The Evolution of Human Risk Tolerance Through ADHD and its Impacts on Socioeconomic Activity Nasir Ahmed Rajah Submitted in accordance with the requirements for the degree of Doctor of Philosophy The University of Leeds Leeds University Business School September 2019 The candidate confirms that the work submitted is his own and that appropriate credit has been given where reference has been made to the work of others. This copy has been supplied on the understanding that it is the copyright material and that non quotation from the thesis may be published without prior acknowledge- ment. The right of Nasir Ahmed Rajah to be identified as Author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. 2 Acknowledgements Throughout my PhD I have received great support, encouragement and assistance from a number of people. I invariably will do an injustice to the immeasurable input they have had on me personally and academically by writing a short acknowledgement prefacing this document. Though, I believe they know me well enough to know that I am indebted to them for their support, encouragement and assistance. I would like to express my sincere appreciation for the feedback and support provided by my PhD supervisors, Professor Nicholas Williams and Professor Vassiliki Bamiatzi. Their support and countless reading of drafts throughout the PhD has improved my writing and wider academic skills. My thanks to the participants and organisers of the British Cohort Study and the Na- tional Child Development Study. Their continued participation and effort has allowed me to test hypotheses that would not have otherwise been possible. I would like to thank my family for supporting me throughout my studies. Their help and encouragement allowed me to keep going in the process. Finally, to my friends, thank you for your help with all manner of things and for the laughs throughout the PhD. 1 Abstract Risk-tolerance is critical to economic activity, affecting numerous socioeconomic outcomes such as occupational choice and educational attainment. Individuals vary in their risk- tolerance. Neoclassical economics struggles to explain the irrational risk-taking of certain individuals, as it does not concern itself with the cause of risk-preferences. This has re- sulted in poor analytical tractability for economic activities, such as entrepreneurship. En- trepreneurship is a key occupational choice for economic growth. From an expected utility hypothesis perspective, entrepreneurship is irrational. Using ADHD-like behaviours, this thesis argues for the integration of biology into economics to demonstrate that irrational behaviours are rational and beneficial from an evolutionary perspective. Risk-tolerance has an evolutionary basis and evolutionary evidence indicates that ADHD- like behaviours provided greater risk-tolerance; assisting humans in exiting the single point of origin, migrating to new lands and relaying this information to the risk-averse popula- tion. Thus, what appears to be irrational risk-taking in the modern concept is rational behaviour through the lens of evolutionary biology. As such, one is able to see that excess risk-tolerance maximises the individuals' utility through high risk activities and benefits society, if risk-tolerance is beneficial in the economic climate. In the modern economy, ADHD is a disorder and the evolutionary basis is overlooked in the discipline of economics. This thesis contributes to the understanding of risk-preferences in economics by adapting the unified growth theory, to show that ADHD behaviours increase risk-tolerance and these behaviours have positive and negative effects. Empirical evidence in the thesis shows the behaviours increase selection into entrepreneurship, providing greater analytical tractability for an economic activity that has previously eluded it. At the same time, the thesis shows that mitigating the negative effects of ADHD are contingent upon its interaction with the environment, for instance, ADHD symptoms interact with socioeconomic background to reduce educational attainment in certain groups in society. The results lead to policy recommendations that may increase economic activity and GDP. 2 Introduction April 15, 2020 Risk-tolerance is critical to economic activity and has a biological component. Risk is studied in multiple disciplines, such as psychology and biology. The biological component of risk-tolerance is often overlooked in economic discussions of risk-tolerance. Insights from biology may help to explain the cause of heterogeneity in risk-preferences and understand- ing this may help to explain better those factors in economics that are affected by variations in risk-preferences, such as occupational choice and education. A key strand of literature at the intersection of biology and economics is evolution- ary economics. One key argument of evolutionary economics, which is indisputable but overlooked in economics, is that human behaviours are shaped by genetics and those genes were determined a long time ago; as such, the determinants of economic activity were deter- mined in the distant past (Spolaore and Wacziarc, 2013). This argument applies to human risk-tolerance; i.e., risk-preferences, including utility functions, have an evolutionary basis (Robson, 1996). One possible source of the evolutionary basis of risk-tolerance is attention deficit hyperactivity disorder like behaviours (ADHD) (G¨oren,2017)1. ADHD by definition of its acronym is considered to be a disorder. Yet, genetic evi- dence suggests that ADHD-like behaviours have been useful in past environments, assisting humans in exiting the single point of origin, migrating to new lands and relaying this infor- mation to the largely risk-averse population (Chen et al., 1999; Ding et al., 2002; Jensen et al., 1997; Williams and Taylor, 2005). As such, there is a mismatch, between the original environment of the behaviour and the one it currently occupies. In this current environ- 1From herein attention deficit hyperactivity disorder is referred to as ADHD. 3 ment, the behaviour produces non-optimal outcomes. However, if an activity represents something akin to the environment in which it was selected for, the behaviour can produce optimal outcomes. To understand this concept, one needs to integrate ADHD into evo- lutionary economics, which is a process of intimately tying theories from economics with biology. This has not yet been attempted2. The original environment and purpose of ADHD as a behaviour is argued to be for risk and novelty seeking. In the Unified Growth Theory (UGT) of Galor and Michalopoulos (2012), the authors propose that in past environments the gene associated with ADHD provided risk and novelty seeking, leading to entrepreneurship. The theory further states that risk-aversion, not risk-tolerance, is favoured as the economy matures. It is difficult to dispute this when one considers that ADHD is a behavioural disorder. Yet, the mature economy still holds pockets of risk-tolerance; that is, activities in which risk-tolerance is still required. Unsurprisingly, one of these activities is entrepreneurship and a small number of studies have found a positive relationship between ADHD and entrepreneurship3. Whilst these studies have certainly furthered knowledge, they have fallen short in a number of theoretical and empirical components4. Theoretically, extant studies investigating entrepreneurship and ADHD have overlooked the evolutionary basis of the behaviour, leading to that described above, an incomplete pic- ture of the relationship between ADHD and entrepreneurship. One of the key components resulting from the extant viewpoints is the presumed simplicity of the relationship between ADHD and entrepreneurship. ADHD does not exist or effect only one outcome (i.e., en- trepreneurship) and the behaviour interacts with the environment. The latter part of the previous sentence is critical, particularly in regard to entrepreneurship. Entrepreneurship has barriers; not every individual who is capable of undertaking entrepreneurship is able 2Notable exceptions include Galor and Michalopoulos (2012) and G¨oren(2017). However, these two studies fall short in that there is little discussion of placing ADHD into the discussion of evolutionary economics and developing a framework. Further, both Galor and Michalopoulos (2012) and G¨oren(2017) provide a macroeconomic argument. 3See Antshel(2018) for meta-review or chapter two of this thesis. 4Empirical shortcomings of existing studies and how they are addressed by this thesis are discussed below and at length in chapter two. 4 to, due to educational or financial constraints, for example. These two factors, educational and financial, influence entry into entrepreneurship in adulthood but also influence the later socioeconomic outcomes of ADHD at an early age. In the above discussion the importance of biology in providing insight into economic outcomes is highlighted. More importantly, the need to produce a better theory of the integration of ADHD into evolutionary economics is stressed and found to be lacking in the current literature. To address this gap in the literature and provide a theoretical contri- bution, chapter one of this thesis expounds a theoretical argument integrating ADHD into evolutionary economics. Studies that have investigated the relationship between ADHD and entrepreneurship have fallen short theoretically, as discussed above, and empirically. Existing studies focus on cross-sectional analysis, which