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Economics, sociobiology and behavioral psychology on preferences
Journal of Economic North-Holland
Psychology
557
12 (1991) 557-573
Economics, sociobiology, and behavioral psychology on preferences Ulrich Witt * Uniuersify of Freiburg, Freiburg. Germany Received
May 28, 1990; accepted
July 16, 1991
Economists have become increasingly interested in hypotheses from sociobiology as a source of inspiration for filling gaps in the economic model of behavior. To avoid borrowing eclectically and arbitrarily from neighboring disciplines, this paper attempts to outline in a systematic way the similarities and differences between the approaches taken in economics and sociobiology. In doing so, special attention is given to an empirical theory of preferences that is lacking in economics. Here, inspiration from sociobiology would seem to be particularly useful. The considerations in the paper suggest that sociobiological arguments may indeed be helpful, albeit at a very elementary level only. A more comprehensive theory cannot ignore the influences of innate learning mechanisms in higher living beings. An elaborated theory of preferences in economics will have to acknowledge and incorporate insights from behavioral psychology.
1. Introduction In recent years an increasing number of economists have been interested in discussing whether or not hypotheses from sociobiology might have a role to play in economics (Becker 1976; Hirshleifer 1977a; Tullock 1977; Hayek 1979; Margolis 1982; Tietzel 1983; Sugden 1986; Ursprung 1988; Giith and Yaari 1992). At first sight, economics and sociobiology do seem to have some things in common. In economics, scarcity and competition figure prominently as basic facts around * 1 would like to thank R.J. Hermstein, J. Irving-Lessmann S.A. Kauffman, and the participants of the European Sociobiological Society meeting in Brussels for helpful discussions related to earlier drafts of the paper. Thanks also to three anonymous referees of the present journal and W. Fred van Raaij for their detailed comments and recommendations. The usual disclaimer of course applies. Author’s address: U. Witt, Faculty of Economics, University of Freiburg, Europaplatz 1, 7800 Freiburg, Germany.
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which theory has been built. In sociobiology, as in biology in general, competition and scarcity of natural resources also play a role, for instance, where habitat space (Milinski 1984) or reproduction opportunities, which are usually competitive, are scarce (on mating opportunities, see Waage 1979; Harcourt et al. 1981; on rearing offspring, see Trivers 1972). Here too, theoretical attempts to explain observable behavior reflect these basic conditions (see, e.g., Wilson 1975: ch. 3 and 6), though at a less prominent level. Apart from that, however, the basic interpretation of behavior is markedly different in the two disciplines. Sociobiology, with its roots in the Darwinian theory of natural selection, is concerned with behavioral traits as represented in whole populations and produced by the principles of variation, selection and replication. In contrast, economics, at least the microeconomic theory discussed here, is deeply committed to the idea of individual autonomy. It has traditionally tried to explain behavior on the basis of a calculus of ‘rational’ decision making. Many components of the rational choice model are, of course, left unspecified, or are only specified in a purely ad hoc manner. A striking example are the hypotheses on individual preferences and on human information processing. Thus, the economic model of behavior is actually incomplete and needs to be complemented with additional empirical hypotheses. Such an extension cannot only be expected to improve the explanatory power of microeconomic theory, but may also offer some new insights into particular features of evolution in the socioeconomic realm. In order to extend the boundaries of economic theory, an interdisciplinary dialogue seems necessary in which sociobiology may indeed play a role. However, a more elaborate theory will have to consider, in addition, the influences of innate learning mechanisms in higher living beings. This leads, in a natural way, to research topics traditionally investigated in psychology. The paper proceeds as follows: section 2 discusses in more detail both the similarities and the differences between economics and sociobiology. Section 3 presents the basic structure of the economic theory of behavior and explains what is lacking. Special concern will be given to the hypotheses on individual preferences, i.e. on what people like/dislike and why. Section 4 considers how sociobiology might be helpful here from an economist’s point of view. It will be shown that important insights can be gained, but that additional hypotheses are
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needed to deal with the kind of behavior which economists usually consider. These hypotheses, to be taken from the domain of the behavioral sciences and psychology, are briefly outlined in section 5 together with some implications. Section 6 contains some concluding remarks.
2. Scarcity and competition in economics and biology It has often been argued that there are significant similarities between economics and biology and, sometimes, even modest forms of mutual inspiration in particular with regard to the theory of natural selection (Marshall 1938 passim; Hirshleifer 1977b, 1982; Fao 1982; Ghishelin 1978; Schweber 1977; Bowler 1989: 164-175). Since Malthus (1797) relative scarcity of resources, a key feature in the realm of economics, has been related to variations in generative behavior. Darwin’s theory of genetic fitness is intimately related to competition and scarcity of resources, as reproductive success of the phenotype is a relative measure which depends on competitive advantage of particular traits in situations where increasing population density entails decreasing chances for survival and for raising offspring. Where these traits are behavioral ones, the proper domain of sociobiology (cf. Wilson (1975) and Krebs and Davies (1984) for introductions) is entered. Both sociobiology and economics are interested in explaining observable behavior in terms of the obvious or, in case of genetic fitness, latent competition induced by scarcity. The former discipline relates the outcome primarily to the organisms’ innate physical and behavioral traits which may or may not enable them to exceed the reproduction rates of rival individuals or rival species. In the socioeconomic sphere, the outcome depends to a usually much more significant extent on an elaborate framework of social behavioral regularities (institutions) as, for instance, rules of conduct, entitlement rights, and law. These are often presupposed implicitly when, for example, competition in the market place is discussed. Even on an intra-individual level, the allocation of an organism’s own scarce resources, time and energy, to alternative options available to the organism/individual may be identified as a competition phenomenon. This internal competition is not independent of external scarcity conditions since the latter may affect both the prospects for
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success and the relative costs of competing options (Wilson 1975: ch. 6). In the Darwinian theory of natural selection, the problem is treated as one of genetic adaptation, and specialization of both, the organism and its parts, is explained by this. Similarly, (micro-) economic theory suggests that observable human behavior can be explained as a response to the prevailing conditions of external scarcity, but the internal choice of one course of action over another is usually interpreted as a matter of deliberate (rational) decision making. In pursuing such analogies, obvious differences between the two disciplines with respect to the role of competition and scarcity should not be overlooked. First, while in economics the notions of scarcity and competition are themselves at the center stage of theorizing, they have a role to play in biology only to the extent to which they can help to explain differences in genetic fitness. Second, in biology, scarcity, if it is relevant, is measured in terms of ‘objective’ criteria such as supply of energy, water, and calories per member of a population in a given habitat. In economics no such objective, easily verified, criteria are used. Since the overthrow of objectivist concepts such as the labor theory of value by the ‘subjectivist revolution’ of the 1870’s, scarcity has been defined in terms of subjective evaluations and desires of the individuals involved or, in economic terminology, relative to their individual preferences (Kauder 1965). As a consequence, intra-individual discrimination between competing options is, in the perspective of economics, a highly subjective matter, and this certainly entails an individualistic bias for the whole theory.
3. The economic model of behavior The simple explanatory scheme which underlies the economic theory of behavior consists of three hypotheses: (1) people are supposed to perceive a set of alternative courses of action and outcomes, but know that only a subset is actually feasible because resources commanded by the individual are scarce; (2) people are supposed to evaluate the alternatives according to their subjective desirability, i.e. according to individual preferences; (3) it is suggested that the alternative most preferred by the individual can be inferred from choices actually observed. This basic construction has also been applied quite successfully by other social scientists as, for instance, in the theory of social
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exchange in social psychology (Thibaut and Kelley 1959) and sociology (Homans 1961), or in a more sophisticated form in the ‘expectancy X value’-approach in psychology (Atkinson 1982). The three hypotheses taken together provide the basis on which, even with only a very limited knowledge of the particular subjective preferences, attempts are made to predict the effect of changing conditions of scarcity on individual behavior. Consider a simple example of an individual’s choice of nutrition. Suppose, for convenience, that the individual can only allocate a fixed amount of her/his time to collecting or producing some form of nutrition A and/or some form B at a constant level of physical effort where A and B strongly differ in taste. 1 With respect to the individual preference it is usually assumed that: (i) the individual evaluates A and B positively and is able to consistently assess alternative bundles of A and B (completeness and transitivity assumption); (ii) for any given amount of A and B obtaining more of at least one of them is a preferred situation (no satiation occurs within the relevant domain); (iii) the desire for A (for B) declines relative to that for B (for A) the more of A relative to B (of B relative to A) the individual disposes of (convexity assumption). If the time constraint is binding, it represents the scarcity condition and prevents the individual from increasing consumption in total. In order to get more of A some amount of B has to be sacrificed and vice versa. In this situation the individual is bound to choose the mix which (s)he prefers most among the combinations which are feasible given the time constraint. Once a choice is made, this means, of course, that the opportunity of choosing any other consumption mix has been foregone. In general, any kind of chosen behavior thus entails ‘opportunity costs’ in the form of the next best alternative that, though feasible, has not been chosen. Now imagine that due to some event in the natural or social environment scarcity conditions change so that more time is needed to obtain a unit of A while the time needed to obtain a unit of B is unchanged. This means that the opportunity costs of consuming A have been increased as the amount of B that can be obtained in place of each unit of A is now greater than before. Given that assumptions (i)-(iii) hold, the economic model predicts that individual behavior is
’ The advantage of this simple choice experiments where A and B are different pressing different food/liquid dispenser
problem is that it can easily be reproduced in animal food pellets or liquids for which animals have to work by levers (cf. e.g. Silberberg et al. 1987; Hush et al. 1989).
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likely to respond by consuming relatively more of the relatively less scarce form of nutrition B. * To put it in more general terms, the theory suggests that individual behavior adjusts to changing conditions of scarcity, if these affect the subjectively perceived opportunity costs, with a tendency to economize on resources which become relatively scarcer and vice versa. This basic hypothesis was originally developed as a description of the outcome of conscious, or ‘rational’, decision making, which was believed be characteristic for solving economic problems. In fact, the theory has often been presented with normative connotations and its formal basis, the apparatus of constrained maximization, has been used to develop the foundations of economic decision-making skills, e.g. in operations research. However, recent years have witnessed a growing belief among economists and also experimental psychologists that the approach has general explanatory power and can successfully be applied to investigating all sorts of human behavior (see McKenzie and Tullock (1978), Hirshleifer (1985) and Radnitzky and Bernholz (1986) for surveys of different applications) and non-human behavior (see Kagel et al. (1980) and Hursh (1984) for surveys). The problem with at least some of the attempts to apply to the economic model is that they come very close to being pseudo-explanatory in the following sense. If the postulated preferences and/or constraints may be specified ad hoc, any kind of choice behavior can be made rational, i.e. can be derived from the economic model (Rosenberg 1979; Rachlin 1980; Boland 1981). Such ad hoc specifications are not unusual (see, e.g., Hamermesh and Soss (1974), Blinder (1974), Azzi and Ehrenberg (1975) for particularly obvious cases). They originate from the fact that economics has failed to develop a body of general, empirically meaningful, hypotheses about what people have preferences for as well as about how they perceive actions, outcomes, and constraints. Instead, perfect perceptual skills (perfect information) and
2 There is one exception. If the costs of acquiring A increase, this diminishes the feasible overall amount of nutrition in all bundles in which A is included. If A and B do not only taste different but A, unlike B, also covers elementary nutritional needs, e.g. for caloric intake, the overall reduction in feasible nutrition may induce the individual to consume even more of A as there may be no other way of satisfying the minimal caloric needs. This exceptional case is known in economics as the ‘Giffen paradox’. Although there are only rare empirical examples in the economic literature (see Koenker 1977) several of the animal experiments mentioned in fn. 1 have been designed to produce, and claim to have found empirical evidence for, the Giffen effect.
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formal properties of preference orders (completeness, transitivity, convexity and others) have simply been assumed without much empirical investigation. With respect to the notion of constraints, the perfect information assumption tacitly presupposes, however, that a change in scarcity conditions is always subjectively realized, by the individual decision maker, in exactly the same way as the outside observer sees it. Furthermore, it is implicitly assumed that the recognition of the choice set is otherwise invariable or, if there is a variation, it is irrelevant. With respect to preferences, the formal properties discussed cannot substitute for empirical hypotheses about what people prefer since these are necessary for any empirical explanation. The only pertinent statement which can be deduced is that individual preferences do not change (explicitly asserted by Stigler and Becker 1977). In terms of the original, static, method in which the economic model of behavior was developed the shortcomings may have been overlooked. In such a framework, individual behavior, which actually emerges from an ongoing learning and decision-making process, appears as simple a-temporal one-shot decision making for which information and tastes can safely be assumed to be invariably given. A systematic discussion of the theoretical background of preferences and perceived constraints, largely drawing on results from psychology, has only recently begun. Models of bounded perception and memory capacity (Simon 1976, 1982), of perception biases and decision heuristics (Kahneman et al. 1982; Machina 1987; Frey 1988), and of nonmaximizing behavior (Vaughan and Herrnstein 1987) have been developed. It has also been recognized that perception of choices involves an imaginative element which cannot be conceptualized within a wholly adaptive framework (Shackle 1983; Witt 1989). Obviously, these psychological insights have considerably improved the theoretical foundations of a behavioral model of decision making. What is still necessary is a debate on individual preferences. As will be argued in the next section, such a debate might profit, though possibly only indirectly, from insights taken over from sociobiology. 4. What sociobiology
might have to say on preferences
The lack of an empirical theory about preferences in economics is unsatisfactory,
the content of individual given the prominent role
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assigned to preferences in its individualistic approach. The lack may in part result from the fact that neither preferences nor the way in which they emerge in the human mind are directly observable by the economist. Only with respect to a very limited number of alternatives, a ‘snap-shot’ of individual preferences may, at best, be indirectly identified from the alternatives a person says (s)he prefers or actually chooses (cf. Wong (1978) on the theory underlying such preference revelation experiments). Can sociobiology help to provide the missing hypotheses? From the point of view of sociobiology, it may seem straightforward to assume that preferences are genetically determined. In line with the population oriented perspective, the preferences of human individuals could then be treated in a way which is fundamentally no different from the one in which other inherited personal traits or even morphological features are analyzed with regard to their survival value. Indeed, it can easily be imagined how the theory of natural selection could be applied here. Natural selection should favor preferences which, under the prevailing environmental conditions, increase the probability of having surviving offspring. Thus, innate preferences should have evolved so that the choice behavior they induce comes close to maximizing the genetic fitness of the respective phenotype. On the basis of this conjecture, it seems possible to arrive at quite definite predictions about some items humans should have (innate) preferences for: air, water or other drinkable liquid, sleep, any measure that helps maintain body temperature, nutrition, sexual activity, maternal care, and so on. Such preferences can be expected to enhance genetic fitness when they induce the choice of those items rather than others in a certain mix per period of time. Even some more formal properties of preference orders might be assessable on the basis of the genetic fitness criterion. In fact, this could be so for the entire rational choice model (see Ursprung 1988). As the very notion of preferences is not directly related to something observable, and as the level at which individual preferences are defined is, thus, a matter of pragmatic decision, it could be asked, of course, why a preference for own genetic fitness should not be stipulated immediately. For such a unique preference the items just mentioned would be assigned only an instrumental value. (If genes had preferences they would certainly choose that way.) An assumption like this seems straightforward in particular with regard to the problem of reciprocal
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altruism. Sociobiology has indeed discussed it in this connection, but the idea was not ultimately upheld. In a seminal work on the apparent paradox of reciprocal altruism, Trivers (1971) had originally cast the problem theoretically in the form of an ordinary prisoner’s dilemma game in which the payoff to each individual player is defined in terms of a genetic fitness measure. As is well known, the ‘rational choice’ game theory, to which Trivers thus referred, presumes that the payoffs correspond to the players’ preferences in the form of a monotonic transformation, and that players deliberately choose among strategies according to some decision criterion (dominant strategy, maximin, etc.) which is but a special application of the standard economic theory of behavior set out in the hypotheses (l)-(3) above. In the further discussions, however, sociobiology turned away from such an interpretation and, instead, developed an ‘evolutionary’ game theory (Maynard Smith 1982; Selten 1983). According to this, the cooperative or the non-cooperative strategy in the game (or a mixture of both) is adopted by the individual as a matter of genetic disposition. This amounts to a ‘hard-wired’ committal which conflicts with the very notion of deliberate or, if you like, opportunistic choice on the basis of individual preferences. 3 What sociobiology might have to say about preferences is therefore best summarized by rather concrete specifications of items like those mentioned above. Unfortunately, it is not clear how insights like these could be helpful for an economist faced with the problem of explaining ordinary economic choice behavior in a modem economy. What do the insights contribute to understanding why some people spend a fortune in motor sports rather than donating their money to charitable organizations that help save the lives of road casualties? Why some invest in or consume education while others start to earn money as unskilled workers as soon as possible? Why some people prefer to have two or three houses rather than two or three children? Can any of these 3 It is worth mentioning that, in the evolutionary interpretation, quite general conditions under which altruistic behavior can survive and propagate in a population can be given (Boorman and Levitt 1973; Axelrod and Hamilton 1981) while in the rationalist interpretation, the proof for the existence of a cooperative solution (assuming no information on the players’ past record) still depends on rather specific assumptions (Kurz 1977; Kreps et al. 1982; Neyman 1985; Rubinstein 1986). A convergence of the two interpretations can be imagined. It would require showing that a pre-commitment to always being cooperative is a dominant strategy in a repeated (rational choice) game in which players hold preferences for own genetic fitness; for a first attempt in that direction cf. Giith and Yaari (1992).
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economic decisions be explained as the result of a corresponding innate preference which, in turn, helps to increase genetic fitness? The answer is by no means obvious. However, the last question raises the more fundamental issue of the degree to which the behavior of homo sapiens is still controlled by selection pressure. The recent debate about microevolution versus macroevolution and the state of Darwinian theory in biology has emphasized, among other things, that a large latent genetic variability is always present (Gould 1982; Stebbins and Ayala 1985). In a stationary environment, such variability does not find much phenotypic representation if selection pressure is tight. In an environment where genetic reproduction is assured for largely varying forms of economic behavior - an environment that mankind, as a species, seems to have been able to create - this may, however, be different. Are individual preferences other than those that enhance genetic fitness immediately then just a matter of genetic variance? Is the huge number of different ordinary, but not arbitrary, choices which everybody makes in economic life perhaps determined by genetically fixed preferences and their natural - now no longer latent - inter-individual variance? A definite answer to these questions is hardly”possible. What occurs as a result of sheer genetic variance in such an ‘affluent’ environment is, in the sense of the - functional - theory of natural selection, non-functional and is therefore not explicable within such a theory. A different explanation is thus clearly needed. In the next section such an explanation will be offered. It is based on the hypothesis of an innate learning mechanism in human behavior which explains much of the variety of individual preferences as being acquired.
5. Innate learning mechanisms
and socioeconomic
evolution
In the previous section, it was mentioned that preferences are not directly observable properties ascribed to the individual by an outside observer. Certain properties may, however, be inferred indirectly by appropriately designed revelation procedures. It is interesting now that, in developing a theory of revealed preferences, economists have tried to solve basically the same problem encountered in behavioral psychology when an attempt is made to determine ‘reinforcers’ empirically, that is those items which have the power to reinforce operant behavior of an
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organism (Lea 1978, 1983). In fact, in a suitable preference revelation experiment with mammals some basic items can be expected to be found as objects of the individual preferences which have been identified in laboratory experimentation with mammals (Millenson 1967) as ‘primary’ reinforcers: air, water, sleep, warmth, nutrition, sexual activity, maternal care, love and affection, physical activity, and novelty. Quite plausibly, th ese items have already been mentioned in the previous section as candidates for innate preferences. Besides these innate, primary reinforcers, behavioral psychology suggests the existence of so-called ‘secondary’ or conditioned reinforcers. They are acquired in a conditioning or learning process which builds on the innate learning capacity shared by all vertebrates and man (Skinner 1966; Pulliam and Dunford 1980: 11-44). According to this theory, learning of secondary reinforcers takes place by simple association with primary reinforcing events. If an originally neutral stimulus is systematically paired with a primary reinforcing stimulus, an association is established in such a way that the learned stimulus can eventually act as a substitute, at least for a limited time. A stimulus associated with conditioned reinforcers can also acquire reinforcing power in this way. It can easily be imagined how, given man’s large associative capacity, a most developed hierarchy of learned reinforcers emerges from the very simple innate learning mechanism. In the light of this theory, some instructive conclusions can be drawn with regard to individual preferences. Their variety can obviously be explained as the result of a permanent learning process, a slow process of preference formation and change. In an individual lifetime history of conditioning, a more or less long chain of learned associations leads from the few innate preferences to those actually revealed in current everyday life. In this process, the current environmental conditions have a crucial impact. They determine the extent to which individually chosen actions are rewarding or non-rewarding and thus affect the ongoing conditioning process. Environment means here largely other individuals’ actions and reactions or, ultimately, preferences. Thus, much of the ‘socialization’ process which human individuals go through with decreasing intensity during their lifetime is simply an attempt by the individual’s social environment (parents, teachers, peers, superiors) to form or change the individual’s preferences. The mutual dependence of the individual preference formation processes within a group or even society has two important implica-
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tions with respect to societal evolution. First, at each point in time, the state of preferences collectively reached imposes constraints on the individual changes. The result is a path-dependency of all individual processes of preference change. This means that, at any moment of time, the present state of a person’s preferences crucially hinges upon the previous history of the individual’s preference formation (for an interesting attempt in this direction cf. Kapteyn et al. 1980). Second, the collective features of the preference formation process are likely to be subject to frequency-dependency effects. The presence of such effects means that individual changes depend on whether, and with which relative frequency, the same changes have already occurred with others. This can give rise to typical features of non-linear dynamics abrupt change and hysteresis (Witt 1991). In the broader perspective of societal evolution, the theory of collective preference formation processes proposed here supports the theory of cultural evolution as outlined by Hayek (1979). It suggests a distinct source of change besides, and largely independent of, phylogenetic change on the one side and cultural change, as far as it is intellectually created, on the other. Sociobiology is particularly concerned with the impact of phylogenetic evolution and may thus indeed be able to explain satisfactorily primitive forms of preference differentiation and social behavior as a result of genetic adaptation to the selection environment faced by early man. As inherited attributes, they are still present in many instinctive reactions and evaluations of modern man. As opposed to this, human intelligence and imagination - the creation, registering, and proliferation of human knowledge - are often viewed as the only other source of evolution, in particular of the evolution of human culture. In fact, it has recently been speculated that intellectual evolution functions as a new and independent mechanism based on the same principles of the variation, selection, and replication, but acting substantially faster (Dawkins 1976: ch. 11; Popper 1984). The notion developed above suggests a different view. Collective preference formation processes can be seen as underlying the spontaneous emergence of civilized interactions in the more recent history of mankind. In this perspective, culture rests, at least in part, on behavioral regularities exhibited by the individuals involved which are neither genetically fixed nor necessarily a result of deliberate human creation. The process of collectively learning of preferences is adaptive in that it depends on whether individually rewarding or non-rewarding experi-
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ences are produced. It works independently of deliberate, intellectual activities. Reward is not necessarily the result of deliberate choice or design, nor must the individual be able to grasp why (s)he becomes positively or negatively conditioned; in fact, the latter may be difficult given the complicated interactive process. From this brief sketch of the interactions between preferences and socioeconomic evolution it is already apparent that the present view is different, yet partially compatible with the theory of co-evolutionary processes and of cultural transmission that have been advanced in the sociobiological tradition in recent years (Durham 1978; Lumsden and Wilson 3981; Gavalli-Sforza and Feldman 1981; Boyd and Richerson 1985). In distinguishing a driving force and a mechanism of cultural evolution ‘between instinct and reason’ (Hayek 1979), the view suggested here is obviously more remote from the genetic than from the co-evolutionary view. Accordingly, the process of learning and change is not limited to transmission between generations. If it is not in a phase of self-stabilizing stasis, the process may therefore produce substantially more rapid transformations within only one or two generations as has been evident in the last two hundred years. Indeed, for the research interests of sociobiology, in contrast to those of economics, a time horizon as short as this is perhaps of no significance. However, the dynamic features of the potentially rapid intra-generational transitions still need serious interdisciplinary exploration.
6. Conclusions In their respective domains economics and sociobiology face some problems which are quite similar. Yet, the ways in which these problems are approached in the two disciplines differ significantly. A comparison of the two approaches is therefore instructive. This is true also for what economics and sociobiology have to say on preferences. The individualistic economic theory of behavior claims that human beings choose those actions which they prefer most from a constrained set of feasible actions. However, what is lacking is an empirical theory of what it is that individuals have preferences for - a theory about the content of preference orders - which is necessary to avoid a pseudo-explanatory attitude of rationalizing all behavior by suitably specifying
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the underlying preferences. The question has thus been raised here as to whether sociobiology might contribute to developing such a theory. In discussing this question it has been argued that the populationoriented rather than individualistic perspective of sociobiology can provide some insights albeit on a very elementary level only. A more elaborate theory must also explain higher, culturally formed, behavior. Such a theory may be obtained by recognizing the influences of innate learning mechanisms in higher living beings. According to such a theory, which refers to the conditioning model developed in behavioral psychology, the formation of, and change in, individual preferences appear as processes of a life-long interactive learning that starts from basic and rather uniform genetic dispositions and develops into highly differentiated, idiosyncratic forms. As a consequence, preferences have determined and partly acquired to be assessed as partly genetically from the specific cultural influences of the respective social environment.
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Frey, B.S., 1988. Ein ipsatives Model1 menschlichen Verhaltens. Analyse und Kritik 10, 181-205. Gishelin, M.T., 1978. The economy of the body. American Economic Review 68, Papers and Proceedings, 233-237. Gould, S.J., 1982. ‘The meaning of punctuated equilibrium and its role in validating a hierarchal approach to macroevolution’. In: R. Milkman (ed.), Perspectives on evolution. Cambridge: Sinauer Association. pp. 83-105. Gtith, W. and M. Yaari, 1992. ‘An evolutionary approach to explain reciprocal behavior in a simple strategic game’. In: U. Witt (ed.), Explaining process and change: Approaches to evolutionary economics. Ann Arbor, MI: Michigan University Press. pp. 23-24. Hamermesh, D.S. and N.M. Sass, 1974. An economic theory of suicide. Journal of Political Economy 82, 83-92. Harcourt, A.H. et at., 1981. Testis weight, body weight and breeding system in primates. Nature 293. 55-57. Hayek, F.A. , 1979. ‘The three sources of human values’. In: F.A. Hayek, Law, legislation, and liberty. London: Routledge. Hirshleifer, J., 1977a. Shakespeare vs. Becker on altruism: The importance of having the last word. Journal of Economic Literature 15, 500-502. Hirshleifer, J., 1977b. Economics from a biological viewpoint. Journal of Law and Economics 20, l-52. Hirshleifer, J., 1982. Evolutionary models in economics and law. Research in Law and Economics 4, l-60. Hirshleifer, J., 1985. The expanding domain of economics. American Economic Review 75(6), 53-68. Homans, G.C., 1961. Social behavior. New York: Harcourt Brace. Hursh, S.R., 1984. Behavioral economics. Journal of Experimental Analysis of Behavior 42, 435-452. Hursh, S.R., T.G. Raslear, R. Bauman and H. Black, 1989. ‘The qualitative analysis of economic behavior with laboratory animals’. In: K.G. Grunert and F. ijlander (eds.), Understanding economic behavior. Dodrecht: Reidel. pp. 393-407. Kagel, J.H., R.C. Battalio, L. Green and H. Rachlin, 1980. ‘Consumer demand theory applied to choice behavior of rats’. In: J.E.R. Staddon (ed.), Limits to action. New York: Academic Press. pp. 237-267. Kahneman, D., P. Slavic and A. Tversky (eds.), 1982. Judgement under uncertainty: Heuristics and biases. Cambridge: Cambridge University Press. Kapteyn, A., T. Wandsbeek and J. Buyze, 1980. The dynamics of preference formation. Journal of Economic Behavior and Organization 1, 123-157. Kauder, E., 1965. A history of marginal utility theory. Princeton, NJ: Princeton University Press. Koenker. R., 1977. Was bread giffen? The demand for food in England circa 1790. Review of Economics and Statistics 59, 225-229. Krebs, J.R. and N.B. Davies (eds.), 1984. Behavioral ecology (2nd. ed.). Oxford: Blackwell. Kreps, M.D., P. Milgrom. J. Roberts and R. Wilson, 1982. Rational cooperation in the finitely repeated prisoner’s dilemma. Journal of Economic Theory 27, 245-252. Kurz, M., 1977. ‘Altruistic equilibrium’. In: B. Balassa, R. Nelson (eds.), Economic progress, private values, and public policy. Amsterdam: North-Holland. pp. 177-200. Lea. S.E.G., 1978. The psychology and economics of demand. Psychological Bulletin 85, 44-446. Lea, S.E.G., 1983. ‘The analysis of need’. In: R.L. Mellgren (ed.), Animal cognition and behavior. Amsterdam: North-Holland. pp. 31-63. Lumsden, C.J. and E.O. Wilson, 1981. Genes, mind, and culture - The coevolutionary process. Cambridge, MA: Harvard University Press. Machina, M.J., 1987. Choice under uncertainty: Problems solved and unsolved. Economic Perspectives 1, 121-154.
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Malthus, J.R., 1797. An essay on the principle of population. 2 ~01s. Cited according to the 7th ed. of 1914. Reprinted London: Everyman. Margolis, H., 1982. Selfishness, altruism, and rationality. Cambridge: Cambridge University Press. Marshall, A., 1938. Principles of economics (8th ed.). London: Macmillan. Maynard Smith, J., 1982. Evolution and the theory of games. Cambridge: Cambridge University Press. McKenzie R.B. and G. Tullock, 1978. The new world of economics - Exploration into the human experience (2nd ed.). Homewood, IL: Irwin. Milinski, M., 1984. Competitive resource sharing: an experimental test of a learning rule for ES%. Animal Behavior 32, 233-242. Millenson, J.R., 1967. Principles of behavioral analysis. New York: Macmillan. Neyman, A., 1985. Bounded complexity justifies cooperation in the finitely repeated prisoner’s dilemma. Economic Letters 19, 227-229. Popper, K.R., 1984. ‘Evolutionary epistemology’. In: J.W. Pollard (ed.), Evolutionary theory: Paths into the future. Chichester: Wiley. pp. 239-255. Pulliam, H.R. and C. Dunford, 1980. Programmed to learn: An essay on the evolution of culture. New York: Columbia University Press. Rachlin, H., 1980. ‘Economics and behavioral psychology’. In: J.E.R. Staddon (ed.), Limits to action - The allocation of individual behavior. New York: Academic Press. pp. 205-236. Radnitzky, G. and P. Bernholz, (eds.), 1986. Economic imperialism: The economic approach applied outside the traditional areas of economics. New York: Paragon House. Rosenberg, V., 1979. Can economic theory explain everything? Philosophy of Social Sciences, 509-529. Rubinstein, A., 1986. Finite automata play - The repeated prisoner’s dilemma. Journal of Economic Theory 39, 83-96. Schweber, S.S., 1977. The origin of the origin revisited. Journal of History of Biology 10, 229-316. Selten, R., 1983. Evolutionary stability in extensive two-person games. Mathematical Social Sciences 5, 269-363. Shackle, G.L.S., 1983. ‘The bounds of unknowledge’. In: J. Wiseman (ed.), Beyond positive economics. London: Macmillan. pp. 28-37. Silberberg, A., F.R. Warren-Boulton and T. Asano, 1987. Inferior-good and Giffen-good effects in monkey choice behavior. Journal of Experimental Psychology 13, 292-301. Simon, H.A., 1976. ‘From substantive to procedural rationality’. In: S.J. Latsis (ed.), Method and appraisal in economics. Cambridge: Cambridge University Press. pp. 129-148. Simon, H.A., 1982. Models of bounded rationality. Vol. 2, Behavioral economics and business organization. Cambridge, MA: MIT Press. Skinner, B.F., 1966. ‘Operant behavior’. In: W.K. Honig (ed.), Operant behavior - Areas of research and application. New York: Meredith Corp. pp. 12-32. Stebbins, G.L. and F.J. Ayala, 1985. The evolution of Darwinism. Scientific American 253, 54-64. Stigler, G.J. and G.S. Becker, 1977. De gustibus non est disputandum. American Economic Review 61, 76-90. Sugden, R., 1986. The economics of rights, cooperation and welfare. New York: Basil Blackwell. Thibaut, J.W. and H.H. Kelley, 1959. The social psychology of groups. New York: Wiley. Tietzel, M., 1983. ijkonomie und Soziobiologie - oder: Wer kann was von wem lernen? Zeitschrift fir Wirtschaftsund Sozialwissenschaften 103, 107-127. Trivers, R.L., 1971. The evolution of reciprocal altruism. Quarterly Review of Biology 46, 281-299. Trivers, R.L., 1972. ‘Parental investment and sexual selection’. In: B. Campbell (ed.), Sexual selection and the descent of man. Chicago, IL: Aldine. pp. 139-179. Tullock, G., 1977. Economics and sociobiology: A comment. Journal of Economic Literature 15, 502-506.
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Ursprung, H.W., 1988. Evolution and the economic approach to human behavior. Journal of Social and Biological Structure 11, 257-279. Vaughan, W., Jr. and R.J. Herrnstein, 1987. ‘Stability, melioration, and natural selection’. In: L. Green and J.H. Kagel (eds.), Advances in behavioral economics, Vol. 1. Norwood, NJ: Ablex. pp. 185-215. Waage, J.K., 1979. Dual function of the damselfly penis: Sperm removal and transfer. Science 203, 916-918. Wilson, E.O., 1975. Sociobiology - The new synthesis. Cambridge, MA: Belknap Press. Witt, U., 1989. ‘Subjectivism in economics - A suggested reorientation’. In: K.G. Grunert and F. Glander (eds.), Understanding economic behavior. Dodrecht: Reidel. pp. 409-431. Witt, U., 1991. ‘Reflections on the present state of evolutionary economic theory’. In: G. Hodgson and E. Screpanti (eds.), Rethinking economics: Markets, technology, and economic evolution. Aldershot: Edward Elgar. In press. Wong, S., 1978. The foundations of Paul Samuelson’s revealed preference theory. London: Routledge & Kegan Paul.
Psychology
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12 (1991) 557-573
Economics, sociobiology, and behavioral psychology on preferences Ulrich Witt * Uniuersify of Freiburg, Freiburg. Germany Received
May 28, 1990; accepted
July 16, 1991
Economists have become increasingly interested in hypotheses from sociobiology as a source of inspiration for filling gaps in the economic model of behavior. To avoid borrowing eclectically and arbitrarily from neighboring disciplines, this paper attempts to outline in a systematic way the similarities and differences between the approaches taken in economics and sociobiology. In doing so, special attention is given to an empirical theory of preferences that is lacking in economics. Here, inspiration from sociobiology would seem to be particularly useful. The considerations in the paper suggest that sociobiological arguments may indeed be helpful, albeit at a very elementary level only. A more comprehensive theory cannot ignore the influences of innate learning mechanisms in higher living beings. An elaborated theory of preferences in economics will have to acknowledge and incorporate insights from behavioral psychology.
1. Introduction In recent years an increasing number of economists have been interested in discussing whether or not hypotheses from sociobiology might have a role to play in economics (Becker 1976; Hirshleifer 1977a; Tullock 1977; Hayek 1979; Margolis 1982; Tietzel 1983; Sugden 1986; Ursprung 1988; Giith and Yaari 1992). At first sight, economics and sociobiology do seem to have some things in common. In economics, scarcity and competition figure prominently as basic facts around * 1 would like to thank R.J. Hermstein, J. Irving-Lessmann S.A. Kauffman, and the participants of the European Sociobiological Society meeting in Brussels for helpful discussions related to earlier drafts of the paper. Thanks also to three anonymous referees of the present journal and W. Fred van Raaij for their detailed comments and recommendations. The usual disclaimer of course applies. Author’s address: U. Witt, Faculty of Economics, University of Freiburg, Europaplatz 1, 7800 Freiburg, Germany.
0167-4870/91/$03.50
0 1991 - Elsevier Science Publishers
B.V. All rights reserved
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which theory has been built. In sociobiology, as in biology in general, competition and scarcity of natural resources also play a role, for instance, where habitat space (Milinski 1984) or reproduction opportunities, which are usually competitive, are scarce (on mating opportunities, see Waage 1979; Harcourt et al. 1981; on rearing offspring, see Trivers 1972). Here too, theoretical attempts to explain observable behavior reflect these basic conditions (see, e.g., Wilson 1975: ch. 3 and 6), though at a less prominent level. Apart from that, however, the basic interpretation of behavior is markedly different in the two disciplines. Sociobiology, with its roots in the Darwinian theory of natural selection, is concerned with behavioral traits as represented in whole populations and produced by the principles of variation, selection and replication. In contrast, economics, at least the microeconomic theory discussed here, is deeply committed to the idea of individual autonomy. It has traditionally tried to explain behavior on the basis of a calculus of ‘rational’ decision making. Many components of the rational choice model are, of course, left unspecified, or are only specified in a purely ad hoc manner. A striking example are the hypotheses on individual preferences and on human information processing. Thus, the economic model of behavior is actually incomplete and needs to be complemented with additional empirical hypotheses. Such an extension cannot only be expected to improve the explanatory power of microeconomic theory, but may also offer some new insights into particular features of evolution in the socioeconomic realm. In order to extend the boundaries of economic theory, an interdisciplinary dialogue seems necessary in which sociobiology may indeed play a role. However, a more elaborate theory will have to consider, in addition, the influences of innate learning mechanisms in higher living beings. This leads, in a natural way, to research topics traditionally investigated in psychology. The paper proceeds as follows: section 2 discusses in more detail both the similarities and the differences between economics and sociobiology. Section 3 presents the basic structure of the economic theory of behavior and explains what is lacking. Special concern will be given to the hypotheses on individual preferences, i.e. on what people like/dislike and why. Section 4 considers how sociobiology might be helpful here from an economist’s point of view. It will be shown that important insights can be gained, but that additional hypotheses are
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needed to deal with the kind of behavior which economists usually consider. These hypotheses, to be taken from the domain of the behavioral sciences and psychology, are briefly outlined in section 5 together with some implications. Section 6 contains some concluding remarks.
2. Scarcity and competition in economics and biology It has often been argued that there are significant similarities between economics and biology and, sometimes, even modest forms of mutual inspiration in particular with regard to the theory of natural selection (Marshall 1938 passim; Hirshleifer 1977b, 1982; Fao 1982; Ghishelin 1978; Schweber 1977; Bowler 1989: 164-175). Since Malthus (1797) relative scarcity of resources, a key feature in the realm of economics, has been related to variations in generative behavior. Darwin’s theory of genetic fitness is intimately related to competition and scarcity of resources, as reproductive success of the phenotype is a relative measure which depends on competitive advantage of particular traits in situations where increasing population density entails decreasing chances for survival and for raising offspring. Where these traits are behavioral ones, the proper domain of sociobiology (cf. Wilson (1975) and Krebs and Davies (1984) for introductions) is entered. Both sociobiology and economics are interested in explaining observable behavior in terms of the obvious or, in case of genetic fitness, latent competition induced by scarcity. The former discipline relates the outcome primarily to the organisms’ innate physical and behavioral traits which may or may not enable them to exceed the reproduction rates of rival individuals or rival species. In the socioeconomic sphere, the outcome depends to a usually much more significant extent on an elaborate framework of social behavioral regularities (institutions) as, for instance, rules of conduct, entitlement rights, and law. These are often presupposed implicitly when, for example, competition in the market place is discussed. Even on an intra-individual level, the allocation of an organism’s own scarce resources, time and energy, to alternative options available to the organism/individual may be identified as a competition phenomenon. This internal competition is not independent of external scarcity conditions since the latter may affect both the prospects for
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success and the relative costs of competing options (Wilson 1975: ch. 6). In the Darwinian theory of natural selection, the problem is treated as one of genetic adaptation, and specialization of both, the organism and its parts, is explained by this. Similarly, (micro-) economic theory suggests that observable human behavior can be explained as a response to the prevailing conditions of external scarcity, but the internal choice of one course of action over another is usually interpreted as a matter of deliberate (rational) decision making. In pursuing such analogies, obvious differences between the two disciplines with respect to the role of competition and scarcity should not be overlooked. First, while in economics the notions of scarcity and competition are themselves at the center stage of theorizing, they have a role to play in biology only to the extent to which they can help to explain differences in genetic fitness. Second, in biology, scarcity, if it is relevant, is measured in terms of ‘objective’ criteria such as supply of energy, water, and calories per member of a population in a given habitat. In economics no such objective, easily verified, criteria are used. Since the overthrow of objectivist concepts such as the labor theory of value by the ‘subjectivist revolution’ of the 1870’s, scarcity has been defined in terms of subjective evaluations and desires of the individuals involved or, in economic terminology, relative to their individual preferences (Kauder 1965). As a consequence, intra-individual discrimination between competing options is, in the perspective of economics, a highly subjective matter, and this certainly entails an individualistic bias for the whole theory.
3. The economic model of behavior The simple explanatory scheme which underlies the economic theory of behavior consists of three hypotheses: (1) people are supposed to perceive a set of alternative courses of action and outcomes, but know that only a subset is actually feasible because resources commanded by the individual are scarce; (2) people are supposed to evaluate the alternatives according to their subjective desirability, i.e. according to individual preferences; (3) it is suggested that the alternative most preferred by the individual can be inferred from choices actually observed. This basic construction has also been applied quite successfully by other social scientists as, for instance, in the theory of social
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exchange in social psychology (Thibaut and Kelley 1959) and sociology (Homans 1961), or in a more sophisticated form in the ‘expectancy X value’-approach in psychology (Atkinson 1982). The three hypotheses taken together provide the basis on which, even with only a very limited knowledge of the particular subjective preferences, attempts are made to predict the effect of changing conditions of scarcity on individual behavior. Consider a simple example of an individual’s choice of nutrition. Suppose, for convenience, that the individual can only allocate a fixed amount of her/his time to collecting or producing some form of nutrition A and/or some form B at a constant level of physical effort where A and B strongly differ in taste. 1 With respect to the individual preference it is usually assumed that: (i) the individual evaluates A and B positively and is able to consistently assess alternative bundles of A and B (completeness and transitivity assumption); (ii) for any given amount of A and B obtaining more of at least one of them is a preferred situation (no satiation occurs within the relevant domain); (iii) the desire for A (for B) declines relative to that for B (for A) the more of A relative to B (of B relative to A) the individual disposes of (convexity assumption). If the time constraint is binding, it represents the scarcity condition and prevents the individual from increasing consumption in total. In order to get more of A some amount of B has to be sacrificed and vice versa. In this situation the individual is bound to choose the mix which (s)he prefers most among the combinations which are feasible given the time constraint. Once a choice is made, this means, of course, that the opportunity of choosing any other consumption mix has been foregone. In general, any kind of chosen behavior thus entails ‘opportunity costs’ in the form of the next best alternative that, though feasible, has not been chosen. Now imagine that due to some event in the natural or social environment scarcity conditions change so that more time is needed to obtain a unit of A while the time needed to obtain a unit of B is unchanged. This means that the opportunity costs of consuming A have been increased as the amount of B that can be obtained in place of each unit of A is now greater than before. Given that assumptions (i)-(iii) hold, the economic model predicts that individual behavior is
’ The advantage of this simple choice experiments where A and B are different pressing different food/liquid dispenser
problem is that it can easily be reproduced in animal food pellets or liquids for which animals have to work by levers (cf. e.g. Silberberg et al. 1987; Hush et al. 1989).
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likely to respond by consuming relatively more of the relatively less scarce form of nutrition B. * To put it in more general terms, the theory suggests that individual behavior adjusts to changing conditions of scarcity, if these affect the subjectively perceived opportunity costs, with a tendency to economize on resources which become relatively scarcer and vice versa. This basic hypothesis was originally developed as a description of the outcome of conscious, or ‘rational’, decision making, which was believed be characteristic for solving economic problems. In fact, the theory has often been presented with normative connotations and its formal basis, the apparatus of constrained maximization, has been used to develop the foundations of economic decision-making skills, e.g. in operations research. However, recent years have witnessed a growing belief among economists and also experimental psychologists that the approach has general explanatory power and can successfully be applied to investigating all sorts of human behavior (see McKenzie and Tullock (1978), Hirshleifer (1985) and Radnitzky and Bernholz (1986) for surveys of different applications) and non-human behavior (see Kagel et al. (1980) and Hursh (1984) for surveys). The problem with at least some of the attempts to apply to the economic model is that they come very close to being pseudo-explanatory in the following sense. If the postulated preferences and/or constraints may be specified ad hoc, any kind of choice behavior can be made rational, i.e. can be derived from the economic model (Rosenberg 1979; Rachlin 1980; Boland 1981). Such ad hoc specifications are not unusual (see, e.g., Hamermesh and Soss (1974), Blinder (1974), Azzi and Ehrenberg (1975) for particularly obvious cases). They originate from the fact that economics has failed to develop a body of general, empirically meaningful, hypotheses about what people have preferences for as well as about how they perceive actions, outcomes, and constraints. Instead, perfect perceptual skills (perfect information) and
2 There is one exception. If the costs of acquiring A increase, this diminishes the feasible overall amount of nutrition in all bundles in which A is included. If A and B do not only taste different but A, unlike B, also covers elementary nutritional needs, e.g. for caloric intake, the overall reduction in feasible nutrition may induce the individual to consume even more of A as there may be no other way of satisfying the minimal caloric needs. This exceptional case is known in economics as the ‘Giffen paradox’. Although there are only rare empirical examples in the economic literature (see Koenker 1977) several of the animal experiments mentioned in fn. 1 have been designed to produce, and claim to have found empirical evidence for, the Giffen effect.
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formal properties of preference orders (completeness, transitivity, convexity and others) have simply been assumed without much empirical investigation. With respect to the notion of constraints, the perfect information assumption tacitly presupposes, however, that a change in scarcity conditions is always subjectively realized, by the individual decision maker, in exactly the same way as the outside observer sees it. Furthermore, it is implicitly assumed that the recognition of the choice set is otherwise invariable or, if there is a variation, it is irrelevant. With respect to preferences, the formal properties discussed cannot substitute for empirical hypotheses about what people prefer since these are necessary for any empirical explanation. The only pertinent statement which can be deduced is that individual preferences do not change (explicitly asserted by Stigler and Becker 1977). In terms of the original, static, method in which the economic model of behavior was developed the shortcomings may have been overlooked. In such a framework, individual behavior, which actually emerges from an ongoing learning and decision-making process, appears as simple a-temporal one-shot decision making for which information and tastes can safely be assumed to be invariably given. A systematic discussion of the theoretical background of preferences and perceived constraints, largely drawing on results from psychology, has only recently begun. Models of bounded perception and memory capacity (Simon 1976, 1982), of perception biases and decision heuristics (Kahneman et al. 1982; Machina 1987; Frey 1988), and of nonmaximizing behavior (Vaughan and Herrnstein 1987) have been developed. It has also been recognized that perception of choices involves an imaginative element which cannot be conceptualized within a wholly adaptive framework (Shackle 1983; Witt 1989). Obviously, these psychological insights have considerably improved the theoretical foundations of a behavioral model of decision making. What is still necessary is a debate on individual preferences. As will be argued in the next section, such a debate might profit, though possibly only indirectly, from insights taken over from sociobiology. 4. What sociobiology
might have to say on preferences
The lack of an empirical theory about preferences in economics is unsatisfactory,
the content of individual given the prominent role
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assigned to preferences in its individualistic approach. The lack may in part result from the fact that neither preferences nor the way in which they emerge in the human mind are directly observable by the economist. Only with respect to a very limited number of alternatives, a ‘snap-shot’ of individual preferences may, at best, be indirectly identified from the alternatives a person says (s)he prefers or actually chooses (cf. Wong (1978) on the theory underlying such preference revelation experiments). Can sociobiology help to provide the missing hypotheses? From the point of view of sociobiology, it may seem straightforward to assume that preferences are genetically determined. In line with the population oriented perspective, the preferences of human individuals could then be treated in a way which is fundamentally no different from the one in which other inherited personal traits or even morphological features are analyzed with regard to their survival value. Indeed, it can easily be imagined how the theory of natural selection could be applied here. Natural selection should favor preferences which, under the prevailing environmental conditions, increase the probability of having surviving offspring. Thus, innate preferences should have evolved so that the choice behavior they induce comes close to maximizing the genetic fitness of the respective phenotype. On the basis of this conjecture, it seems possible to arrive at quite definite predictions about some items humans should have (innate) preferences for: air, water or other drinkable liquid, sleep, any measure that helps maintain body temperature, nutrition, sexual activity, maternal care, and so on. Such preferences can be expected to enhance genetic fitness when they induce the choice of those items rather than others in a certain mix per period of time. Even some more formal properties of preference orders might be assessable on the basis of the genetic fitness criterion. In fact, this could be so for the entire rational choice model (see Ursprung 1988). As the very notion of preferences is not directly related to something observable, and as the level at which individual preferences are defined is, thus, a matter of pragmatic decision, it could be asked, of course, why a preference for own genetic fitness should not be stipulated immediately. For such a unique preference the items just mentioned would be assigned only an instrumental value. (If genes had preferences they would certainly choose that way.) An assumption like this seems straightforward in particular with regard to the problem of reciprocal
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altruism. Sociobiology has indeed discussed it in this connection, but the idea was not ultimately upheld. In a seminal work on the apparent paradox of reciprocal altruism, Trivers (1971) had originally cast the problem theoretically in the form of an ordinary prisoner’s dilemma game in which the payoff to each individual player is defined in terms of a genetic fitness measure. As is well known, the ‘rational choice’ game theory, to which Trivers thus referred, presumes that the payoffs correspond to the players’ preferences in the form of a monotonic transformation, and that players deliberately choose among strategies according to some decision criterion (dominant strategy, maximin, etc.) which is but a special application of the standard economic theory of behavior set out in the hypotheses (l)-(3) above. In the further discussions, however, sociobiology turned away from such an interpretation and, instead, developed an ‘evolutionary’ game theory (Maynard Smith 1982; Selten 1983). According to this, the cooperative or the non-cooperative strategy in the game (or a mixture of both) is adopted by the individual as a matter of genetic disposition. This amounts to a ‘hard-wired’ committal which conflicts with the very notion of deliberate or, if you like, opportunistic choice on the basis of individual preferences. 3 What sociobiology might have to say about preferences is therefore best summarized by rather concrete specifications of items like those mentioned above. Unfortunately, it is not clear how insights like these could be helpful for an economist faced with the problem of explaining ordinary economic choice behavior in a modem economy. What do the insights contribute to understanding why some people spend a fortune in motor sports rather than donating their money to charitable organizations that help save the lives of road casualties? Why some invest in or consume education while others start to earn money as unskilled workers as soon as possible? Why some people prefer to have two or three houses rather than two or three children? Can any of these 3 It is worth mentioning that, in the evolutionary interpretation, quite general conditions under which altruistic behavior can survive and propagate in a population can be given (Boorman and Levitt 1973; Axelrod and Hamilton 1981) while in the rationalist interpretation, the proof for the existence of a cooperative solution (assuming no information on the players’ past record) still depends on rather specific assumptions (Kurz 1977; Kreps et al. 1982; Neyman 1985; Rubinstein 1986). A convergence of the two interpretations can be imagined. It would require showing that a pre-commitment to always being cooperative is a dominant strategy in a repeated (rational choice) game in which players hold preferences for own genetic fitness; for a first attempt in that direction cf. Giith and Yaari (1992).
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economic decisions be explained as the result of a corresponding innate preference which, in turn, helps to increase genetic fitness? The answer is by no means obvious. However, the last question raises the more fundamental issue of the degree to which the behavior of homo sapiens is still controlled by selection pressure. The recent debate about microevolution versus macroevolution and the state of Darwinian theory in biology has emphasized, among other things, that a large latent genetic variability is always present (Gould 1982; Stebbins and Ayala 1985). In a stationary environment, such variability does not find much phenotypic representation if selection pressure is tight. In an environment where genetic reproduction is assured for largely varying forms of economic behavior - an environment that mankind, as a species, seems to have been able to create - this may, however, be different. Are individual preferences other than those that enhance genetic fitness immediately then just a matter of genetic variance? Is the huge number of different ordinary, but not arbitrary, choices which everybody makes in economic life perhaps determined by genetically fixed preferences and their natural - now no longer latent - inter-individual variance? A definite answer to these questions is hardly”possible. What occurs as a result of sheer genetic variance in such an ‘affluent’ environment is, in the sense of the - functional - theory of natural selection, non-functional and is therefore not explicable within such a theory. A different explanation is thus clearly needed. In the next section such an explanation will be offered. It is based on the hypothesis of an innate learning mechanism in human behavior which explains much of the variety of individual preferences as being acquired.
5. Innate learning mechanisms
and socioeconomic
evolution
In the previous section, it was mentioned that preferences are not directly observable properties ascribed to the individual by an outside observer. Certain properties may, however, be inferred indirectly by appropriately designed revelation procedures. It is interesting now that, in developing a theory of revealed preferences, economists have tried to solve basically the same problem encountered in behavioral psychology when an attempt is made to determine ‘reinforcers’ empirically, that is those items which have the power to reinforce operant behavior of an
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organism (Lea 1978, 1983). In fact, in a suitable preference revelation experiment with mammals some basic items can be expected to be found as objects of the individual preferences which have been identified in laboratory experimentation with mammals (Millenson 1967) as ‘primary’ reinforcers: air, water, sleep, warmth, nutrition, sexual activity, maternal care, love and affection, physical activity, and novelty. Quite plausibly, th ese items have already been mentioned in the previous section as candidates for innate preferences. Besides these innate, primary reinforcers, behavioral psychology suggests the existence of so-called ‘secondary’ or conditioned reinforcers. They are acquired in a conditioning or learning process which builds on the innate learning capacity shared by all vertebrates and man (Skinner 1966; Pulliam and Dunford 1980: 11-44). According to this theory, learning of secondary reinforcers takes place by simple association with primary reinforcing events. If an originally neutral stimulus is systematically paired with a primary reinforcing stimulus, an association is established in such a way that the learned stimulus can eventually act as a substitute, at least for a limited time. A stimulus associated with conditioned reinforcers can also acquire reinforcing power in this way. It can easily be imagined how, given man’s large associative capacity, a most developed hierarchy of learned reinforcers emerges from the very simple innate learning mechanism. In the light of this theory, some instructive conclusions can be drawn with regard to individual preferences. Their variety can obviously be explained as the result of a permanent learning process, a slow process of preference formation and change. In an individual lifetime history of conditioning, a more or less long chain of learned associations leads from the few innate preferences to those actually revealed in current everyday life. In this process, the current environmental conditions have a crucial impact. They determine the extent to which individually chosen actions are rewarding or non-rewarding and thus affect the ongoing conditioning process. Environment means here largely other individuals’ actions and reactions or, ultimately, preferences. Thus, much of the ‘socialization’ process which human individuals go through with decreasing intensity during their lifetime is simply an attempt by the individual’s social environment (parents, teachers, peers, superiors) to form or change the individual’s preferences. The mutual dependence of the individual preference formation processes within a group or even society has two important implica-
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tions with respect to societal evolution. First, at each point in time, the state of preferences collectively reached imposes constraints on the individual changes. The result is a path-dependency of all individual processes of preference change. This means that, at any moment of time, the present state of a person’s preferences crucially hinges upon the previous history of the individual’s preference formation (for an interesting attempt in this direction cf. Kapteyn et al. 1980). Second, the collective features of the preference formation process are likely to be subject to frequency-dependency effects. The presence of such effects means that individual changes depend on whether, and with which relative frequency, the same changes have already occurred with others. This can give rise to typical features of non-linear dynamics abrupt change and hysteresis (Witt 1991). In the broader perspective of societal evolution, the theory of collective preference formation processes proposed here supports the theory of cultural evolution as outlined by Hayek (1979). It suggests a distinct source of change besides, and largely independent of, phylogenetic change on the one side and cultural change, as far as it is intellectually created, on the other. Sociobiology is particularly concerned with the impact of phylogenetic evolution and may thus indeed be able to explain satisfactorily primitive forms of preference differentiation and social behavior as a result of genetic adaptation to the selection environment faced by early man. As inherited attributes, they are still present in many instinctive reactions and evaluations of modern man. As opposed to this, human intelligence and imagination - the creation, registering, and proliferation of human knowledge - are often viewed as the only other source of evolution, in particular of the evolution of human culture. In fact, it has recently been speculated that intellectual evolution functions as a new and independent mechanism based on the same principles of the variation, selection, and replication, but acting substantially faster (Dawkins 1976: ch. 11; Popper 1984). The notion developed above suggests a different view. Collective preference formation processes can be seen as underlying the spontaneous emergence of civilized interactions in the more recent history of mankind. In this perspective, culture rests, at least in part, on behavioral regularities exhibited by the individuals involved which are neither genetically fixed nor necessarily a result of deliberate human creation. The process of collectively learning of preferences is adaptive in that it depends on whether individually rewarding or non-rewarding experi-
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ences are produced. It works independently of deliberate, intellectual activities. Reward is not necessarily the result of deliberate choice or design, nor must the individual be able to grasp why (s)he becomes positively or negatively conditioned; in fact, the latter may be difficult given the complicated interactive process. From this brief sketch of the interactions between preferences and socioeconomic evolution it is already apparent that the present view is different, yet partially compatible with the theory of co-evolutionary processes and of cultural transmission that have been advanced in the sociobiological tradition in recent years (Durham 1978; Lumsden and Wilson 3981; Gavalli-Sforza and Feldman 1981; Boyd and Richerson 1985). In distinguishing a driving force and a mechanism of cultural evolution ‘between instinct and reason’ (Hayek 1979), the view suggested here is obviously more remote from the genetic than from the co-evolutionary view. Accordingly, the process of learning and change is not limited to transmission between generations. If it is not in a phase of self-stabilizing stasis, the process may therefore produce substantially more rapid transformations within only one or two generations as has been evident in the last two hundred years. Indeed, for the research interests of sociobiology, in contrast to those of economics, a time horizon as short as this is perhaps of no significance. However, the dynamic features of the potentially rapid intra-generational transitions still need serious interdisciplinary exploration.
6. Conclusions In their respective domains economics and sociobiology face some problems which are quite similar. Yet, the ways in which these problems are approached in the two disciplines differ significantly. A comparison of the two approaches is therefore instructive. This is true also for what economics and sociobiology have to say on preferences. The individualistic economic theory of behavior claims that human beings choose those actions which they prefer most from a constrained set of feasible actions. However, what is lacking is an empirical theory of what it is that individuals have preferences for - a theory about the content of preference orders - which is necessary to avoid a pseudo-explanatory attitude of rationalizing all behavior by suitably specifying
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the underlying preferences. The question has thus been raised here as to whether sociobiology might contribute to developing such a theory. In discussing this question it has been argued that the populationoriented rather than individualistic perspective of sociobiology can provide some insights albeit on a very elementary level only. A more elaborate theory must also explain higher, culturally formed, behavior. Such a theory may be obtained by recognizing the influences of innate learning mechanisms in higher living beings. According to such a theory, which refers to the conditioning model developed in behavioral psychology, the formation of, and change in, individual preferences appear as processes of a life-long interactive learning that starts from basic and rather uniform genetic dispositions and develops into highly differentiated, idiosyncratic forms. As a consequence, preferences have determined and partly acquired to be assessed as partly genetically from the specific cultural influences of the respective social environment.
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