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Selection, Sociality, and Systems

Recently, I have been trying to wrap my head around some of the major tenets of biology, I have enjoyed it so much that I commented to someone close to me that I was sad I chose economics for my PhD, I would have enjoyed biology with equal fervor. Nevertheless, I am in a pursuit to connect the various themes of the fields and create a stronger stance for both. We are, after all, a species of biological organisms whose very survival is dependent on our interactions. It is interesting to note the variety of systems of organization and hierarchy found throughout biology and economics; there seems to be an plethora of solutions to an infinite number of potential problems. Through learning and adaptation, we eventually get to the now. This also must mean that many systems of organization did not make it to the now, they failed to survive. What I mean to uncover in my research is the framework by which social interactions and systems evolve and persist. This is where I begin to look for the interconnections with biology.

I have come across a controversy in biology that hinges on the fitness and adaptability  of species: the debate between group and individual selection. Group selection exists when there is competition not only between individuals but between groups as well. And we know that individuals compete on a number of various levels for both resources and mates. But what about species that have high populations of sterile or non-reproducing organisms like ants or bee? Why would any one ant give up their life in order to save the lives of their fellows?

Hamilton’s theory of kin selection solved that paradox. Hamilton proposed that kin selection was an evolutionary strategy that favors the reproductive success of an organism’s relatives, potentially at the cost of the organisms own fitness or survival. It must be noted that group selection and kin selection are not the same.

Recently, there has been a resurgence in the biology literature on the efficacy of Hamilton’s theory, how these play out in the real world, and how does altruism fit into all of this. The paper that reinvigorated the dormant argument between the different types of selection was published in Nature during August 2010. In “The Evolution Of Eusociality,” Nowak, Tarnita, and Wilson argue that the previous four decades of theorizing using the kin selection theory had serious limitations and perhaps another methodology would be more useful and simpler. This caused a cascade of dissent from the biology community, and rightly so. One cannot shake a beehive and expect the residents to remain content.

The main issue seemed to be with the first half of the paper, which provided plenty points of contention for those who would adamantly disagreed with the paper, but the latter half included a well-developed mathematical framework by which their new theory could be expounded. Unfortunately, many of those who read the first half failed to check the appendix, which being a grad student is something I would forgive them for. (Who has time to check appendices?) The main point of their paper was that kin selection makes far too many simplifying assumptions and that Hamilton’s rule fails to describe a number of interactions that occur in the wild.

Seven years later, Jordana Cepelewicz writes in Quanta about the mathematical underpinnings of the growing debate. She brings in other research and further shows that the assumptions made by Hamilton’s rule fail to take into account a number of phenomena, especially when it comes to offspring:

In other words, it can be more important for an individual’s reproductive success to be consistent on average, rather than simply higher than that of others. In an uncertain environment, the bet-hedging value of helping others starts to look much more appealing as a strategy: It improves the odds that some shared genes will survive even if an individual’s own lineage dies out. Allocating some energy to helping others, even at the expense of further reproductive success, then works as an insurance policy.

There are even more variations when it comes to differences in hives, colonies, and species,

But even so, “there are a lot of subtleties within how those dominance hierarchies form and how those societies maintain stability,” said Sandra Rehan, a biologist at the University of New Hampshire. “It’s much more nuanced than just saying ‘something is social,’ or ‘something is eusocial.’”

She goes on to further claim that uncertainty is apt to breed altruism. This is equivalent to the economics concept of the Folk Theorem: when the end of a game is unknown, cooperation is sustainable. The problem with many one-shot and finite games is that cheating is a sustainable strategy in the last turn, but if someone will cheat in the last turn, why not cheat in the next to last turn and so on. Games of this kind tend to unravel, but if there is some probability of continuing the game, at say the species/multigenerational scale, then it is definitely worth cooperating at the individual level.

Public Choice and the expansion of the government

Why government expands is an important point of discussion in the public choice literature. (Public choice being the application of economic tools onto the realm of political theory and practice.) This question has often been asked by economists and occasionally there is an answer that makes sense, but rarely can we account for all of government growth through the use of a singular theory.

Donald Wittman claims to provide an overarching, mono-causal theory of government expansion: it’s because the people, the voters, want government to expand. An increase in the role government is the reflection of the will of the voters and this expansion supposedly leads to the lowering of transaction costs or opportunity costs of the constituency. Bryan Caplan, Wittman’s nemesis, says that this theory is wrong since we know that voters are absolutely underinformed; he claims that it is too costly for voters to gain information and that there is relatively little benefit to having that information. The logic of collective action is in full swing.

A second theory, purported by Robert Higgs, claims that government has grown during times of emergency and afterwards fails to shrink back down to its previous size. Higgs calls this his “ratchet-model” of government expansion. It can be seen through the lens of history: the US government rapidly expanded during the World Wars and after each of them were over, the size of the federal government shrunk somewhat but never back to the size it was before the onset of war. During each of these national “emergencies,” the government takes on extra roles and duties not previously delegated, only to refuse to relinquish them once the need for that role being filled is over. Whether the government should have occupied that set of duties in the first place is a different question. The ratchet model fails to take into account countries that have not experienced world wars or other national emergencies but have still grown nonetheless.

A third theory of government expansion has been cited by Tyler Cowen. His theory, unlike the previous two, is not mono-causal, but only relates a part of the story. Cowen claims that as technology has advanced, the cost of governing has decreased. This, in turn, has lead to an expansion of powers to places that were previously too costly to govern. Cars, highways, and air travel made far away places accessible within hours or days instead of weeks. Telephones and internet made communication instantaneous. Much of the technical innovation lowers the transaction costs of implementing policies. I am partial to this explanation of government expansion, though, it must be kept in mind that this is only a small part of the story.

Lately, I have been wondering about a more endogenous model of government expansion. Many of us who study public choice often look at the incentive structures of policy and the public realm, but sometimes we miss the forest for the trees. In a democracy, government might expand due to the opinion of the majority at the expense of the minority. Such a case has been theorized since Madison’s Federalist 51 and has been often repeated in various circles as outside threats arise. Madison says, “It is of great importance in a republic not only to guard the society against the oppression of its rulers, but to guard one part of the society against the injustice of the other part. Different interests necessarily exist in different classes of citizens. If a majority be united by a common interest, the rights of the minority will be insecure.”

I think it is improbable that a society can exist for long without having the majority take over large parts of governance without some minority bearing some cost. This is especially true when the minority can be seen as the outgroup. This has been a defining part of history. Many societies have increased the burden on the fringes and minorities of their civilization to prop up the rest or to simply keep the other group down. Medieval Europe, South Africa, Japan, China, the Aztec Empire, the United States, Ancient Greece, the Roman Empire, and the list goes on, have engaged in these kinds of actions. Not every policy action is a pareto improvement, so, someone is hurt, at least in the short run, each time a new policy comes out. What makes this viewpoint different is that entire groups pay the price instead of a small collection of individuals who have no connection other than interest.

The possibility from this kind of policy endeavor rises from the formation of large groups who can at any one time control the majority. Madison continues, “Whilst all authority in it will be derived from and dependent on the society, the society itself will be broken into so many parts, interests, and classes of citizens, that the rights of individuals, or of the minority, will be in little danger from interested combinations of the majority.” If there are not enough interests shared by enough groups and large bundles are instead monopolized under the umbrella of an uber Gruppen, we get a system that prioritizes the majority. In a duopoly, one group can claim to prioritize the wants of the minorities it supposedly represents, but given the a prior fractures among groups this will achieve little and may exacerbate the polarization and fracture of a society. This is especially true of democratic societies in which the median voter model holds true.

The Tale of Two Disciplines

Economics, as it is taught today, is split into two different disciplines. The first being economic theory, which is real science in that it attempts to explain the world as we know it. According to Einstein, theory should be a systematic description of the essential interrelations of reality. While the second being decision theory, uses mathematical or logical modes of operation to explain the end actions of individuals. In this mode of operation, the thing being studied can be via the usage of consistent axioms.

My Austrian friends have told me that the difference I am attempting to explain is that of praxeology and catallactics. The former being that study of purposeful human action and the latter being a study at how the market orders itself, how exchange happens. Robert Whately defined catallactics as the science of exchanges, which is something I am partial to. However, while these larger themes fit my prior complaints, much of the profession, including the material taught to students, does not use the heterodox methodology or terminology of Austrian economics. While I think heterodoxy is important, this leads to a different set of questions and not ones I will try to answer in this essay.

The broader point that I want to make is that the profession is split into two camps, and has been for a long time. The economic theorists have been left behind by the choice theorists. The science has lost its way in assuming that the logical nature of decision theory, which always ends in a binary variable of the choice is taken (1) or not taken (0). This is neither truly descriptive nor informative, minus what is the supposed outcome. Mind you, the outcome is only fictional until it happens in actuality. At that point, the supposed outcome and the actual may be different since each person, though they are subject to the law of demand, has a different set of constraints.

Our need for preference negation following the landmark paper, De gustibus non est disputandum, removes the source of variations via preferences from the field.  Stigler and Becker “show” that preferences do not matter. This has been a source of contention for many since, because surely any two given people will not act similarly in similar situations. If you remove what makes humanity, well, human, then what are we studying? Even more so, the current replication crisis in many fields shows that many studies are woefully underpowered or cannot be replicated. Why? What actions undertaken by a few people at a given time and place may not be the same actions undertaken by others in a similar experiment, albeit a different time and place. Economics is more complicated than choice theory.

Even when choice theory scales up into the macroeconomy, it cannot capture the complexity and vast amount of information necessary to be processed. The greatest tragedy of choice theory is that aggregates all of the actions taken by the individuals within the model. If you’ve ever seen the summation of utility curves, then you’re well aware of what I am talking about. Choice theorists don’t know how these utility measures came into being, they’ve assumed them into the model, nor can choice theorists tell you the magnitude of the utility. Not only that, but they assume that the summation works simply because preferences will cancel out. In a zero-sum world, there may be truth to that statement, but the world isn’t zero-sum, especially with the advent of zero-marginal cost technologies.

Janos Kornai said, “The ‘transplantation’ of the models of decision theory cannot, however, serve as a substitute for a scientific theory describing reality.” Choice theory won’t save the field, but it may keep us above water for a time. There is so much more to be explored, both the whys and the hows, but especially the patterns of entanglement.

Thus we are left with a void in economics, one that if filled would describe the reality of our world without reducing its inhabitants to a homo economicus.

Trash: Who’s to blame?

This essay is a response to NPR’s recent throughline podcast “The Litter Myth.”

The real question they want to ask is who is to blame, who is morally culpable for trash? At the same time, the cast of the podcast is engaging in the logic of collective action in that it’s costly for them to make any small impact, so they want to throw the cost of doing so on to corporations. Humans have been making refuse since time immemorial. Landfills and garbage pick-up have been a thing at least since Rome. Trash and refuse has been a huge problem in cities since then, especially since people often refuse to carry their trash out to the a known location; it was unsanitary conditions like these that contributed to the magnitude of the black death. Furthermore, the history of cities provides a context in which we know that humans often shirk in cleaning up after themselves: the logic of collective action. It’s nonsense to assume that trash started in the mid-20th century along with the rise of corporations. What is true is that modern recycling methods were started around that same time period. Everyone is individually responsible for their actions regarding the environment. A better argument for them might have been that since corporations produce more trash relative to consumers, the corporations should take the lion’s share in costs dealing with waste management. I know that back home, companies have to pay for their waste at a higher rate (per ton) than their residential counterparts. I imagine that’s true elsewhere.

The whole thing with the Keep America Beautiful campaign sounded like a “damned if you, damned if you don’t” statement. There might be a bootleggers and Baptists argument for the creation of KAB, but they don’t provide any evidence and charge ahead with hindsight bias. What is true is that KAB was very successful and was an important component in the environmental movement. (Though, their use of the noble savage trope was definitely racist and the whitewashed campaigns would be considered wrong by today’s standards.) This whole section seems to suggest that government regulation would have been the way out of the environmental struggles of that era, however, I must remind you that prior to the EPA, the USDA monitored pesticide use and Rachel Carson’s Silent Spring will give you a peak at just how costly that regulatory framework was on the environment.

Something I didn’t understand is the whole thing on consumables: if the corporations make things disposable, then people will buy more of them. 1) The backdrop of this argument is the use of non-refillable beer bottles in Vermont. Does making a bottle non-refillable encourage consumers to buy more from the company? 2) This statement implies that supply creates its own demand, which we know it doesn’t (What is the demand of t-shirts boasting a Super Bowl victory of the team who actually lost? Zero, yet many of these are pre-printed prior to the game.) Some things, like disposable plates and cups, do require people throw them away at each use, but it is still up to the end user to properly dispose of the product.

In the last section of the podcast, there’s a line that says something to the extent “imagine if that candy wrapper didn’t exist in the first place.” I think that’s a great idea to ponder, but one must consider the alternatives. Prior to plastic or foil wrapping, paper and cardboard were used, which are fine until you consider the food safety aspects. I’m not sure paper alone is good choice for the current supply chains. I have seen biodegradable wrappers recently and maybe that’s the way of the future, but we have to look at the costs and constraints of the now. Entrepreneurial discovery will pave the way for innovations.

What happens in this podcast is a mix of the logic of collective action and some cognitive dissonance to smooth over the rough edges of the arguments. They claim that corporations should hold the blame, while according to the corporations, it’s up to the end consumer. In reality, it is everyone’s responsibility to make sure that we properly dispose of our trash. Because once the producer or consumer purchases a product, they have assumed the property rights of that product. It is up to them to use, disuse, or transfer that good. The cleanliness of the environment is a public good, the producers of this show are looking for a way to free ride and remove their moral culpability from situation. It’s easy to blame something that is already disliked by your listeners, it’s far more difficult to find the middle path and accept responsibility for your own actions while still holding others accountable to theirs.

Laws of Demand and Diminishing Marginal Returns Outside Economics

Yesterday, I posted on a synthesis between economics and the other sciences. In this blog post, I provide a couple examples of such theoretical crossover. This is from a current working paper of mine on the endogeneity of social systems.

The laws governing the physical universe are constant through time and space; however, they must be discovered by someone to be brought into the set of scientific theory and knowledge recognized by humanity. Likewise, economic laws are constant throughout society, but it takes observations from people to draw these theories out from the interactions of others. Economic laws are inherent to the universe; they are de facto a priori synthetic. The laws of demand are known to be constant and everywhere existent, much like the laws of the positive sciences. It does not take transactions amongst people for the laws of economic to become evident, notably the first law of demand can be seen in biology, chemistry, and physics.

For instance, the law of demand has been seen throughout the biological systems as animals have evolved to display certain traits. The male peacock, for example, has a wonderful plume of tail feathers for which he uses to attract mates. The larger his plume, the more attractive he becomes but at a price: he is more visible to predators. This form of tradeoff is seen throughout the animal kingdom, but there is a correlation with increased expression and increased vulnerability to predators. As can be easily identified, there are more animals with nominal characteristics within any given population and increasingly less as phenotype characteristics become more flamboyant. The quantity of phenotypes that make an animal attractive to mates decreases as the resulting characteristics make the more easily seen by predators.

In the physical sciences, the law of diminishing returns can be seen through the processes of chemical reactions and limiting reagents. In the process of creating a fire, three factors are needed: heat, fuel, and oxygen; however, in a contained environment, an increase in any one of these could lead suboptimal reaction if the other factors are held ceteris paribus. If there is too much fuel for the fire to consume, then the oxygen in the environment becomes the limiting reagent: the reactant that is used up first in a chemical reaction and determines the amount of product that can be formed in a reaction. If the oxygen in the environment becomes too abundant, the fire will begin to burn faster. The chemical reaction may happen so quickly all the fuel becomes used and there is leftover oxygen. If the heat in this scenario becomes too high, the risk of changing the reaction from a fire to combustion increases. The law of diminishing returns is a priori to economic and societal systems.

Tilson, William. “Societal Actions as Outcomes of an Endogenous System: Economic Theory and Policy: Autonomous or Caused?” Working Paper, 2019.

Bridging the physical and social sciences

Throughout the past, biology has borrowed much from economics. I think it’s time that economics begins to take back some ground. I’d argue that economics and biology have more in common than you’d think. We both deal with agents who are constrained in their environments and are subject to larger systems whose rules may not be fully known. Agents, animals, cells, and DNA all have similarities in how they engage with the world. 1) They’re subject to the law of demand: price and quantity demanded of any good and service are inversely related to each other. 2) They must follow diminishing marginal returns. 3) They all abide in a world of emergent behaviors and outcomes; some of these may take hundreds or more generations to manifest themselves.

Given these constraints, it can be followed that outcomes of this system can be described by other outcomes of the same system. Most notably, there should be patterns of behavior and design that transcends the individual agents within the system, no matter how large or small they might be. From this point, I think that the sciences, both social and physical, should be able to share methods and ideas. I think many of the truths in our would can be found at the intersection of these ideas.

In my current research, I’m looking to create a synthesis between the rules provided by evolutionary biology and the human action from the micro scale to the macro phenomenon. Many of these patterns will reside in the meso-level, a place in between micro and macro. Note that the feedback loops will reside at all levels of the system.

I’m going to take a moment here, while I am in class to give my impression on Charlie Plott’s fundamental equation. In it, he says

preferences * institutions * physical possibilities = outcomes.

Is there anything wrong with this attempt to constrain the outcomes of human actions? I would say yes. The biggest issue resides in an engineer-like observation of human action. This equation steps outside the system, when it actually unable to do so. Furthermore, all of these are self-reinforcing or self-removing. The equation is entirely endogenous at both the system level and the agent level. In a Robinson Crusoe situation, at least on of these variables need not exist. Additionally, where does choice and subsequently action occur? In this line of thinking, there is little room for the adaptation that happens in reality.

On a side note, I recently listened to a podcast on the ideas purported by Glen Weyl where he claims that the study of economics has a difficult time explaining increasing returns to scale. Much of human social behavior exhibits this, not to mention digital technologies. Does economics explain this? I’ll link to another blog on this later.

Farms or Cities: A Chicken and Egg Problem

I am only a few pages into Jane Jacobs’ book The Economy of Cities and she posits something I have yet to hear in any of my time learning economics or philosophy: cities are not made possible by the agricultural economy but agricultural economies are made possible by the economies of cities. I think most of the profession, and many farmers, would argue against that thought. To them, cities must arise out of the foundations of agrarian economies. For the first cities, that is certainly true. What about later cities?

If it wasn’t for cities, there could be no expansion of farming technologies. There could be no global exchange of produce. Without cities, farms would have fewer people to which they could sell their goods.  I am not against farming; in fact, I think transitioning to many more, smaller farms instead of the mega-factory farms would be a net good to our society. However, this does not detract from the case presented by Jacobs; farms need cities to advance their trade and keep it viable.

But let’s face it, cities are unable to produce enough food to keep their own fed. They rely on massive harvests from farms the world over. Vertical farming has recently become a fad, but upon closer inspection, vertical farms can only produce leafy greens and vegetables with low-caloric value. A city cannot be sustained on vertical farms, nor can a farm be maintained over multiple generations without plenty of customers.

I don’t think Jacobs is entirely correct in her assumption. Cities need farms and farms need cities. There is a feedback loop here. Farms feed innovation and human interaction in cites; this, in turn, brings innovation back to the farm and allows it to profit from these interactions. The city is then able to have increased interaction due to increased production from the farms.

One issue that arises is that massive fixed costs undertaken by some farmers attempting to compete with larger farms who are able to dilute the costs across their investments. For the average non-factory farmer, this level of capital expense may be unsustainable. What does competition look like in the farming industry? I imagine the margins are tight.

Comparative economic systems, thoughts

As I alluded to in an earlier post, no economic system is purely capitalistic or socialist– there are an infinite number of potential combinations (this is analogous to sociology’s proposal that no person is purely masculine or feminine). This is not to say that one combination can clearly be superior to any other; though, at any given time, there might be one system combination may produce more output than another. Furthermore, there may be other metrics than the dichotomy that I have just posited. Surely, there are numerous types of economic organization that we have long forgotten or have yet to discover.

Some systems, even a few currently in existence, fail to expand past their current boundaries because of scalability issues. We know that issues with moral hazard and adverse selection often lead to the downfall of interpersonal and interfirm relationships; at the very least, they can put considerable strain on these same relationships. In the market, insurance companies and banks have to find contractual work-arounds and screening devices to limit these problems. Depending on the constraints and the desired outcomes, not all economic systems are created equally. Some systems may perform better for a certain task, at a certain time.

This poses a number of questions:

  • What are these outcomes?
  • What metrics do we use to measure the economy?
  • Are these metrics correct?
  • What is the goal of the system?
  • What is the paradigm that governs the system?
  • What are the base ideas of the system?
  • How do these ideas change the system?
  • What are the marginal changes of black swans?
  • Are averages overrated? (I think so)
  • What is inequality, and by what metric do we determine inequality?
  • What are the feedback loops in each economic system?
  • How do stocks and flows change these?
  • Which feedback loops have increasing returns to scale vs those that have diminishing return to scale?
  • What about returns to scope?
  • How can open ended evolution systems help us find the answers? (In a way that DSGE is unable to do?)
  • What are the ultimate ends of the society?
  • Was George Bernard Shaw correct when he stated that socialists were just communists without courage?

Upcoming, a look at the Soviet economy via Janos Kornai.

Thoughts on complexity in economic systems

  • If a social system develops in practice, it should also work in theory. (That theory may be convoluted and never finished, however.) Much like the sorting and randomization algorithms, the efficiency and effectiveness of the system of economic organization will vary.
  • The difference between economic systems lies not only in the rules of the game, but the stocks and flows of each system, and how they are determined. Additionally, how much self organization do the agents have?
  • The flow chart will change depending on the type of system.
  • No system is purely socialist or purely capitalist, but a gradient of each. Communism may fit in somewhere, as well.
  • The system must seek resiliency and self perpetuation
  • This fails at the extremes because in the purest systems there are leakages; not all agents will be able to continue in economic means.
  • In pure socialism, the end will transfer economic activity into the public choice domain as people, no longer lacking of economic wants, will demand positional goods in their place.
  • Pure capitalism creates its own undoing by driving technology to a place at which there is no work available for anyone to do. To put it simply, after the Hansonian singularity, there will be no more economic activity necessary for an agent.