Human Nature and Economics

Articles● The Riddle of the Human Species

By E.O. Wilson● Energy and Climate on the White House Agenda● Rethinking Mill and Paternalism

Mill, who believed that each individual is in a unique position to know what’s in her best interest, concluded that government may coerce citizens to refrain only from acts that are hazardous to others, and has no warrant for regulating an individual’s behavior. Whether this view is correct is, Sunstein claims, “an empirical question,” and recent research in cognitive psychology has seemed to show that in fact, we aren’t so good at choosing what’s best for us.

Good and Bad

● Write a list of 5 behaviors characteristic of a good person

● Write list of 5 behaviors characteristic of a bad person

Why Study Human Nature?● To what extent are desirable ends constrained by

human nature? Insatiability Biophilia (ecophilia) Fairness and concern for others Attitudes towards the future

● To what extent are allocative mechanisms constrained by human nature? Are we inherently competitive, cooperative, or both? Are we rational, emotional, or both?

● Are people the same everywhere?

Will Competition or Cooperation Solve Society’s Current Crises?

What is the conventional economic model of human nature?

● Homo-economicus Self-interested Insatiable Rational Competitive

● Is this closer to your depiction of a good person or a bad person?

Are People Rational?

Split into two groups. Group 2 leave room

Group 1

● Serious flu will kill 6000 people Choice A: Conventional vaccine will save 2000 people Choice B: Experimental vaccine has 1/3 chance of

saving everyone, 2/3 chance of saving no one● Mark your choice and leave room

Group 2

● Serious flu will kill 6000 people Choice A: Conventional vaccine will result in death of

4000 people Choice B: Experimental vaccine has 1/3 chance of

saving everyone, 2/3 chance of saving no one● Mark your choice

Are People Rational or Emotional?

● Context: social security #, health care

● Losses vs. gains WTP vs. WTA

● Is perfect rationality possible in a complex world?

Are we Purely Self-interested?

● Game theory and experimental economics Ultimatum game Dictatorship game Public goods game

Or do we care about others?

• H. comunicus, concern for fairness and community preferences

• H. naturalis, concern for sustainability and whole system preferences

Evidence From Evolution Cooperation and energy abundance

Dictyostelium discoideum (amoeba)Myxococcus xanthus (self-organized, predatory,

saprotrophic, single-species biofilm called a swarm) In humans, genetic and cultural evolution interact

Are People the Same Everywhere?

● Ultimatum game across cultures

● Homo economicus, H. reciprocans, H. Comunicus Behavioral economics

● Neuroeconomics Prosocial behavior Easterlin Paradox Choice under conflict Extrinsic and intrinsic

● incentives Dictator game Ultimatum game

Prisoner’s dilemma Public-good and commonpool Altruistic punishment Conditional cooperation

Why Does this Matter?

● Desirable ends Humans are satiable We have a broad range of needs Desired ends are in relationship to what others have

● Allocative mechanisms Non-rival resources are best provided through

cooperation, and we are highly adapted to cooperate Rival resources may be effectively allocated through

competition Modeling humans as solely cooperative or solely

competitive is entirely inappropriate