Ingela Alger is a TSE researcher and the research director of CNRS. She holds a PhD degree in economics from Université des Sciences Sociales. Her research interests include evolution of preferences, contract theory and industrial organization.
When I left Toulouse as a freshly minted Ph.D., I would have been surprised to learn that fifteen years later part of my job would consist in building bridges between economists and biologists. At the time I had no intention whatsoever to make this connection, and if somebody had mentioned it, I would probably have asked myself: What could economists and biologists possibly have in common?
At first glance, the answer is, “Nothing”: for while biologists study cells, plants, animals, and the human body, economists analyze markets, firms, and other institutions created by humans. However, while these two disciplines clearly have distinct objects of study, they share an important goal, namely, to discover laws governing the functioning and behavior of the objects of study. Now, physicists and chemists also seek to uncover such laws; a key difference, however, is that their objects of study are not living beings, while those of biologists and economists are. At second glance, then, the answer is, “Potentially a lot”.
Opening a biology journal or textbook would likely bring surprise to many an economist, who would quickly notice that “costs,” “benefits,” and “scarce resources” are mentioned quite frequently. Nonetheless, the currency is not the same: whereas economists use some numeraire good to express costs and benefits, biologists use reproductive success as currency. For biologists, living beings all share one goal, which is to reproduce, and, hence, an individual’s success is measured by his or her reproductive success, or fitness.
Many people would certainly find it shocking to reduce the purpose of life to reproductive success, and we economists take pride in our ability to provide models where general results do not necessitate strong assumptions about individual preferences. However, there are strong and compelling arguments in favor of the biologists’ view.
By definition, any living individual descends from a long string of ancestors who were all successful at reproducing. By the same token, at any point in time, there are billions of individuals who could have existed, but who failed to do so. Clearly, the ancestors of the former set of individuals must, on average, have followed strategies that led to higher reproductive success than did the ancestors of the latter set of individuals. Hence, by way of “Darwinian revealed preference,” those who are alive today may be expected to be equipped with traits that have been selected for by evolutionary pressure to maximize, or at least favor, reproductive success. Depending on the species and the habitat at hand, surviving and reproducing requires a more or less complex set of traits. These traits come in many forms, including body design, sensory abilities, and behavioral responses. Just like economists, biologists collect data and use mathematical models to produce theoretical predictions. This, then, points to one natural point of connection between economics and biology: using evolutionary logic, what kind of behavioral responses, and preferences triggering these responses, may be expected from first principles, provided that reproductive success is the driving force?
In the 1970’s theoretical biologists developed evolutionary game theory, the tool of choice to study this question. Starting about twenty years ago, economists have relied on and further developed evolutionary game theory to model preference evolution. This literature has produced evolutionary foundations for expected and non-expected utility, prospect theory, intertemporal preferences, a host of other-regarding preferences – such as altruism, inequity aversion, spite, and status-seeking – as well as moral values.
Importantly, this literature holds the potential for establishing a link between, on the one hand, the preferences that may be expected to arise in a population, and on the other hand, the environment in which the population evolves. Which in turn leads me to how I got into conducting research on preference evolution...
Ever since I was a child, I have had the opportunity to observe different cultures from within over long stretches of time. Differences appeared to run deep. At some point I became particularly struck by differences in the amount of helping within families. Broadly speaking, helping within families is less common in developed countries than in developing ones. I soon discovered that biologists had looked into the issue of helping behaviors within the family for decades. Theoretical work published by British biologist William Hamilton in 1964 had shown that, ceteris paribus, the amount of help between relatives should be determined by the degree of relatedness (e.g., helping should be more commonly observed between siblings than between cousins). My work with Jörgen Weibull on the evolution of altruistic preferences builds on and refines Hamilton’s insights. It predicts that the degree of intrafamily altruism selected for by evolutionary forces will typically depend on factors in the environment, where the environment is the set of factors that jointly determine how reproductive success is achieved.
In particular, we find that harsher environments may lead to weaker family ties. Hence, while an obvious explanation for the pattern of family ties is that in developed countries formal insurance mechanisms have rendered informal insurance within the family obsolete, this research suggests another hypothesis, namely, that family ties grew weak several centuries ago in regions that are now well developed. Could it be, then, that the formal insurance mechanisms in developed countries are not only the “chicken,” but also to some extent the “egg”? If so, how would such an insight inform our view of economic development?
Preference evolution is but one research topic at the border between economics and biology. There are several other natural potential connections.
For instance, it is clear that two powerful forces stand out as being ubiquitous not only among humans, but also in a host of other species: competition and cooperation. The cells that make up our bodies all contain the same genetic material, and yet, while some of them produce a liver, others produce a brain: they cooperate in a rather grandiose manner. Anthills are built and maintained by way of teamwork by myriad ants. Among humans cooperation occurs in many different settings, including families, groups of friends, clans, tribes, firms, political parties, government, etc. One can even argue that there is cooperation as long as individuals refrain from killing each other. Competition occurs both between and within species. Often, individuals, or groups of individuals (like firms), that share the same habitat (or the same market) will vie for the same resources. A special but important kind of competition arises in species with sexual reproduction, where individuals of the same sex compete for mates. While cooperation and competition are common among all living beings, economists and biologists may have approached the subject from different angles, and perhaps there are “gains from trade” to be made between the disciplines.
Last but not least, building models that recognize that humans are but one species in the dynamic ecosystem that is Earth would likely be useful not only for humans, but also for other species, some of which we depend on to survive.