David Sloan Wilson Hankers After a Paradigm Shift in Economics

The prominent evolutionary biologist is on a tear at his Evolution for Everyone blog. He has a string of posts on the gaps between our knowledge of human nature and the assumptions economists make in their predictive models. Here is the first in the series. Wilson wants to tame some wild views in economics–namely, that self-interest is king–and, with the help of his Institute, he hopes to create better regulations and public policy recs based on more realistic assumptions about human behavior. All well and good.

In evolutionary biology, Wilson is best known for his pioneering work on multi-level selection theory, which looks at the ways evolution occurs at the group level in addition to the individual. On this view evolution is comprised of a nested hierarchy of embedded evolutionary systems, from the group to the individual to the cell to the gene. For a very insightful application of this theory to religion and community, I highly recommend his brilliant Darwin’s Cathedral. When applied to national rule sets, I call his multi-level selection theory competitive governance. But now I’m getting ahead of myself.

Based on Wilson’s string of posts, he fits squarely into what Arnold Kling describes as the MIT mantra: markets fail, let’s use government. He devotes a lot of space to pointing out the fallacies in Milton Friedman’s 1953 paper on positive economics (see here) and on describing (what he sees as) the inadequacies of the invisible hand. He also hates Ayn Rand and “market fundamentalism.” However, a lot of his posts seem blissfully unaware of public choice problems, almost as if there could never be government failure or democratic fundamentalism. I begin to wonder–is Wilson willing to apply his model of human behavior to regulating government failures? Hard to ascertain, which is too bad, because his thinking here seems better adapted to what Kling calls the GMU view of economics: sure, markets fail, but let’s use markets.

For instance, Wilson writes:

Other rules cause honeybees to act as if guided by an invisible hand for other aspects of their lives, as recounted by Tom Seeley in The Wisdom of the Hive: The Social Physiology of Honeybee Colonies and for other social insects by Bert Holldobler and Ed Wilson in their bookThe Superorganism. Similarly, the cells within our bodies follow rules than enable us to be miracles of collective action. In both cases, the rules that contribute to the common good are a tiny fraction of the set of all possible rules. A worker honeybee could use a longer waiting time, the time of day, the amount of cloud cover, or innumerable other environmental stimuli as a cue to forage more. Those rules would not contribute to the common good. The reason that real foraging bees employ just the right rule, of course, is due to the winnowing action of natural selection, which discovers rules that work as needles among the haystack of rules that don’t work. This is so basic, at least in retrospect, that it can’t be wrong, but it has profound consequences for the invisible hand metaphor in relation to human economies. The invisible hand is not axiomatically true. It is not the case that individuals following any rule automatically contribute to the common good.

Ahhh, yes, but do legislators automatically create rules that contribute to the common good? Among bees, the best rules emerge from a bottom up process of natural selection. As they do within single cells. So if we’re thinking about rule discovery, what is the best kind of system to filter out the bad from the good? Certainly not by top down rule imposition. Remember, there are no bee “regulators.” The knowledge to craft the best rules simply isn’t there. It has to emerge. Therefore I suggest Wilson would do well to look at his own work for the answer: a nested hierarchy of embedded evolutionary systems. A system of competing systems…and the best rules will emerge from a group level evolutionary process of discovery and emulation. In other words, Mr. Wilson, I’d like to introduce you to Paul Romer’s theory of history. Or what I call competitive governance.

Wilson comes very close to expressing this view in his discussion of Lin Ostrom’s work:

First, her work shows that human life is permeated with situations in which the invisible hand does not operate. Again and again, behaviors that are “for the good of the group” require forms of restraint and coordination that are highly tailored to the particular situation and are undermined by narrow self-interest. In other words, Lin’s work is centered upon the conflict between levels of selection and adaptation, as I describe for multilevel selection theory in the previous installment. Second, people are capable of managing their own affairs only by virtue of a suite of psychological traits that cannot be collapsed into the narrow construct of self-regarding preference. Human psychology must be studied in all its complexity and evolutionary theory is required to understand human psychology. Third, certain environmental conditions are required for people to manage their own affairs. Adaptations only work in the environments to which they are adapted and can spectacularly misfire in other environments. Lin’s work recognizes the importance of studying individuals and groups in relation to their environments, far more than contemporary economic theory. Fourth, Lin’s work recognizes the importance of ongoing cultural evolution, rather than trying to derive everything from a conception of universal human psychology. Every group trying to manage its own affairs is an experiment in open-ended cultural evolution, with all the historicity and indeterminacy inherent in any evolutionary process. Different groups trying to solve the same problem will arrive at different solutions, none optimal, some better than others, and a few meltdowns. Groups will learn from other groups, resulting in cumulative cultural evolution, especially when environmental conditions facilitate the comparison of solutions across groups. The suite of psychological traits shared by all people creates the architecture for this kind of rapid adaptation to current environmental conditions.

To say rules are important is not to say top down regulation is. Regulations are a kind of rule, but given the assumptions Wilson makes, he should look for meta-rules that let the best rules emerge. In other words, competitive governance.