Tuesday, October 9, 2012

Old Money: Evolutionary Economics and Biophobia in Social Sciences

Author's religious medallion, obverse. Religious endorsement, like government endorsement of fiat currency, may replace materials or labor as scarcity indicators as long as the behavior of others supports this illusion.

In 1898, Thorstein Veblen (of Veblen goods) published an essay on the question of why economics was not an evolutionary science. He referred not only to the biological evolution of human brains, but also (perhaps especially) to the processes by which systems evolve, including the evolution of items of culture.

Veblen mentions (I emphasize, in 1898, when Darwin's bones were scarcely dry) that scientists in the fields of psychology, anthropology, and ethnology must consider economics to be behind the times in its failure to adopt an evolutionary outlook on its problems. In 2012, we may still ask the same question of economics - why has it not become a field dominated by an evolutionary perspective? - but we must also ask what happened to the other social sciences to retard their adoption of a truly evolutionary perspective.

In their 1988 work on the evolutionary psychology of homicide, Martin Daly and Margo Wilson lament what they term the "biophobia" present in the social sciences in their day. Referring to the work of Margaret Mead in creating a myth of pure adaptability and cultural arbitrariness, they say:

What is of interest is how the myth fills a need for social scientists and commentators. It seems to demonstrate that our social natures are pure cultural artifacts, as arbitrary as the name of the rose, and that we can therefore create any world we want, simply by changing our "socialization practices." (This may sound a remarkably totalitarian vision, but it's not, you see, because the new, improved socialization practices will be designed by nice people with everyone's best interest at heart, and not by nasty, self-interested despots.) The social science that is used to legitimize this ideology can only be described as biophobic. [Emphasis in original.]

In 2002, Steven Pinker took up Daly & Wilson's cause in his book The Blank Slate: The Modern Denial of Human Nature. Over a hundred years after Veblen asked why economics was so far behind the other social sciences in adopting an evolutionary perspective, Pinker was left to ask why those other social sciences, so evolutionarily modern in 1898, had dropped the thread in favor of socialization theory and other comfortable, common sense ideas Veblen might have dismissed as "spiritual stability."

Ten years later, the idea that humans have a specific, evolved nature that is unlikely to be changed by arbitrary cultural change is much more widely accepted. Critics of this theory tend to be those who do not like the implications that are drawn from it, rather than those with substantive objections to the theory itself. The most theoretical objection to evolutionary psychology is an allegation of reductionism; this, however, is misplaced.

What is beginning to be acknowledged is that just as human brains have evolved with a specific, genetically determined (though somewhat plastic) nature, items of human culture have also undergone evolutionary adaptation. (The evolution of cultural items may be seen as a special case of sexual selection: the most relevant part of the environment of adaptation is the brains and perceptions of conspecifics, within the constraints of material resources, as with chain letters and ships' rudders. Cultural items, like AGIs, would do well never to lose track of their base realities.) The adapted brain - not a blank slate - constrains, but does not fully specify, the kinds of cultural items that can evolve. To complicate matters more, items of evolved culture have formed a great deal of the relevant environment in which humans have biologically evolved.

Author's religious medallion, reverse.

Old Money

What would economics, the study of the production and exchange of goods (broadly defined), look like if it took a genuinely evolutionary approach to its problems?

A 2002 paper by Nick Szabo entitled "Shelling Out — The Origins of Money" is a thrilling example of how a non-reductive, biologically aware science of economics might approach problems. Szabo traces the appearance of proto-money into prehistory, concluding that the use of collectible items like shell necklaces allowed hunting, foraging groups to specialize in seasonal protein sources and exchange protein with other groups. One of the most exciting, useful observations in the paper relates to the features of proto-money. Collectible items valuable as tokens of exchange must be:

  1. More secure from accidential loss and theft. For most of history this meant carriable on the person and easy to hide.
  2. Harder to forge its value. An important subset of these are products that are unforgeably costly, and therefore considered valuable....
  3. This value was more accurately approximated by simple observations or measurements. These observations would have had more reliable integrity yet have been less expensive.
Szabo especially examines the second feature: difficulty of forgery. Collectible items that necessarily involve considerable human labor and time are particularly hard to forge. He explains how this feature might have caused flints to become the first proto-money:
There are many puzzling instances of useless or at least unused flints with homo sapiens. We have mentioned the unusable flints of the Clovis people. Culiffe discusses a European Mesolithic era find of hundreds of flints, carefully crafted, but which micrograph analysis reveals were never used for cutting.

Flints were quite likely the first collectibles, preceding special-purpose collectibles like jewelry. Indeed, the first flint collectibles would have been made for their cutting utility. Their added value as a medium of wealth transfer was a fortuitous side effect that enabled the institutions described in this article to blossom. These institutions, in turn, would have motivated the manufacture of special-purpose collectibles, at first flints that need have no actual use as cutting tools, then the wide variety of other kinds of collectibles that were developed by homo sapiens sapiens. [Citations omitted.]

The features Szabo identifies are all, he says, features of the metals and coins that have functioned as money, and the reserve commodities that have backed non-fiat currencies. Further, since the advent and widespread use of fiat currency,
It is no coincidence that markets in rare objects and unique artwork — usually sharing the attributes of collectibles described above — have enjoyed a renaissance during the last century. One of our most advanced high-tech marketplaces, EBay, is centered around these objects of primordial economic qualities. The collectibles market is larger than ever, even if the fraction of our wealth invested in them is smaller than when they were crucial to evolutionary success. Collectibles both satisfy our instinctive urges and remain useful in their ancient role as a secure store of value.
Importantly, when the scarcity of items became forgeable (e.g., glass beads introduced to tribes unfamiliar with glass manufacturing), those capable of mass-manufacturing apparent costliness had a material advantage over those who had not yet adapted to detect this sort of forgery. Glass beads "were very popular wherever European colonialists encountered Neolithic or hunter-gatherer cultures," says Szabo.
Author's hand-knitted socks, made from factory-produced yarn.

Szabo's non-biophobic, evolutionarily-aware view of money, with room for both biological and cultural evolution, gives us a new way to see money. In particular, it gives us a new perspective on the labor theory of value.

Mainstream economics generally dismisses the labor theory of value as a fallacy, a cognitive bias to be eradicated (but which stubbornly, stupidly refuses eradication). This is of a piece with the similar dismissal of the consideration of sunk costs as a departure from rationality to be eradicated in rational minds.

Just as the evolutionary, game-theoretical understanding of human cognition has helped (some of) us see the point of the sunk costs "fallacy" (it helps facilitate commitment, which, like Timeless Decision Theory, though apparently irrational, improves welfare), Szabo's evolution-aware account helps us see the function of the labor theory of value: it facilitates the creation and use of hard-to-forge proto-money by inextricably connecting it to the man-hour. Prior to stationary agriculture, populations were relatively stable, and an hour of human effort required relatively stable inputs (including the care and nutrition required to raise and maintain an adult human). Agriculture increased populations, but also increased the opportunity cost of making labor-intensive, decorative items. The man-hour therefore has had a relatively stable value in real-world inputs that made it an ideal basis for proto-currency; sensitivity to this basis would benefit individuals.

Compare the two worldviews. In the mainstream economic view, the sunk costs fallacy and labor theory of value are fallacies that stubbornly resist change. To the evolutionary worldview, these "fallacies" are basic, functional realities of evolved human minds, unlikely to change, that systems must adapt to accommodate if they are to be successful.

In this latter view, mass production is a problem for consumers as well as for workers. Branding and other shenanigans have replaced genuine scarcity in markets for goods. Humans likely have an innate desire to acquire valuable, proto-money-like objects; we likely also have an innate pleasure in creating such goods. Globalization and mass production allows the lesser-valued labor of worse-off others to fulfill our needs for handmade goods, while turning the production of handmade goods into an expensive, commodified hobby for the well off.

Author's hand-spun yarn, with factory-produced hand spindle and roving.

Finally, with the advent of mass-produced food and related technologies like public education and daycare, humans themselves have become items of mass production. I have joked on Twitter that SWPLs think they are creating artisanal humans; paleo diets, along with free-range, unschooling, and the fetishization of the traditional and the offline, are ways we react to the extensive forgery of value in our cultures and ourselves. Fewer of us sing, make music, and dance; more time is spent in offices and less making shell necklaces. The welfare loss is best made apparent with an evolutionary view of economics, which might actually explain why this view has not obtained currency.

It's Full of Shells

The late Seth Roberts laid out a loopy, ambitious, and thoroughly fun theory about how we may have ended up using shells as proto-money - explaining, along the way, the evolutionary meaning of procrastination, the economic importance of gifts, and the scientific importance of decoration. "How Economics Shaped Human Nature: A Theory of Evolution" deserves to be read alongside Szabo's "Shelling Out."

Thursday, October 4, 2012

How Innovation is Like Genetic Mutation

Our system of intellectual property, especially the patent system for inventions, prioritizes innovation above other contributions to culture. The patent system (appropriately referred to, I think, as "intellectual monopoly" rather than intellectual property) attempts to allow an innovator to capture the profits that flow from his innovation, largely ignoring the contributions of those who copy and use the technology. 

The conception of copying and using an innovation as "theft" is fundamentally wrongheaded. In practice, throughout human history, copying and use (with slight modifications) is how technology has progressed. Use and copying with modification contributes more value than mere innovation, but is not rewarded (and is actually punished) by our current intellectual monopoly scheme. An analogy to biological evolution is apt: innovation provides the raw material upon which selection (copying and use) acts, in the same way that genetic mutation provides the raw material upon which natural selection acts. We would not expect large amounts of genetic mutation caused by radiation to result in better and better ecosystems; quite the opposite. Genetic mutations are mostly harmful, and even mutations that are successful for an organism can disrupt an entire ecosystem. Radical changes to the ecosystem must follow a major genetic change in any participant organism.

Proponents of the value of innovation would argue that unlike radiation, human innovators can think about the implications of an innovation, designing only those that would result in a beneficial change. This is, I argue, fundamentally hubristic. The ability of humans, even the smartest humans, to mentally project changes into the future is more limited than humans generally acknowledge. The most salient consequences of historical innovations were generally not widely anticipated. 

The success of an innovation is often not apparent at the moment the innovation is conceived. Only in an environment in which appropriate supportive technologies have developed, and after long use, can any particular innovation be considered successful. (See, e.g., the development of the rudder over the past two millennia.)

The problem of the failure to project the effects of innovation has been especially visible in the case of the design of human societies. Utopian societies of the 19th century failed to have an average longevity of even a single human generation, despite the careful planning and effort of concerned individuals. 

A related problem is the size and interconnectedness of modern systems. Many separate ecosystems adapting in different environments would offer some hope of hitting on stable solutions. A single, giant ecosystem, in which everything is interconnected and innovations spread throughout the system immediately, offers much less hope of happening upon a stable solution. Our megasystem limps along, gathering an ever-increasing load of dangerous innovations, and will do so until it no longer can. 

This is not to say that simpler, stabler systems are necessarily better. They are frequently quite awful. Interestingly, however, removing the salient awfulness of a particular simple system often (imperceptibly, over generations) also removes whatever was beneficial about the system. 

There is a fundamental problem with our extremely complex system. Not only has it failed to provide decent lives for its human citizens, but it is not even on a course likely to provide decent lives in the future. Our almost religious focus on innovation as a solution to our problems ignores the manner in which change occurs in large, complex system. 

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