Frankfurt School – Working Paper Series Naturalizing Institutions

Frankfurt School – Working Paper Series

No. 182

Naturalizing Institutions:

Evolutionary Principles and Application on the Case of Money

by Prof. Dr. Carsten Herrmann-Pillath

November 2011

Sonnemannstr. 9 – 11 60314 Frankfurt an Main, Germany Phone: +49 (0) 69 154 008 0 Fax: +49 (0) 69 154 008 728 Internet: www.frankfurt-school.de Abstract

In recent extensions of the Darwinian paradigm into economics, the replicator-interactor duality looms large. I propose a strictly naturalistic approach to this duality in the context of the theory of institutions, which means that its use is seen as being always and necessarily dependent on identifying a physical realization. I introduce a general framework for the analysis of institutions, which synthesizes Searle’s and Aoki’s theories, especially with regard to the role of public representations (signs) in the coordination of actions, and the function of cognitive processes that underly rule-following as a behavioral disposition. This allows to conceive institutions as causal circuits that connect the population-level dynamics of interactions with cognitive phenomena on the individual level. Those cognitive phenomena ultimately root in neuronal structures. So, I draw on a critical restatement of the concept of the ‘meme’ by Aunger to propose a new conceptualization of the replicator in the context of institutions, namely, the replicator is a causal conjunction between signs and neuronal structures which undergirds the dispositions that generate rule-following actions. Signs, in turn, are outcomes of population-level interactions. I apply this framework on the case of money, analyzing the emotions that go along with the use of money, and presenting a stylized account of the emergence of money in terms of the naturalized Searle-Aoki model. In this view, money is a neuronally anchored metaphor for emotions relating with social exchange and reciprocity. Money as a meme is physically realized in a replicator which is a causal conjunction of money artefacts and money emotions.

Keywords: Generalized Darwinism; institutions; replicator/interactor; Searle; Aoki; naturalism; memes; emotions; money

JEL classification: B52; D02; D87; E40; Z1

ISSN: 14369753

Contact:

Prof. Dr. Carsten Herrmann-Pillath Academic Director, East-West Centre for Business Studies and Cultural Science Frankfurt School of Finance and Management Sonnemannstraße 9-11 60314 Frankfurt am Main, Germany

Email [email protected]

This article was published in Frankfurt.

Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money

Inhalt

1 Introducing naturalism into the evolutionary approach to institutions...... 4

2 Institutions, distributed cognition and neuromemes: Outline of a naturalistic approach to institutions...... 10 2.1 Institutions and functions in evolutionary causal circuitry: Merging Searle’s and Aoki’s theories of institutions...... 11 2.2 Status functions and the neuronal theory of metaphor: Establishing the larger framework of Neuronal Darwinism...... 16 3 Darwinizing money...... 25 3.1 The pivotal role of emotions in the naturalistic approach to institutions ...... 25 3.2 Money emotions...... 27 3.3 Money, signal selection and the human instinct to social exchange ...... 31 3.4 The emergence of money as the creation of a new metaphor ...... 35 4 Conclusion and outlook ...... 41

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money

1 Introducing naturalism into the evolutionary approach to institutions

One of the major challenges in generalizing the theory of evolution is to include human culture and institutions into the picture. In economics, this research agenda has been launched by Thorstein Veblen (1899) for the first time and was lost out of sight even in the so-called ‘Old Institutionalism’, after the cultural turn triggered by the strong impact of American pragma- tism. The co-evolution of human biology and culture received considerable attention in anthropology and biology after sociobiology had attacked the foundations of the social sciences and humanities as independent research traditions. Meanwhile, different approaches to gene- culture evolution are at hand which avoid fully-fledged reductionism but also extend the evolutionary concepts into the realm of culture (e.g. Richerson and Boyd 2005; Jablonka and Lamb 2006). In economics, unified approaches are only back on the research agenda with the recent claims of a Universal Darwinism (Hodgson and Knudsen 2010).

One fundamental conceptual problem in all these extensions is the question of ontology, in the specific sense of social ontology. The major ontological difference between old and new institutionalism in economics lies in the much richer social ontology of the former, especially in accepting institutions as ‘real’, i.e. as ‘facts’, whereas new institutionalisms mostly follow the standard assumption of methodological individualism in economics, which would only treat ‘individuals’ as ‘real’ units of larger social systems. For evolutionary approaches and Darwinism in particular, this applies as well, in the context of the tensions between claims of genetic reductionism and the possible role of alternative approaches which would highlight the role of higher-level units in evolution. I reduce these complexities to one question: Can we construct an extension of evolutionary theory that treats institutions as units of evolution? This question would lead to a number of other questions, which I just notice, but cannot pur- sue in this paper (for more, see Herrmann-Pillath 2010/11), such as: Could we possibly imag- ine an evolutionary theory in which human individuals emerge as a phenomenon at the interface of two different ontological levels of evolution, i.e. genetic and institutional? Can we analyze evolution in the context of human beings in terms of complex interactions of different ontological domains of evolution, i.e. biological, cultural, and even individual?

In this paper, I present an argument in favour of treating institutions as ‘real’ and as units of evolution on an ontological level which is independent from the genetic level. As such, the

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money paper picks up a distinction which is currently seen as obsolete by the vast majority of researchers, namely the distinction between genes and memes, which was posited in one early universalization of Darwinism by Dawkins (1989). One reason is that defining the concept of the ‘meme’ faces the same difficulties as recent generalizations of another Dawkins concept, that underlies the notion of meme, i.e. the ‘replicator’ (Knudsen 2002; Hull and Wilkins 2005). This is the question of the physical realization of the replicator beyond chemical mechanisms such as genetics. I argue that this empirical question is in fact an ontological one, which implies that we can develop a number of principled ideas about the structure of reality that would also enable us to formulate hypotheses about the physical nature of replicators in the domain of institutions.

I will put together different theoretical resources from different disciplines to offer my solution to this quandary. There is one pivotal point that I make in following John Searle’s (1995, 2005, 2010) approach to social ontology. This is that institutions are a special kind of facts, namely observer-relative facts. Being facts, however, they are conceived in naturalistic terms, i.e. as having autonomous causal powers beyond the beliefs and attitudes of individuals who act in a certain institutional setting (Bhaskar 1989). The question is how we can empirically specify this status of institutions as facts. In answering this question, I go far beyond Searle’s approach. I wish to present a conceptual framework for the Darwinian analysis of institutions and present an application on one of the most important institutions of the economy, money. This framework builds on two ideas borrowed from the literature.

The first starts out from Aunger’s (2002) theory of (neuro)memes. Aunger, too, posits that one of the intricate questions of the generalization of Darwinism is the distinction between replicators and interactors. Although it is possible to make sense of this distinction in purely information-theoretic terms (as in Hodgson and Knudsen 2010), this approach is methodol- ogically problematic because it implicitly gives up the naturalistic ontology underlying Dar- winism. In fact, the purely information-theoretic approach is a disguised Cartesian substance dualism of mind vs. matter which builds the universalization of the theory on the distinction between a material domain, where biology reigns, and an abstract domain of ‘information’, in which the generalization holds. Instead of this, I present an entirely naturalistic account of institutions in relation with the replicator/interactor distinction. I define naturalism as the ontological hypothesis that the world is physically closed in causal terms, thus eschewing any

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money sort of substance dualism, and that therefore ‘existence’ is defined in terms of physical causal powers (Papineau 2007). Naturalism does not preclude the possibility of emergence, i.e. ontological novelty (Bunge 1977/1979), that means, I propose a non-reductionist evolutionary account of institutions (in the sense of Hodgson 1999). As Aunger has shown, in the generalization of Darwinism, naturalism requires to focus on the causal circuitry between artefacts and neuronal structures as the physical realization of replicator functions in the context of human culture and institutions. I argue that this is necessary to justify an assumption that was central to Old Institutionalism, namely that institutions are facts in the modern sense of social ontology. So, the first central claim of this paper is that if we want to treat institutions as replicators, we have to conceive them in naturalistic terms, i.e. as causal conjunctions between artefacts and neuronal states, which are both physical phenomena. Then, one central question is how we can understand the causality between artefacts and neuronal states in terms of Searle’s notion of observer-relativity: In Searle’s approach, the institutional nature of an artefact results from its being interpreted by an observer in a particular way: A piece of paper is treated ‘as money’. On first sight, this interpretive relation seems to be substantially different from the causal relation between the artefact and neuronal states (which, of course, just re- states the Diltheyian fundamental distinction between ‘Erklären’ und ‘Verstehen’, i.e. the sciences and the humanities). My solution to this problem is to synthesize the categories of ‘meaning’ and ‘function’ in an evolutionary account of institutions. This synthesis starts out from the recent ‘cognitive turn’ in institutional economics (e.g. North 1990, 2005), which sees institutions as combinations of incentive mechanisms and cognitive schemes (mental models etc.).

I present a detailed proposal on how to conceptualize replicators in the context of cognitive theories of institutions, taking Aoki’s (2007, 2011) approach as a workhorse. Aoki has shown that for the emergence and sustainability of institutions a specific kind of causal circuitry between external artefacts (his ‘public representations’) and states of individuals (his ‘beliefs’) is essential. This causal circuity mediates between individual-level and population level processes. I show that this view can be translated into purely naturalistic terms, which eventually allows to treat institutions as memes in the sense of Aunger’s. As a side effect, my argument points toward a lacuna in recent debates in evolutionary economics, namely the integration of the brain sciences and recent progress in neuroeconomics. So, I propose an extension of the

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money cognitive approach to institutions into a neurocognitive foundation, following recent theories about ‘grounded cognition’ and related approaches (e.g. Barsalou 1999, Pecher and Zwaan 2005). As I will show, this applies for both the behavioral regularities that are implied by rule- following, and to the interpretive activities. Naturalism claims that all these different phenomena are ultimately states of the brain as a physical entity. However, the complete evolutionary framework puts these phenomena into a direct causal relation with what Aunger calls ‘artefacts’ and Aoki ‘public representations’. I propose to indicate this synthesis by using the term ‘sign’ for both. The meaning of signs rests in the function that the realize in the entire evolutionary causal circuitry.

In emphasizing the pivotal role of these approaches in a generalized Darwinian argument, I basically follow the example of Hayek, who had put the analysis of the brain at the center of his entire approach to institutions, starting out from his seminal ‘Sensory Order’ (Hayek 1952). As a result, I argue that the evolution of human behavior takes place at the interface of two levels of evolutionary processes, namely the evolution of states of the brain (Neuronal Darwinism) and the evolution of signs in the most general sense. These two processes connect with the process of genetic evolution via epigenetic mechanisms and the phylogenetic heri- tage of value functions that guide human learning in an institutional context.

Figure 1: Theoretical resources activated in the Darwinian approach to institutions

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money

Hence, my argument will operate on two levels, namely the level of the brain and the level of signs (fig. 1). In this framework, I expand and complement Searle’s approach in two ways, so that I can relate it with a Generalized Darwinian replicator/interactor model. This is possible, if, following Hayek, we conceive the human brain as an evolutionary system that is physically autonomous from the level of genetic evolution. This approach has been seminally elaborated by Gary Edelman (1987, 2005) in a paradigmatic way. The linkage between this general framework and Searle’s social ontology can be established in a two-fold way. Searle has put a fundamental cognitive process at the center of his explanation of the emergence of institutions, which is the so-called status function. Status functions are metaphors in the broadest sense, such as when treating a piece of metal ‘as money’. In other words, certain cognitive capacities are indispensible in producing the new functionings that become possible with the emergence of a new institution. Thus, I give an exemplary account of these capacities by simply referring to two lead theories in the field, one on the purely cognitive level of concept formation underlying institutions, which is Fauconnier and Turner’s theory of conceptual blending, and the other Lakoff’s neuronal theory of metaphor. Both theories harmonize well with the more fundamental evolutionary approach of Edelman, in my view.

The other analytical level that I introduce is the level of external artefacts, i.e. signs. That is, I adopt an externalist position in analyzing mental phenomena. This is essential to develop on a modern version of Veblen’s notion of ‘habits of thought’ undergirding institutions. I present a most general externalist model of Edelman’s theory which follows Aunger’s theory of memes. This linkage can be referred back to Searle’s theory, if we highlight one of Searle’s ideas that has not been fully developed by himself, namely that following an institution is a disposition, and not a conscious act, and that these dispositions can be analyzed in naturalistic terms, i.e. as neurophysiological dispositions, i.e. states of the brain as a physical system. Then, it is straightforward to realize that institutions can be conceived as causal conjunctions of neuronal states and signs that trigger certain dispositions that result into behavioral regularities which can be described in terms of the institution. I will propose that this causal conjunction can be specified further in terms of the conjunction of signs and emotions, with the latter being complex neuronal structures which coordinate valuations and sensorimotoric ou- puts. As I have argued elsewhere (Herrmann-Pillath 2010, 2012), this results into rule- following being a performative action in the sense of speech-act theory, i.e. through the action

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money the rule comes into existence. The entire argument boils down to a simple empirical proposition: All institutions build on causal conjunctions between evolving artefacts and brain states, resulting into behavior that shows the feature of following the institution.

This model remains on a highly abstract level. Following Herrmann-Pillath (2012) I offer a more detailed empirical interpretation in adding Aoki’s theory of institutions. As stated above, Aoki analyzes institutions in terms of a specific causal circuitry that relates interactions under the institution with external sets of public representations, which have the essential function of ‘information compression’. With this idea, he grasps another important element of the Hayekian tradition in understanding institutions, namely that institutions are mechanisms of distributing knowledge, hence carriers of information. This idea matches exactly with the information-theoretic interpretation of the replicator/interactor duality. In Aoki’s conceptualization, the signs have the function of information compression, and they generate certain dispositions that result into actions which reproduce certain behavioral regularities as well as the public representations. If we recognize the conceptual equivalence between this notion and the notion of artefacts in the more abstract framework, it is straightforward to identify Aunger’s neuromemes with causal conjunctions of signs and dispositions in the Aoki model. Thus, we get an empirical interpretation of the general replicator function in the context of a fully fledged evolutionary approach to institutions. The replicator is a conjunction of signs and neuronal states, and the interactor is the resulting behavior, however in terms of its aggregate, population level patterns, i.e. the ‘states of play’ in Aoki’s sense. This analysis catches the important fact that both the interactor and the replicator must be population-level phenomena, such as in the classical distinction between the genotype and the phenotype (Lewontin 2007). Even though the neuronal states are strictly individual, the signs are population level phenomena, and their functional relation depends on the sustainability of collective behavioral patterns in the population of agents.

Thus, in summary, I present a Darwinian account of institutions that interprets institutions in terms of the replicator-interactor duality. The interactor is the pattern of sustainable behavioral regularities on the population level. The replicator is a stable conjunction of signs, which are generated on the population level, and emotions qua neuronal states on the individual level. The replicator connects sings and individual behavioral dispositions, such that meaning of the signs is the function that it has in sustaining the population-level patterns.

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money

The paper proceeds as follows. I section two, I present an detailed account of the theory sketched so far. In section three, I apply this theory on the institution of money, adding together three different sources of insights, first, the empirical record of the role of emotions in the use of money, second, a specific proposal by Lea and Webley (2006) about the core emotion that undergirds the use of money, which I interpret in Darwinian terms, and third, a conceptual model of the historical emergence of coins presented by Hutter (1994), which I analyze in terms of Searle’s status function. As a result, I claim to show that money is a meme. Section four summarizes the argument by means of looking at the larger research agenda of a naturalistic theory of institutions.

2 Institutions, distributed cognition and neuromemes: Outline of a naturalistic approach to institutions

In this section I develop the theoretical framework in more detail. I will relate different theoretical resources, which also implies that I present my own interpretations of these contribu- tions. This is especially true for the pivotal theory, Searle’s theory of institutions. Without being able to go into the details here, I will introduce many of Searle’s concepts, but impose a strictly naturalistic interpretation. Searle himself is also arguing in naturalistic terms (e.g. Searle 2004), but also maintains what I call a mentalistic approach, or, in other words, inter- nalism with regard to mind. This is the main reason why he changed some terminologies in his recent 2010 book, compared with his 1995 book, which I follow more closely. Especially, I focus on one notion that has been retreating in Searle’s own work recently, which is the ‘background’. The background is a set of enabling capacities of agents, which makes rule following possible. My central concern is whether these capacities require mental representations. In my argument, which departs from Searle’s work, especially the more recent one, I focus on one of his (1995) ideas that is important but remains peripheral, namely that the background generates behavioral dispositions. This idea I will relate with another theory of institutions in economics, which I find congenial to Searle’s approach, namely Aoki’s, especially in its most recent versions. For Aoki’s approach, too, I develop a naturalistic account, and I will show that the linkage between the two theories rests on the notion of a functional causal circuitry, mediated via language and dispositions, such that institutions emerge as population-level regularities in behavioral patterns. This ideas prepare the ground for an analysis in terms of the replicator-interactor duality.

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money

2.1 Institutions and functions in evolutionary causal circuitry: Merging Searle’s and Aoki’s theories of institutions

Searle (1995: 129ff.; compare Searle 2004) argues that institutionalized behavior builds on behavioral dispositions, which are neurophysiologically anchored. Following a rule does not require to know the rule as such, so there is no need for a fully fledged mental representation. It suffices to be able to process environmental cues which trigger neurophysiological reactions that produce the required behavior. Thus, in this view institutions are not fully reflected in cognitive models, but in complex conjunctions of partial cognitive representations and neurophysiological mechanisms. This viewpoint seems to be complementary to Aoki’s (2001) notion of the stabilization of institutions by summary representations of the underlying game structures. Summary representations are partial cognitive models which do not need to be shared in a population, but still form part and parcel of the reproduction of the institution by means of coordinated behavior, as long as pay-offs stabilize the different summary representations.

In this elaborating on this model, Aoki (2007, 2011) starts to introduce the notion of ‘substantive institutions’. This compares with the mentalism of many theories about institutions, especially in game theory. Mentalism approaches institutions as coordinated states of mind between individuals, especially in the sense of mutually confirming expectations, based on common knowledge. To the contrary, substantive institutions are external determinants of mental states, i.e. beliefs. I argue that this approach can be directly connected to Searle’s theory of institutions as facts, which is in turn based on a theory of functions. The theory of functions is central to understand the replicator-interactor relationship in the complete model that I propose.

Searle puts his theory in the broader context of a general theory of facts (Searle 1995: 120ff.). He distinguishes between observer independent and observer relative facts (in 2010, he changes the terminology from ‘observer’ to ‘mind’, which I do not follow). A metal coin is a piece of metal, which is observer independent. But the function as money is entirely dependent on the observer, hence observer relative. It is important to notice that Searle advances a very broad notion of observer relativity, because he assigns the status of an observer relative fact to all functions. That is, the function of a heart, namely to pump blood, is also an observer relative fact. Observer relativity ultimately roots in collective intentionality. This is a crucial

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money step, if we further consider that Searle distinguishes between two kinds of the subjective / objective distinction, i.e. the ontological one, referring to facts about entities, and the episte- mological one, referring to judgments about facts (see table 1). A fact can be ontologically subjective and epistemologically objective, such as in case of a technological artefact, which is observer relative, but the functioning of which follows physical laws. On the other hand, there can be ontologically objective facts which are epistemologically subjective, such as the so-called qualia, i.e. inner perceptions of feelings, which are physical states of the brain, but nevertheless cannnot be directly accessed by outside observers. From these distinctions, it becomes clear that institutions, which build on brute facts, are ontologically subjective but epistemologically objective. So, money is a part of an ontology which is observer relative, but its functionings can be analyzed by objective epistemic tools, such as the quantity theory of money.

Table 1: Types of facts and examples

judgement Epistemically subjective Epistemically objective entity Ontologically subjective Subjective fact Institutional fact Ontologically objective psychoneural fact (qualia) Biological fact

There are further important distinctions, especially between agentive and non-agentive functions, and, on the level of institutions, regulatory and constitutive ones. Agentive functions involve intentional agents not only in the ascription of the function, but also in its workings. That is, the function of my heart is non-agentive because its works independent from my in- tention. If I use money, the function depends me and all other agents who agree to use money. However, in institutional analysis many functions are also non-agentive, if there are also collectively unintended consequences which might be only perceivable to the external observer. In the standard view, institutions are regarded to be agentive functions. They can be only regulatory, which means, the refer to an pre-existing field of activity, such as institutions governing the exploitation of fish resources. Constitutive institutions create the very activity that is governed by the institution, as in the case of a financial market. As we shall see, money can be regarded as a constitutive institution in the case of modern money, whereas the transition from pure commodity money to coins starts out from regulatory institutions. Further, agentive

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money functions can result into states in which the process of collective intentionality actually re- treats into the ‘background’, such as when coins as money are taken for granted. This implies a shift from agentive to non-agentive functions. Actually, we can state that in the evolution of institutions, the transformation from agentive to non-agentive functions is the essential process in the general phenomenon of institutional scaffolding of individual behavior (North 2005).

This analysis is essential to develop on a radicalization of Aoki’s theory (for more detail, see Herrmann-Pillath 2012). This is because in Aoki’s original argument, deployed in 2007 and 2011, there are still some traces of mentalism in two senses. One is that the public representations are seen in terms of a semantics of representation (survey in Lycan 1999), and the other is that they still generate beliefs qua mental states. I propose to substitute this with a functional semantics which follows recent developments in teleosemantics (overview in Mac- Donald and Papineau 2006; compare Millikan 2005). This means to analyze the public representations exclusively in terms of their causal effects in the causal circuitry of institutions. To indicate this change of perspective, I use the term ‘sign’ instead of ‘public representations’, also following recent developments in game theory (e.g. Skyrms 2004, 2010). A sign does not represent a state of play, but has a function, which consists of triggering certain responses by the agents that in turn support those states of play dynamically, which includes the production of those signs. This causal circuitry is the ontological feature that justifies to treat institutions as facts.

Hence, I introduce a radically naturalistic approach in making the function independent from mental states of the agents, in the particular sense that at least the major aspect of institutions lies on the population level interactions, which renders them into non-agentive functions partially. Treating institutions as combinations of agentive with non-agentive functions grasps the Aoki concept of information compression, i.e. there can be no full assignment of functions by any purely internal mental states of observers because they are lacking the necessary knowledge of doing that. In other words, following an institution is normally based on a certain understanding of an institution, but also includes many unintended effects which are essential for the functioning of the institution, and which enable the generic function of information compression. This also catches the Hayekian idea of distributed knowledge, which we can translate into the more recent term of distributed cognition. As a consequence, we can no

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money longer reduce institutions to internal mental states. To the contrary, the entire causal circuitry of the revised Aoki model describes an externalist approach to institutions, which allows to argue that via the institutions cognitive functions are externalized on population level processes.

I summarize the revised Aoki model in fig. 2. This keeps the distinction between the individual(micro) and the aggregate population(macro) level, but changes the original orthogonal distinction between the behavioral and the cognitive level into the two notions of distributed cognition and performativity, which actually connect the individual with the macrolevel (indi- cated by the diagonal). I also maintain the idea that there are strategic interactions in populations which can be analyzed by different tools familiar from game theory and other approaches in economics and complex systems sciences. The interactions result into states of play which include the generation of signs or sign systems. These are artefacts which may be partly produced intentionally, but their functioning in the causal circuitry does not rely on this property. This is essential to understand the role of signs in processes of distributed cognition. The signs produce causal effects that are mediated via neuronal structures of the agents. Thus, I merge the two notions of function and meaning in the sense that the meaning of the sign is its function relative to the neuronal states of the agents. As I will show subsequently, this function is analyzed in terms of recent approaches in neurolinguistics and the theory of concept formation. The neuronal states create dispositions to act, again, without the essential re- quirement of consciously reflected choices. Dispositions cause actions within a certain range of random variation, which renders the entire model evolutionary in the Darwinian sense. The actions of different agents play together on the population level, producing certain aggregate results, possibly including the reproduction of the sign systems. Thus, in case of sustainability we can say that the function of the signs is the maintainance of the behavioral regularities. This is reflected in a twofold merger of the individual, micro-level phenomena, and the aggregate macro-level phenomena: First, cognitive functions are distributed across individual neuronal states and sign systems on the population level, and second, because of the causal relation between signs and dispositions, I argue that the actions become performative in the sense that rule-based behavior emerges in which the individual actions anticipate the collective-level results within a certain range that suffices to reproduce them. In this view, collec-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money tive intentionality in the sense of Searle’s is supervening on the causal conjunction between signs and dispositions.

Figure 2: The Aoki model of institutions, naturalized

It is important to notice already at this stage that this circular causal structure allows to grasp certain essential aspects of the replicator-interactor duality. This is because on the level of populations, the emergent patterns of behavior are stabilized via the pay-offs, which are in turn related to exogenous determinants, in particular states of nature. Hence, we can say that those behavioral patterns correspond to the interactor. On the other hand, the patterns are generated by the causal conjunction of signs and neuronal states, which do not fully reflect the entire information that is embodied on the interactor level. In this sense, the causal conjunctions have the function of the replicator. The stability of the replicator rests upon the fact that it is partly insulated from the direct environmental impacts, precisely because it represents a state of information compression. Since individual behavior results from dispositions, these can manifest evolutionary stasis, in spite of generating individual behavioral variants stochas-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money tically. Yet, if on the population level patterns emerge that lead to a change of signs that also alter the causal conjunctions with those dispositions, evolutionary change becomes possible, ultimately conceivable as a series of mutations on the replicator level.

2.2 Status functions and the neuronal theory of metaphor: Establishing the larger framework of Neuronal Darwinism

To complete this argument, we only need to further specify the nature of the causal relationship between signs and dispositions. For this, I go back to Searle again. How can we understand the fusion between function and meaning at this stage of the causal circuitry?

In Searle’s theory of institutions the so-called ‘status function’ and the ‘power creation opera- tor’ play a central role. The status function builds on language in a most general sense. In a status function, a certain entity is treated as another entity, hence a metaphorical relation is created, depending on a particular context. The status function has the general form:

For example, I can treat a piece of metal as ‘money’, which is different from just using that piece in a simple barter process in which the traders may have some generalized use for it. A status function involves a fundamental conceptual shift to another category of meanings. This is a linguistic activity because it cannot be done individually, as the use of the target concept depends on rules shared in a population of users of the concept (along Wittgensteinian 1958 lines of his private language argument, see Candlish 2004).

Institutions presuppose collective intentionality in the sense that the status function must build on a collectively shared understanding. Once this has emerged, the metaphor gains in ontological validity and robustness, as it evolves into an observer-relative fact, the institution. So, if in a community of language users a certain metal is used as money, single individuals cannot change this use just by taking an autonomous decision. Similar to related approaches to collective intentionality (e.g. Tuomela 1995), Searle also assumes that these collective uses may build on power relations in a certain community, but one has to be aware of the fact that these themselves build on institutions. So, current institutions are a complex web of mutually supporting institutions, which can be traced back to some original situation where ‘brute

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money facts’ counted more, in the sense, for example, that power relations may have been based on violence, or other physical facts, such as walls separating social spheres.

The distance between modern institutions and their incipient forms can be explained by the recursiveness of the status function, and can be compared to the etymological relations in language. That is, modern word use almost always goes back to past metaphors, yet this does not mean that those metaphors still determine our understanding of the meaning in terms of actual usages (Pinker 2007: Chapter 5). In the same way, a modern institution such as money evolved through a series of recursive status functions, ending up with different forms of money, for example, such as cash, giral accounts etc. Yet, it is a question of empirical inquiry whether primordial status functions still hold, which may directly relate institutions with ‘brute facts’ such as elementary biological functionings (as in the case of many religious symbols and institutions, see Burkert 1996). I argue that such ‘brute facts’ in the historical emergence can be still present in the emotional mechanisms underpinning an institution, as we shall see with money.

The status function is a metaphor in the most general sense: There is a transfer of meaning across previously disconnected domains, which is the very foundation of institutional creativity. Human individuals collectively create a new concept, money, for which a piece of metal, the coin, serves as a metaphor. I will now argue that Searle’s status function can be interpreted in terms of a causal conjunction between signs and neuronal states, thus completing the naturalistic revision of the Aoki model. Lakoff (2008) has developed a neuronal theory of metaphor which can help us to clarify the linkage between the notion of the status function, which is a purely cognitive notion, and the notion of a neurophysiologically rooted behavioral disposition. So, in the framework depicted in figure 1, we move up to higher levels of genera- lity, with Lakoff’s theory serving as a specification of the more general paradigm of Neuronal Darwinism.

This theory posits a number of structural and processual characteristics of the brain, which are supposed to correspond to the conceptual operations that underly the creation and use of metaphors (Gentner and Bowdle 2008). As it is also assumed in generalized connectionist and network models of cognition (for a seminal approach, see Strauss and Quinn 1997), concepts are seen as corresponding to arrangements of neuronal groups which are overlapping and or-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money ganized into higher-level circuits with different fundamental patterns of connectivity (for a survey of related empirical brain research, see Coulson 2008). The basic mechanism behind this pattern formation is the dualism of activation and inhibition across neurons that form part of a group. Recurrent activation and inhibition linkages through neuronal firing result in neuronal bindings of different degrees of rigidity, which is basically the synchronization of neuronal firings across populations of neurons. In particular, moving balances between inhibition and activation can catalyze the activation of circuits across different domains in the brain. Different distinctive larger patterns can emerge, such as dominant groupings that are activated by a single cue (for example, the fear of snakes activated by the view of a snake), or so-called Gestalt circuits, in which the perception of parts of a phenomenon is completed by internal constructive processes in the brain. A central mechanism is the mapping between neuronal groups in different parts of the brain, which connect internally activating groups via an additional Gestalt mechanism, such that the partial activation of one group simultaneously activates the entire other group in other parts of the brain. For the analysis of the cognitive processes that underly status functions in institutional theory, two larger structural features of connections in the brain are crucial, mappings and bindings. Maps are projections across different brain areas, bindings establish a unity between more simple constituent units which can also relate with independent concepts.

The dynamics of this system is guided by a small number of principles, of which the best-fit principle is very important for the evolution of conceptual structures. The best-fit principle means that the brain maximizes connectivity, under the constraint of given inhibitory relations between neuronal substructures. This is the force that underlies Gestalt dynamics and the creation of meanings from contextual cues. As a result of these different dynamics, the brain can build more complex linkages between simple mappings and bindings, which in turn can be the object of further mappings and bindings. At the same time, if only for stochastic rea- sons, those structures can be continuously reshuffled and recreated.

Lakoff’s approach can be put into the general framework of Neuronal Darwinism that was developed by Edelman (1987) for the first time and has been extended into a full scale theory of mind and cognitive processing (Edelman 2006), presaged in Campbell’s (1960) seminal thinking, and even Hayek’s (1952) early work (for other related seminal approaches, see Cal- vin 1996, 1998; Hull et al. 2001). The structure of Edelman’s theory is as follows (Edelman

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money and Tonioni 1995 offer a good summary, see also the assessment by Sacks 1995). The basic idea is that the brain operates as a group selectionist system, in which groups of neurons com- pete against each other in mobilizing resources (e.g. neurotrophines) for neuronal growth and activity.

The evolution of the neuronal system starts with developmental selection before birth, which features a highly disordered growth of neuronal connections under genetic constraints. Pre- sumably, neuronal capacities for primary emotions emerge, which have phylogenetic roots and shape further brain development in terms of a set of basic evaluative mechanisms, related to survival and reproduction (e.g. primary emotions such as rage or lust, see Toronchuk and Ellis 2005). In Lakoff’s theory, and corresponding to Searle’s framework, these basic structures build the basis for the transformation of primary bodily, i.e. sensorimotoric experience into more abstract conceptual schemes, especially linguistic representations (Gallese and La- koff 2005; Gibbs and Matlock 2008; for a critical review, see Pinker 2007).

After birth, experiential selection takes place through which connections between neurons are strengthened according to differential sensory and motor inputs. Selection is guided by the set of genetically transmitted value systems, which define the fitness of neuronal units as reflec- ting certain causal mappings between events and states of the world and their effects on survival and reproduction, and which operate via the release of a number of neurotransmitters and other chemical substances in the brain, such as endorphines which relate with affects of pleasure (a value, for example, can be, ‘eating is better than non-eating’). Building on these elementary structures, a further increase of complexity is achieved by means of re-entrant signalling and re-entrant mapping, which corresponds to Lakoff’s similar notions of mappings and bindings. This refers to the increasing density of signal relations between neuronal groups which map different aspects of reality. Re-entrant signalling is different from feedback mechanisms in neuronal network models of error correction, as it primarily results in the active construction of the world by the brain. Via re-entrant signalling, neuronal groups end up in stable arrangements.

Now, in order to complete the general framework for analyzing the neuroscience foundation for the phenomenon of the institutionalization of behavior, what is missing is the role of communication across brains (compare Oullier, Kirman and Kelso 2008; Oullier and Kelso

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2009). This question is directly relevant for relating the analysis so far with the role of signs in the causal circuitry of institutions. Edelman (1987: 320ff.) had already stated that without signal exchange across neuronal systems, no internal stabilization would be possible. This amounts to a fundamentally externalist position in the theory of mind, which sees mental facts as causal conjunctions of neuronal states and external causal processes (on externalism in general, see Schantz 2004; on causal theories of mind see Neander 2009, Adams and Aizawa 2010). One conceptual approach to grasp this role of external factors is the theory of memes that has been presented by Aunger (2002). In a nutshell, we can equate recurrent neuronal structures with neuromemes in Aunger’s sense, and which relate with external artefacts or signs, thus directly connecting with the causal circuitry analyzed by Aoki. In other words, I claim that institutions are memes.

Originally, the theory of memes has been proposed by Dawkins (1989) as an approach to biology-culture coevolution. Dawkins himself had suggested to look at culture as a meme pool, that is, a set of cultural items such as tunes, ideas, or dress styles. Those items were seen as replicators similar to genes, which, however, operate in another kind of environment, i.e. human brains (on the notion of replicator and its generalizations, see Hull and Wilkins 2005). For meme reproduction, imitation is the central process (Blackmore 2000). This theory has met with devasting criticism, because the direct analogy between genes and memes does not hold (e.g. Richerson and Boyd 2005: 80ff., Cordes 2006), although the central role of imitation in the diffusion of cultural items has been further accentuated in recent research (e.g. Bent- ley and Shennan 2003).

The Aunger proposal is to substitute the notion of the meme by the notion of the ‘neuromeme’. The neuromeme is a replicative neuronal structure within the human brain, which is defined according to certain structural effects in the ongoing evolution of the neuronal architec- ture, both in the static and the dynamic sense. This proposal fits into Neuronal Darwinism framework. The specific mechanisms are still theoretical, but make empirical sense (see e.g. Fernando et al. 2008).

By definition, neuromemes do not reside outside the individual brain, so that there is no way to presume that neuromemes are the same across different brains. This differs fundamentally from the Dawkins conception: The neuromeme is a unit of neuronal evolution, but not of cul-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money tural evolution. They do not have meanings in the sense of culture, but are defined according to neuronal functionings. At the same time, neuronal evolution is a process that is basically independent from genetic evolution. That is, neuromemetics, following theories of neuronal selection and Neuronal Darwinism, posits that gene-culture coevolution is based on the simul- taneous and interlocking runs of myriads of autonomous neuronal evolutionary sequences, with the neuromeme as the replicator. However, the extension to the notion of culture requires the introduction of another conceptual category. This is communication across brains, and, more specifically, artefacts (Aunger 2002: 276ff.).

Cultural meaning supervenes on communication across brains, which operates via artefacts, in Aunger’s parlance, or signs, as stated previously. The notion of a sign includes a broad range of physical phenomena, not only artefacts in the usual sense, but also, and foremostly, embodied signals such as the soundwaves of language or body movements. Signs are an essential part of a closed causal circuit which underlies the process of imitation in populations of brains. In recent theories about concept formation, the basic sensorimotoric feedback loop between motor outputs and the resulting sensory inputs, continuously matched with phylogenetically rooted valuation mechanisms, is the elementary unit from which more complex structures emerge (Hurley 2008; Fogassi 2011). On the one hand, via output inhibition this builds the basis for the internalization of functionings. On the other hand, outputs can simultaneously be inputs into different brains, thus enabling double track feedback loops between Egos and Alters Outputs. Thus, a neuromeme causes a behavioral output, the sign, which in turn triggers a neuromeme in another brain. This might elicit another output which feeds back into the originating brain. The convergence of outputs in terms of functionings results into a cross-brain coordination of neuromemes, without implying that the neuromemes have the similar structure across brains. In this framework, we can argue that signs emerge out of such feedback circuits, ending up in a convergence of signs. In other words, in Aunger’s framework cultural evolution is a causally coupled coevolution of populations of neuromemes within individual brains and populations of signs, i.e. brain outputs (an abstract view on this is provided in fig. 3, for more detail see Herrmann-Pillath 2010/11).

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Figure 3: Coordination between brains via signs

This viewpoint vindicates the more general externalist approach to mind, especially in the shape of theories on distributed cognition (Hutchins 1995; Clark and Chalmers 1998; Sterelny 2004; Clark 2011). The brain necessarily relies on a large and open range of external objects to achieve a stable equilibrium in what would be a chaotic fluctuation of neuronal firings otherwise. Contrary to Dawkins, culture cannot be equated with memes. But culture appears to be a set of signs which provide the stability and continuity so that the epistemic functionings of the brain can be scaffolded and leveraged. Culture, however, does not have a mentalist dimension here, though being causally interrelated with brain processes. If we were to continue with the use of the term ‘meme’, because it is a commonplace in many attempts at extending Darwinian analysis into other areas, we can redefine a meme as a stable conjunction of artefacts and neuromemes that evolve independent from each other, though being causally connected closely.

I can now close the circle of my argument. I posit firstly, that institutions can be equated with memes in the sense of stable conjunctions of signs and neuromemes. Further, the emerging neuronal patterns provide the foundation for behavioral dispositions that can be activated by external cues, the signs, and which are amplified via endogenous Darwinian mechanisms of

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money neuronal selection and pattern emergence. These internal mechanisms provide the foundation for metaphors, which is the basis for Searle’s status function. Hence, the neuroscience framework can help to grasp three facts. One is that the neuronal system is creative, the second is that it involves external facts and hence is anchored in an objective ontology, and third, the bridge between internal and external processes is built via concepts that have neurophysiological correlates.

It is important to notice that the causal linkages shown in figure 3 also allow for a clear conception of performativity that we have introduced in the context of the Aoki model. Performa- tivity is based on feedback loops between motoric outputs and sensory inputs, and it becomes externally anchored via the diffusion of the sign correlates in a population of individuals that communicate via the exchange of artefacts. That is, performativity follows from the externalist approach to the mind/brain, combined with collective intentionality that emerges from neu- romemetic evolution. The only remaining clarification is to present appropriate tools to analyze the conceptual correlates of the neuronal processes, following Lakoff’s line of reasoning.

According to the framework of figure 1, I propose to relate Searle’s theory to Fauconnier and Turner’s (2002; 2008) theory of conceptual blends, put into the context of Neuronal Darwin- ism. A conceptual blend is precisely this: Two concepts in different conceptual spaces are blended within a certain generic space, so that a new concept emerges, which may show also a new blend of pre-existing properties. A blend is simply a higher-order neuronal mapping that builds on more elementary maps in the neuronal system, and crosses different parts of the brain (compare Coulson 2008). Because of the highly fluid nature of neuronal group selection, one can explain why the brain constantly creates novelty in the sense of new mappings between partial aspects of concepts that organize sensory and motor inputs. In a selectionist system, there can be no fixed reference, and only fuzzy meanings pop up from the dynamic course of neuronal variation, selection and retention (Edelman 2006: 98ff.). Thus, conceptual evolution might be imagined to proceed from some most basic concepts to the more complex ones, even though this is only a merely analytical convenience, because for a certain set of concepts at a particular point of time, all concepts relate synchronically, independent from their presumed diachronic order of emergence.

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There are different kinds of blends, with different degrees of structural complexity. All blends can be described as conceptual networks with directed relations. For example, a simplex network is just a projection of an abstract reference frame on a particular input space. The most interesting case is the double-scope network, which is also most relevant for our analysis of the status function. In a double-scope network, two input spaces are projected into a generic space, such that the blend does not retain all properties of the input spaces, that is, it emerges as a novelty not only as a concept, but also regarding the specific combination of manifest properties. Clearly, this allows for the construction of new blends if that first blend is then projected into other generic spaces with other inputs and so forth.

* * *

We have now put together all necessary elements for a naturalistic theory of institutions. This can be finally summarized in terms of the replicator-interactor duality. The central observation is that in the phenomenon of institutions, evolutionary processes on different levels interact, i.e the population level and the neuronal level. This interaction can be conceived along the lines of the naturalized Aoki model, which I have extended to include Searle’s theory of institutions. On the population level, we locate the interactor, which is the recurrent equilibria in states of interactions between individuals. These states include the generation of signs, which connect causally with neuronal structures in the individuals. Those structures are the physical embodiments of Searle’s status functions, which we can analyze on different levels, in turn, especially the conceptual level, which is accessible via cognitive sciences, linguistics and related disciplines. The neuronal dynamics creates behavioral dispositions to display certain actions that interact on the population level. The neuronally mediated causal link between signs and dispositions is the replicator.

Clearly, in the context of general Darwinism, this model is a co-evolutionary model in which the environment (in this case, the signs) and somatic storages of information co-evolve (such as Odling-Smee et al. 2003 or Jablonka and Lamb 2006). This is necessarily complex. In the next section, in order to prepare the ground for the empirical application on the institution of money, I start with a proposal for simplification.

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3 Darwinizing money

3.1 The pivotal role of emotions in the naturalistic approach to institutions

In order to render the naturalistic theory of institutions empirically traceable, I propose to introduce the analytical category of ‘emotions’. There are many competing theories about the brain and its structure, and I dare to be selective in an almost opportunistic fashion. In the structure outlined in figure 3, valuations play an important role, as they connect the neuronal dynamics with stored information about past adaptive functionings. Damasio has proposed the theory of ‘somatic markers’ to account for this function (Damasio 1995, Bechara and Dama- sio 2005). This theory also advances the idea that those evaluative functions flow together in the phenomenon of ‘emotions’.

In recent approaches to human behavior and the brain, emotions are seen as higher level coor- dinating neuronal mechanisms that relate with fundamental valuations, which result from evolutionary processes on different levels, in turn. This leads to a simple restatement of the theory of institutions. In many models of current economic theorizing, an institution is seen as a cor- relate between a set of external incentives and enforcement mechanisms on the one hand and a set of cognitive models on the other, such that institution-guided behavior is always frame- dependent (North 2005). Those frames are shared in a population of rule-followers. However, in these cognitive theories in economics emotions are not taken into consideration. This is remarkable, as we can say that after the cognitive turn of the 1960s we observe another turn towards emotions since the 1990s in the human sciences. Economics has been a late-comer as far as cognition is concerned, and this translates into an even slower response to the emotional turn (for rare early attempts, see Frank 1988; Elster 1998). Currently, hotspots of research into emotions are the literature in experimental economics which deals with commitment devices, among others (see Hopfensitz / Reuben 2009 and the literature referenced therein), and, of course, the revival of the ‘animal spirits’ notion after the financial crisis of 2008 (see e.g. Tuckett 2009 with a psychoanalytical background).

This is not the place where I can discuss the immensely complex literature on cognition and emotion (with special reference to the notion of rationality, see Pham 2004, 2007). So I just posit one particular position. This is to define emotions as framed affects, such that the notion

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money of the frame, well recognized in economics now (Gintis 2006), can serve as the conceptual bridge between the notions of emotions and institutions, as we say that frames are just another expression of the more general notion of the status function. In evolutionary psychology, emotions are seen as higher-order neuronal structures that coordinate sets of more elementary affectual circuits (Tooby and Cosmides 2005: 52ff.). As such, they are necessarily related with cognitive structures, in the sense that the coordination builds on pattern recognition in the environment. Thus, the emotional complex underlying fear of snakes is related with cognitive mechanisms of identifying snakes, including all possible transfers of meaning by metaphorical uses of the term etc.

This argument can be also inverted, in the sense that cognition presupposes affectual mechanisms which provide the ultimate standards of evaluation, which is, for instance, essential to select informational cues from the environment (Pham 2007: 161ff.). This is the claim put forward by Damasio’s theory of somatic markers. From this follows, that cognitive approaches in institutional economics cannot work without taking emotions as a central category. However, so far economics is missing a conceptual framework for doing this, as even in the majority of heterodox approaches a variation on the theme of rationality is maintained, mostly in the shape of bounded rationality, and emotions are rarely systematically explored (Phelps 2008).

I argue that the concept of ‘emotion’ is the missing conceptual link between the general evolutionary framework developed in the previous section and the analysis of specific institutions such as money, which I present in this section. That is, I posit that the fundamental replicator in an institution such as money is a causal conjunction of a sign and an emotion, the latter understood as a higher-level neuromeme in the sense of Aunger’s. This approach offers a response to Glimcher’s (2011: 423f.) challenge. Glimcher ponders that money should be one of the priority research topics in neuroeconomics, because of its centrality in the incentive systems in recently evolved human economic systems. He speculates that there must be a specific neuronal structure that undergirds the human handling of money. I submit a proposal how that structure might look like. However, I do not posit a specific structure, but a mechanism that builds on the generic structures of the human brain. This is because I follow an externalist appropach, which implies that the specificity of the institution of money does not lie in the specificity of internal structures of the brain, but in the specificity of the money artefacts,

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money hence the causal circuitry between the money signs and the emotions qua neuronal structures. So, my discussion of tbe institution of money serves two purposes. One is to present an application of the theory, but second is to further develop the theory in terms of advancing the notion of emotion as an empirically traceable expression of neuronal dynamics. Therefore, I begin with analyzing the emotions that go along with the societal use of money.

3.2 Money emotions

The best place to begin an exploration of money emotions is where the pinnacle of the economic notion of rationality seems to have been materialized, i.e. the modern financial markets, which have been the object of the conceptual struggle between rational theory of finance and behavioral finance in recent decades.

Looking at the activities involving the ‘money professions’, recent anthropological and socio- logical research has shown that financial trading is a far cry from being a purely rational- calculative concern (Zaloom 2003; 2004). Trading financial assets involves very strong feelings and requires a special emotional discipline, which, however, does not simply mean to supress emotions, which are absolutely necessary to raise the alertness and aggressiveness indispensible to sucessful trading. Making money often shows a resemblance to making sex, highly exciting, but also highly dangerous, in the sense of financial ruin or social and physical havoc (sexual diseases, unwanted pregnancy etc.) (Seabright 2004: 76). This is reflected in the language and the habits of traders’ communities (Hassoun 2005). After all, the financial business is also highly gender-biased with a very pronounced male dominance (Klaes et al. 2007). Recently, those affectual underpinnings have been related to different testosterone levels in both male and female traders affecting their relative professional success and other aspects of the neuronal and hormone system (Maestripieri et al. 2009; Wargo et al. 2010).

Thus, rationality in financial trading does not appear to be a given capability of the univer- sally rational individual, but results from special emotional disciplines and techniques of self- management that both contain and exploit underlying affectual drives (Preda 2008: 918). This can be also seen in the larger context of historical sociology, which reveals how the investor as a particular kind of personality emerged in the 19th century (Preda 2005). In an even broader perspective, the emergence of modern capitalism was accompanied by strong reac-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money tions in religion and folk beliefs, often resulting in a demonization of money. Against this background, Max Weber’s account of the rise of capitalism acquires a new meaning, as he had argued that Calvinism inspired its believers with a particular emotional stance towards money. As an expression of ‘innerworldly ascetism,’ Calvinists were able to pair the acquisitive drive with abstention from lavishly spending it, thus launching the machine of accumulation in early capitalism.

These sketchy observations clearly underline what is evident from our everyday experience: Money causes strong emotions, and using and spending money has an emotional basis. Yet, in economics emotions normally do not play a role in theoretical explanations. In the case of money, theory is even more antiseptic, as money is mainly a ‘veil’, that is, a device purely used to ease transactions, without any independent utility. How can a veil cause such strong emotions? Something important is missing in the economics of money.

Contrary to the economic theory of money, one of the important results of neuroeconomics is that money comes close to being a direct reinforcer. That means, money activates the same dopaminergic circuits in the human brain (more exactly, the mesolimbic system) as other items causing pleasure, such as beautiful faces (Camerer et al. 2005: 35, Phelps 2009: 240). This simple fact is exploited in the work of psychologists, as money can be directly used as a generalized reward without further modification (Knutson and Wimmer 2007: 159f.). From that perspective, money is nothing special, as it just triggers general reward mechanisms in the human brain, possibly even involving a so-called ‘common currency’ (Landreth and Bickle 2008). There is no interference by an alleged purely instrumental role of money, which would imply that money would mean different rewards to people who might have different uses of money in mind when receiving the reward.

An interesting case in point is the asymmetry in loss aversion in experiments with gift certificates (Trepel et al. 2005: 41). If people are offered certificates for goods with different he- donic value, they choose them with equiprobability, but if they asked to part with particular certificates, they respond exceptionally strong for those representing goods with higher he- donic value, thus manifesting a differential effect of loss aversion as compared to gains perception. Vice versa, such kind of asymmetry is also reflected in the tendency of people to avoid the pains caused by paying cash, such that they love to enter flat-rate payment arrange-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money ments in many areas or bonus schemes, which clearly simply hide what can be in effect a higher factual expense (Camerer et al. 2005: 36). This observation invalidates criticisms such as Harrison’s (2008: 306f.) who argues that it is a common economic assumption in economics that the utility of money is equivalent to the basket of goods that can be purchased with money, as this would require strong cognitive capabilities of individuals and convergence across different individuals. In game theoretic contexts, if money is taken as an equivalent to pay-offs in terms of utility, this is just a simplifying methodological assumption. The sepa- rateness of money in reward mechanisms is further proven by many other empirical results in behavioral finance and economics.

Before recounting these, one has to be careful with distinguishing between the two reward processing systems in the brain. If money activates the same dopaminergic circuits as other positively valued things, this refers to the so-called ‘wanting’ system, so there is a difference to the ‘liking’ system which refers to the actual consummation (Trepel et al. 2005; Camerer 2006; Brocas and Carrillo 2008; Berridge 2009). This distinction confirms the distinction between ‘experience utility’ and ‘decision utility’ that has been proposed in the psychological literature on economic choice (Kahnemann et al. 1997). The wanting system underlies the processes that guide anticipatory planning and expectations. Clearly, we cannot eat money, so the actual consummation cannot cause the same effects as with other goods, but that is also true for every differerent commodity. If neuroeconomists relate the wanting system with a generalized notion of utility, the results concerning money could be simply translated into the proposition that money carries utility, as it triggers the generic dopaminergic mechanisms. Yet, this is not the ordinary assumption in economics, which treats money as being different from all other goods.

The autonomous role of money as a reinforcer is related with important anomalies in behavioral economics and finance. For example, people loath the loss of cash dividends and do not net them out with capital gains, so cash seems to carry an additional value (see surveys of behavioral finance such as Van der Saar 2004 or Subrahmanyam 2007). This can be explained by complex conceptual constructions, such as an interaction between loss aversion and hyperbolic discount curves. A present cash loss is weighted relatively strong against a future capital gain, even though the two might be equivalent for a rational decision maker. People organize their perceptions in different mental accounts for income and wealth, such that current income

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money shows a disproportionally strong impact on consumption behavior, as compared to the predic- tions of rational choice theory (surveyed in Akerlof 2007). Thus, people seem to need a special approach to manage money in the narrow sense, that is, cash, which is deeply grounded in social norms and expectations. Lack of control in spending money is often seen as a lack of self-control. The special meaning of cash in those systems of behavioral regulation can be also gleaned from the fact that credit cards seem to loosen those constraints, presumably because they have different effects in the context of hyperbolic discount curves, combined with loss aversion (Laibson 1997).

These observations are also related to the equity premium puzzle, which has been explained by moving reference points with regard to dividend payments, as opposed to capital gains. If reference points move, different degrees of loss aversion are implied, thus explaining the additional risk premium necessary to make the trades equal. If this explanation is valid, however, this implies that money activates the neuronal mechanisms underlying frame-dependent loss aversion (Knutson et al. 2008), whereas the more complex accounting constructs of capital gains and losses do not. The same monetary values trigger different neuronal responses, depending on their representation.

The clearest proof, also confirmed by brain research recently, for the independent reward triggered by money is money illusion. The existence of money illusion has been confirmed by psychological research beyond any doubt (Shafir et al. 1997). For example, people normally report higher satisfaction with deals involving higher nominal quantities of money to deals with lower ones, even if, in an inflationary setting, the real values are the same. In brain imag- ing studies, researchers could show that the reward circuits in the brain react much stronger with the higher nominal, yet identical real values, and they could even identify proportional activities in the pertinent brain areas (Weber et al. 2009).

To summarize, recent research in behavioral economics and neuroeconomics has shown that money can be seen as a direct reinforcer in the same way as other goods. Obtaining and keep- ing money satisfies a want that is independent from the derived need for money to obtain other goods. This implies, that our standard conception of money may be misled by the assumption that money is a general purpose exchange medium. Although this use of money is part and parcel of the modern institution of money, it may not be at the core of the social fact.

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In other words, the transactional use of money might be a derived function, which is, however, prevalent in modern economies. So-called behavioral anomalies of money use can be explained by the fact that these two functions of money interact in social practice. However, so far we have only stated that money is ‘normal’ in the sense of triggering standard reward processing mechanisms in the brain. This does not suffice to explain the many other emotional intricacies related with the use of money, and does not eventually meet Glimcher’s question what makes money special.

3.3 Money, signal selection and the human instinct to social exchange

The analysis of money emotions presented so far does not yet identify a specific emotion that is triggered by the use of money. Psychologists Lea and Webley (2006) have recently proposed a ‘drug and tool’ theory of money, which presents a proposal of identification. The upshot of their argument builds on a large number of empirical observations of the kind that I have sketched in the previous section, that is, in their wording, money is a strong and universal incentive. Clearly, money is used as a tool in many contexts, that is, as a mere transaction device, but at the same time it manifests very strong emotional reactions in other contexts, and can trigger strong drives of acquisitive and hoarding behavior. To grasp this phenomenon conceptually, the authors introduce the notion of a ‘perceptual drug’ which differs from a mere psychoactive drug such as nicotine. Perceptual drugs hijack an existing instinct or behavioral drive without actually satisfying the underlying adaptive biological functions. Thus, an instinct of sex may be triggered by certain erotic signals, yet without actually satisfying the underlying drive to reproduce. As a consequence, the trigger can result into a drug, even reinforcing the underlying behavior, but without any biological value, and without the final consummation of the underlying drive.

This specific argument about the addictive roles of money is problematic, as it does not match with established theories about addiction, which do not make the distinction between psychoactive and perceptual drugs (e.g. the authoritive overview of West 2006). In some theories, the psychoactive drugs are only a special case of the more general model of addiction which emphasizes internal malfunctionings of brain mechanisms, especially related with learning (e.g. Redish et al. 2008). One approach would emphasize the fundamental duality of wanting and liking in the human neuronal system and resulting psychological setup, that I referred to

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money already in the previous section: There is a duality of rewards operating in the activities of planning and acting to acquire a certain benefit, and the rewards actually resulting from con- suming the pertinent acts. In the neuroeconomic literature, this intermediation is reflected in the autonomous role of the dopamine circuits in guiding action as distinguished from consummation of actions, which implies that the dopaminergic circuits themselves are involved in creating the phenomenon of addiction. This simple connection emerges from the fact that dopamine signals code deviations between actions and results, such that positive results trigger further action (reward prediction errors, see Schultz 2009). Thus, the dopamine circuits can establish self-reinforcing feedback loops. Addiction would result from failures of the as- sociated learning process, such that the wanting system runs astray and drives behavior auto- nomously. In the context of money, the most appropriate illustration is gambling (Ross et al. 2008, Clark 2010). In gambling, the individual seeks the rewards of money, but succumbs to the mechanism which increases dopamine levels in her brain because of the ongoing perception of failures which are close to the target (hence indicate improvements, in the sense of positive reward prediction errors), and which are even interpreted as indicators of the individual skills of the gambler (illusion of control). Thus, I retain the Lea and Webley approach to money, but put forward a slightly different theoretical explanation. Whereas Lea and Webley start out from a general theory about perceptual drugs, I would follow mainstream addiction theory and claim that there are few cases that correspond to that notion, because in most apparent examples the neuronal mechanisms that undergird the addiction are by no means obvious. But I think that Lea and Webley are right in emphasizing the empirical evidence in the case of money, which, however, would only demonstrate that money can have drug-like effects, depending on the context of actions (such as gambling), precisely because it relates with certain neurophysiologically encoded valuations that link up with the standard mechanisms causing addictive behaviors.

Now, we can interpret this view in terms of a general Darwinian approach. The phenomenon of malfunctioning that is apparent in addictive behavior can be related to the Darwinian theory of signal selection as stated by Zahavi and Zahavi (1997). The dualism of wanting and liking underlies the human capacity to plan and has phylogenetic roots in the evolution of the mammalian brain (overview in McCabe 2008: 354ff.). This, in turn, functionally requires representation, that is, builds on language, and more general on symbols that intervene in the

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money causal process of eliciting goal-oriented behavior (for more on that in a general evolutionary argument, see Dennett 1991 or Millikan 1989, 2005). Therefore, different from purely instinc- tual or reflexive reactions, human behavior is systematically built on the distinction between the sign and the object. Thus, an apple is both on object and its sign. The signs play the crucial role in anticipatory reward mechanisms that underly the wanting system. With this insight, we can establish a direct conceptual linkage with our previous analysis of the role of signs in institutions.

Now, the theory of signal selection implies that for arbitrary signs, the so-called handicap principle may apply, depending on the selective context. The handicap principle posits that the coordination of behavior via signals may require the investment into costly signals which produces an adaptive disadvantage in the sense of natural selection (as opposed e.g. to sexual selection) (Dawkins 1989: 309ff.; Grafen 1990). Yet, precisely these costs make the signal functional, because otherwise it would be open to manipulation and cheating. That is, handicaps are truthful signals and because of that, are adaptive in terms of the universal currency of reproductive success. Yet, this implies the possibility of outright runaway processes which appear to be maladaptive, if only the pure engineeering standards are applied, such as in the case of big antlers of deer that might hamper agility of movements.

In extension of the Lea and Webley approach, I posit that the handicap principle underlies also the malfunctioning of the human decision system, elaborating on a suggestion of Ascoli and McCabe (2005) in their comment on the Lea and Webley paper. Ascoli and McCabe pon- der whether the argument may hold for all scarce goods. An excellent example is eating (Ber- ridge 2009). In times of scarcity of food, certainly prevalent throughout most of human phylogenetic past, the signs of food become exceptionally important for behavioral choices. This implies that the signs will also play a crucial role in behavioral coordination. Accordingly, food use is also governed by signal selection, ending up in the many examples of ritualized and very expensive and elaborate food customs. If that is the case, however, the sign of food can also trigger malfunctionings. As such, it underlies the many dysfunctions of eating. Peo- ple who devour sweets without limits do not actually consume the sweets, but the signs of sweets, in this interpretation.

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money

So, a generalization of the Lea and Webley argument works via the adoption of the broader evolutionary framework of signal selection. As in the example of food, the question is which fundamental human drive and need might underlie the use of money. I propose a slight, yet essential modification of their central idea: which is, that the money drug piggybacks on an instinct to trade that evolved out of the universal mechanism of reciprocal altruism. More ge- nerally, we can point to the emotional patterns underlying social exchange that have been identified by evolutionary psychology (Cosmides and Tooby 2005, Ermer et al. 2006). Evolu- tionary psychology argues that the human species manifests a peculiar emotional structure that enables humans to maintain complex networks of social exchange based on reciprocity. Though reciprocity as such is a universal biological phenomenon (Trivers 1985: Chapter 3; Noë et al. 2001), the human species excels in terms of the generalization and the scope of exchange patterns (Seabright 2004). In these relations, both competitive and cooperative relations occur, often simultaneously, as modelled in game theoretic approaches towards egoistic cooperation (for example, in hunting large game, epitomized in Rousseau’s stag hunt, see Skyrms 2004). As a result, modern evolutionary approaches to the development of the human brain posit the ‘social brain’ hypothesis (e.g. Dunbar and Shultz 2007; Frith 2007). Following up to earlier versions of Macchiavellian intelligence (Byrne 1995), this hypothesis states that the evolutionary more recent and innovative neuronal structures in the human brain are geared towards the organization and manipulation of social exchange. This evolutionary argument can be further supported by the observation that phylogenetically closer animals can also show distinctly human deviations from rational choice models, if they also live in highly interactive social groups (Santos and Chen 2009).

From that perspective, money is a sign that triggers emotional responses related to social exchange in general. These are affects that relate with calculating mutual benefits across time, with detecting cheaters, or with perceiving mutual relations of indebtedness. Money as a drug mobilizes these emotional patterns, without actually satisfying them, which can only be done with executing the underlying exchanges (i.e. the ‘liking’ system). Yet, money triggers the same reward mechanisms (the ‘wanting’ system), which, accidentally, also seem to be activated in the entirely different setting of PD dilemmata (Knutson and Wimmer 2007: 166; Fehr 2009). This seems to go back to the fact that the perception of cues to cooperation is tanta- mount to the perception of gains, i.e. rewards. Indeed, PD dilemmata also manifest social ex-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money change relations, as it is evident from considering repeated games, which is the reasonable assumption for primordial human groups and trading communities. Therefore, the historical record that indicates the primary role of hierarchically embedded reciprocity in the emergence of money seems to match with the observation that evolutionary more ancient patterns of social exchange might not have been related with market-kind behavior, but with exchange of contrived goods (Ofek 2001: Chapter 9). The complexity of exchange in these cases results precisely from the intermingling of exchange relations with cooperative behavior, as in main- taining and sharing fire, or in hunting and sharing large game.

So, finally I have identified the emotion that directly relates causally with money as a sign. Therefore we can posit that this causal conjunction between money signs and money emotions is the replicator underlying the sustainable existence of the institution of money in human societies. Then, the question pops up whether we can relate these insights to the historical analysis of the emergence of money. Clearly, early money was a phenomenon related with social exchange. Against the background of my evolutionary model of institutions, could we be able to do some work in cognitive archeology, in order to show how the emotional underpinnings of the institution of money relate with the cognitive mechanisms that resulted with the diffusion of the artefact of money?

3.4 The emergence of money as the creation of a new metaphor

I will now use the notion of the conceptual blend to reconstruct the emergence of money. Subsequently, I use money as a most generic term, that is, I do not differentiate between different kinds of money. However, I draw a relatively neat line between the mere fact of a particular good to be used as medium of exchange (pure commodity money) and money as an institution, which I relate to the emergence of the first coins. This transition is the central concern of this section. So, if I use the term ‘money’ subsequently, it is always in the second sense.

In this context it is important to notice that there is a clear contradiction between established theories of the emergence of money and the historical facts. Purely theoretical accounts emphasize the role of money in enabling transactions, as in the triangular exchange paradigm. The classic, almost unsurpassed until today, is Menger’s (1892) evolutionary account (for

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money modern receptions, see e.g. Schotter 1982). In these accounts a certain item evolves as (commodity) money for the pure function of serving as a transaction device. This also implies that basically, there is no conceptual transformation, in the sense of a status function, but only a growing functional salience of properties such as resaleability, storability and dividability. In Searle’s parlance, the institution of money would emerge as a purely regulatory institution, referring to commodity money.

This view clearly fits into the established economic theory of money, but contradicts the historical evidence. In fact, money emerged in the context of relations of power and authority, regulating hierarchical exchange relations and the production of public goods, and only the further evolution was intermingled with the more haphazard use of valuable items in barter (for a survey of the evidence, see Chavas and Bromley 2008). The historical data suggest that the transactional function of money is in fact a derived function. Hutter (1994) presents an intriguing account of the historical facts that we can directly translate into the conceptual blend framework and into the status function structure, which precisely models that derivative relation between pristine money and derived functions. In Searle’s framework, those status functions would come close to a constitutive institution, in which money appears to be a new kind of thing, which actually superseded the parallel use of commodities for exchange.

When money coins emerged for the first time in the Eastern Mediterranean (at least as far as Western civilization is concerned), this was an effect of cross-cultural merger of meanings between Assyrian culture and the Ionian peasant communities. In Assyria, gold served as an indicator of status and as a medium of wealth accumulation in a steeply stratified society. In the Greek communities, silver was used for ritual purposes and occasionally for exchange, which was mostly mediated via a number of items with less value in barter, thus corresponding to the Menger view. The first genuine coins orginating from Lydia, however, were made from electrum, an alloy of silver and gold. Thus, they could be interpreted differently in the two societies, enabling cross-cultural exchange of signs and goods. Further, in order to test the quality of coins, people applied punchs resulting into punchmark, firstly unintendedly. Once the coins circulated, people discovered the possible use of the punchmarks as indicators of origin. The question of origin was crucial in lowering quality uncertainty with regard to the actual metal composition. From this moment onwards, the custom of coining emerged, with the incipient use of the punchmarks as signals. Hutter (1994) speaks of an oscillation between

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money the notions of ‘signed metal’ and ‘metal sign’. Soon, the new coins were reintegrated into the political and the religious realm when local regents adopted the institution of minting. Thus, the first coins appeared displaying the images of rulers and holy symbols. With this transition, we can say that the institution of money has emerged.

Figure 4: Conceptual blending in the emergence of coins

Hutter’s account easily can be translated into the framework of conceptual blends. Simultane- ously, we can apply the status function notion. As we see in a standard Fauconnier and Turner notation, the central point is that two different artefacts with different uses in different societies were merged into a common frame. This corresponds to a so-called ‘double-scope integration network’, in which two concepts are only partially merged, as in the case of ‘time as space’, where the two notions bring in partial meanings into a blend, which, as a specific example, was the notion of a ‘day’ which relates to the generic space of circular motion. In a similar fashion, in the cross-cultural semantic ambiguity an alloy could be treated both as being close to a gold bar or a silver piece, thus also making those two artefacts commensu-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money rable, though only partially. In terms of the status function, in a double-scope integration network we can say that the status function in fact works in both directions, with ‘gold’ being treated as ‘silver’ and vice versa, in the context of cross-cultural exchange, and being related to the ‘brute fact’ of the physical entity of electrum. In other words, the physical fact of an alloy enabled the creation of the status function (compare in general Hutchins 2005). Once the status function was established, the institution of money, reified in the emergence of the first coins circulating in inter-regional trade, came into existence. The new coins were clearly different from the mere use of commodities in exchange, hence constituting new things as artefacts.

The question is, what is the generic space that corresponds to the ‘brute fact’ of the alloy? And how can we relate this cognitive process to emotive structures? In figure 4, I propose to use the notion of ‘balanced reciprocity’, which is both an abstract notion underlying ritualized power relations and of early exchange across longer time horizons (a classic on this is Pryor 1977: Chapters 4 and 7; Burkert 1996: Chapter 6). That means, money and balanced reciprocity are deeply interconnected, which seems to be an acceptable intuition, which, however, turns into a hypothesis based on much broader evidence if we connect the status function model with the analysis of money emotions in the previous sections. Then, we can state that the first coins evolved into metaphors for the notion of generalized exchange and reciprocity, which connects with the underlying emotions identified by evolutionary psychology.

So, if money is a sign of that special kind, it is also open to the functioning of signal selection, especially with regard to the handicap principle. So it is straightforward to explain why the emergence of money immediately went along with the appearance of extreme forms of accumulation and wealth display, as in Greek tyranny. In the original conceptual blend, money used for transactions and money used for storing and accumulating wealth were merged into one blend. This allows for a handicap mechanism to emerge, in the sense that the capability to hoard and display wealth is a marker of the capacity to spend limitless. The waste of wealth in useless displays is precisely the signal that communicates the capacity to enter a limitless number of transactions, thus claiming the role of a hub with exceptionally high prestige in ever-growing networks of exchange. This account matches the historical data in the sense that the purely technical uses of money emerged as a side effect of the primordial uses. Later, the runaway evolution of money also supported its rapid diffusion as a tool for transactions. This

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money blend was epitomized in the emergence of the coin as an artefact for trade, but at the same time as a symbol for power and authority.

Figure 5: The emergence of money

I can now reconstruct the emergence of money in terms of the Aoki model, which specifies the underlying causal circuitry (fig. 5). As in the empirical case of Lydian commerce, resulting from cross-cultural interactions between traders, certain physical entities, the coins as money tokens, were increasingly used as money, that is, they were recognized socially as a new kind of artefact. This involved the transition from the tokens to the signs, hence led to the emergence of money species, i.e. certain classes of coins with similar characteristics. These social practices result into the realization of the distributed cognition function of the institution, i.e. the diffusion of money enables the innovation of new uses of the signs qua artefacts, such as in the different dimensions of money functions, understood in the traditional way. The use of particular money species is rooted in the status function which is in turn anchored in money emotions, centering around money as a metaphor for social exchange. This anchor creates a disposition to use money on the individual level, finding expression in particularly

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money strong evaluations of money. The individual use of money plays together with other uses on the population level, which establishes the performativity of the institution of money.

We can now state that money is a meme, in the specific sense of the causal conjunction of certain signs, the money tokens circulating in a population, and the emotion related with social exchange, i.e. a particular neuronal structure. Interestingly, this structure can be traced back to the functioning of genetic evolution as well, as we can safely assume that there is direct phylogenetic line leading from the human ancestors to the modern human species, which included the particular somatic structures underlying the emotions of social exchange and reciprocity. However, it is not possible to reduce the cultural phenomenon of money to the genetic level, but only the underlying human penchant for social exchange. With the emergence of money, a fact on a different ontological level had emerged, which depends on the workings of the Searlian status functions.

As money is related with neuronal patterns underlying social exchange, mutually reinforcing causal feedback circuits emerged that further stabilized those human capacities, and open up the way for new expressions. Thus, with the diffusion of money its possible use as a transaction device was further strengthened, which in turn changed the context of social exchange towards the settings of more anonymous market-type relations. It is not the evolution of markets that required the emergence of money, but to the opposite: The evolutionary emergence of an artefact with the properties of early money made the further growth of markets possible, which is exactly the shift towards derivative functions of money. We can add that this transition is the crucial step towards performing a monetary exchange economy, with money beco- ming an observer relative fact, hence adding to the social ontology. Money as an externaliza- tion of social exchange emotions allowed for the emergence of new cognitive powers, such as the intersubjectively accepted calculation of values. This further enhanced its autonomous status in social reality, triggering behavioral innovations which were not possible without its existence.

The naturalistic approach enables us to make sense of the empirical observations about the strong emotional components in handling money even in most advanced human societies. This does not imply, however, that those components always prevail. The artefact of money evolved historically in increasingly complex ways, thus strengthening functional and techno-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money logical interdependencies. Therefore, actual money use today is governed by a mix of determinants, including also the ‘rational’ use of money without significant impact of primordial emotions. However, this means that those rational uses of money are not an outcome of the rationality of the human agent, but reflect the workings of external artefacts, such as institutions governing money markets, technologies governing money calculations in accounting, or new money artefacts such as electronic money. That is, the proposed perspective on money is also an externalist account of economic rationality in the modern uses of money. Evolving artefacts may trigger “irrational uses” (such as in the credit card case, Laibson 1997) or “rational uses” (such as with the evolution of modern accounting systems, see Hatherly at al. 2008). So, the Darwinian theory of money also fits into the conceptual schemes that are emerging in economic sociology as an extension of social studies on science, especially in the context of social studies on finance (Preda 2008). Here, agency on financial markets is increasingly seen as resulting from complex networks of interaction between individual behavior and embedding technologies (for pertinent collections of papers, see Callon et al. 2007; Pinch and Swedberg 2008). This is just a special expression of the general neuromeme-artefact conjunction that was identified in this paper. So I expect that the framework can be extended to include also more sophisticated institutions in modern finance.

4 Conclusion and outlook

I summarize the results of this paper in figure 6, focusing on the replicator-interactor duality, and taking a slighly different view on the causal circuitry analyzed in the previous sections. The first important insight is that we have to refer the term ‘institution’ to the entire causal circuitry, which corresponds to Aoki’s model. This directly implies that we can think of the selection of institutions, relative to a particular environment. This selection works via the state of nature impact on the outcomes of the interactions within a population that follows an institution. Treating the institution as the entire causal circuitry corresponds to the type/token distinction in the relation between the individual and species: The individual corresponds to the individual action, and the species corresponds to the population level patterns. Insofar as following an institution is a performative action, the individual action reflects the population- level patterns, in the same way as the individual reflects the species features, within a range of

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money variation, which, as we have seen for the case of institutions, result from the stochastic relationship between dispositions and actions.

Figure 6: The Darwinian approach to institutions

Since selection operates via the outcomes of the interactions, we can identify the realized patterns of behavior on the population level as the interactor in the generalized Darwinian sense. This catches the different uses of the term ‘institution’ in the literature, which vascillate between the rules of the game and the realized equilibria (e.g. Aoki 2001: 24ff.; Dixit 2004: 5ff.). In my approach, both is true to a certain extent, but more exactly, the game equilibria are the interactor (which corresponds to the notion in biology that the interactor is actually equal to the selectively relevant behavioral patterns of a species).

The interactor relates with the replicator via the process of epigenesis (compare Jablonka and Lamb 2006). I relate this process directly to the disposition that generates the individual actions. It is essential to see that this disposition is created by the causal conjunction of the signs and the emotions in the replicator. Therefore, the notion of epigenesis captures gene-culture co-evolution in the specific sense that the emotions are genetically anchored, but the gene expression is always mediated culturally, i.e. via the signs that evolve entirely independently

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money from the genetic level. This extends the notion of epigenesis from somatic mechanisms to extra-somatic mechanisms. By implication, it is not possible to reduce observed actions directly to the genetic basis. This offers a solution to the nature-nurture quandary, as all gene expressions are seen as culturally contextualized, such that culture is an ontologically autonomous channel of the transmission of biological information (which matches with approaches such as Richerson and Boyd 2005).

Thus, institutions build on a new kind of replicator, which, as I have discussed extensively, consists of a causal conjunction of signs and neuronal structures. The intricate property of this replicator is that the signs are strictly population level phenomena, whereas the neuronal structures are strictly individual phenomena. Important properties of the institutional replicator therefore directly relate with the material stability of the signs. Signs change, too, because of the population level processes. But it is important to notice that those changes only become evolutionarily relevant if they result into altered dispositions which in turn generate actions that change the ppoulation level equilibria. It is perfectly possible that a new sign generates similar actions and hence reproduces a similar institution.

In this paper, this model of institutions has been applied on a core institution of ther economy, money. My analysis shows that it is necessary to strip institutions of their technical complexities in modern societies in order to make their evolutionary foundations explicit. The reason lies in the reflexivity of status functions, which create new social facts continuously. As we have seen in the case of money, this means that money today is a very complex phenomenon, with different uses and expressions in different contexts. Money emotions may not count much for a central banker. In my analysis I have not scrutinized the process of growing complexity in the evolution of institutions, which is often driven by the reflective powers of human reason and imagination. However, this is just another reflection of the ontological au- tonomy of institutions. If we want to understand the fundamentals, we have to go back to the prototypical institutions, as I have shown for the case of money. On the other hand, complexity also means that those institutions also may exert an indirect impact on institutional innovations that connect with them. So, financial markets may bear the imprint of the primordial institution of money (which is evident from the many effects of money emotions on their performance). I think that a similar analysis is possible for other primordial institutions, as I have argued earlier (Herrmann-Pillath 1994) for the case of property. In standard modelling appro-

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money aches to animal conflicts (the Hawk-Dove game), the so-called Strategy of Bourgeois is evo- luntionarily stable, which builds on a particular emotional structure, that is, to invest more resources into the defense of a territory if one is incumbent than if one is intruder. In human culture, this emotional structure has been causally conjoined with the emergence of numerous signs that signal the relative positions of incumbents and intruders. This would be the arche- typical situation of the emergence of private property, akin to my analysis of money in this paper. I think that similar evolutionary approaches can be specified for other elementary human institutions, such as the institutions of cooperation (following Skyrms 2004 and others).

With relation to the more general problem of the extension of Darwinism into the domain of human social systems, this paper has shown that we can draw on more recent abstract refor- mulations of Darwinism, especially the replicator-interactor duality, in order to achieve a conceptual unification. However, I emphasize that this is only possible if we adopt a radically naturalistic ontology which follows the rule that all entities that are posited must have a physical realization. We may not yet have discovered such realizations, similar to Darwin’s position, when genes were still unkown. But we always need to present a reasonable speculation. This paper offers a speculation about the physical nature of the replicator in institutional evolution: The causal conjunction of neuronal structures and signs. I think that this hypothesis can be also extended into the analysis of human material culture, that is, consumption. This raises the additional question how far consumption activities are institutionalized. However, the basic point seems promising, namely to analyze the evolution of human consumption patterns in terms of replicators which are ontologically defined as causal conjunctions of emotions and signs. There is already a growing literature on the Darwinian analysis of consumption (e.g. Saad 2007) which makes the accomplishment of this task straightforward. In the end, I expect that we will be able to identify a set of universal human emotions that connect with a cultural cosmos of signs, that we can further systematicize into different domains of institutions and economic activities. Whereas the set of emotions is mainly in the state of evolutionary stasis, the evolution of signs drives the continuous emergence of behavioral novelties, which also change the context of the expressions of human biology.

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FRANKFURT SCHOOL / HFB – WORKING PAPER SERIES

No. Author/Title Year 181 Prof. Dr. Carsten Herrmann-Pillath Making Sense of Institutional Change in China: The Cultural Dimension of Economic Growth and Modernization 2011

180 Prof. Dr. Carsten Herrmann-Pillath Hayek 2.0: Grundlinien einer naturalistischen Theorie wirtschaftlicher Ordnungen 2011

179 Daniel Braun Ratingverfahren: Diskriminanzanalyse versus Logistische Regression 2011

178 Genia Kostka / Ulf Moslener/ Jan G. Andreas Barriers to Energy Efficency Improvement: Empirical Evidence from Small- and-Medium-Sized Enterprises in China 2011

177. Horst Löchel / Helena Xiang Li 2011 Understanding the High Profitability of Chinese Banks 176. Prof. Dr. Carsten Herrmann-Pillath Neuroökonomik, Institutionen und verteilte Kognition: Empirische Grundlagen eines nicht-reduktionistischen natura- 2011 listischen Forschungsprogramms in den Wirtschaftswissenschaften 175. Libman, Alexander/ Mendelski, Martin 2011 History Matters, but How? An Example of Ottoman and Habsburg Legacies and Judicial Performance in Romania 174. Kostka, Genia Environmental Protection Bureau Leadership at the Provincial Level in China: Examining Diverging Career Back- 2011 grounds and Appointment Patterns 173. Durst, Susanne / Leyer, Michael 2011 Bedürfnisse von Existenzgründern in der Gründungsphase 172. Klein, Michael 2011 Enrichment with Growth 171. Yu, Xiaofan 2011 A Spatial Interpretation of the Persistency of China’s Provincial Inequality 170. Leyer, Michael 2011 Stand der Literatur zur operativen Steuerung von Dienstleistungsprozessen 169. Libman, Alexander / Schultz, André 2011 Tax Return as a Political Statement 168. Kostka, Genia / Shin, Kyoung 2011 Energy Service Companies in China: The Role of Social Networks and Trust 167. Andriani, Pierpaolo / Herrmann-Pillath, Carsten 2011 Performing Comparative Advantage: The Case of the Global Coffee Business 166. Klein, Michael / Mayer, Colin 2011 Mobile Banking and Financial Inclusion: The Regulatory Lessons 165. Cremers, Heinz / Hewicker, Harald 2011 Modellierung von Zinsstrukturkurven 164. Roßbach, Peter / Karlow, Denis 2011 The Stability of Traditional Measures of Index Tracking Quality 163. Libman, Alexander / Herrmann-Pillath, Carsten / Yarav, Gaudav 2011 Are Human Rights and Economic Well-Being Substitutes? Evidence from Migration Patterns across the Indian States 162. Herrmann-Pillath, Carsten / Andriani, Pierpaolo 2011 Transactional Innovation and the De-commoditization of the Brazilian Coffee Trade 161. Christian Büchler, Marius Buxkaemper, Christoph Schalast, Gregor Wedell Incentivierung des Managements bei Unternehmenskäufen/Buy-Outs mit Private Equity Investoren 2011 – eine empirische Untersuchung – 160. Herrmann-Pillath, Carsten 2011 Revisiting the Gaia Hypothesis: Maximum Entropy, Kauffman´s “Fourth Law” and Physiosemeiosis 159. Herrmann-Pillath, Carsten 2011 A ‘Third Culture’ in Economics? An Essay on Smith, Confucius and the Rise of China 158. Boeing. Philipp / Sandner, Philipp 2011 The Innovative Performance of China’s National Innovation System

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157. Herrmann-Pillath, Carsten 2011 Institutions, Distributed Cognition and Agency: Rule-following as Performative Action 156. Wagner, Charlotte 2010 From Boom to Bust: How different has microfinance been from traditional banking? 155. Libman Alexander / Vinokurov, Evgeny 2010 Is it really different? Patterns of Regionalisation in the Post-Soviet Central Asia 154. Libman, Alexander 2010 Subnational Resource Curse: Do Economic or Political Institutions Matter? 153. Herrmann-Pillath, Carsten 2010 Meaning and Function in the Theory of Consumer Choice: Dual Selves in Evolving Networks 152. Kostka, Genia / Hobbs, William 2010 Embedded Interests and the Managerial Local State: Methanol Fuel-Switching in China 151. Kostka, Genia / Hobbs, William 2010 Energy Efficiency in China: The Local Bundling of Interests and Policies 150. Umber, Marc P. / Grote, Michael H. / Frey, Rainer 2010 Europe Integrates Less Than You Think. Evidence from the Market for Corporate Control in Europe and the US 149. Vogel, Ursula / Winkler, Adalbert 2010 Foreign banks and financial stability in emerging markets: evidence from the global financial crisis 148. Libman, Alexander 2010 Words or Deeds – What Matters? Experience of Decentralization in Russian Security Agencies 147. Kostka, Genia / Zhou, Jianghua 2010 Chinese firms entering China's low-income market: Gaining competitive advantage by partnering governments 146. Herrmann-Pillath, Carsten Rethinking Evolution, Entropy and Economics: A triadic conceptual framework for the Maximum Entropy Principle as 2010 applied to the growth of knowledge 145. Heidorn, Thomas / Kahlert, Dennis Implied Correlations of iTraxx Tranches during the Financial Crisis 2010 144 Fritz-Morgenthal, Sebastian G. / Hach, Sebastian T. / Schalast, Christoph M&A im Bereich Erneuerbarer Energien 2010 143. Birkmeyer, Jörg / Heidorn, Thomas / Rogalski, André Determinanten von Banken-Spreads während der Finanzmarktkrise 2010 142. Bannier, Christina E. / Metz, Sabrina Are SMEs large firms en miniature? Evidence from a growth analysis 2010 141. Heidorn, Thomas / Kaiser, Dieter G. / Voinea, André The Value-Added of Investable Hedge Fund Indices 2010 140. Herrmann-Pillath, Carsten The Evolutionary Approach to Entropy: Reconciling Georgescu-Roegen’s Natural Philosophy with the Maximum 2010 Entropy Framework 139. Heidorn, Thomas / Löw, Christian / Winker, Michael Funktionsweise und Replikationstil europäischer Exchange Traded Funds auf Aktienindices 2010 138. Libman, Alexander Constitutions, Regulations, and Taxes: Contradictions of Different Aspects of Decentralization 2010 137. Herrmann-Pillath, Carsten / Libman, Alexander / Yu, Xiaofan State and market integration in China: A spatial econometrics approach to ‘local protectionism’ 2010 136. Lang, Michael / Cremers, Heinz / Hentze, Rainald Ratingmodell zur Quantifizierung des Ausfallrisikos von LBO-Finanzierungen 2010 135. Bannier, Christina / Feess, Eberhard When high-powered incentive contracts reduce performance: Choking under pressure as a screening device 2010 134. Herrmann-Pillath, Carsten Entropy, Function and Evolution: Naturalizing Peircian Semiosis 2010 133. Bannier, Christina E. / Behr, Patrick / Güttler, Andre Rating opaque borrowers: why are unsolicited ratings lower? 2009 132. Herrmann-Pillath, Carsten

Social Capital, Chinese Style: Individualism, Relational Collectivism and the Cultural Embeddedness of the Institu- 2009 tions-Performance Link 131. Schäffler, Christian / Schmaltz, Christian Market Liquidity: An Introduction for Practitioners 2009

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130. Herrmann-Pillath, Carsten Dimensionen des Wissens: Ein kognitiv-evolutionärer Ansatz auf der Grundlage von F.A. von Hayeks Theorie der 2009 „Sensory Order“ 129. Hankir, Yassin / Rauch, Christian / Umber, Marc It’s the Market Power, Stupid! – Stock Return Patterns in International Bank M&A 2009 128. Herrmann-Pillath, Carsten Outline of a Darwinian Theory of Money 2009 127. Cremers, Heinz / Walzner, Jens Modellierung des Kreditrisikos im Portfoliofall 2009 126. Cremers, Heinz / Walzner, Jens Modellierung des Kreditrisikos im Einwertpapierfall 2009 125. Heidorn, Thomas / Schmaltz, Christian Interne Transferpreise für Liquidität 2009 124. Bannier, Christina E. / Hirsch, Christian The economic function of credit rating agencies - What does the watchlist tell us? 2009 123. Herrmann-Pillath, Carsten A Neurolinguistic Approach to Performativity in Economics 2009 122. Winkler, Adalbert / Vogel, Ursula

Finanzierungsstrukturen und makroökonomische Stabilität in den Ländern Südosteuropas, der Türkei und in den GUS- 2009 Staaten 121. Heidorn, Thomas / Rupprecht, Stephan Einführung in das Kapitalstrukturmanagement bei Banken 2009 120. Rossbach, Peter Die Rolle des Internets als Informationsbeschaffungsmedium in Banken 2009 119. Herrmann-Pillath, Carsten Diversity Management und diversi-tätsbasiertes Controlling: Von der „Diversity Scorecard“ zur „Open Balanced 2009 Scorecard 118. Hölscher, Luise / Clasen, Sven Erfolgsfaktoren von Private Equity Fonds 2009 117. Bannier, Christina E. Is there a hold-up benefit in heterogeneous multiple bank financing? 2009 116. Roßbach, Peter / Gießamer, Dirk Ein eLearning-System zur Unterstützung der Wissensvermittlung von Web-Entwicklern in Sicherheitsthemen 2009 115. Herrmann-Pillath, Carsten Kulturelle Hybridisierung und Wirtschaftstransformation in China 2009 114. Schalast, Christoph: Staatsfonds – „neue“ Akteure an den Finanzmärkten? 2009 113. Schalast, Christoph / Alram, Johannes Konstruktion einer Anleihe mit hypothekarischer Besicherung 2009 112. Schalast, Christoph / Bolder, Markus / Radünz, Claus / Siepmann, Stephanie / Weber, Thorsten Transaktionen und Servicing in der Finanzkrise: Berichte und Referate des Frankfurt School NPL Forums 2008 2009 111. Werner, Karl / Moormann, Jürgen Efficiency and Profitability of European Banks – How Important Is Operational Efficiency? 2009 110. Herrmann-Pillath, Carsten Moralische Gefühle als Grundlage einer wohlstandschaffenden Wettbewerbsordnung: 2009 Ein neuer Ansatz zur erforschung von Sozialkapital und seine Anwendung auf China 109. Heidorn, Thomas / Kaiser, Dieter G. / Roder, Christoph Empirische Analyse der Drawdowns von Dach-Hedgefonds 2009 108. Herrmann-Pillath, Carsten Neuroeconomics, Naturalism and Language 2008 107. Schalast, Christoph / Benita, Barten

Private Equity und Familienunternehmen – eine Untersuchung unter besonderer Berücksichtigung deutscher 2008 Maschinen- und Anlagenbauunternehmen 106. Bannier, Christina E. / Grote, Michael H. Equity Gap? – Which Equity Gap? On the Financing Structure of Germany’s Mittelstand 2008 105. Herrmann-Pillath, Carsten The Naturalistic Turn in Economics: Implications for the Theory of Finance 2008

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104. Schalast, Christoph (Hrgs.) / Schanz, Kay-Michael / Scholl, Wolfgang Aktionärsschutz in der AG falsch verstanden? Die Leica-Entscheidung des LG Frankfurt am Main 2008 103. Bannier, Christina E./ Müsch, Stefan Die Auswirkungen der Subprime-Krise auf den deutschen LBO-Markt für Small- und MidCaps 2008 102. Cremers, Heinz / Vetter, Michael Das IRB-Modell des Kreditrisikos im Vergleich zum Modell einer logarithmisch normalverteilten Verlustfunktion 2008 101. Heidorn, Thomas / Pleißner, Mathias Determinanten Europäischer CMBS Spreads. Ein empirisches Modell zur Bestimmung der Risikoaufschläge von Commercial Mortgage-Backed Securities (CMBS) 2008 100. Schalast, Christoph (Hrsg.) / Schanz, Kay-Michael Schaeffler KG/Continental AG im Lichte der CSX Corp.-Entscheidung des US District Court for the Southern District of New York 2008 99. Hölscher, Luise / Haug, Michael / Schweinberger, Andreas Analyse von Steueramnestiedaten 2008 98. Heimer, Thomas / Arend, Sebastian The Genesis of the Black-Scholes Option Pricing Formula 2008 97. Heimer, Thomas / Hölscher, Luise / Werner, Matthias Ralf Access to Finance and Venture Capital for Industrial SMEs 2008 96. Böttger, Marc / Guthoff, Anja / Heidorn, Thomas Loss Given Default Modelle zur Schätzung von Recovery Rates 2008 95. Almer, Thomas / Heidorn, Thomas / Schmaltz, Christian The Dynamics of Short- and Long-Term CDS-spreads of Banks 2008 94. Barthel, Erich / Wollersheim, Jutta Kulturunterschiede bei Mergers & Acquisitions: Entwicklung eines Konzeptes zur Durchführung einer Cultural Due Diligence 2008 93. Heidorn, Thomas / Kunze, Wolfgang / Schmaltz, Christian Liquiditätsmodellierung von Kreditzusagen (Term Facilities and Revolver) 2008 92. Burger, Andreas Produktivität und Effizienz in Banken – Terminologie, Methoden und Status quo 2008 91. Löchel, Horst / Pecher, Florian The Strategic Value of Investments in Chinese Banks by Foreign Financial Insitutions 2008 90. Schalast, Christoph / Morgenschweis, Bernd / Sprengetter, Hans Otto / Ockens, Klaas / Stachuletz, Rainer / Safran, Robert Der deutsche NPL Markt 2007: Aktuelle Entwicklungen, Verkauf und Bewertung – Berichte und Referate des NPL Forums 2007 2008 89. Schalast, Christoph / Stralkowski, Ingo 10 Jahre deutsche Buyouts 2008 88. Bannier, Christina E./ Hirsch, Christian The Economics of Rating Watchlists: Evidence from Rating Changes 2007 87. Demidova-Menzel, Nadeshda / Heidorn, Thomas Gold in the Investment Portfolio 2007 86. Hölscher, Luise / Rosenthal, Johannes Leistungsmessung der Internen Revision 2007 85. Bannier, Christina / Hänsel, Dennis Determinants of banks' engagement in loan securitization 2007 84. Bannier, Christina “Smoothing“ versus “Timeliness“ - Wann sind stabile Ratings optimal und welche Anforderungen sind an optimale 2007 Berichtsregeln zu stellen? 83. Bannier, Christina E. Heterogeneous Multiple Bank Financing: Does it Reduce Inefficient Credit-Renegotiation Incidences? 2007 82. Cremers, Heinz / Löhr, Andreas Deskription und Bewertung strukturierter Produkte unter besonderer Berücksichtigung verschiedener Marktszenarien 2007 81. Demidova-Menzel, Nadeshda / Heidorn, Thomas Commodities in Asset Management 2007 80. Cremers, Heinz / Walzner, Jens Risikosteuerung mit Kreditderivaten unter besonderer Berücksichtigung von Credit Default Swaps 2007

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79. Cremers, Heinz / Traughber, Patrick Handlungsalternativen einer Genossenschaftsbank im Investmentprozess unter Berücksichtigung der Risikotragfähig- keit 2007 78. Gerdesmeier, Dieter / Roffia, Barbara Monetary Analysis: A VAR Perspective 2007 77. Heidorn, Thomas / Kaiser, Dieter G. / Muschiol, Andrea Portfoliooptimierung mit Hedgefonds unter Berücksichtigung höherer Momente der Verteilung 2007 76. Jobe, Clemens J. / Ockens, Klaas / Safran, Robert / Schalast, Christoph Work-Out und Servicing von notleidenden Krediten – Berichte und Referate des HfB-NPL Servicing Forums 2006 2006 75. Abrar, Kamyar / Schalast, Christoph Fusionskontrolle in dynamischen Netzsektoren am Beispiel des Breitbandkabelsektors 2006 74. Schalast, Christoph / Schanz, Kay-Michael Wertpapierprospekte: Markteinführungspublizität nach EU-Prospektverordnung und Wertpapierprospektgesetz 2005 2006 73. Dickler, Robert A. / Schalast, Christoph Distressed Debt in Germany: What´s Next? Possible Innovative Exit Strategies 2006 72. Belke, Ansgar / Polleit, Thorsten How the ECB and the US Fed set interest rates 2006 71. Heidorn, Thomas / Hoppe, Christian / Kaiser, Dieter G. Heterogenität von Hedgefondsindizes 2006 70. Baumann, Stefan / Löchel, Horst The Endogeneity Approach of the Theory of Optimum Currency Areas - What does it mean for ASEAN + 3? 2006 69. Heidorn, Thomas / Trautmann, Alexandra Niederschlagsderivate 2005 68. Heidorn, Thomas / Hoppe, Christian / Kaiser, Dieter G. Möglichkeiten der Strukturierung von Hedgefondsportfolios 2005 67. Belke, Ansgar / Polleit, Thorsten (How) Do Stock Market Returns React to Monetary Policy ? An ARDL Cointegration Analysis for Germany 2005 66. Daynes, Christian / Schalast, Christoph Aktuelle Rechtsfragen des Bank- und Kapitalmarktsrechts II: Distressed Debt - Investing in Deutschland 2005 65. Gerdesmeier, Dieter / Polleit, Thorsten Measures of excess liquidity 2005 64. Becker, Gernot M. / Harding, Perham / Hölscher, Luise Financing the Embedded Value of Life Insurance Portfolios 2005 63. Schalast, Christoph Modernisierung der Wasserwirtschaft im Spannungsfeld von Umweltschutz und Wettbewerb – Braucht Deutschland 2005 eine Rechtsgrundlage für die Vergabe von Wasserversorgungskonzessionen? – 62. Bayer, Marcus / Cremers, Heinz / Kluß, Norbert Wertsicherungsstrategien für das Asset Management 2005 61. Löchel, Horst / Polleit, Thorsten A case for money in the ECB monetary policy strategy 2005 60. Richard, Jörg / Schalast, Christoph / Schanz, Kay-Michael Unternehmen im Prime Standard - „Staying Public“ oder „Going Private“? - Nutzenanalyse der Börsennotiz - 2004 59. Heun, Michael / Schlink, Torsten Early Warning Systems of Financial Crises - Implementation of a currency crisis model for Uganda 2004 58. Heimer, Thomas / Köhler, Thomas Auswirkungen des Basel II Akkords auf österreichische KMU 2004 57. Heidorn, Thomas / Meyer, Bernd / Pietrowiak, Alexander Performanceeffekte nach Directors´Dealings in Deutschland, Italien und den Niederlanden 2004 56. Gerdesmeier, Dieter / Roffia, Barbara The Relevance of real-time data in estimating reaction functions for the euro area 2004 55. Barthel, Erich / Gierig, Rauno / Kühn, Ilmhart-Wolfram Unterschiedliche Ansätze zur Messung des Humankapitals 2004 54. Anders, Dietmar / Binder, Andreas / Hesdahl, Ralf / Schalast, Christoph / Thöne, Thomas Aktuelle Rechtsfragen des Bank- und Kapitalmarktrechts I : Non-Performing-Loans / Faule Kredite - Handel, Work-Out, Outsourcing und Securitisation 2004 53. Polleit, Thorsten The Slowdown in German Bank Lending – Revisited 2004

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52. Heidorn, Thomas / Siragusano, Tindaro Die Anwendbarkeit der Behavioral Finance im Devisenmarkt 2004 51. Schütze, Daniel / Schalast, Christoph (Hrsg.) Wider die Verschleuderung von Unternehmen durch Pfandversteigerung 2004 50. Gerhold, Mirko / Heidorn, Thomas Investitionen und Emissionen von Convertible Bonds (Wandelanleihen) 2004 49. Chevalier, Pierre / Heidorn, Thomas / Krieger, Christian Temperaturderivate zur strategischen Absicherung von Beschaffungs- und Absatzrisiken 2003 48. Becker, Gernot M. / Seeger, Norbert Internationale Cash Flow-Rechnungen aus Eigner- und Gläubigersicht 2003 47. Boenkost, Wolfram / Schmidt, Wolfgang M. Notes on convexity and quanto adjustments for interest rates and related options 2003 46. Hess, Dieter Determinants of the relative price impact of unanticipated Information in 2003 U.S. macroeconomic releases 45. Cremers, Heinz / Kluß, Norbert / König, Markus Incentive Fees. Erfolgsabhängige Vergütungsmodelle deutscher Publikumsfonds 2003 44. Heidorn, Thomas / König, Lars Investitionen in Collateralized Debt Obligations 2003 43. Kahlert, Holger / Seeger, Norbert Bilanzierung von Unternehmenszusammenschlüssen nach US-GAAP 2003 42. Beiträge von Studierenden des Studiengangs BBA 012 unter Begleitung von Prof. Dr. Norbert Seeger Rechnungslegung im Umbruch - HGB-Bilanzierung im Wettbewerb mit den internationalen 2003 Standards nach IAS und US-GAAP 41. Overbeck, Ludger / Schmidt, Wolfgang Modeling Default Dependence with Threshold Models 2003 40. Balthasar, Daniel / Cremers, Heinz / Schmidt, Michael Portfoliooptimierung mit Hedge Fonds unter besonderer Berücksichtigung der Risikokomponente 2002 39. Heidorn, Thomas / Kantwill, Jens Eine empirische Analyse der Spreadunterschiede von Festsatzanleihen zu Floatern im Euroraum und deren Zusammenhang zum Preis eines Credit Default Swaps 2002 38. Böttcher, Henner / Seeger, Norbert Bilanzierung von Finanzderivaten nach HGB, EstG, IAS und US-GAAP 2003 37. Moormann, Jürgen Terminologie und Glossar der Bankinformatik 2002 36. Heidorn, Thomas Bewertung von Kreditprodukten und Credit Default Swaps 2001 35. Heidorn, Thomas / Weier, Sven Einführung in die fundamentale Aktienanalyse 2001 34. Seeger, Norbert International Accounting Standards (IAS) 2001 33. Moormann, Jürgen / Stehling, Frank Strategic Positioning of E-Commerce Business Models in the Portfolio of Corporate Banking 2001 32. Sokolovsky, Zbynek / Strohhecker, Jürgen Fit für den Euro, Simulationsbasierte Euro-Maßnahmenplanung für Dresdner-Bank-Geschäftsstellen 2001 31. Roßbach, Peter Behavioral Finance - Eine Alternative zur vorherrschenden Kapitalmarkttheorie? 2001 30. Heidorn, Thomas / Jaster, Oliver / Willeitner, Ulrich Event Risk Covenants 2001 29. Biswas, Rita / Löchel, Horst Recent Trends in U.S. and German Banking: Convergence or Divergence? 2001 28. Eberle, Günter Georg / Löchel, Horst Die Auswirkungen des Übergangs zum Kapitaldeckungsverfahren in der Rentenversicherung auf die Kapitalmärkte 2001 27. Heidorn, Thomas / Klein, Hans-Dieter / Siebrecht, Frank Economic Value Added zur Prognose der Performance europäischer Aktien 2000 26. Cremers, Heinz Konvergenz der binomialen Optionspreismodelle gegen das Modell von Black/Scholes/Merton 2000

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25. Löchel, Horst Die ökonomischen Dimensionen der ‚New Economy‘ 2000 24. Frank, Axel / Moormann, Jürgen Grenzen des Outsourcing: Eine Exploration am Beispiel von Direktbanken 2000 23. Heidorn, Thomas / Schmidt, Peter / Seiler, Stefan Neue Möglichkeiten durch die Namensaktie 2000 22. Böger, Andreas / Heidorn, Thomas / Graf Waldstein, Philipp Hybrides Kernkapital für Kreditinstitute 2000 21. Heidorn, Thomas Entscheidungsorientierte Mindestmargenkalkulation 2000 20. Wolf, Birgit Die Eigenmittelkonzeption des § 10 KWG 2000 19. Cremers, Heinz / Robé, Sophie / Thiele, Dirk Beta als Risikomaß - Eine Untersuchung am europäischen Aktienmarkt 2000 18. Cremers, Heinz Optionspreisbestimmung 1999 17. Cremers, Heinz Value at Risk-Konzepte für Marktrisiken 1999 16. Chevalier, Pierre / Heidorn, Thomas / Rütze, Merle Gründung einer deutschen Strombörse für Elektrizitätsderivate 1999 15. Deister, Daniel / Ehrlicher, Sven / Heidorn, Thomas CatBonds 1999 14. Jochum, Eduard Hoshin Kanri / Management by Policy (MbP) 1999 13. Heidorn, Thomas Kreditderivate 1999 12. Heidorn, Thomas Kreditrisiko (CreditMetrics) 1999 11. Moormann, Jürgen Terminologie und Glossar der Bankinformatik 1999 10. Löchel, Horst The EMU and the Theory of Optimum Currency Areas 1998 09. Löchel, Horst Die Geldpolitik im Währungsraum des Euro 1998 08. Heidorn, Thomas / Hund, Jürgen Die Umstellung auf die Stückaktie für deutsche Aktiengesellschaften 1998 07. Moormann, Jürgen Stand und Perspektiven der Informationsverarbeitung in Banken 1998 06. Heidorn, Thomas / Schmidt, Wolfgang LIBOR in Arrears 1998 05. Jahresbericht 1997 1998 04. Ecker, Thomas / Moormann, Jürgen Die Bank als Betreiberin einer elektronischen Shopping-Mall 1997 03. Jahresbericht 1996 1997 02. Cremers, Heinz / Schwarz, Willi Interpolation of Discount Factors 1996 01. Moormann, Jürgen Lean Reporting und Führungsinformationssysteme bei deutschen Finanzdienstleistern 1995

Frankfurt School of Finance & Management 58 Working Paper No. 182

Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money

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Naturalizing Institutions: Evolutionary Principles and Application on the Case of Money

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Frankfurt School of Finance & Management 60 Working Paper No. 182