Neuroeconomics as a Natural Extension of Bioeconomics: The Shifting Scope of Standard Economic Theory

Synopsis Neuroeconomics rightly has been claimed to be a natural extension of bioeconomics. One of the things bioeconomics investigates is what behavioral dispositions and what behavioral patterns evolutionary processes have produced. Neuroeconomics extends this to the study of evolved mechanisms that are at work in decision-making at the neural level of the brain. The paper argues that in another respect neuroeconomics and bioeconomics are discontinuous, however. Bioeconomics maintains that the applicability of standard economic theory’s constrained maximization framework is not confined to human behavior. The constrained maximization framework is believed to be suitable to describe behavior throughout the animal kingdom. By contrast, despite some minor internal disagreements all neuroeconomists seem to agree that human behavior is predicted poorly by standard economic theory in several social and economic situations. Neuroscience is believed to hold out the hope of an advanced understanding of when and why this is the case.      

Economic natural selection in Bertrand and Cournot settings

We study economic natural selection in classical oligopoly settings. When underlying pure strategies consist of a finite number of prices, convex monotonic dynamics always converge under a weak condition to the smallest price in the support of the initial state that exceeds marginal cost. When underlying pure strategies consist of a finite number of quantities, monotonic dynamics always converge under a specific condition to a quantity equal or similar to classical Cournot equilibrium.     

Convergent cultural evolution and multilevel selection: Reply to comments on Janet Landa’s ‘The bioeconomics of homogenous middleman groups as adaptive units: Theory and empirical evidence viewed from a group selection framework’

The comments on Janet Landa’s (J Bioecon 10(3):259–278, 2008) target article provide a fascinating snapshot of how multilevel selection theory is perceived across several disciplines. When we focus on the zone of agreement among the commentators, Landa’s article provides an important example of convergent cultural evolution. When we focus on the zone of disagreement, we find a snapshot of the current status of the group selection controversy that goes beyond narrow scientific issues and requires a ‘truth and reconciliation’ process to resolve, as discussed in my series of blogs titled “Truth and Reconciliation for Group Selection” (Wilson , 2009) and briefly summarized here.      

On economic applications of evolutionary game theory

Evolutionary games have considerable unrealized potential for modeling substantive economic issues. They promise richer predictions than orthodox game models but often require more extensive specifications. This paper exposits the specification of evolutionary game models and classifies the possible asymptotic behavior for one and two dimensional models.     

Monopoly Power and Stagflation

Post Keynesian economists have followed Joan Robinson's criticism of general equilibrium theory as abolishing history by allowing all contracts to be executed today for all future contingencies. This was the justification for the support of financial innovation to provide for the completeness of futures markets. The recent crisis has shown that force of history. Instead, many evolutionary and Keynesian economists have suggested the approach of cumulative causation as an approach that includes history and eschews equilibrium. This approach may provide a way to take history seriously in economic analysis.     

Walras and Darwin: an odd couple?

General equilibrium theory and the evolutionary branches of economics and game theory take rather opposite positions in the spectrum covered by the economic science. However, we reveal and explore analogies between Darwinian dynamics and Walrasian tatonnement processes for pure exchange economies, as well as further analogies implied by these.     

A group selection perspective on economic behavior, institutions and organizations

This article examines the role of group dynamics and interactions in explaining economic behavior and the evolution of institutions. Our starting point is the large literature on group selection in the biological, behavioral and social sciences. We present a range of interpretations of group selection, describe a complete set of group selection mechanisms, and discuss the empirical and experimental evidence for group selection. Unique features of cultural group selection are investigated, and opportunities for applying the latter to various areas of economic theory and economic policy are identified.     

Coevolution of economic behaviour and institutions: towards a theory of institutional change

Traditionally, economics has regarded institutions, notably norms and regulations, as fixed or exogenous. Surprisingly few insights on institutional evolution from natural and social sciences have made their way into economics. This article gives an overview of evolutionary theories of institutions in biology, sociology, anthropology and economics. These theories are subsequently compared with non-evolutionary theories of institutions. Next, the insights and approaches are integrated into a framework for analysis of institutions based on the notion of coevolution.JEL Classification: B52, D10, D70, D64, Z13J.C.J.M. van den Bergh     

An evolutionary theory of the convergence towards low inflation rates

This paper presents an evolutionary interpretation of Barro-Gordons monetary policy game. The model describes a multi-country setup where governments and private agents are boundedly rational players. The behavioral rule of players decisions leads to the imitation of the strategy giving the highest payoff. In this evolutionary monetary policy game, we show how a low inflation state is reached from an international context dominated by inflationary policies. The analysis explains the convergence towards low inflation rates observed during the past twenty years. Moreover, the low inflation state appears to be the long-run equilibrium of the game under some conditions featuring the observed macroeconomic context.JEL Classification: E5, C72, C73 Correspondence to: A. dArtigues     

Demonstrating group selection: A comment on Janet Landa’s ‘The bioeconomics of homogenous middleman groups as adaptive units’

Janet Landa provides an impressive historical tour of the development of her theory of homogeneous middlemen groups (HMGs), and how she arrived at the group selection approach. Despite her claim that the case studies she presents provide evidence for group selection in human societies, we argue that such a conclusion is premature. We suggest that an evolutionary explanation of HGMs will be strengthened by greater attention to the details of the selective process.     

On the Co-existence of Conventions

Recent stochastic evolutionary models have shown that the most likely outcome when the probability of a mutation is sufficiently small is coordination on the risk-dominant strategy rather than on the payoff-dominant one. This paper looks at the consequences of player movement between locations when there are constraints which limit the number of agents who can reside at each location. If the constraints are tight then the risk-dominance result continues to hold. However, we show that when sufficient movement is possible, the most likely outcome involves a mixed state in which agents at different locations coordinate on different strategies. In the asymmetric case, it is the location with the tighter constraint that coordinates on the payoff-dominant strategy. Journal of Economic Literature Classification Numbers: C72, C73, D83.     

On the geography of conventions

Summary. We study an evolutionary model in which heterogenous boundedly rational agents interact locally in order to play a coordination game. Agents differ in their mobility with mobile agents being able to relocate within a country. We find that mobile agents enjoy a higher payoff and always benefit from increased mobility, while immobile agents benefit from increased mobility at low levels of mobility only. This wedge in payoffs weakly increases as mobility increases. Some extensions are discussed. Received: January 10, 2001; revised version: December 4, 2002 RID="*" ID="*" We thank, without implicating in any way, George Mailath for helpful discussions. Some of the ideas in this paper were developed during the V Conference of the Society for the Advancement of Economic Theory in Ischia, Italy. The NSF provided financial support. Correspondence to: T. Temzelides     

Collusion and group lending with adverse selection

In an environment with correlated returns, this paper characterizes optimal lending contracts when the bank faces adverse selection and borrowers have limited liability. Group lending contracts are shown to be dominated by revelation mechanisms which do not use the ex post observability of the partners' performances. However, when collusion between borrowers under complete information is allowed, group lending contracts are optimal in the class of simple revelation mechanisms (which elicit only the borrower's own private information) and remain useful with extended revelation mechanisms.