The Origins Of Markets

Don Boudreaux over at Cafe Hayek wonders whether economic activity and markets are an extended phenotype of humans.  Boudreaux writes:

In The Extended Phenotype, Dawkins pointed out that phenotypes are not limited to things attached to bodies. They include things created by genes but that aren’t attached to bodies – for example, beaver dams and groundhog holes. A bird’s nest is created by bird genes no less than is a bird’s wing; genes ‘program’ birds to build nests; they do so because nests promote bird survival.  Therefore, bird nests are an extended phenotype of birds.

Are markets an extended phenotype of humans? A case can be made that they are. We are programmed to trade, to exchange, to seek bargains, all in order to make ourselves better off and, hence, to promote our survival. Markets certainly do promote our survival. By promoting the division of labor increases the total amount that humans produce and enable those with relatively little in the way of valuable resources to increase the value of their holdings. For sure, without the enormously deep division of labor that now marks much of the globe, and the market institutions that sustain and guide it, billions of us would perish.

So, yes, as I understand the concept of phenotypes, the market-driven extensive global division of labor is an extended human phenotype. It’s in our genes

But Trent McBride over at Catallarchy argues against the over-application of Dawkin’s work.

The idea, for it to work, is that markets are an extension of some human genes, and that these genes have been selected for by evolutionary processes. This strikes me as implausible. Now, I’m admittedly a little light on the Dawkins (and heavy on the Gould), but I doubt he would buy this either. In the basic theory of natural selection, individuals have genetic variations, nature selects for those individuals whose genetic traits are more adaptive, and the species evolves though differential reproduction. Notice, selection occurs on the individual level, while evolution occurs on the species level.

Now, for Boudreaux’s hypothesis to be correct, two things have to be true:

• Markets need to be a product of genetic origin, meaning there must be a gene, or more likely, a large group of genes, that direct willingness of an individual to engage in trading and market activity.

• This trait has to be adaptive for the individual. Specifically, people without such genes need to be selected against.

I’m no paleontologist nor anthropologist, but at least the second one seems very unlikely. For one thing, trading and markets, to the best of my knowledge, is a relatively recent phenomenon; so recent that the human genome has likely hardly evolved since we really got the hang of division of labor. Secondly, even if it had, these behaviors don’t seem like they would be adaptive for the individual. Beaver dams and groundhog holes are adaptive for the individual beavers and groundhogs. Economic activity actually is remarkable because it has positive externality, even for those who do not engage in it. Thus, if such genes exist, it is not obvious to me they would be selected for.

I share McBride’s skepticism.  Dawkins has been criticized for stretching evolutionary theory beyond its scope and for attempting to harness its explanatory power to account for all forms of human behavior.  But not all social constructions require such explanatory depths. Football games and stock markets may be explained by referencing concepts like competition and fitness; but these social constructions are just particular instances of a general behavior.  In other words, there are no football or stock market genes – only those that confer a general competitive advantage.

Markets strike me the same way.  It’s not as if economic activity mirrors God’s design or that nature finds its true voice in commerce. Economic activity, like technology, represents an extension of intelligence (itself a tool for adapting to and exploiting the environment).  Obviously, economic activity confers multiple advantages, namely the division of labor, but economic activity itself is just a particular instantiation of a more generalized behavior.  Engaging in market activity may be a good way to promote our survival, but it’s not the form that is selected for, it’s the pull to find ways to promote our survival.  And the urge to survive and multiply may find its expression in any number of forms.

Comments

[Trent McBride]

Thanks for the link!

I should clarify that there is nothing in Dawkins, or at least in the part quoted by Boudreaux that I disagree with. Dawkins theories of gene selection are highly controversial, of course - but, if you ask me, highly persuasive. My argument is, while some sort of "market gene," while technically plausibly, is unlikely according to my own understanding of human historty and geneology.

[Jason Turner]

Trent...On closer reading I fear I may have come across as ambivalent on the explanatory power of evolutionary theory. I am not, and find it to be a persusasive and powerful tool for accouting for a wide variety of behaviors and activities.

My only issue with Boudreaux's hypothesis was explanatory over-reach. It stretches the theory beyond coherence to attempt to account for every specific form of behavior. For the sake of simplicity, it seems that complex behaviors (and their corresponding social constructions) can best be attributed to a number of genetic urges which may find expression in a variety of forms - economic activity being a perfect example. That humans engage in economic activity does not mean that they possess 'market genes' (which, as you argue, seems historically suspect). It simply means that humans seek out activity that increases the chances of their survival.

[Max]

I've been into this stuff, myself lately. Matt Ridley's Origins of Virtue does a good job of explaning this phenomenon. Instead of thinking of it as "humans are homo economicus," think of it as: "humans are predisposed to cooperate with non-hostile groups, where possible--which usually takes the form of trade in the David Ricardo sense (division of labor, gains from trade)."

[Jason Turner]

I like that. I think that's a pretty good way of putting it. Keeping the rule pretty broad, something along the lines of, "humans are pre-disposed to cooperate (for advantage) with non-hostile groups" is the best way to account for complex behavior and activity.

[Trent McBride]

I'm pretty sure we're in perfect agreement. My beef was with Boudreaux, not Dawkins. As, it seems was yours.