Selected Abstracts

"The Evolution of Attitudes to Risk: Lottery Tickets and Relative Wealth", Games and Economic Behavior 14 (1996), 190-207.

Individual attitudes to risk are examined in an evolutionary model. Males obtain more offspring as a consequence of greater wealth both directly and because this attracts more mates. The second effect induces gambling driven by relative wealth and can create Pareto-inefficiency. Fair bets involving small losses and large gains are taken if any fair bets at all are taken. Altogether, the model accords well with observations concerning bets taken and declined by typical individuals despite settings of widely varying per capita wealth.

"A Biological Basis for Expected and Non-Expected Utility", Journal of Economic Theory 68 (1996), 397-424.

A biological model is developed here to determine the fittest attitude to risk. With a fixed environment, the type maximizing expected offspring is selected. This yields the expected utility theorem when translated into a criterion for evaluating gambles over commodities. With a random environment, however, the type selected is strictly less averse to idiosyncratic risk than to risk which is correlated across all individuals. The implied criterion for choice over gambles does not satisfy the expected utility theorem and may induce choice of a gamble which is first-order stochastically dominated.

"Efficient Equilibrium Selection in Evolutionary Games with Random Matching", (with Fernando Vega-Redondo), Journal of Economic Theory 70 (1996), 65-92.

This paper investigates the sensitivity of recent evolutionary models of learning to the specification of the matching mechanism. We study a literally random matching mechanism, combined with a process of strategy adjustment based on the realized average performance of each strategy. In the key class of symmetric 2x2 coordination games, the Pareto-efficient equilibrium, per se, is selected, rather than the risk-dominant equilibrium, as the probability of experimentation (or ``mutation'') goes to zero. Furthermore, convergence to the equilibrium is relatively fast. We extend these results, for example, to games of common interest.

"The Growth-Maximizing Distribution of Income", (with Myrna Wooders), International Economic Review 38 (1997), 511-526.

This paper presents an unconventional argument based on population growth to bolster marginal productivity theory. There is an economy with a single output produced from a number of different types of labor. Each type of labor is reproduced from that type itself and from the amount of the output devoted to it under some income distributional norm. Any norm which fails to induce convergence to maximal balanced growth is ''growth dominated'' in that the population and income it induces can be overwhelmed eventually. On the maximal balanced growth path, the norm divides output according to marginal productivity.

"Naive Adaptive Behavior and the Observability of Gambles", Games and Economic Behavior 24 (1998), 97-108.

This paper considers a class of naive adaptive learning rules in a social setting. They generalize biological selection and have become relevant in economic theory as a consequence of their use in evolutionary game models. The environment considered here is non-strategic but includes gambles which are more or less completely observed in each period. In the long run, individuals are more averse to a gamble which is less observable, other things equal, and may violate first-order stochastic dominance. Thus these rules need not be consistent with rational behavior in the usual sense.

"Forward Induction, Public Randomization and Admissibility" (with Srihari Govindan) Journal of Economic Theory 82 (1998), 451-457.

Gul and Pearce argue that forward induction has much less power as an equilibrium refinement than is generally supposed. The present comment raises the issue: What does admissibility imply for Gul and Pearce's analysis? In a key example, the precise equilibrium constructed by Gul and Pearce relies on a strategy which is not admissible. Even if all equilibria are considered, it is not possible to preserve the Gul and Pearce results under admissibility.

"Risky Business: Sexual and Asexual Reproduction in Variable Environments," (with Carl Bergstrom and Jonathan Pritchard), Journal of Theoretical Biology 197 (1999), 541-556.

Patterns of reproductive uncertainty can have an important influence on population dynamics. There is a crucial distinction between what we describe here as aggregate uncertainty (in which reproductive output in each generation is correlated among the individuals in a population) and idiosyncratic risk (in which reproductive output is independent across individuals). All else being equal, populations experiencing idiosyncratic risk have a competitive advantage over those experiencing aggregate uncertainty in that they enjoy a higher asymptotic growth rate.  Applying this distinction to models of randomly fluctuating environments, we point out that genetic variation among offspring can serve to reduce aggregate uncertainty, transforming it into a more idiosyncratic form of risk. We show that this transformation underlies the dynamics observed in several previous models of the role of  outcrossing in the evolution of sex.

"Why Would  Nature Give Individuals Utility Functions?" Journal of Political Economy 109 (2001), 900-914.

This paper considers the biological derivation of von Neumann Morgenstern utility functions. On the one hand, if individuals possess an explicit utility function stemming from the rate of production of expected offspring, they can readily adapt to novelty in a two-armed bandit problem. Embedding such a function in a simple rule of thumb involving no beliefs about prior or posterior probabilities leads to maximization of expected offspring, in a certain limit as the number of repetitions tends to infinity. In general, on the other hand, if any rule yields such evolutionary optimality of behavior, this biological utility function is implicit at least.

"The Biological Basis of Economic Behavior," Journal of Economic Literature 39 (2001), 11-33.

This paper first considers the implications of biological evolution for economic preferences.  It analyzes why utility functions evolved, considers evidence that utility is both hedonic and adaptive and suggests why such adaptation might have evolved.  Time preference and attitudes to risk are treated—in particular, whether the former is exponential and the latter are selfish.  Arguments for another form of interdependence—a concern with status—are treated.  The paper then considers the evolution of rationality.  One hypothesis examined is that human intelligence and longevity were forged by hunter-gatherer economies; another is that intelligence was spurred by competitive social interactions.

"Evolution and Human Nature," Journal of Economic Perspectives 16 (2002), 89-106.

This paper considers how biological evolution shaped the elements of a simple but complete model of economic decision-making.  These elements are preferences, beliefs and rationality.  Whereas Nature should impose preferences over consumption on the individual, Nature should allow beliefs to be influenced by local knowledge, and final choice to be flexible.  This reinforces the usual approach.  However, on the one hand, evolution also suggests that some extensions of this model are implausible; on the other, it suggests unexpected directions of generalization.  In any case, evolution provides a basis for an overarching economic theory and maintains restrictions on this theory.

"The Emergence of Humans: The Coevolution of Intelligence and Longevity with Intergenerational Transfers," (with Hillard Kaplan), Proceedings of the National Academy of Sciences of the USA 99 (2002), 10221-10226.

Two striking differences between humans and our closest living relatives, chimpanzees and gorillas, are the size of our brains (larger by a factor of three or four) and our life span (longer by a factor of about two). Our thesis is that these two distinctive features of humans are products of coevolutionary selection. The large human brain is an investment with initial costs and later rewards, which coevolved with increased energy allocations to survival. Not only does this theory help explain life history variation among primates and its extreme evolution in humans; it also provides new insight into the evolution of longevity in other biological systems. We introduce and apply a general formal demographic model for constrained growth and evolutionary tradeoffs in the presence of life-cycle transfers between age groups in a population.

"Imitation, Group Selection, and Cooperation," (with Philippe Gregoire), International Game Theory Review forthcoming.

A prior signalling stage is added to the prisoner's dilemma and the overall population involved is divided into a number of subpopulations. Evolution involves both local and global imitation---so that the process is formally one of ''group selection.'' A subpopulation that is not signalling and defecting against one and all can be invaded by two ''secret handshake'' mutants. A subpopulation that is composed entirely of the secret handshake strategy can be invaded by a single ``sucker punch'' mutant. Nevertheless, if there are at least three subpopulations, the population cooperates always, in the limit as the mutation rate tends to zero.

"Embodied Capital and the Evolutionary Economics Of the Human Lifespan" (with Hillard Kaplan and Jane Lancaster) Population and Development Review, forthcoming.

This paper presents an evolutionary economic framework for a general theory of lifespan, with a particular focus on humans. The principal argument is that lifespans evolve as part of a larger, integrated life history program and that the program for development and reproduction is fundamentally related to the age at which death becomes imminent due to physiological deterioration. A series of empirical findings suggests that humans have a species-specific life course with characteristic schedules of growth, development, fertility, mortality and aging, based on a set of specialized anatomical, physiological and psychological adaptations to the niche humans occupied during their evolutionary history. Together, those adaptations result in a species-typical lifespan that can vary within a limited range. Our theory is that large brains and slow life histories result from a dietary specialization that has characterized the last two million years of human evolutionary history. The paper concludes with a discussion of two themes: short and long term flexibility in the human lifespan and the building blocks for a more adequate theory of senescence and lifespan.

"The Evolution of Human Life Expectancy and Intelligence in Hunter-Gatherer Economies" (with Hillard Kaplan) American Economic Review 93 (2003), 150-169.

The economics of hunting and gathering must have driven the biological evolution of human characteristics, since hunter-gatherer societies prevailed for the two million years of human history. These societies feature huge intergenerational resource flows, suggesting that these resource flows should replace fertility as the key demographic considerations. It is then theoretically expected that life expectancy and brain size would increase simultaneously, as apparently occurred during our evolutionary history. The brain here is considered as a direct form of bodily investment, but also crucially as facilitating further indirect investment by means of learning-by-doing.

"The Evolution of Rationality and the Red Queen"  Journal of Economic Theory 111 (2003), 1-22.

Strategic rationality is subjected here to natural selection. In a zero-sum repeated game of incomplete information, one long-run individual is informed of the state of the world, and plays against a sequence of short-run opponents who are not. Strategies are noisy and have bounded recall. An equilibrium in these is shown to exist. Relative to any such equilibrium, sufficiently greater recall enjoys an advantage that is not decreasing in the original level of recall, thus capturing the Red Queen effect. The selection pressure to reduce a small amount of noise is less than that to increase recall.

"A Short Proof of the Harsanyi Purification Theorem" (with Phil Reny and Hari Govindan), Games and Economic Behavior (special issue in memory of Bob Rosenthal), 45 (2003), 369-374.

A short proof of more general version of Harsanyi's purification theorem is provided through an application of a powerful, yet intuitive, result from algebraic topology.

"Reinterpreting Mixed Strategy Equilibria: A Unification of the Classical and Bayesian Views" (with Phil Reny), Games and Economic Behavior 48 (2004), 355-384.

We provide a new interpretation of mixed strategy equilibria that incorporates both von Neumann and Morgenstern's classical concealment role of mixing as well as the more recent Bayesian view originating with Harsanyi. For any two-person game, G, we consider an incomplete information game, IG, in which each player's type is the probability he assigns to the event that his mixed strategy in G is "found out" by his opponent. We show that, generically, any regular equilibrium of G can be approximated by an equilibrium of IG in which almost every type of each player is strictly optimizing. This leads us to interpret i's equilibrium mixed strategy in G as a combination of deliberate randomization by i together with uncertainty on j's part about which randomization i will employ. We also show that such randomization is not unusual: For example, i's randomization is nondegenerate whenever the support of an equilibrium contains cyclic best replies.

"Complex Evolutionary Systems and the Red Queen," Economic Journal, Symposium "Markets as Complex Adaptive Systems" 115 (2005) F211-F224.

Some of the most obvious complex adaptive systems are biological.  A key concern in biology is how the overall properties of systems relate to the behavior of their components.  Competition between these components in the form of an arms race, the "Red Queen effect", for example, helps explain the trend towards more complex organisms, perhaps the most dramatic of macroevolutionary trends.  The Red Queen effect is then basic to understanding complex biological systems since it helps explain why these became complex and remain that way.  An arms race between parasites and a host species may indeed explain why there is sex.  Further, a Red Queen effect within our species may well have driven the most distinctive and economically relevant of human biological characteristics---high intelligence.  Analogously, competition in the form of the Red Queen effect is a promising avenue of research within economics.

"The Economics of Hunter-Gatherer Societies and the Evolution of Human Characteristics" (with Hilly Kaplan), Canadian Journal of Economics, forthcoming.

We argue here for attention to the evolutionary origins of economic behavior.  Going beyond this, we argue that the economy of hunting and gathering was the context in which evolution shaped human characteristics that underlie modern economic behavior.  We first reconsider the basic biological question of why aging occurs at all.  We then illustrate the usefulness of considering foraging economics by asking why it biologically advantageous for humans to live well after their reproductive career is over.  Further, we argue that foraging economics would have led to the simultaneous exaggeration of intelligence and of longevity that is characteristic of humans.