Zak, Paul J Zak, Paul J. and Denzau, A. Economics is an Evolutionary Science pp.31-65 in Evolutionary Approaches in the Behavioral Sciences: Toward a Better Understanding of Human Nature, Albert Somit and Stephen Peterson, Editors, JAI Press, 2001 Citation:Paul J. Zak and Arthur Denzau 30 LEE CRONK Voland, E. (1998). Evolutionary ecology of human reproduction. AMIIQI Review of Anthropology, 27, 347-374. White, L. A. (1959). The Evolution of Culture: The Development of CiviliVJtion to the Fall of Rome. New York: McGraw-Hill. Williams, G. C. (1966). Adaptation and Natural Selection. Princeton, NJ: Princeton University ECONOMICS IS AN Press. Wilson, E. O. (1975). Sociobiology: The New Synthesis. Cambridge: Harvard University Press. Winterbalder, B., & Smith, E. A. (&Is). (1981). Humer-Gatberer Foraging Strategies: Ethnographic EVOLUTIONARY SCIENCE and Archuological AlUJlyses. Chicago: University of Chicago Press. Winternalder, B., & Smith, E. A. (2000). Analyzing adaptive strategies: Human behavioral ecology at twenty-five. EvolutiolUJry Anthropology. Winterbalder, B. (1977). Foraging Strategy Adaptations of the Boreal Forest Cree: An Evaluation Paul 1. Zak and Arthur T. Denzau of Theory and Models from Evolutionary Ecology. Ph.D. Dissertation, ComeD University. Wrangham, R. W., McGrew, W. C., & De WaaI, F. B. M. (Eds) (1994). Chimpanz.ee Cultllns. Cambridge: Harvard University Press. Wright, R. (1994). The Moral Animal: The New Science of Evolutionary Psychology. New York: Pantheon. INTRODUCTION Zahavi, A. (1990). Arabian babblers: 1be quest for social status in a cooperative breeder. In: P. B. Stacey & W. D. Koenig (Eds). Cooperative Bruding in Birds: Long-Term Studies of In a widely read 1898 essay published in the Quarterly Journal of Economics, Ecology and Behavior, (pp. 103-130). Cambridge: Cambridge University Press. zahavi, A., Zahavi, A., Zahavi-Ely, N., & Ely, M. P. (1997). The Handicap Principle. Oxford: Thorstein Veblen asked why economics had strayed from its foundation in the Oxford University Press. natural sciences. The title of Veblen's paper is "Why is economics not an evolutionary scienceT' In it, Veblen identifies the many advances of classical and the emerging neoclassical economics, but critiques their use of hypothetical constructs of human decision processes. The paper is an appeal to return the focus of economic analysis to human beings. With one hundred years perspective, Veblen's essay is amazingly prescient. Nevertheless, as this chapter demonstrates, this call has been largely ignored by professional economists. To the contrary, the predominant approach to economic analysis in the twentieth century was not the biology of human behavior, but a systems approach mimic­ king the analysis of classical physics. This chapter examines the mutual evolution of the biological and economic sciences, tracing their intimate relationship in the previous two centuries, their nearly complete divorce in the twentieth century, and their current gradual rapprochement. We do this by examining the individuals, many with familiar names, who forded the currents between disciplines, bringing to light the bi-directional contributions of one upon the other. By doing this, we reach the fundamental conclusion which is this chapter's title: Economics is an evolutionary science. This chapter does not argue that evolutionary biology is EVIIlutloaary Approlldles in the Behaviol'll1Sciences, Volume 8, pages31~. Cepyript C _I by EllleYier Sdmce Ltd. ADnplB 01reproduction In any form raerved. ISBN: 0-7613-8769-2 31 32 PAUL 1. ZAK AND ARTHUR T. DENZAU Economics is an Evolutionary Science 33 the proper metaphor for economic analysis, but that methods and findings in In this section, we examine the historical co-evolution of biology, especially the biological sciences need to be incorporated directly into economics if the evolutionary theory, and economics, by examining the major influences during discipline is to continue to produce relevant insights into human behavior. the past two centuries. Note that by "evolutionary theory" we mean the modem synthetic or neo-Darwinian theory that adjoins genetics, biochemistry, paleo­ A mSTORICAL CHRONOLOGY OF THE FEEDBACK biology, and natural history as supporting pillars to the basic theory of natural BETWEEN ECONOMICS AND BIOLOGY selection developed by Darwin. German medical doctor Karl Burdach (1776-1847) coined the term "biology" to Adam Smith refer to the study of human beings. His masterwork Physiology as a Science of Experience advocated the deduction of the bases of human behavior by obser­ Several features of classical economic analysis have strong ties to biology. vation. The purview of biology was expanded to include botany, zoology, Natural law was a fundamental notion of the Enlightenment, focusing on the geology, chemistry and meteorology by Jean Baptiste Pierre Antoine de Monet innate basis of human behavior. A key notion of the Scottish Enlightenment is Lamarck in 1812 who was convinced that the scientific methods of observation the idea of unanticipated consequences, which relates closely to the Darwinian and experiment applied uniformly to the study of humans, animals, cells, and approach to evolution. Also related is the classical economic model of popu­ molecules. A near-contemporary of Burdach, Adam Smith, wrote repeatedly in lation growth. These three elements are all expressed in the work of Adam 1759's The Theory of Moral Sentiments of the "oeconomy of nature," when Smith (1723-1790). describing human behavior, borrowing the phrase from a 1751 book with this Smith was fully aware of one of the earliest unanticipated consequences title by the father of biological taxonomy Carolus Linnaeaus. By his 1776 The arguments, that of Bernard de Mandeville. Mandeville, in The Fable of the Bees Wealth of Nations, Adam Smith had dispensed with biology as his overarching (1714), argued that the selfish motives of humans did not necessarily cause the metaphor, and adopted Newtonian mechanics. Henceforth the schism between results of their actions to be bad for society as a whole. We would now term the evolutionary basis in biology and economics, for the most part, grew. this a discovery of an emergent phenomenon, and this is a very sensible inter­ The lacuna between biology and economics deepened in the 19th century pretation of the unanticipated consequences idea in Scottish Enlightenment because of a fundamental misunderstanding of the relationship between the two philosophy. by the polymath Herbert Spencer (1820-1903). Spencer published a simple Smith's contemporary David Hume specifically designed the specie flow version of biological evolution before Charles Darwin, and was the first to use model to reference economic phenomena in his 1752 work On the Balance the terms "evolution" and "survival of the fittest" to describe biological of Trade. Once again, an emergent phenomenon, in this case the stability of dynamics. Unfortunately, Spencer did not clearly identify the mechanisms equilibrium was invoked to explain the implications of a mercantilist surplus through which evolution occurs as did Darwin, and the latter is rightfully in the balance of trade between two countries in the context of the use of specie, identified as the father of modem evolutionary theory, though for many years gold, for the settlement of international payments.I This example of a negative Spencer outshined Darwin and was considered one of the world's leading feedback mechanism supporting an equilibrium naturally leads to similar uses biologists. Spencer went on to write important works in sociology and both of equilibrium and of stability in Smith's work. psychology (Spencer, 1851, 1855, 1880), and to work as an editor at the Smith's 1759 book, The Theory of Moral Sentiments, is explicit in the ties Economist magazine. Nevertheless, Spencer is often now overlooked because with biology. In various parts, Smith attempts to argue for the implications of he was unwilling to accept the non-directional nature of Darwinian evolution; natural sentiments assumptions, based on his conception of human nature. These instead his take on evolution continued to be both Lamarckian and teleological. were tied to the natural law approach promulgated by Enlightenment scholars, Spencer (1851) wrote that "Progress ... is a part of nature" (p. 65). As a result, Spencer's later work advocated laissez-faire economics in order to promote adaptation and social progress via Lamarckian learning. Nevertheless, Spencer 1. It is interesting to note that the anachronistic economic use of "specie" and the biological was the first to integrate biological evolution with social theory, and his "species" have the same Indo-European root indicating a particular form or type. influence - for better or worse - is still present, if only tacitly. 34 PAUL J. ZAK AND ARTHUR T. DENZAU Economics is an Evolutionary Science 35 both in Scotland. and on the continent. But these quite explicit ties seem both could be used by fields other than economics or moral philosophy. One of the quaint and far less convincing to the modem reader. fields which benefited from these abstract arguments was biology. when Charles Much more convincing. and tied more to the emergent properties idea are Darwin encountered the bewildering display of plants and animals on his round­ many arguments in The Wealth of Nations. For example. a version of the Iron the-world tour of duty as naturalist on the HMS Beagle. Law of Wages is developed in which a model of population growth