Leaving money on the table to stay in the game

July 27, 2020

If given the chance, a Kenyan herder is likely to keep a mix of goats and camels. It seems like an irrational economic choice because goats reproduce faster and thus offer higher near-term herd growth. But by keeping both goats and camels, the herder lowers the variability in growth from year to year. All of this helps increase the odds of household survival, which is essentially a gamble that depends on a multiplicative process with no room for catastrophic failure. It turns out, the choice to keep camels also makes evolutionary sense: families that keep camels have a much higher probability of long-term persistence. Unlike businesses or governments, organisms can't go into evolutionary debt -- there is no borrowing one's way back from extinction.

How biological survival relates to economic choice is the crux of a new paper published in Evolutionary Human Sciences, co-authored by Michael Price, an anthropologist and Applied Complexity Fellow at the Santa Fe Institute, and James Holland Jones, a biological anthropologist and associate professor at Stanford's Earth System Science department.

"People have wanted to make this association between evolutionary ideas and economic ideas for a long time," Price says, and "they've gone about it quite a lot of different ways." One is to equate the economic idea of maximizing utility -- the satisfaction received from consuming a good -- with the evolutionary idea of maximizing fitness, which is long-term reproductive success. "That utility equals fitness was simply assumed in a lot of previous work," Price says, but it's "a bad assumption." The human brain evolved to solve proximate problems in ways that avoid an outcome of zero. In the Kenyan example, mixed herding diversifies risk. But more importantly, the authors note, the growth of these herds, like any biological growth process, is multiplicative and the rate of increase is stochastic.

As Jones explains, most economics is additive -- adding value, adding utility. But evolutionary fitness is multiplicative, so it can't tolerate zero. The size of the Kenyan's herd next year is essentially the size of the herd this year times the net birth rate. If there is ever a zero in that equation - a drought kills the whole herd of goats - it becomes a catastrophic loss that the herder can't overcome.

"These multiplicative factors influence variables that matter for evolutionary fitness," Price says. In the herder scenario, the decision to diversify ultimately benefits fertility and the long-term survival of the family. The two liken major life decisions -- diversifying the herd, buying a house, having more kids -- to lotteries with inherent risks and uncertain payoffs. They theorize that evolution strongly favors "pessimistic probability weighting" - choosing lower-profit camels despite the immediate potential payoff of goats. In the long run, Jones says, this may "leave money on the table" but it keeps people in the evolutionary game.

Price gives another example: climate change. From a purely economic standpoint, he says, one could argue it would be cheaper to do nothing now and wait until geoengineering offers a solution however many years down the road. But we don't know all the risks and potential consequences of multiplicative factors like Arctic permafrost thaws and oceanic circulation changes coming together at once. "We should probably deal with climate change," Price says, because "the success of our species is probably way more important than eking out a little bit more efficiency over the next five years of economic growth."

Price also hopes to apply these ideas to archaeology. "I am interested in pushing this perspective into the past." He aims to study the problems and decision-making patterns that preceded the Maya collapse.
-end-


Santa Fe Institute

Related Climate Change Articles from Brightsurf:

Are climate scientists being too cautious when linking extreme weather to climate change?
Climate science has focused on avoiding false alarms when linking extreme events to climate change.

Mysterious climate change
New research findings underline the crucial role that sea ice throughout the Southern Ocean played for atmospheric CO2 in times of rapid climate change in the past.

Mapping the path of climate change
Predicting a major transition, such as climate change, is extremely difficult, but the probabilistic framework developed by the authors is the first step in identifying the path between a shift in two environmental states.

Small change for climate change: Time to increase research funding to save the world
A new study shows that there is a huge disproportion in the level of funding for social science research into the greatest challenge in combating global warming -- how to get individuals and societies to overcome ingrained human habits to make the changes necessary to mitigate climate change.

Sub-national 'climate clubs' could offer key to combating climate change
'Climate clubs' offering membership for sub-national states, in addition to just countries, could speed up progress towards a globally harmonized climate change policy, which in turn offers a way to achieve stronger climate policies in all countries.

Review of Chinese atmospheric science research over the past 70 years: Climate and climate change
Over the past 70 years since the foundation of the People's Republic of China, Chinese scientists have made great contributions to various fields in the research of atmospheric sciences, which attracted worldwide attention.

A CERN for climate change
In a Perspective article appearing in this week's Proceedings of the National Academy of Sciences, Tim Palmer (Oxford University), and Bjorn Stevens (Max Planck Society), critically reflect on the present state of Earth system modelling.

Fairy-wrens change breeding habits to cope with climate change
Warmer temperatures linked to climate change are having a big impact on the breeding habits of one of Australia's most recognisable bird species, according to researchers at The Australian National University (ANU).

Believing in climate change doesn't mean you are preparing for climate change, study finds
Notre Dame researchers found that although coastal homeowners may perceive a worsening of climate change-related hazards, these attitudes are largely unrelated to a homeowner's expectations of actual home damage.

Older forests resist change -- climate change, that is
Older forests in eastern North America are less vulnerable to climate change than younger forests, particularly for carbon storage, timber production, and biodiversity, new research finds.

Read More: Climate Change News and Climate Change Current Events
Brightsurf.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.