How Economics Shaped Human Nature

Seth Roberts

University of California Berkeley

What is this store selling?

This theory was inspired by

Adam Smith was right

The division of labor, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labor. The separation of different trades and employments from one another seems to have taken place in consequence of this advantage. – Smith, Wealth of Nations

. . . if by “division of labor” he means division of expertise and “productive power” includes creative power.

Ontogeny Recapitulates Phylogeny

1. Man makes jam as hobby.

2. Gives surplus to friends. Gets vague obligation in return.

3. Places his work in local specialty food store – makes a little money.

4. Places his work in more distant stores. More profit. Part-time job.

5. Starts business: Full-time job.

People & Animals at Parties

• Humans: Usually ask “What do you do for a living?”

• Other Animals: Never ask that question because they already know the answer. All members of a species – e.g., all salmon -- make their living the same way.

• Humans: extreme specialization, every other species: almost no specialization

Outline of Talk

1. In the beginning, hobbies

2. Diversify expertise: procrastination

3. Help traders find each other: language

4. Support R & D: art/decoration, music, fashion

5. Support R & D: gifts, ceremonies, collectors & connoisseurs

6. How to test the theory

7. Practical applications

Background: The Lion King Theory of Evolution

• Animals escaped predators in various ways: outrun, go down into holes, go up into trees

• Our ancestors chose trees

• The longer aloft, the safer. Eventually spent most of their time in trees

• Developed better and better hands to swing through the trees

In the beginning, hobbies

• Like the cosmic background radiation• Skilled hands made tools. 1st tools made hunting

& food processing faster and easier, creating spare time and energy–how to spend it?

• Thorstein Veblen’s “instinct of workmanship”: better tools. Better tools, even more spare time.

• Hobbies: specialized knowledge & skills, especially construction (e.g., model planes). Many different hobbies.

Table made by statistics professor

Instinct of Workmanship in action

“[He] said, “You must see my brother’s enormous vibrating-balls organ.” He was referring . . . to a musical device [whose] chief component was four hundred colored golf balls. . . .

“How long did you work on your vibrating balls?”. . .

“Four months.”“And why did you work for four months on this

useless piece of equipment?”“We loved it.” – The New Yorker (2006-10-16)

What came after hobbies?

A well-functioning economy has several features:

1. Diverse goods & services

2. Buyers and sellers easily connect

3. Research and development leading to new goods & services

How were these features produced?

Feature 1 (diverse goods & services): tendency behind procrastination

Feature 2 (buyers and sellers easily connect): language

Feature 3 (research and development leading to new goods & services): gifts, rituals & ceremonies, art & decoration, music, fashion, connoisseurship, collectors

Procrastination: From a tendency that diversified expertise

• Problem: Create a wide range of expertise among people with similar genes in the same environment

• Solution: Create tendency to repeat what you did the day before. Easy to repeat, hard to vary. Effect in the Stone Age: magnified random differences in activities

• Today, this creates procrastination: hard to start something new, such as taxes.

Language: Helped traders connect

Language now has many uses:• tell stories/tell jokes/entertain• teach/question/acquire skills & knowledge• lead/govern/preach/organize groups• Inspire/cheer up/encourage/discourage• praise/insult/blame• express emotion• alert/notify/warn/scare/threaten• courtship• sell/buywhich came first?

Use of Single Words

I assume language began as single words. How are single words used today?

Agree/disagree: yes, noSwear: f---, damn, sh--, cr—Insult: jerk, moron, b----Traffic signs: stop, exit, bump, hump, parking,

upstairsButton/Switch labels: backspace, enter, shift . . . Business signs: open, closedFor sale: panini, burritos, tamales, nail,

microdermabrasion, phone, alterations . . .

Other Evidence

1. Single nouns help immensely find sellers & buyers. Guatemalan markets.

2. Many names come from occupations: Smith, Cooper, Cohen, Porter, Roper, Clark, Wainwright.

3. Possession at core of language in verb tenses: to have gone, to have written

4. When people of different languages have extended contact, the shared language that develops (pidgin) is mainly used for commerce. For example, “West African Pidgin English originated in the 17th century when English traders begun trading with various West African tribes” (Wikipedia).

Where does innovation come from?

Portrait of one tool

Value vs. Expertise, several tools

How to bridge gaps between tools? A tool like this would help:

What would such a tool be like?

1. No clear endpoint2. Very long period of development (i.e., both ancient and

modern)3. Exist in very low-tech and very high-tech versions

because both would be good values. Low-tech (cheap): a little value. High-tech (expensive): a lot of value.

4. Better tool requires better material science (because most new tools are made possible by better material science).

5. Solves no problem (i.e., facilitates no pre-existing task)

Art/Decoration & Music Have These Characteristics

1. Unclear endpoint. Aesthetic endpoint = to be beautiful. 2. Very long period of development. Ancient & modern art &

music.3. Very low-tech & very high-tech. Low-tech: Cultures with

little technology sell art. Drums carved from wood. High-tech: Frank Gehry buildings, modern music.

4. Advance material science. Better material science new & better art & new & better musical instruments

5. Solves no pre-existing problem. Pre-existing circumstances produce no obvious need/desire for art & music. Art & music are “super-tools” – a whole new level of problem-solving.

Fashion Encourages Innovation

• Fashions in art/decoration & music clearly exist, but not in most tools

• Fashion: Yesterday’s clothes – which were profitable yesterday – no longer sell. Planned obsolescence of expertise.

• Artists/decorators and makers of musical instruments must innovate to stay at the same income level

Music Supports Material Science

Did Music Evolve To Signal Fitness to Potential Mates?

Problem with this explanation: Sex difference in performance/audience too small. Compare with dance:

Music Dance

Large sex

difference? no yes

Promotes

technology? yes no

Promotion of Innovation in Many Other Technologies I

• Gifts. Peculiar property: giver wouldn’t buy for himself, recipient wouldn’t buy for himself. Hard to make. Toronto nutcracker. Tail of the Yak = gift shop.

• Ceremonies, Special Days. Use better (higher-priced) versions of ordinary products. Thanksgiving turkey, Christmas ham. Japanese New Year. Fancy (“nice”) clothes.

Japanese Tea Ceremony

Wikipedia lists 50 special tools. “A wide range of dōgu [tea-ceremony tools] is necessary for even the most basic tea ceremony.” These tools are finely-crafted, not easy to make.

To Promote Innovation in Many Other Technologies II

• Collectors & collections. Vast range of man-made objects are collected. Increase value of rare well-made objects & small differences.

• Connoisseurship. Connoisseurs pay more for this or that (wine, chocolate, music) than the rest of us. Reward small improvements, state-of-the-art craftsmanship.

Predictions of This Theory

• Existence of “hobby tendency” in all cultures• Existence of “instinct of workmanship” in all

cultures.• Existence of tendency behind procrastination.

Found in all cultures, not in animals.• Confirmation of statements about language• Role of art & music in history of technology• Persons of all cultures enjoy art & music,

animals do not• Existence of tendencies behind gifts, rituals, etc.,

found in all cultures & not in animals.

Two Applications

• Young adults: Make college better fit human nature. Diversify college – treat each student differently

• Job holders: Predict long-term economic changes

The Trouble with College

• Few students want to be professors. Yet profs know no other skills, can teach nothing else. Overvalue “critical thinking.”

• We need many kinds of knowledge. Students in a class should be allowed to learn different things.

• We need many skills. Many skills should be rewarded (= many ways to get an A).

Long-term Economic Changes

The New Democracy

• Traditional democracy shifts political power from elites to everyone else. The new democracy shifts economic power from elites to everyone else

• Super-hobbyists do for free what professionals do for a price

• Examples: Books, Wikipedia, open-source software, digital cameras, blogs, self-experimentation