Darwinian Markets

Economist Paul Seabright on how homo sapiens evolved into homo economicus

After spending millennia as one more smart hunter-gatherer primate, human beings developed an unprecedented, fantastically complex system of cooperation and specialization between unrelated individuals unknown elsewhere in nature. In The Company of Strangers: A Natural History of Economic Life (Princeton), University of Toulouse economist Paul Seabright examines how biological dispositions and social institutions together enabled the "great experiment" of civilization. Seabright spoke with Assistant Editor Julian Sanchez in March.

REASON: How did evolution and institutions in tandem allow hunter gatherers to become cosmopolitan participants in market economies?

Paul Seabright: The important part of the story is to emphasize that this is an opportunistic experiment. It's quite common when you look at animal behavior, for example, to say that their behavior must have proved adaptive for them, that it fits their environment. Implicitly when we do that, we're saying that the environment today is the same as the environment in which the species evolved. So we use a kind of functionalist explanation that accounts for the evolution of the behavior in terms of its adaptiveness in that environment.

The key thing about human beings is that our environment is as much each other as it is a particular natural ecology, and that component of our environment, the social component, has changed spectacularly in the last ten millennia. Therefore, the things we do can't possibly be explained in a very simple way as having evolved through ordinary natural selection for the environment in which we find ourselves today. So we have to patch together an argument consisting of two parts. The first part is to say: What do we think human beings were like, physically and psychologically, as a result of their evolution in the African woodland savannah until about 10 millennia ago? Then we have to ask: How can we imagine that you launch that set of capacities out on the open sea of human social interactions where suddenly things get fantastically complicated, we start dealing with situations we never had to deal with before, with modern society as the result.

You can still use selective explanations, though they're much more likely to be cultural as opposed to natural selection explanations, but at the same time they have to be compatible with what we think the psychology was that survived through the African woodland savannah. So, for example, if we want to think that human beings are inherently pacifist in nature, we have to explain how a pacifist nature could've survived on the woodland savannah, and that's not very plausible.

REASON: Are there general differences that account for some countries' having institutions and conventions that promote trust and market exchange, whereas others seem stuck?

PS: I think you need to distinguish relatively superficial sorts of conventions like "How do people behave at traffic lights" from more fundamental ones like "how do they interact with their neighbors, with their business associates, with their communities?" It's true that you can sometimes look in a sort of pop-sociology way at the fact that people don't stop at traffic lights in Brazil even when there are policemen there, whereas in Sweden they frequently do even when there are no policemen there, and say something about the tendency of the society for social order. On the other hand, whether people stop at traffic lights is not really a fundamental determinant of their prosperity. What's much more important is the kinds of associative habits they have and, crudely put, who they're prepared to trust. If you read Tocqueville on America in the 19th century, he was very struck by the fact that the US was characterized by enormous efflorescence of voluntary organizations. Even at that point he was struck by something that still characterizes the US today. If you look at membership in churches, community groups, and so on the United States, it's very much higher than in most European countries.

We don't know exactly the causes of that, but we can speculate. We can speculate, for example, that feudalism was rather bad for these things, because feudalism encouraged vertical ties, where essentially you got your place in society from your ties to your feudal lord, and therefore it didn't help you very much to set about creating ties to your horizontal equals. The United States is really the only country in the world founded as a commercial republic, where right from the start, whether they were settlers clearing the back wood or whether they were traders or so on, they had to forge some way of living with people who were in some sense their equals—might not be their economic equals, but were at least in status their equals.

So there's something about settling virgin territory where you don't have all the feudal baggage to contend with that almost certainly encouraged that. But as very interesting recent work by Stan Engerman and Ken Sokoloff has shown, it wasn't just a matter of settling virgin territory, because South America was among the richest continents in the world at the beginning of the 18th century and has been massively overtaken by North America. That seems to have a lot to do with the fact that Latin American agriculture was characterized much more by large estates and a smaller proportion of independent farmers, who elsewhere provided a bedrock of citizenry, who demanded a vote, and having gotten the vote demanded education. So Latin American societies were much more hierarchical.

REASON: So what would you recommend to someone who wanted to improve institutional performance in the developing world?

PS: It sounds banal, but I actually believe in education quite a lot. Effective education in the developing world takes place at all levels. Some of the most useful money that's been spent in Russia and Eastern Europe in the past decade has been training judges in how to apply civil law, particularly the Russian empire bit of eastern Europe, the part that never really enjoyed a bourgeois period between feudalism and socialism. They never really had proper civil law, and if you're an entrepreneur trying to do creative things with all this property that's been privatized, you don't have a tradition of law that ensures your contracts will be respected. Those countries badly needed to establish the institutions that would make people depend on the law and not have to go to the Mafia for enforcement. That's still very fragile in Russia, but the money that's been put into training judges is very useful. So that's at the top end. Right at the bottom, it's really striking how education is not just about teaching people to handle the information superhighway or whatever, it's also about teaching them what kinds of institutions work and what don't.

I've been very struck by this in my research in India, and in fact I have a student now who's doing research in Tunisia on simple things like: What makes people respect allocations of water? My student's been doing this work understanding how water cooperatives handle this and make sure people don't steal water. You might think this is a simple matter, but it's not a simple matter. You can't get the secret police to watch over people; what you need is a community consensus that people who steal water are harming the community. It's very clear that the smaller the communities are, the better they police stealing, but communities with higher levels of education police stealing better too. That's partly because education teaches them about what kinds of institutional incentives work and what don't, gives them some experience in terms of comparing with elsewhere in the world what the options are.

REASON: Which evolved traits of our hunter-gatherer brains turned out to be conducive to market society?

PS: The two key characteristics are the ability to calculate and to reflect on what's prudent for you and the ability to respond with reciprocity to others—to respond warmly and generously to others' warmth and generosity. I suggested you can't reduce one to the other: We don't respond generously to generous people just because we calculate that it's in our interest to do so. Modern life is so complex and full of opportunities for cheating—if you're really determined—that if everyone had an eye to the main chance 100 percent of the time, we probably couldn't get any social cooperation going.

It's precisely because most people will cooperate reasonably decently if it doesn't cost them too much, because they generally quite like the company of their fellows and respond warmly to people who are decent to them, that we can get by with a feasible level of mutual policing. We need surveillance mechanisms and rational calculation about our interests to get us to cooperate, but we also need some reciprocity, some instinctive emotional need to respond cooperatively to others who are cooperative with us. The advantage of the capacity for calculation is that it can make a relatively small amount of reciprocity go a long way, once other people's tendency for reciprocity is factored into your calculations, just as a little bit of yeast can raise a lot of dough.

REASON: How about the other side; what are the atavistic, obstructive holdovers?

PS: It's pretty clear that a lot of characteristics were adaptive for us as hunter gatherers, and in a lot of contexts may even be adaptive for us individually, but collectively may be very damaging—most obviously a tendency for violence. We can strongly conjecture from our own pre-history, with corroborative evidence from the behavior of other species and non-state societies today, that a capacity for physical violence and a tendency to engage in it to pursue your ends would've been strongly adaptive for individuals. People who were peacefully inclined and only ever sorted out disputes in a reasonable and peaceful manner would've got blown over by people who took a tough and violent approach. That has to be nuanced, because communities where people only ever sorted out conflicts violently lacked the cohesion that would've made them more prosperous and, having become prosperous, capable of buying more sophisticated forms of defense. So we know that some ability to moderate our violent passions by rational cooperation has been better for us than a crude tendency to resort to violence for every dispute. But that ability to cooperate is put into the most deadly effect in group warfare, when we join armies and make military alliances against other groups, often for reasons that are very poorly founded in an assessment of our direct interest in doing so.

REASON: You emphasize the importance of trust and cooperation. What about the importance for societies as a whole of dissent, even when its not in someone's immediate self interest to pipe up?

PS: We deal with problems very different from what existed on the woodland savannah. One difference is that the ability to spot a low probability but high cost risk may be particularly valuable. If you're one of a group of tough young males wondering which alpha male to follow, on the woodland savannah it probably does some good to follow the male who shouts loudest and beats his chest most. It may not suit you very much to follow the sensitive philosopher type who can see three sides to every question. That's because on the woodland savannah your fundamental challenges are of a relatively restricted kind. You need to go hunting, you need to make sure you don't starve, and you need to see off predators. The guy who thumps his chest the loudest is probably going to be best at all those things, and the sensitive philosopher isn't going to have an edge on very much except possibly adjudicating family disputes. Modern challenges, including modern warfare, the guy who thumps his chest loudest isn't going to be very good at the challenges beyond attacking the next machine gun post. He won't necessarily be best at deciding the right balance between "shock and awe" tactics and a "hearts and minds" operation.

What we have is a series of emotional responses to who we find convincing as a leader that were shaped by the emotional responses that were adaptive for hunter gatherers. What we've realized is that those are frequently rather dangerous for us in modern contexts. What we want is modern contexts is someone whose thinking isn't determined by a wish, conscious or unconscious, to side with the powerful guy in the group, but the person whose eyes are really out there looking for hazards and spotting dangers well in advance. That's going to require a capacity for independent and critical thinking that's very valuable to us now but was not that valuable to us then.

What we should be doing is set up incentive systems that make that attractive to somebody, and I don't think we should underestimate the extent to which we do this. Think of the humble world of accounting. What are accountants but people who in some sense, with many flaws and mistakes as we've seen recently, we try to incentivize to tell the truth about what's going on inside a company when the board of directors would rather send a much more rosy picture. Sometimes they collude with the management, but most of the time we set up countervailing powers inside the companies to make sure that what's adaptive for the individual inside the company isn't just to follow whatever the CEO says. We do that all the time, even if not as effectively, especially in the political sphere, as we might like. 

REASON: You have an interesting aside noting that the alienating "anonymity" and "impersonality" of modern markets is also a source of their vibrancy.

PS: It's been a refrain of romantic conservatives down the ages that modern market society doesn't give us the kind of hum they think people of former ages felt. The feudal lord would go and observe his happy subjects tugging their forelocks at him and allowing him to hold their babies on his knee and enjoy the harmony of the community in which there was "a place for everyone and everyone in his place."

I don't want to caricature that too much, because I know there are people who regret the anonymity of modern society but don't buy the fantasy of a lost age. But the key point is precisely that in order to be able to engage someone—the guy who sells me bread or installs my telephone or whatever—I actually don't need to know much about the guy's character. That's a really important strength, because if I had to know something about his character before I could let him into my house, most of the time I just wouldn't dare. It's exactly because I can be indifferent to the guy that we can function at all. If you trust somebody's personality, you need to know a lot about them.

That links in with the evidence we have about our fundamentally fairly violent nature. If you think human beings are by nature generally placid, sociable, trustworthy people who can be trusted into each other's homes without killing their children and stealing their worldly goods, then you don't really see why this feeling of indifference to other people can possibly be a strength of modern society. You're bound to bemoan it. If you think that, in the absence of a set of institutions that allow us to trust the postman just because he's the postman, we wouldn't be able to have a modern society at all because we'd be too scared of the guy, then you start to see why this anonymity is a good thing, or a symptom of a good thing.

REASON: Economists focus on how markets respond to people's interests; you argue that narratives have a great but underappreciated importance.

PS: Things like professional ethics, though sometimes thought of as being antithetical to market economies and market logic, are actually pretty central to them. Even if you are only doing the decent thing because of fear of the consequences, you must be conjecturing that somebody, somewhere down the line, is going to be behaving as they do just because it's the right thing to do. So the policeman inquiring into who cheated who mustn't just be motivated by who's giving him the biggest bribe, the judge looking at the case mustn't be deciding on that basis, but saying: "No, no, I'm looking at the case on its merits as I am professionally required to do."

The professional narratives are really important for all of us. It's not just people in the "higher" professions; someone working at a supermarket checkout is partly internalizing a picture of how they do things well. I go to the supermarket and think, you know, five minutes into the job I'd be grumpy and miserable, yet people who do it hour after hour and day after day are smiling at me and taking care that I haven't dropped anything. Even people doing pretty humdrum jobs tend to want to project a sense that they do it well. That's what I mean by professional ethics, not just what a Supreme Court judge does.

REASON: You talk a bit about "tunnel vision," the way phenomenally complex market processes work without producers or consumers paying any mind to the big picture, but only knowing their immediate wants and price constraints. What about the growth in what we might call "symbolic consumption," fair trade coffee or no-sweatshop apparel?

PS: It's precisely because tunnel vision can have dangerous consequences—environmental degradation, spiraling military expenditures—that it's clearly desirable that people should be thinking out of the box a bit, or at least out of the tunnel. It doesn't follow from this that all kinds of non-tunnel thinking are constructive. I'm struck by the work of some of the anti-globalization protesters, which I think has been admirably out-of-the-tunnel in terms of motivation, but naively ill-informed about how the world economy works in many other respects. You get people campaigning against investment by multinational companies in some poor countries on the gorunds that they're only paying $5 a day, when the people they're employing would otherwise be working at between $1 and $2 a day. Now, you may say "we wish the multinationals paid them $10 a day," but to say that the multinationals have no business to be there unless they're paying people $10 a day is a spectacularly stupid and self-defeating campaign platform. You really damage an awful lot of people. There has been evidence that some NGO campaigns against child labor, for instance, have led to children being laid off and left in much worse situations.

The upside of modern communications is that people are thinking conscientiously and intellignently about the wider impact of the way they live, and that's clearly desirable. But a little bit of thinking outside the tunnel can be a dangerous thing. You can wind up, in a fury of moral fervor, harming the very people whose cause you purport to advance.

REASON: Is there something in our evolved background that makes us susceptible to this?

PS: One problem is cognitive: It's just difficult to master all the information about how the world actually does work. The other is emotional. Realistically, if you're trying to think "should I buy trainers from Nike, or do I think Nike's employment practices suck?" it's difficult to get all the information, for one thing, but for another you're surrounded by other people, many of whom you admire, who are sending you strong emotional messages: "These are disgusting capitalists; these are the enemy." So you may be motivated as much by hatred of Nike as by love for the people employed in their factories. If you're motivated by that, it's going to be quite difficult to evaluate information coming from different sources about what's actually a desirable policy in different circumstances.

I'm not, incidentally, saying there shouldn't be regulation of employment practices by multinationals. But a simple stance that says it's outrageous that they're employing people at some wage that seems low to you and me may have very bad consequences. 

So the problem, I think, is at least as much emotional. I have friends in the anti-globalization movement who get thrilled when a big demonstration imposes humiliation on some multinational or Starbucks windows get smashed. It's the thrill of the chase, the thrill of the battle. They'd be completely incapable of explaining why this particular result advances the interests of anybody that they care about. Yes, the fact that it's hard for us to engage in political activism without the emotional highs and lows of the tribal experience is a big problem.

REASON: You say we should think of liberalism as a tradition that goes back far further than, say, the aftermath of the wars of religion in Europe.

PS: I think you can view philosophers, particularly political philosophers, as doing two kinds of jobs. On the whole, academics tend to think one of these jobs is more high status than the other. You can view them as acting as sages and mediators to societies wracked with problems, offering advice about how to resolve these various difficulties. Or you can view them as more like psychotherapists, helping societies to articulate things they probably already know about themselves. I tend to view political philosophers, the good ones, as more in the psychotherapist mold. What the great philosophers of liberalism did was appeal to stuff about ourselves that we sort of knew that had gotten obscured or overlaid. What they said was that thinking about other people in a certain way does come more naturally to us than you might think.

You can see why they needed to say this after the wars of religion, which were exceptionally bloody. It took very clear heads among the political philosophers of the age to say: Look, toleration of people who don't share your religion is not something completely foreign to human nature. Sometimes they did it in a combative spirit, like Voltaire, who took on in a very polemical way some of the forces of religious intolerance. But actually he was preaching a message that was less confrontational than it seemed. It was not: You guys are prejudiced religious bigots who have to be faced down. It's more: All of us have some capacity for hatred and bigotry in us, but all of us have a capacity to overcome that and to treat other people without being upset that their religion is different from ours.

Most of the conventional stories of the origins of liberalism imply that it's something we discovered in response to these horrific events, a new way of living that nobody had ever thought of before. But if you go back to the Athens of Pericles, you find that a lot of the ingredients were there. Only some of them, of course: The Athens of Pericles practiced slavery. Nobody was arguing that slaves should have a say; nobody in their right mind then thought women should get a say. But in terms of a frame of mind in which you don't automatically think you can kill somebody just because they bow down in front of a different altar from yours, the elements were there.

REASON: How fragile or robust is our "great experiment" of extended social order today?

PS: One aspect of that is: How should we react to the view that the whole edifice of modern social life just rests on convention? Convention is just what people have decided to do; maybe tomorrow they could decide to do something completely different. Maybe the conventions that underpin your ability to call me from across the Atlantic with both of us sitting reasonably securely in our respective offices having this conversation could disappear tomorrow. It may look, in a general sense, almost vertiginously contingent. But on the other hand it's also remarkable how robust some of the conventions are. That's partly because the conventions aren't masterminded in any one place. Most of the conventions that underpin modern society are extremely decentralized: Nobody's actually enforcing the fact that we all behave in a certain way. We reinforce it ourselves through billions of everyday decisions about how we treat our colleagues and our friends. There's that general question of the fragility of the system.

What the sophisticated modern terrorist organizations are trying to do is find a symbolic point of weakness that can threaten the whole edifice, even though the edifice itself doesn't have any kind of central pillar. You could knock out the White House or many other places and society wouldn't collapse. It would be bad news, but in terms of how I respond to my neighbor in daily life, I'm not doing it because it's been politically commanded; I'm doing it because it's an equilibrium of my interactions.

You can think of terrorist organizations as saying: This doesn't seem to have a genuine central pillar, but could we find a symbolic pillar we can knock out such that people will be so scared that they begin to modify their behavior to each other in other ways, even though strictly speaking they don't have to? That's why they chose the Twin Towers, and why a lot of modern terrorist organizations are very media savvy.

Religious conflicts come to the fore in this because religious ideologies are so heavily symbolically weighted toward objects of veneration. If you're trying to launch a terrorist attack on some boringly secular bourgeois republic, it's pretty hard to know where to hit. Whereas if you're launching it on a society that has a collective religious allegiance, you've got the Pope or you've got symbolic sources authority that don't seem as easily replaceable. It's always more attractive to attack a king than some Scandinavian style president whose name nobody can remember. The exception that proves the rule is when the Swedish foreign minister was stabbed by a loony in Stockholm a few years ago, and people realized that senior Swedish politicians had been walking around for ages in the streets without any kind of bodyguard, because they're too boring for anyone to want to attack on symbolic grounds. And that's how they should be; it's great. I'm a fan of that kind of boring, secular, bourgeois society. But to the extent that modern conflicts take a religious tone, they kind of up the stakes because they create more symbolic hostages.