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.

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