Michael Shermer's The Mind of the Market: chapter six & seven

Here are my notes on chapter six of Michael Shermer’s The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics (click here to read my notes through chapter five and click here to read my initial thoughts on this book).

Chapter six, The Extinction of Homo Economicus, focuses on behaviorism and behavioral economics. Much of this chapter felt familiar from my college introductory psychology course and here are some of the terms:

  • matching law: “organisms will match their rate of responding to the rate of reinforcement” (discovered by Harvard psychology Richard Herrnstein and author of Bell Curve: Intelligence and Class Structure in American Life)
  • habituation: a decrease in response to a stimulus after repeated stimulation
  • undermatching effect: “the more variables added to a choice, the more complicated the decision and the less predictable the behavior”
  • law of supply and demand: an example of an autocatalytic feedback loop that “predicts that if the price of a good is at a low enough level to cause consumers to demand more of it than producers are prepared to supply, the price will go up until demand decreases”; the converse it true and “market equilibrium is reached at the point where the quantity supplied is approximately equal to the quantity demanded, and the balance is maintained through this interaction of consumers, producers, and prices”
  • time preference: “how we discount value over time”
  • intertemporal choice: “decisions that include tradeoffs among costs and benefits occurring at different times” (people prefer long-term options if given an incentive; most people would rather take $20 today versus $22 in one week, but most people would rather take $22 in eight weeks over $20 in seven weeks)
  • experienced utility: moment by moment experience
  • retrospective utility: the recollection of the aggregate experiences
  • peak-end rule: “we judge a past event almost entirely on how the experience was at its peak and at its end . . . instead of a net average for the entire duration of the event”
  • coefficient of determination: r squared (where r is the correlation coefficient), a statistic that determines how well a model fits

Shermer concludes chapter six with the finding that how risk-averse or risk-seeking we are depends on our brains and starts chapter seven, The Value of Virtue, with a classic moral dilemma to illustrate that “evolution has designed us to value humans over nonhumans”:

You are walking along a railroad line when you come upon a fork in the track and a switch. There are five workers on one track and one worker on the other track. Suddenly, you realize that a trolley car is hurtling along and is about to hit and kill the five workers unless you throw the switch and divert the car down the other branch, killing the one worker instead. Kill one to save five. Would you throw the switch? Most people say that they would. In a second scenario, instead of coming upon a switch, you happen across a bridge where there is a large man standing next to you. The trolley is once again speeding down the track and is about to hit and kill the five workers, nless you push the large man onto the track, killing him but stopping the car. Kill one to save five. Would you throw the man? Most people say that they would not.

Shermer then teaches readers about what we find attractive in mates — people whose bodies and faces are bilaterally symmetrical, men with an inverted-pyramid-shaped upper body (and a strong jaw), women with a waist-to-hip rtio of 0.7:1 (and full lips, strong cheek bones, thick and silky hair, ) — from David Buss’s The Evolution of Desire: Strategies of Human Mating (which I read in 2002) and provides extensive lists of human universals as determined by anthropologist Donald Brown:

Universal moral emotions

  • affection expressed and felt: necessary for altruism and cooperation
  • attachment: necessary for bonding, friendship, mutual aid
  • coyness display: courtship, moral manipulation
  • crying: expression of grief, moral pain
  • empathy: necessary for moral sense
  • envy: moral trait
  • fears: basis of guilt
  • generosity admired: reward for cooperative and altruistic behavior
  • incest taboo: moral prohibition with genetic implications
  • judging others: foundation of moral approval/disapproval
  • mourning: expression of grief
  • pride: a moral sense
  • self-control: moral behavior
  • sexual jealousy: foundation of moral mate guarding
  • shame: moral sense

Universal moral behaviors

  • age statuses: social hierarchy, dominance, respect for elder wisdom
  • coalitions: foundation of social and group morality
  • collective identities: basis of xenophobia, group selection
  • conflict mediation: foundation of much of moral behavior
  • customary greetings: part of conflict prevention and resolution
  • dominance/submission: foundation of social hierarchy
  • etiquette: enhances social relations
  • family (or household): the most basic social and moral unit
  • food sharing: form of cooperation and altruism
  • gift giving: reward for cooperative and altruistic behavior
  • government: social morality
  • group living: social morality
  • groups that are not based on family: necessary for higher moral reasoning and indirect reciprocity
  • inheritance rules: reduces conflict within families and communities
  • institutions: rule enforcement
  • kin groups: foundation of kin selection/altruism and basic social group
  • law (rights and obligations): foundation of social harmony
  • marriage: moral rules of foundational relationship
  • reciprocal exchanges: reciprocal altruism
  • redress of wrongs: moral conflict resolution
  • sanctions: social moral control
  • sanctions that include removal from the social unit: social moral control

Universal economic emotions and behaviors (based on the fundamental principle of reciprocity universally expressed as the golden “do onto others as you would have them do unto you”)

  • cooperative labor: part of kin, reciprocal, and indirect altruism
  • fairness: equity
  • food sharing: form of cooperation and altruism
  • generosity admired: reward for cooperative and altruistic behavior
  • gestures: signs of recognition of others, conciliatory behavior
  • gift giving: reward for cooperative and altruistic behavior (also in above list)
  • hospitality: enhances social relations
  • insulting: communication of moral disapproval
  • judging others: foundation of moral approval/disapproval
  • planning for future: foundation of moral judgment
  • pride: a moral sense
  • promise: moral relations
  • negative reciprocity: revenge, retaliation, reduces reciprocal altruism
  • positive reciprocity: enhances reciprocal altruism
  • redress of wrongs: moral conflict resolution
  • shame: moral sense
  • turn-taking: conflict prevention

Whew that was exhausting! Shermer then goes on to discuss evolution — particularly evolutionary choices of monogamy, adultery, and jealousy — in economic terms.

Additional terms learned include:

  • kin altruism: evolved to aid and reinforce cooperation to facilitate genetic propagation through children
  • reciprocal altruism (inclusive fitness): “I’ll scratch your back if you’ll scratch mine”
  • blind altruism: “if you scratch my back now, I’ll scratch yours later”
  • Evolutionary Stable Strategies (ESS): Nash equilibrium which is “evolutionarily” stable meaning that once it is fixed in a population, natural selection alone is sufficient to prevent alternative strategies from successfully gaining traction
  • Costly Signaling Theory (CST): “people sometimes do things not just to help those related to them genetically, and not just to help those who will return the favor, either now or later, but to send a signal, or a message that says, in essence, ‘My altruistic and charitable acts prove that I am an honest and trustworthy member of the community, and that I am so successful that I can afford to make such sacrifices for other and for the group.'”

Okay that’s all I can stand to write today. To learn more, click here to visit Shermer’s website.

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