best conceptual tools possible. My approach to these questions has been informed by anthropological and evolutionary-psychological questions. I will focus primarily on the terms ‘ethnic group’, ‘nation’, and ‘nationalism’, and I will make the following points: (1) so-called ‘ethnic groups’ are collections of people with a common cultural identity, plus an ideology of membership by descent and normative endogamy; (2) the ‘group’ in ‘ethnic group’ is a misleading misnomer—these are not ‘groups’ but categories, so I propose to call them ‘ethnies’; (3) ‘nationalism’ mostly refers to the recent ideology that ethnies—cultural communities with a self-conscious ideology of self-sufficient reproduction—be made politically sovereign; (4) it is very confusing to use ‘nationalism’ also to stand for ‘loyalty to a multi-ethnic state’ because this is the exact opposite; (5) a ‘nation’ truly exists only in a politician’s imagination, so analysts should not pretend that establishing whether something ‘really’ is or is not ‘a nation’ matters; (6) a big analytic cost is paid every time an ‘ethnie’ is called a ‘nation’ because this mobilizes the intuition that nationalism is indispensable to ethnic organization (not true), which thereby confuses the very historical process—namely, the recent historical emergence of nationalism—that must be explained; (7) another analytical cost is paid when scholars pretend that ethnicity is a form of kinship—it is not.     

Alternative evolutionary theories: A historical survey

Our overview has the objective of making our study relevant to bioeconomists. The need for the ‘alternatives’ to the Synthetic Theory of Evolution in social-economic studies was substantiated, for example, by Colombatto (Journal of Bioeconomics, 5, 1–25, 2003), who maintains that the natural-selection theory is ‘ill suited’ to describing evolutionary processes in economics. He proposed an alternative ‘non-Darwinian’ approach by equating the ‘non-Darwinian’ approach with a definite version of neo-Lamarckism. Yet, as we will show, there is a palette of alternative approaches within and beyond the neo-Lamarckism. We hope to give bioeconomists more choice in their theoretical modeling and constructing of analogies between biology and economics. It will also be shown that in the light of suggested definitions the concept of ‘universal Darwinism’ recently discussed in bioeconomics makes little sense as a generalizing category. In addition, in the concluding part of the paper we demonstrate that the majority of alternative approaches are far from being pigeonholed as archaic and once and for all wiped off the theoretical landscape. On the contrary, in recent years one can observe some revival of interest in the theoretical ‘heresies’.      

Don’t blame the P2P file-sharers: the impact of free music downloads on the purchase of music CDs in Canada

This study measures the extent to which P2P file-sharing activities act as substitutes or complements to music purchases in markets for CDs. The paper breaks with the mainstream economics approach which dominates the music file-sharing discussion. Whereas such models assume relationships at the micro level (e.g. between file-sharing and purchases) based on observations made at the macro level, our evolutionary economics approach measures the direct effects using micro data representative of the Canadian population. The behavioral incentives underpinning free music downloading, novel to this paper, are the multiple effects of: ‘unwillingness to pay’ (market substitution), ‘hear before buying’ (market creation), ‘not wanting to buy a whole album’ (market segmentation), and ‘not available in the CD format or on electronic pay-sites’ (market creation). Although the two first mentioned incentives significantly influence CD album purchases—i.e. there is a negative and significant market substitution effect and a positive and significant market creation effect—on the whole, these two effects ‘cancel’ one another out, leading to no association between the number of P2P files downloaded and CD album sales.     

Sugden’s critique of Sen’s capability approach and the dangers of libertarian paternalism

The force of Sugden’s critique of Sen’s capability approach depends on the interpretation of the approach adopted. It is persuasive when public reasoning about what is good (or best) for people can justify policies which promote opportunity through (potentially objectionable) restrictions on liberty. Sunstein’s discussion of preference formation and politics shares key elements of Sen’s views. His proposals for democratic controls illustrate the potential danger Sugden signals about application of the capability approach. Sugden is also critical of paternalist views inspired by the findings of behavioural economics. One of these—Sunstein and Thaler’s ‘libertarian paternalism’—is a worrying extension of Sunstein’s earlier views and opens the door to a much wider range of interventions. Sugden rightly and forcefully resists it. His critique of the capability approach may, by contrast, be better seen as sounding a cautionary note than as an act of resistance.     

Charles Kingsley and the Theological Interpretation of Natural Selection

Synopsis This paper questions the common view that Darwinian biology is a straighforward extension of classical political economy. Our analysis contrasts the economists’ classification scheme – whereby all humans were presumed natural kinds, to be equally competent for economic and political decision making – with the post-Darwinian classification scheme that developed. When the tools of political economy were imported into biology, the presumption of homogeneity of competence was denied. Charles Kingsley played a significant role in the transition from one sort of classificatory scheme to another, in the overthrow of the economists’ notion that humans are the same in their capacity for trade and moral judgment. Darwin sent Kingsley a presentation copy of Origin of Species and quoted him in the second edition as the ‘celebrated author and divine’ who had sketched a theology in which Providence used natural selection in the creation process. The economists’ doctrine that all people form a natural kind had many opponents. Biologists agreed with economists that, whatever differences existed between races of people, none put a person outside the protection of law. Other opponents, e.g., Thomas Carlyle, criticized both the economists’ premise and their conclusion regarding protection under the law. Kingsley moved from a Carlylean to a Darwinian opposition to natural kinds.     

The origins of meso economics

The paper starts from Schumpeter’s proposition that entrepreneurs carry out innovations (the micro level), that swarms of followers imitate them (meso) and that, as a consequence, ‘creative destruction’ leads to economic development ‘from within’ (macro). It is argued that Schumpeter’s approach can be developed into a new—more general—micro-meso-macro framework in economics. Center stage is meso. Its essential characteristic is bimodality, meaning that one idea (the generic rule) can be physically actualized by many agents (a population). Ideas can relate to others, and, in this way, meso constitutes a structure component of a ‘deep’ invisible macro structure. Equally, the rule actualization process unfolds over time—modelled in the paper as a meso trajectory with three phases of rule origination, selective adoption and retention—and here meso represents a process component of a visible ‘surface’ structure. The macro measure with a view to the appropriateness of meso components is generic correspondence. At the level of ideas, its measure is order; at that of actual relative adoption frequencies, it is generic equilibrium. Economic development occurs at the deep level as transition from one generic rule to another, inducing a change of order, and, at the surface level, as the new rule is adopted, destroying an old equilibrium and establishing a new one.     

The ‘science-as-market’ analogy: a constitutional economics perspective

The ‘science-as-market’ analogy has been used in support of the notion that in science just as in markets competition works as an effective instrument for reconciling the self-interested ambitions of individual agents with the social function that science and markets are supposed to serve. This paper examines the analogy from a constitutional economics perspective, drawing attention to the role that the rules of the constitution of the ‘game of science’ as well as the ‘market game’ play in conditioning the ways in which competition works in the two realms.     

Darwinism in economics: from analogy to ontology

Several social scientists, including ‘evolutionary economists’, have expressed scepticism of ‘biological analogies’ and rejected the application of ‘Darwinism’ to socio-economic evolution. Among this group, some have argued that self-organisation is an alternative to biological analogies or Darwinism. Others have seen ‘artificial selection’ as an alternative to natural selection in the socio-economic sphere. Another objection is that Darwinism excludes human intentionality. It is shown that all these objections to ‘biological analogies’ and ‘Darwinism’ are ungrounded. Furthermore, Darwinism includes a broad theoretical framework for the analysis of the evolution of all open, complex systems, including socio-economic systems. Finally and crucially, Darwinism also involves a basic philosophical commitment to detailed, cumulative, causal explanations. For these reasons, Darwinism is fully relevant for economics and an adequate evolutionary economics must be Darwinian, at least in these fundamental senses. However, this does not undermine the need for auxiliary theories and explanations in the economic domain.     

The Sensory Order and other Adaptive Classifying Systems

Synopsis Hayek’s cognitive theory, which seeks to describe the operation of a particular order, in fact provides a paradigmatic account of knowledge-generating orders in general. We claim that this paradigm provides a fertile conceptual framework for exploring a variety of problems in economics and social theory. In particular, we shall show that Hayek’s conception of the ‘map’ and the ‘model’, which he uses to explain the operation of the complex adaptive classifying system called ‘mind’, are promising analytical devices with applications extending to social structures of various kinds and complexity. We use Hayek’s notion of the map and model to analyze how different social structures – regarded as classifying systems – work in terms of their input, processing, and output capabilities. The adaptive characteristics of such systems, via communicative routines, multi-level classification, and feedback, form central motifs for our discussion of markets, science, and other social structures. We show that by analyzing the knowledge-generating characteristics of such structures we are also able to gain insights about the circumstances affecting their adaptive properties.     

Social Market Economy: origins,meanings and interpretations

This paper investigates various possible meanings of ‘Social Market Economy’—60 years after its political initiation in Germany. We focus on the variety of intellectual sources that influenced the formation and interpretation of the concept in Germany during the first half of the last century. Our particular attention is on Müller-Armack’s definition of a rather dualistic concept of ‘social’ versus ‘market economy’ and the subtle differences it has with an original (Freiburg School) view of ordo-liberalism that lends itself more easily to a constitutional economics perspective.

Preference Anomalies,Preference Elicitation and the Discovered Preference Hypothesis

There is wide-ranging evidence, much of it deriving from economics experiments, of ‘anomalies’ in behaviour that challenge standard preference theories. This paper explores the implications of these anomalies for preference elicitation methods. Because methods that are used to inform public policy, such as contingent valuation, are based on standard preference theories, their validity may be called into question by the anomaly data. However, on a new interpretation, these anomalies do not contradict standard theory but are errors in stated preference that can be expected to disappear as people become more experienced in relevant decision environments. We explore the evidence for this interpretation and what implications follow for preference elicitation methodology. JEL classifications: C91, D01, D60, D81, D83, H40     

Sociology of economics or sociology of economy? theoretical-methodological arguments for sociological economics

This paper makes a proposal for reintroducing sociological or social economics into contemporary economic science. Such a reintroduction is proposed to be substantive, by analyzing the social structuring of the economy, and formal, by including sociological/social economics in the current (JEL) classification system of economic disciplines (code A.15). Both epistemological and ontological arguments can be presented to support the proposal. Epistemological arguments invoke the presence of essential components of sociological economics in the development of economic thought, and ontological arguments stress the role of social factors in economic life. In this paper I present primarily epistemological (theoretical-methodological) arguments for sociological economics, and secondarily ontological ones. I show that the present designation, sociology of economics, is something different from sociological or social economics in that the former refers to economic epistemology (knowledge) and the latter to economic ontology (reality). I conclude that, in addition to a sociology of economic science, we need a sociology of economic life. There is nothing surprising in the habit of economists to invade the sociological field. A major part of their work—practically the whole of what they have to say on institutions and on the…[social] forces which shape economic behavior—inevitably overlaps the sociologist’s preserves. In consequence, a no man’s land or everyman’s land has developed that might conveniently be called economic sociology … [or sociological economics] (Schumpeter 1956:134). The author is grateful to two anonymous referees for their constructive comments on an earlier version of this article.     

Towards Sustainability Economics: Principles and Values

Synopsis  Radical alternatives, in terms of our ideas about science in society, about economics, ideology and institutional arrangements, should be included among possibilities considered within the scope of a pluralistic philosophy. While all these aspects of our mental maps are interrelated and important, economics plays a key role in attempts to get closer to a sustainable society. Mainstream neoclassical economics is not enough. The tendency to exclusively rely on this particular theory is considered part of the problems faced. A ‘sustainability economics’ more in line with dominant ideas of democracy is proposed, emphasizing the ethical, ideological and political elements. Reference is made to institutional theory but the principles and concepts suggested are in many ways similar to other kinds of heterodox economics and developments in other social sciences. Neoclassical economics is used as a point of reference in pointing to alternative ideas about human beings, organizations, markets, decision- making, efficiency, rationality, progress in society and institutional change processes. Predilection for such an alternative conceptual framework (or for neoclassical economics) is not exclusively a scientific choice but as much a matter of political and ideological preferences. One paradigm may be dominant at a time, but because of the ideological specificity of each paradigm, competing theoretical perspectives should be accepted and even encouraged in a democratic society.      

Coevolution of human speech and trade

We propose a paleoeconomic coevolutionary explanation for the origin of speech in modern humans. The coevolutionary process, in which trade facilitates speech and speech facilitates trade, gives rise to multiple stable trajectories. While a ‘trade-speech’ equilibrium is not an inevitable outcome for modern humans, we find it is a relatively likely scenario given our species evolved in Africa under climatic conditions supporting relatively high population densities. The origin of human speech is not independent of economic institutions—the economics of early human trade can provide additional insight to help explain the physiological emergence of human speech.      

Schumpeter’s ‘conduct model of the dynamic entrepreneur’: scope and distinctiveness

Schumpeter formulated a ‘conduct model’ of entrepreneurial behaviour. Received wisdom has emphasised the economic functions of Schumpeter’s entrepreneur, neglecting behavioural aspects. Schumpeter’s model is examined; it posits a continuum of behaviours which are ‘entrepreneurial’, that rely on socially situated, tacit knowledge and are expressions of conscious, subjective rationality. Schumpeter’s model excluded unconscious optimisation and decision rules derived from bounded rationality. Comparisons are drawn with modern neoclassical, Austrian, and the older behavioural characterisations of entrepreneurial behaviour. The newer ‘effectuation’ model of entrepreneurial behaviour is also contrasted with Schumpeter’s approach. We find, among other things, that modern Schumpeterian economics associated with Nelson and Winter is not a natural continuation of Schumpeter’s model. However, some developments in neo-Schumpeterian economics, including the effectuation model deriving from the older behavioural tradition, are congruent with both the original ‘conduct model’ and Schumpeter’s directions for further research.     

Homogeneity and Heterogeneity Within and Across Boundaries and Shorelines: Ensemble of Darwin's Finches and Human Transaction Types

Synopsis: In the most famous example of the biological process of adaptive radiation, two forces explain the fourteen distinct species of Darwin's finches on the Galápagos and Cocos Islands: First, populations adapt to their respective distinct ecological environments. Second, previously separated populations come in contact and may adapt to mitigate inter-species competition. The result is a complex pattern of homogeneity and heterogeneity among the birds, both on a single island and across islands. This pattern reflects the finches' adaptations both to the distinct ecological conditions created by the visible shorelines that separate the islands' niches and to the finches' own less-visible cultural and societal shorelines. The New Institutional Economics highlights the fact that human institutional infrastructures also exhibit complex homogeneities and heterogeneities, as we adapt those infrastructures to accomplish the tasks at hand in distinct geographic and societal contexts. Mixes of both state enforcement and self-enforcement, through inter-temporal, inter-issue, and inter-actor linkages, provide support and enforcement for transactions; and those mixes differ across transactions and across states. When transactions occur across state or cultural shorelines, institutional infrastructures must be flexible enough to accommodate those differences, without allowing the differences to become disguised protectionism or barriers to competition. These issues contribute to many of the regulatory disputes associated with ‘globalization’. We briefly consider two concrete recent examples: (1) the European Union–United States ‘Safe Harbor’ Agreement that regulates firms' policies toward Internet-data privacy; and (2) international trade policy negotiations over regulation of ‘geographical indications’ (for example, Champagne or Roquefort) as means of assuring product quality for processed foods. This revised version was published online in July 2006 with corrections to the Cover Date.     

Introduction to field experiments in economics with applications to the economics of charity

This special issue highlights an empirical approach that has increasingly grown in prominence in the last decade—field experiments. While field experiments can be used quite generally in economics—to test theories’ predictions, to measure key parameters, and to provide insights into the generalizability of empirical results—this special issue focuses on using field experiments to explore questions within the economics of charity. The issue contains six distinct field experimental studies that investigate various aspects associated with the economics of charitable giving. The issue also includes a fitting tribute to one of the earliest experimenters to depart from traditional lab methods, Peter Bohm, who curiously has not received deep credit or broad acclaim. Hopefully this issue will begin to rectify this oversight.      

Out of a slave contract: the analysis of pre-Hobbesian anarchists in the Old Testament

Buchanan’s constitutional economics takes social conflict (the ‘Hobbesian jungle’, ‘Hobbesian anarchy’) as the starting point for the analysis of social contract. Buchanan argues that in the presence of social conflict either some social contract (e.g. some system of formal laws) or some generally shared moral precepts are needed to resolve the predicament that social conflict presents. The present paper argues that a social conflict model also served the Old Testament as an analytical starting point. However, contrary to both standard theological interpretation and Buchanan’s explicit claims, I argue that the Old Testament had already made an attempt to model ‘Hobbesian anarchy’ in order to approach social conflict in an essentially modern, non-metaphysical manner. I argue that figures like Adam and Eve or Jacob, in the tradition of Hobbesian anarchists, questioned godly authority and the associated imposed, authoritarian, metaphysical social contract. In this way, one can detect a modern, contractarian constitutional economics in pre-Enlightenment literature (and in Genesis, specifically) in direct contrast to Buchanan’s claims.