Evolutionary Economics - Evolutionary Psychology

Evolutionary Psychology

See also: Behavioral economics and Neuroeconomics

A different approach is to apply evolutionary psychology principles to economics which is argued to explain problems such as inconsistencies and biases in rational choice theory. A basic economic concept such as utility may be better viewed as due to preferences that maximized evolutionary fitness in the ancestral environment but not necessarily in the current one. Loss aversion may be explained as being rational when living at subsistence level where a reduction of resources may have meant death and it thus may have been rational to place a greater value on losses than on gains. People are sometimes more cooperative and altruistic than predicted by economic theory which may be explained by mechanisms such as reciprocal altruism och group selection for cooperative behavior. An evolutionary approach may also explain differences between groups such as males being less risk-averse than females since males have more variable reproductive success than females. While unsuccessful risk-seeking may limit reproductive success for both sexes, males may potentially increase their reproductive success much more than females from successful risk-seeking. Frequency-dependent selection may explain why people differ in characteristics such as cooperative behavior with cheating becoming an increasingly less successful strategy as the numbers of cheaters increase.

Another argument is that humans have a poor intuitive grasp of the economics of the current environment which is very different from the ancestral environment. The ancestral environment likely had relatively little trade, division of labor, and capital goods. Technological change was very slow, wealth differences were much smaller, and possession of many available resources were likely zero-sum games were large inequalities were caused by various forms of exploitation. Humans therefore may have poor intuitive understanding the benefits of free trade (causing calls for protectionism), the value of capital goods (making the labor theory of value appealing), and may intuitively undervalue the benefits of technological development. There may be a tendency to see the number of available jobs as a zero-sum game with the total number of jobs being fixed which causes people to not realize that minimum wage laws reduce the number of jobs or to believe that an increased number of jobs in other nations necessarily decreases the number of jobs in their own nation. Large income inequality may easily be viewed as due to exploitation rather than as due to individual differences in productivity. This may easily cause poor economic policies, especially since individual voters have few incentives to make the effort of studying societal economics instead of relying on their intuitions since an individual's vote count for so little and since politicians may be reluctant to take a stand against intuitive views that are incorrect but widely held.