Why Economists Should Study Biology

In some ways, this is a blessing. By ignoring dopamine, a neurotransmitter linked to the brain chemistry of pleasure, economists have followed a tradition of avoiding the deeper questions connected with human happiness, in order to concentrate on more manageable problems. This tradition goes back to when the profession wisely chose to steer clear of Jeremy Bentham’s quixotic quest for the exact measurement of pleasure and pain. Economists approach the psychology of pleasure with humility, parsimony and circumspection. There is no scientific way to compare the utility level of different individuals, intones Edwin Mansfield in an italicized passage from his economics textbook. All textbooks agree; better to concentrate on easier stuff like income and prices. Economists don’t know or care why you like ice cream; they just want to know what you’ll do if its price goes up.

By focusing on simpler questions, economists escape getting sucked into the labyrinthine intricacies of the human brain. Contrast the success of cautious economists with the failures of intrepid Freudian psychologists, who plunged into the dark recesses of the mind and came up with so little that has stood the test of time.

Early economists were smart to ignore nuances of the brain because those nuances were poorly understood. In Bentham’s day, the cutting edge of brain science was phrenology—the idea that you could read someone’s character by feeling the contours of his or her skull. But today’s economists, unlike their counterparts just a couple of decades ago, can now access a wealth of information about the physiology of pleasure thanks to advances in neuroscience, evolutionary biology, primatology, ethology, and other fields. Recent discoveries and technology enable researchers of every stripe to learn more about what goes on inside the once inscrutable black box economists call the utility function.

For instance, imagine if Freud were able to conduct his experiments with cocaine using today’s technology. He would have been able to observe, through the use of positron emission tomography (PET) scanning, the exact parts of his brain that were activated by his cravings. He might have seen the folly of prescribing the drug as a cure for “melancholia.” We now know that cocaine wreaks havoc with the brain’s finely tuned reward system by lodging itself in a dopamine transporter, causing a flood of the stuff and producing an unforgettable euphoric rush. (It is as if a child’s allowance, once doled out by an exacting parent, were now spilling from a jackpot slot machine.) But the dopamine splurge is short lived; the brain soon re-engineers itself to stanch the flood, causing the user to need a lot of cocaine just to feel normal. Goodbye, euphoria; hello, addiction.

Sophisticated technology such as PET scans point to the possibility that Bentham’s hedonimeter—the machine that measures utility—might not be such a crazy idea after all. Were such a thing ever to be perfected it would likely shake the very core of welfare economics and public policy. Imagine an addendum to your W2 statement that includes your annual number of “utils.” It’s just science fiction now, but perhaps someday working hedonimeters will generate new and thorny problems in economic policy and ethics.

There are other developments in the physiology of utility that are just as radical, and they’re already here. For the past dozen years, increasing numbers of people have been altering their brain chemistry by raising their serotonin levels with drugs like Prozac. Serotonin, like dopamine, is a neurotransmitter that has been implicated in the experience of pleasure, especially the kind that comes from having high status in one’s peer group. Drugs like these offer people a chance to literally choose their utility functions, a decision which, as far as I know, has not received much analysis by economists.

But it doesn’t take leaps of imagination or fancy technology to connect economics and biology. Insights from plain old high school biology classes—or high school dances for that matter—can contribute fundamental insights into the workings of the utility function. Consider the possibility that, for biological reasons, the utility functions of men and women might differ because of differences in reproductive capacity. A typical woman, in her whole life, produces only about 400 viable eggs; a typical man, in just one day, produces enough sperm to populate a country the size of Japan. Even though the dictates of evolutionary biology—survive and reproduce—hold with equal force for men and women, their means of achieving these goals differ. A man can literally “go forth and multiply,” but a woman can only go forth and add.

This conflict of interest between the sexes was first remarked upon by Charles Darwin, and later formalized and tested by Angus John Bateman
in his pioneering experiments with fruitflies, first published in 1948.1 Bateman found that male fruitflies that were promiscuous passed on more of their genes than more monogomous males. But for females, monogomy was the road to increasing the prevalence of their genes in future generations. Male-female differences in human sexual behavior are usually experienced first hand at the high school dance, or something like it. The stereotype of eager boys pursuing recalcitrant girls, while not universally true, is nonetheless close to the mark. Several psychological studies indicate that men usually have a more avid desire for short-term sexual liaisons.

The more avid pursuit of short-term sex by males, or “Bateman Principal” is relevant for economics in many ways. The worst economic calamity to befall a family, and especially women and children, is divorce. A leading cause of divorce is infidelity. And the Bateman effect sheds light on the problem of infidelity by addressing its biological roots.

Economists do study things like mating, marriage and family behavior, but what is astonishing, in light of concepts like the Bateman Principle, is that they hardly ever assign any special role to being male versus being female. Spouses might just as well be persons 1 and 2. I suspect that part of social scientists’ reluctance to face up to obvious sex differences comes from concerns about political correctness. Sex differences in behavior get more attention from stand up comics. I expect, though, that these concerns will evaporate, and probably soon, because of the excellent recent work of feminist scholars from several fields—especially anthropology and primatology—which addresses issues related to reproductive biology. None of them would likely be offended by discussions of the Bateman Principle. Some, like behavioral ecologist Sarah Blaffer Hrdy, have challenged Bateman’s model using logic and evidence. But that’s science, not politics.

The economic implications of sex differences in utility functions extends beyond family behavior. For example, there is emerging evidence that men invest differently than women. They tend to be more active traders, take bigger risks, and, in at least one study, earn lower returns. Biologists trace the male propensity for risk-taking back to reproductive concerns. Men who multiply succeed in the “mating sweeps” by spreading their genes disproportionately, but achieving “alpha” status requires taking risks.

But all these brain chemicals and genes… do they paint free will into an ever shrinking corner? If economics is about choice, wouldn’t increased attention to these so-called “hard-wired” forces eventually relegate economic decision making to the shadows? The answer is an emphatic no.

In the late 1970’s Time magazine’s cover did a disservice to the emerging field of sociobiology by featuring a portrait of a glassy-eyed couple attached to puppet strings, presumably meant to signify genes. This is not even a caricature, it’s a gross misrepresentation. Genes don’t control us, and you don’t need fancy biological arguments to see why, just simple arithmetic. One of the big surprises of the human genome project is how few genes we have—30,000 instead of the expected 100,000. But even 100,000 genes would not be enough to “control” our behavior for every contingency. Hardwired behavior occurs when you yank your hand away from a hot stove before you know it; most of our actions don’t happen this way. In fact, evolutionary biology interprets the capability to make choices in a fast-changing environment as a key adaptation. The ability to think about new problems and to choose under uncertain and unfamiliar conditions helps us to survive and reproduce.

Genetic determinism is not the only fallacy that bedevils biological inquiry. Another is the decrepit catchphrase, “Nature versus nurture.” Nature, that is, genetically based capabilities and inclinations, is designed to work in concert with nurture (that is, environment). A toddler’s brain automatically lights up to receive new words, but to learn them, she has to hear them first. So what accounts for her knowledge of words, the capability to store them or the opportunity to hear them? I am reminded of the Zen riddle, “What is the sound of one hand clapping?” It’s a hard question, and not one I want to spend too much time thinking about.

The “either-or” quality of the nature-nurture debate has created a lot of suffering. Hitler favored nature and thought people could be bred like chickens. Stalin and Mao favored nurture and thought people could be trained like seals. Each had a stupid model of human nature.

Understanding human behavior requires more knowledge about the utility function—to understand why we care about the things we care about—along with knowledge about prices, incomes and how we make choices. In other words, the time is ripe for combining biology and economics.