- 1.1What Evolves?
- 1.2Result of Evolution
- 1.2.1Increase in ability for producing capital
- 1.3Communication skills
- 1.5.1Paying Extra Taxes
- 2Biological Analogy
- 2.5.3Ancient Egypt
- 3Real World Markets
- 3.1Ancient Egypt
- 3.2.1Ecology and History
- 3.2.2Current State
- 3.4.1East India Company
- 3.5.1Economic Stagnation
- 3.6The United States
- 3.6.1Monopolies have the support of government
- 3.6.2Intellectual Property Laws
- 3.6.3Pacific Railroad Acts
- 3.6.5The Banking Industry
- 3.7Explaining Russia
- 3.7.1Transition market
- 3.8Ancient Rome
- 4Open Source Development
- 5Monopolies as indicators
- 5.8.1Cell Phone Carriers
- 6What is Government
- 7Business Model Taxonomy
- 7.1Sole proprietorship
- 7.6For Profit vs Non-Profit
- 7.7Publicly Traded/Privately Owned/Closely Owned
- 7.8Member Owned
- 7.12Unions and Guilds
- 8Types of Markets
- 8.1Key Variables
- 8.2Market Topology
- 8.2.1The Three Groups
- 18.104.22.168The consumer-producer complex
- 8.2.2False Classifications
- 8.2.3Oversimplification: An Example
- 8.2.4Spectrum Based Class Stratification
- 9Governments Evolve
- 10Future Work
- 12Partial Source List
- 12.1Further Reading
Here is a rough draft detailed outline for Economy and Government: an Evolutionary Perspective. Included are theories on evolutionary psychology and dynamics of evolution, the creation of an analogy between market systems and biological systems, concepts regarding complex dynamic systems, and a discussion of optimization problems. Heavy reading, but worth it if you’re interested in finding out just why natural market economics is indeed a reasonable solution.
It should be noted that, while there may be existing political and economic theories that are influencing this work, I will not be using any of them unless I can build and justify such theories through anthropological evidence, evolutionary theory, or the theories of dynamic systems. Why am I doing this? Economics may seem like a very robust field, and in some ways it is, but a lot of economic theory is based on early philosophical debate and conjecture which had been produced by taking a very narrow and incomplete view of the world. Science may have cleared up some debate between economics, but much of the current work is still founded on very unscientific principles. Therefore, the arguments addressed in this text will be supported by three pillars: mathematics, science, and history.
It is strange that those with such great propensity to support the theories of evolution, and scientific investigation overall, have such a difficult time accepting natural market economics as a viable means of resource management. At the same time they ignore the fundamental issues which the study of evolutionary theory brings to light regarding the use of government and politics as the primary methods of resource management in society. This book attempts to give a very basic overview of evolutionary theory, how human evolutionary history helps to dictate which method of resource management would be the most successful, how evolving systems function better at finding optimal solutions to our resource management problem, and how we can draw an analog between the marketplace and evolving biological systems. I will use as much supporting evidence as possible, but will also include some testable hypotheses for which there is no data yet, but for which data can certainly be obtained. Therefore, while this paper contains a large amount of detail, it should in no way be considered a finished work.
In the study of evolutionary dynamics, it is taken for granted that, at least some, systems can “self regulate”. This is the key opposition to the need for intelligent design. Even though individual activities may be random, the overall nature of the system may have well defined patterns of behavior, and thus do not need an intelligent force dictating the direction of the system and keeping it from going out of control.
“Wherever information reproduces, there is evolution.” (Evolutionary Dynamics: Exploring the Equations of Life) This means that evolution is not limited to biological systems and indeed, evolutionary theory is used in many other areas beyond biology. For instance, we can study the evolution of culture: post-biological evolution. At the core of evolution we have reproduction and the idea that models which reproduce outlast those that do not. We also have some form of constraint which determines fitness of the current model. In biological systems, we have limited resources such as sunlight, water, air, land, etc.
Result of Evolution
Every organism in biological systems needs to manage the resources around it. Every species needs to find a way to ensure that it reproduces.
In “Death From a Distance and the Birth of a Humane Universe” Bingham and Souza argue that the ability to kill conspicifics from a distance is the reason why humans are able to interact in meaningful ways. This is a reasonable conclusion for early hominins. At the time we lacked other more sophisticated methods of resource management. Indeed, this continued to be true up until historical periods: a point that I will address by reviewing research done by Steven Pinker.
Increase in ability for producing capital
Archaeology is interested in analyzing material culture: the physical objects, created or directly manipulated by humans which survive in the archaeological record. This can easily be extended to a total inventory of physical materials and ideas. The material and intellectual inventory includes every physical object, as well as every idea, that is accessible to a group. If we include “human capital” in the definition of capital, then we can simply use capital rather than material and intellectual inventory.
It is, at least in part, our ability to manipulate our capital that is so fundamental to our current way of living. Because we can create so much, we have that much more to trade with others. We have division of labor which requires interdependence, and with interdependence we obtain a less violent situation. This is one of the conclusions made by Steven Pinker, who compares violent death rates throughout history and draws the conclusion that, relatively speaking, fewer violent deaths occur in societies which have greater levels of socioeconomic interdependence.
While economic interdependence generally leads to an overall reduction in violence, this may be most effective when interdependence is equal. It is easy to see examples of unequal interdependence in cases like industrial labor where businesses have large numbers of employees. In these instances, the employee is highly dependent on the employer, the employer is far less dependent on a single employee. This was one of the selective pressures which resulted in the evolution of the union. By working as a single unit, the employer and the employee block function together equally.
Because capital is so core to our modern way of life, and in maintaining peace, the entire concept of “worth” can be boiled down to capital. Even our “worth” in a the market is dependent on our ability to manipulate capital. The value of a good or service is again a function of its impact on capital. Note that adding to the amount of things in the capital inventory is not the only way to have a large impact on it. The type of material or intellectual property that is added also has a major impact. For instance, if we already have VHS tapes, doubling the number of VHS takes does less to impact the material inventory than does the creation and production of DVDs. The part about our worth may sound cold, it is important to understand a person’s market value when deciding how a market functions.
This does not mean that something’s worth is a direct product of the total amount of that product in existence. A good example is diamonds. The overall number of diamonds in the world is quite large, but diamond cartels are hoarding a lot of them. The reason this increases the worth of a diamond is because it increases the impact on the available capital. Of course, it can be argued that the total capital and available capital have an impact on the ability to hoard. What impact that is, I do not know and I will not make an conjecture regarding it.
More of a side note: The ability of an organism to manipulate and add to its capital can be considered a measure of its intelligence. This does not mean that an organism that happens to “hit it rich” is more intelligent. Random events and single cases are not a measure of ability. As an example, we can look at ants. They certainly do manipulate their capital, yes? They can built whole ant colonies. However, how much do they manipulate it and add to it as a whole? Compare ant colonies 1,000 years ago in comparison to the current day, at least in proportion to the number of ants, things look more or less the same. The structure of the variations in colony construction is more or less consistent. Now look at humans. In a matter of years, the elements and quantity of each element increases dramatically. Of course, this is only one form of intelligence, and is arguably separate from, but related to, other forms of intelligence. This is simply one additional dimension, which happens to have arisen from this discussion.
Being able to manipulate capital is not enough for natural market dynamics to succeed. Voluntary exchanges require that we be able to communicate with one another. That is why complex language is such an important development. In addition, Dunbar 1993 notes that the extent to which humans can relate to others is extended by language through the ability to classify people into groups rather than consider them as individuals. Unfortunately, it is difficult to say how much of an impact this has on altruism. Can entire groups be considered possible kin and thus cause the individual to act selflessly towards that group? Pseudo-kin relationships show other issues. This can be seen in team rivalry, and in more violent cases, warfare between different groups, including nations and religious affiliations.
In order to determine how large a group our species can manage, it may pay to look at how humans have lived for most of their existence. Dunbar attempted to estimate this number. The Dunbar number is the theoretical upper limit of the number of “friends” an individual can have. This number is based on physical properties of the brain. For humans, the upper limit appears to be roughly 150. This is in line with the maximal size of bands in H&G societies that would have existed during the bulk of AMH’s history.
This is confirmed by real world analysis of large social networks. According to Leskovec et al. 2008, communities of “size scale beyond [roughly] 100 nodes gradually ‘blend into’ the expander-like core of the network and thus become less ‘community-like’, with roughly inverse relationship between community size and optimal community quality.” However, while this is consistent with the Dunbar number, it is not consistent with network generation models. Why is this? One answer is that it is not fundamental to network models, but rather to human biology, which again would be consistent with Dunbar’s theories. (Community Structure in Large Networks)
At the most fundamental level, an organism needs to be selfish. If it is not, it cannot reproduce. However, simply being selfish is not enough. There are times when it is impossible to reproduce without being helped by others, or perhaps it is simply impossible for a given individual to be able to reproduce. We therefore have some level of altruism. However, biological evolution centers around the perpetuation of genes. Therefore, the gene itself can be far more greedy than the individual and the individual can limit altruism to those who may also have the same gene. This is the foundation of kin and proximal altruism.
Related to altruism is the concept of nepotism. The level to which an organism will give preferential treatment to one of its kin varies from species to species, however, as Dario Maestripieri puts it, ” there is no society in which individuals are biased in favor of nonkin and against their kin.” (Macachiavellian Intelligence) One might argue that a lot of altrusim is seen in an ant colony or a bee hive. This is true, but it is nepotism or kin altrism. Insects which exist in large colonies, like ants or bees, are closely related to one another. In some, every single member of the colony is a direct offspring of a single queen or a few queens. Regardless, the amount of genetic distance between members of the colony is small.
The level to which an organism is willing to provide for another is dependent on many factors. As mentioned earlier, there are ways to extend perceived kinship relations due to language and our highly symbolic thought process.
Do humans have a sense of fairness, or is fairness a byproduct of some other pattern of behavior? While it is nice to think that humans are fair by nature, it is quite possible that fairness, is really just a product of selfishness.
What is the most common way in which “fairness” is used? How is it directed, towards others, or towards oneself? In most cases, it seems that fairness is directed towards oneself: “it’s not fair(to me).”
According to Samuel Bowles and Herbert Gintis in “Is Equality Passé?” a 1991 ABC/Washington Post poll found that there was a 2 to 1 ratio of people “willing to pay higher taxes to reduce poverty” vs those who were opposed to raising taxes. “In 1995, 61% expressed willingness to pay more taxes to ‘provide job training and public service jobs for people on welfare so that they can get off welfare.” However, according to “a 1995 CBS/New York Times survey…89 percent supported a mandated work requirement for those on welfare.”
If we are selfish, how can we explain the willingness to pay more taxes? The answer is spite. They’re willing to pay more, if everyone else does too. It’s very evident that many people consider to rich to pay too little in taxes. “It’s not fair.” But to whom? It’s not fair to those who are paying “enough” taxes. So those very people are willing to pay even more, as long as the rich do the same. Then it becomes “fair”. But this is not altruistic behavior. We can see this quite easy.
Paying Extra Taxes
It’s always possible to pay more taxes than you actually owe. According to the Treasury Department’s website “citizens who wish to make a general donation to the U.S. government may send contributions to a specific account called ‘Gifts to the United States.’ This account was established in 1843 to accept gifts, such as bequests, from individuals wishing to express their patriotism to the United States. Money deposited into this account is for general use by the federal government and can be available for budget needs. These contributions are considered an unconditional gift to the government.”
Now, certainly, with a 2 to 1 ratio of people, that would mean a fair boost in revenue. According to the 2008 – 2012 census, there are roughly 115 million households in the United States. Again according to the census, there are roughly 118,000,000. Assuming an even polling distribution, and excluding those making below $25,000 a year and those making over $200,000 a year, assuming that the first group cannot pay anything and the latter refuse to do so, this leaves 83,567,000 households. Assuming two thirds of those were actually willing to pay more that’s 55,711,000 households paying more. Based on census data obtained by National Center for Law and Economic Justice Inc roughly 47,000,000 people are currently living below the poverty threshold. This equates to roughly a 1:1.18 conversion ratio. In other words, if every household that said they were willing to pay more gave just $1 each, every person living in poverty would receive $1.18, assuming the government doesn’t take a cut. Taking into account that, the closer one is to the poverty threshold, the more of a difference a single $1 makes, that’s not chump change.
So why don’t these same people who say that they are willing to pay more in taxes do so? Because what they are really saying is that, they do not think their current situation is fair and out of spite are willing to pay more in taxes if those who are violating them do the same. Note that in regard to fairness, people are analyzing what is fair to themselves, not what is fair to the larger group or to another group. Is it fair to the poor that they are not getting all of the help that they can because the group who has said that it can pay more, refuses to do so, because they feel that they are holding an unequal burden of support? No; of course not. So this group has prioritized that which would create a fair situation for itself.
This concept of fairness and spite is not the same as a recent study: “The Evolution of Fairness through Spite.” In the case of the study, the findings suggested that fairness can be attributed to a fear of spiteful retaliation. But that game is a very different game from the game of taxes and donations. In that game, players were directly given money by another player with the goal of the game being to end up with the most money. In other words, there was knowledge of who gave what and it was given directly from one person to another. In the case of taxes, knowledge of who gave what is not as readily available, especially in regard to charity, and the money is thrown into a pool which is then distributed “evenly” throughout society.
I want to point out that, this entire time, I have been using the word spite. While the word use is technically correct, the connotation is important. Spite is often considered to be the willingness to harm oneself in order to also harm another who has wronged you, or at least, you perceive to have harmed you. The example mentioned in this discussion is something that, according to western ethical views, is actually quite deplorable: the refusal to help a group of people in need because another group of people have done the same.
The analogy has been moved to its own document. Please read it here.
Ancient Egypt may be one of the best examples of both the religious method and the state method of extending kin relationships. Ancient Egypt had an established state religion. This religion was polytheistic with the Pharaoh acting as a god on Earth.
There are some issues with extending kin and proximal altruism through cultural means. This is usually done by creating fictitious groups tied together by some form of mythology. Religion is the obvious example of this, but it is by no means the only one. One of the largest means of using fictitious groups to extend kin and proximal altruism is the concept of the nation. We define our group by arbitrary borders and consider everyone within those borders to be somehow connected to ourselves, as if they are family. In the United States, we use concepts such as the “founding fathers” to unite us. However, this also produces the undesired consequence that those who are not within the borders are not within our kin group. We see the negative consequences of this on a dangerous scale whenever there is warfare based on borders. We see this on a lesser, but still sometimes violent scale, in the case of team rivalry.