J Evol Econ (2003) 13: 289–317
DOI: 10.1007/s00191-003-0158-8
c Springer-Verlag 2003
Coevolution of economic behaviour and institutions:
towards a theory of institutional change
Jeroen C.J.M. van den Bergh1 and Sigrid Stagl2
1
2
Faculty of Economics and Business Administration and Institute for Environmental Studies,
Free University, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands
(e-mail: jbergh@feweb.vu.nl)
School of the Environment, University of Leeds, Leeds LS2 9JT, UK
(e-mail: sts@env.leeds.ac.uk)
Abstract. Traditionally, economics has regarded institutions, notably norms and
regulations, as fixed or exogenous. Surprisingly few insights on institutional evolution from natural and social sciences have made their way into economics. This
article gives an overview of evolutionary theories of institutions in biology, sociology, anthropology and economics. These theories are subsequently compared
with non-evolutionary theories of institutions. Next, the insights and approaches
are integrated into a framework for analysis of institutions based on the notion of
coevolution.
Key words: Altruism – Cooperation – Culture – Dual inheritance – Evolutionary
psychology – Group selection – Norms – Social psychology – Sociobiology
JEL Classification: B52, D10, D70, D64, Z13
1 Introduction
By definition, an institution or a norm is constant during a certain period of time.1
In this way it contributes to the stability of the social system to which it belongs.Yet
sooner or later it changes, in response to the decisions and actions of individuals.
The current pace of institutional change in the world illustrates this, as it is characterised by new governance structures (EU), new communication technologies (the
Internet and mobile phones), new policies and instruments, and shifting norms and
preferences.
Correspondence to: J.C.J.M. van den Bergh
1 According to Ostrom (2000), norms are shared understandings about actions that are obligatory,
permitted, or forbidden.
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Economists have for long regarded most institutions as constant or at best as
changed by factors exogenous to the economy, notably public policy. As a consequence, they have shown very little interest in the patterns and causes of institutional
change and the endogenous mechanisms underlying them. Whenever economists
recognise that regulatory institutions can change, they tend to apply normative
economic policy analysis, which is aimed at proposals as to the way in which institutions should be directed and managed, typically to realise efficient levels of scarce
resource use. This has given rise to mainly static and to a lesser extent dynamic
optimisation analysis in which the range of possible policy changes is determined
ex ante and exogenously. Orthodox economics lacks a positive theory of the manner
in which institutions actually change and have changed during economic history.
This article aims to shed light precisely on such a positive theory. For this purpose, we examine the interaction between social institutions and the behaviour of
individuals and groups. We build heavily upon evolutionary theories of institutional
change, as in our view these offer the best – even if yet incomplete – insights, and
thus provide the best starting point for developing an economic theory of institutional change. This means assigning a central role to bounded rationality, individual
and group selection, dual inheritance, altruism, co-operation, social psychology and
coevolution.
Evidently, the literature on cultural evolution following the older debate on
human sociobiology and group selection provides a useful benchmark for our approach (Ruse, 1979; Boyd and Richerson, 1985). In fact, many of the fundamental
issues in this debate, relating to individual versus group selection and selfish versus
genuine altruism, have recently been revived (Sober and Wilson, 1998). Nevertheless, the gap between these approaches and economics is still very wide. Our aim
is to fill this gap. The work by researchers. such as Axelrod, Ben-Ner and Putterman, Bowles and Gintis, Fehr, Nelson and Winter, Ostrom and others, is closely
related, but has not been able to benefit fully from insights in evolutionary biology,
behavioural ecology, evolutionary psychology, and human genetics.
We propose to use a new framework for analysis that is developed around the
notion of coevolution. This is motivated by two considerations. First, it can take into
account the diversity of institutions, which is subject to selection and innovation.
Second, it can address the fact that institutional change does not occur in a vacuum,
but that the underlying selection and innovation of institutions are affected by
economic, social and environmental forces.
While a coherent theory of the coevolution of individual behaviour and social
institutions is still missing, there are building blocks of such a framework available.
At the level of culture-gene interactions, coevolution allows us to move beyond onedimensional cultural theories as well as narrow sociobiological (genetic) theories
by combining the best of both. Within a purely cultural or economic context, coevolution stresses that the system considered – the society or economy – consists
of multiple subsystems, such as regions, groups, institutions and organisations that
are part of a joint, interactive evolutionary process. Only by taking into account diversity within relevant subsystems, and interactions between these, can one devise
a truly endogenous theory of institutions that sheds light on institutional change.
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The essay is organised as follows. Section 2 provides a background for the discussion, by exploring the notion of coevolution. In Section 3, we survey relevant
ideas on the relationship between individual or group behaviour and institutional
change in various evolutionary theories, dealing with: sociobiology, evolutionary
psychology, group selection, social-cultural evolution, economic evolution, and
gene-culture coevolution. Section 4 discusses the essential differences between
evolutionary and other theories of institutional change. Next, Section 5 develops
a framework for studying institutional change, based on an integration of individual and group selection mechanisms, and distinguishing interactions between five
layers of change. Section 6 presents conclusions.
2 Coevolution = evolution + ecology
Coevolution was originally proposed in ecology to refer to the joint evolution of
butterflies and flowering plants (Ehrlich and Raven, 1964). Coevolution denotes
the fact that evolutionary changes in one species are a response to changes in other
species with which it ecologically interacts, i.e. in the same community (Strickberger, 1990). This definition reflects an integration of elements from ecology and
evolutionary biology. Initially, coevolution was used at the level of species interactions, primarily to explain the evolutionary adaptation of parasites and their
hosts, predators and their prey, and herbivores and plants. More recently, coevolution has been invoked to denote very different types of interactions: biologicalcultural, ecological-economic, production-consumption, technology-preferences,
behaviour-institutional, and human genetic-cultural (Lumsden and Wilson, 1981;
Norgaard, 1984, 1994; Durham, 1991; Gowdy, 1994; Feldman and Laland, 1996;
Wilson, 1998). Coevolution should not be confused with the biological concept of
‘coadaptation’. The latter denotes changes in alleles at multiple gene loci due to
selection. In other words, it refers to a kind of coevolution of different features
(morphological, physiological and behavioural) within a single species.
Evolution in an ecological context means ecological adaptation. Two basic
‘bionomic’ strategies relate to the r and K parameters in the logistic population
growth model:
• The r-strategy: produce many offspring and apply little parental care. This is
typical for insects and amphibians, which are small, mature rapidly, and have a
relatively short life span. Annual plants also belong to this type.
• The K-strategy: produce few offspring and apply much parental care. This is
typical for birds and especially mammals, which are larger, mature more slowly,
and have a longer life span. Forest trees also belong to this type.
Because of these dynamics, growth curves differ between r- and K-strategists.
Population of r-strategists can overshoot and then collapse, possibly creating cycles around the equilibrium under unstable environmental conditions. K-strategists
instead follow the logistic growth curve, except that often, for low (viable) levels,
extinction results. This tends to result in very stable populations.
Typically K-strategist animals evolved later in natural history, due to the fact
that they require a more developed brain for performing care functions, a particular
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type of social interaction. Similarly, young ecosystems in early succession stages
are dominated by r-strategists, which due to their features are perfect colonizers.
K-strategists are found typically in older climax ecosystems, which have a more
stable environment, allowing for more complex food web structures that are needed
to support the larger K-strategists. Evidently, the r- and K-strategy distinction is
a caricature, and they should best be considered as relative concepts. More and
less extreme forms exist, both among and within groups of species. Nevertheless,
evolution seems to promote a movement towards one or the other extreme once
initial selection pressure has pushed a species in one direction (Putman and Wratten,
1984, Ch. 10). This in fact is an example of path-dependence.
The environment of organisms consists of abiotic and biotic elements. The biotic
ones include other species, such as prey (food), predators, competitors, and other
organisms of own species. Due to these various species relationships, evolution
shapes species in interactions with other evolving species. This leads to our notion
of coevolution, as the interactions affect the dynamics, structure and functions of
ecosystems. While no theory makes claims as to the selection and adaptation of
ecosystems, the notion of coevolution goes a long way in this direction, offering
a theory for the evolution of communities. It sees multi-species relationships as a
coadapted system of interactive species.
A particular type of coevolution that has received much attention is known as
the “arms race”: characteristics of species respond positively to one another. For
instance, predation will select prey that run faster, which in turn will select predators
that run faster, and so on. Another example is the immense size of many dinosaurs,
which is explained by prey dinosaurs increasing in size due to selection – as larger
size offered a better protection against predators – which in turn selected for larger
dinosaur predators. Somewhat later in natural history, mutual selection for larger
cerebral brain size occurred between prey and predator mammals, due to the fact
that brain size is related to skill in avoiding predators as well as capturing prey
(Strickberger, 1990, pp. 399 and 429).
The end result of coevolution is likely to be a stable regime of sub-optimised
species. The coevolution of parasites and hosts can lead to commensalism, where the
parasite inflicts minimal damage to the host. Whereas commensalism occurs at an
individual level – parasites do not kill the host – a stable predator-prey relationship
can be regarded as commensalism on the population level – where the predator
population does not ‘kill’ the prey population, even though individual predators kill
individual prey. Another coevolutionary path may be seen in the case of parasites
as beneficial to the host, i.e. the case of mutualism. This illustrates that the different
multi-species relationships can be linked to one another through coevolution: one
type of interaction can over time change in another type.
Norgaard (1984, 1994) was the first to use the concept of coevolution explicitly in a socio-economic context. He regards it as reflecting long-term feedbacks
that occur between five main subsystems, namely knowledge, values, organisation,
technology and environment. Variation within each subsystem is strongly influenced by selection conditions provided by the other subsystems, which act as the
total environment of the respective subsystem. He illustrates this view with the
interaction – during the last century – between pests, the use and production of pes-
Coevolution of economic behaviour and institutions
293
ticides, policies and institutions to regulate pesticides, and knowledge and valuation
of pesticides and pests. Campbell (1996, p. 569) notes that the human invention of
agriculture, the domestication of animals and especially plants, and the subsequent
cultural-economic developments can be regarded as special cases of coevolution
among animals and plants. Humans depend on the cultivated and selectively bred
plants, and the plants depend on human control, i.e. either could not survive without
the other.
History shows that, due to coevolution, humans do not control and change
their environment to meet predetermined goals, but nature and human society are
formed in a joint, interactive development. This sometimes works out beneficially
to both, sometimes only to one, and sometimes to none. Notions of progress and
planning lose credibility in the face of coevolution, as they are replaced by change
and adaptation, and experimentation and selection, respectively.
Biologists have also studied cultural processes from a coevolutionary perspective. This is sometimes referred to as gene-culture coevolutionary theory (e.g.,
Cavalli-Sforza and Feldman, 1973, 1981; Durham, 1991; Feldman and Laland,
1996), and emphasises the joint evolution of human genes and human culture,
which offers a perspective that differs from Norgaard’s. One can even question
whether it represents coevolution in a strict sense, despite its name, because it is
not concerned with the interaction among different species, but rather among different characteristics of a single (human) species, i.e. coadaptation. On the other
hand, if culture is regarded as a species separate from humans – much as language
is a parasite thriving on human hosts – then human gene-culture interactions can
well be regarded as coevolution in a strict sense.
This has led to a theory of dual inheritance, genetic and cultural (Cavalli-Sforza
and Feldman, 1981; Boyd and Richerson, 1985). The empirical support for it has
been focused on the influence of cultural traits – in particular behavioural strategies
which are studied by anthropologists – on the frequency of certain genetic traits.
Examples include (Durham, 1991; Boyd and Richerson, 1985; Galor and Moav,
2002):
• The frequency of sickle cell anaemia among populations in West Africa has
been shown to depend on their means of subsistence. Cutting trees allows the
cultivation of yams, which in turn causes pools of standing water that promote
an increase in the mosquito population. The latter transmit malaria against which
sickle cell anaemia provides protection.
• The rise of agriculture, notably of dairy farming, has created a selection environment in which the proportion of individuals with genes allowing lactose
absorption could increase.
• Living in densely populated societies with domesticated animals, such as cows,
pigs, and sheep, has resulted in contagious diseases, and ultimately resistance
against them.
• Culture may have selected genetically determined behaviours that support cooperation.
• Culture may have elicited and selected genetically codetermined, competitive
and innovative, behaviour that has stimulated growth.
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Additional examples include such diverse issues as basic colour terms, skin depigmentation, plural marriage, incest taboos, excess female mortality, headhunting
and cannibalism.
These examples show that the nature-nurture opposition is simplistic, and
should be replaced by nature-nurture coevolution. Feldman and Laland (1996,
p. 456) note that “The clear conclusion of gene-culture coevolutionary analyses is
that cultural transmission can transform evolutionary dynamics in numerous ways,
implying that, for many questions related to human evolution or human behaviour
genetics, traditional methods and models are no longer appropriate.” Similarly, the
motivation for this paper is that models of singular evolution are inappropriate as
a general approach in the evolutionary analysis of institutional change. Instead, a
coevolutionary perspective is required in which interactions at multiple levels –
behaviour, institutions, technology, etc. – is examined. The next section discusses a
number of evolutionary approaches in literature that provide relevant concepts and
insights for studying such coevolution.
3 Institutions in evolutionary theories
3.1 Human sociobiology and evolutionary psychology
Based on the groundbreaking work of William Hamilton, Robert Trivers and John
Maynard Smith, Wilson (1975) presented a genetic-biological perspective on the
social behaviour and organisation of animals, including (in a final chapter) human beings. The theme of human behaviour was continued, partly in response
to critiques, in Wilson (1978) and Lumsden and Wilson (1981). Sociobiology is
a powerful theory with surprising insights, which has caused much debate (see
Ruse, 1979). The argumentation used in sociobiology is mainly theoretical (genetics, logic), while definite empirical-genetic statements have been provided for
social insects. For higher animals, and certainly mammals, primates and humans,
such irrefutable empirical evidence is missing (De Waal, 1996). Nevertheless, many
writers now agree that the criticism of sociobiology was unfair, because it is not
so much a theory as a field of research. Durham (1991) notes that a coevolutionary
view in which the genetic evolutionary perspective is matched by a serious cultural
evolutionary one overcomes much of the criticism which suggests that sociobiology
overemphasises genetic factors. Durham (1991) and Boyd and Richerson (1985)
have undertaken such a matching using anthropological and social-psychological
factors, respectively.
Essential to sociobiological explanations of altruism are kin selection, reciprocal altruism, and inclusive fitness. Kin selection means that altruistic behaviour
is genetically based because altruists are actually protecting their own genes by
helping close relatives survive. Reciprocal altruism refers to behaviour based on
the expectation that favours will be returned. Inclusive fitness of a gene not only
reflects the performance (survival and replication) of the individual by which it is
carried, but also of relatives of the individual who carry the same gene. An individual can thus be altruistic towards his relatives and at the same time maximise the
inclusive fitness of a certain gene - without even being aware of it.
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Although social science as the study of ‘culture’ or ‘nurture’ in social relationships is often regarded as the antithesis of sociobiology as the study of ‘genetic
constraints’ or ‘nature’ underlying social relationships, they support the same insight; namely, that individual behaviour can only be understood completely within
a social context. While sociobiology has focused on the commonality of human
nature (i.e., a unity of genetic basis) rather than genetic differences, the debate
between its supporters and opponents has been – confusingly – largely about the
degree of biological or genetic determinism assumed by the theory (see Ruse,
1979). It should therefore be concluded that sociobiology is not providing support
to racism, as some have tried to argue (e.g., Rosenthal, 1998). It rather focuses the
attention on similarities of behaviour among groups within a certain species, and
to a lesser extent between species due to genetic overlap and historical constraints.
Behavioural differences among individuals and groups within a single species are
regarded as mainly due to different environments. For humans this is consistent
with the main conclusion following from an analysis of the ultimate causes of differences among current human cultures and the domination of the Eurasian culture
by Diamond (1997). Important for the study of institutions is that, according to
sociobiology, higher culture and social organisation have their historical origin in
co-operation based on kinship.
Sociobiology and economics have been shown to share a starting point, namely
competition for scarce resources (e.g. Witt, 1991). This has stimulated some
economists (Hirshleifer, 1985; Becker, 1976; Tullock, 1979) to argue that altruism
and social behaviour can be entirely explained on the basis of utilitarian altruism as
an equivalent of sociobiological selection and fitness. This has been operationalised
by including the welfare or consumption of relatives in an individual’s utility function. Some economic implications of sociobiology are then that the welfare of near
relatives is more important than that of distant ones, and that altruism, co-operation
and solidarity can be consistent with self-interest. The analogy is incorrect, however, in that the utilitarian approach based on utility maximising behaviour adopts
the Spencerian (and not the sociobiological-Darwinian) notion of ‘selection of the
fittest’, which should in fact be replaced by ‘selection of the fitter and luckier’ or
“selection of the fitting” (Boulding, 1981), suggesting consistency with bounded
rationality. This relates to the well-known Alchian (1950) thesis: individuals seeking profits dominate due to a selective advantage under the pressure of competitive
markets. It incorrectly supposes, however, that selection pressure from markets is
perfect, and that profit maximising (“profit seeking” in Alchian’s words) can be
perfectly imitated by others (Winter, 1964).
Elements of human sociobiology have recently been adopted in a field known as
evolutionary psychology. Here human psychology is studied on the basis of evolutionary insights about human individuals, societies and their environments (Barkow
et al., 1992; Buss, 1995; Crawford and Krebs, 1998). In particular, it is hoped that
constraints to human behaviour can be identified on the basis of an understanding
of the social and environmental conditions that prevailed during the Pleistocene
Era. In other words, the belief is that genetically we are still Pleistocene beings.
By focusing on evolutionary roots, ultimate rather than direct or proximate causes
of behaviour are traced. The main line of reasoning is Darwinian selection, but
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evolutionary psychology links up with group selection (see next section), as human
hunter-gatherer groups showed a large degree of co-operation and altruism, which
probably cannot be entirely explained on the basis of kin and reciprocal selection.
The presence of mechanisms of punishment and reward in a context of social learning seems to be crucial. The topics addressed by evolutionary psychology include
general ones, such as information processing, the role of emotions, time allocation,
problem solving, co-operation, and the role of language, along with more specific
topics, such as aggression and violence, sexual behaviour, the formation of relationships, jealousy, parental strategies, and the preference for status and power. One
general insight is that human behaviour is predominantly automatic and characterised by heuristics and biases instead of being rational. This is very much in line
with the Nobel Prize-winning work of Simon (1957) and Kahneman (with Tversky,
1979).
As expected, evolutionary psychology, like human sociobiology, has been subject to strong criticism (see, e.g., Rose and Rose, 2000). Opponents tend to emphasise that evolutionary logic in terms of adaptation to environmental circumstances
often sounds convincing, but can lead to ‘just-so-stories’ without any factual evidence. They further argue that genes work in combination and at different levels,
taking away the basis for ultra-Darwinian ‘selfish gene’ theories in the spirit of
Dawkins (1976). Nevertheless, support is increasing for the idea that as long as the
results of sociobiology and evolutionary psychology are judged critically, they can
provide interesting hypotheses for empirical testing and generally provide a useful
biological starting point for thinking about social behaviour (see also Cosmides and
Tooby, 1994; Ben-Ner, 2000; Jackson, 2000). Indeed, psychological research comparing identical and non-identical twins has provided support for the idea that genes
have a significant and identifiable influence on human behaviour. This should of
course not be confused with genetic determinism. Also, evolutionary psychologists
themselves have argued that ‘adaptation stories’ should be built on firm ground,
involving multiple sources of evidence: theory, history, experiments and empirical
facts. This implies an integration of insights from evolutionary and social psychology. De Waal (2002) emphasises the “dilemma of the rarely exercised option”. This
means that an evolutionary, adaptive explanation of atypical behaviour should be
consistent with explanations of the typical, dominant behaviour found in reality.
In the case of exceptional acts such as rape of women by men, and child abuse by
stepfathers, this is not the case (the dominant behaviour is no rape and no abuse),
which causes related adaptive stories to be suspect.
Sociobiology and its modern counterpart, evolutionary psychology, try to identify the genetic evolutionary foundations of the range of possible human behaviours.
The simple idea here is that culture is bounded, not determined, by genes and natural history.2 While the similarity of human cultures around the world is the result
of genes, this does not deny the variation of cultures. Sociobiology can explain the
general similarity rather than the variations in behaviour, which are not inconsistent
with it. Moreover, the general similarity of human behaviour and cultures in differ2 A reviewer noted that this can be interpreted in two ways: (1) boundaries are closed; and (2)
boundaries are open. Only in the second case are there sufficient degrees of freedom for cultural evolution
to occur.
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297
ent parts of the world is consistent with the fact that the genetic differences between
human groups are very small. This is in fact the main argument against misusing
sociobiology to support ideologies of racial discrimination and class domination.
3.2 Group selection
One of the hottest debates in evolutionary biology since the 1960s has been over
group selection (Wynne-Edwards, 1962; Wilson, 1975; Ruse, 1979; Sober, 1981;
Boyd and Richerson, 1985; Trivers, 1985; Alexander, 1987; Wynne-Edwards, 1991;
Wilson, 1997; Sober and Wilson, 1998). This denotes that the fitness of every
member of a group depends on a group characteristic that is not isolated in an
individual. In particular, it is suggested that groups characterised by non-kin and
non-reciprocal altruism out-compete groups composed of selfish individuals or
individuals showing only kin and reciprocal altruism.
Williams (1966) presented an influential early critique of group selection that
supported the opinion that group selection was based on incorrect reasoning. Sociobiology provided opposition to ideas about group selection by offering an alternative
according to which social behaviour is the result of individual selection (Wilson,
1975). An extreme version is Dawkins’ (1976) selfish gene interpretation (see also
Ruse, 1979).
The important criticism raised against group selection theory is that there is no
clear mechanism to ensure that an advantageous pattern of change for the group
will be replicated by the actions of the individuals in the group. In other words,
a basis for group inheritance is missing. The reasoning is that if a characteristic
valuable to the group is not also of value to the individual or the ‘gene’ – directly
or indirectly – then it will not be passed on. An important element in the discussion
of group selection and altruism is free rider behaviour. Free riders will profit from
the benefits of being part of the group with genuine altruism and social institutions,
without contributing to either. When the relative proportion of free riders in the
group increases, the benefits of the group and the characteristics of group selection
will slowly disappear. In other words, group selection may work as long as free
riders do not dominate the group. Suppression of free rider behaviour is most likely
to occur when resource scarcity and competition are low, i.e. when it is relatively
easy to be altruistic. But altruism is less common when scarcity and competition are
high, i.e. when it implies a serious sacrifice. Typically, selective pressure is higher
in the second case, so that individual selection will usually have more of an impact
than group selection.
Following an argument in favour of group selection by Edwards (1962), Maynard Smith (1964) presented an early model in support of it, known as the “haystack
model”. It describes nonassortative random group formation as leading to distinct
groups, some with more altruistic cooperators than others. Although within an
‘altruistic group’ cooperators have fewer offspring than defectors, the group as a
whole produces more offspring than ‘less altruistic groups’. Altruistic cooperation
can evolve because groups exist for some time – several periods – before being
mixed with other groups. This allows groups with relatively many altruists to grow
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relatively fast, causing the proportion of altruistic cooperators in the whole population to increase. This result is conditional upon the interaction among individuals
not being equated to a prisoner’s dilemma but to a “stag hunt” type of game. This
type of game is characterised by defection being the best response to defection (as in
prisoner’s dilemma games) and cooperation being the best response to cooperation
(unlike the prisoner’s game, where defection is the best response to cooperation).
In a generalised model, Cohen and Eshel (1976) show that an equilibrium with only
altruists is also possible if the game between individuals is a prisoner’s dilemma,
as long as groups remain intact for a minimum amount of time. The reason is that
the latter results in an intertemporal game that is not a prisoner’s dilemma.
Group selection can also result from assortative interaction or group formation.
Special cases are families subject to kin selection. Other cases require a minimal
degree of (social) intelligence – notably altruists (or egoists) recognising and associating with their own kind. The degree of kinship (biological relatedness) can
be regarded as a proxy for the probability of assortative interaction. In an economic context, however, the variety of assortative characteristics among groups
will depend on group-specific institutions that promote cooperation and altruism.
Examples of these are schooling, religion, political features (voting systems), free
press and democratic history. Roughgarden (1979), Sober and Wilson (1998), Gintis (2000) and Bergstrom (2002) present an overview of other, related models that
suggest that group selection can work.3
Although for many years group selection as a factor in evolution was considered
unscientific – in spite of the aforementioned model-based support for it –, the
1980s and 1990s have witnessed a renewed interest in-group selection, in biology
(Wilson, 1997) as well as social science (Boyd and Richerson, 1985; White, 1998;
van den Bergh and Gowdy, 2002). The existence of group behaviour relates to the
recently much referred to notion of ‘strong reciprocity’ in human behaviour (Fehr
and Gächter, 1998; Ostrom, 1998). The experimental and empirical finding that
reciprocity applies in a positive and negative sense, that is, subjects co-operate if
others co-operate and punish if they do not, is consistent with the tit-for-tat strategy
made famous by Axelrod (1984). Bowles and Gintis (1999a,b) used findings of
experiments and case studies of hunter and gatherer societies to argue that sharing
is as much ‘normal’ human behaviour as is selfishness. This has recently also been
confirmed in a comparative study of fifteen hunter-gatherer, nomadic herding and
other small-scale societies, which show much cultural diversity (Henrich et al.,
2001). The general lesson therefore is that ‘Homo reciprocans’ is more human than
‘Homo economicus’.
The criticism of group selection is too general, and the truth seems to be more
subtle. Non-reciprocal and non-kin altruism are rare in animals, causing group selection effects to be weak. The social organisation of insects is entirely genetically
determined. Group selection requires individuals with extended memory and intelligence, found in social mammals as diverse as wolves, dolphins and apes (De Waal,
1996). According to Wilson (1975) all extended social behaviour and organisation
3 Surprisingly, in a review of the biological basis of economic behaviour, Robson (2001, 2002) does
not pay any attention to group selection issues.
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299
starts with the strong tie between mother and child, which explains why it is most
common and well-developed in mammals.
The existence of social cognition among humans suggests that group selection
in human populations and thus in economic systems may be more significant. One
reason for this is assortative matching supported by intelligence and perception
of characteristics – notably degree of selfishness or altruism – in others, which
leads to groups with relatively many altruists. In addition, a wide range of possible
individual behavioural strategies can be elicited or suppressed. In human huntergatherer societies, co-operation, recognition of trustworthy or cheating individuals
as well as of potential reciprocators meant a selective advantage. Nowadays, culture
fosters and reinforces this kind of co-operative behaviour. As a result, one can find
that many individuals behave automatically as co-operators and ‘punishers’. It is,
therefore, not surprising to find increasing attention for group selection issues in
economics (Bergstrom, 2002).
Group selection based on real (pure, genuine) altruism (self-sacrificing) would
mean that individuals who sacrifice themselves while contributing to increase group
benefits would by definition have a negative impact on their own individual fitness. Group selection theories argue that, even if such individuals and their genes
disappeared, so that their genes were less proportionally represented in the next
generation, real altruism can be still be maintained and the number of free riders
can be kept low. The following mechanisms are responsible for this:
• Social institutions leading to norms, punishment and rewards stimulate or even
force individuals to behave genuinely altruistically. In other words, the replication
of real altruism is a social and not a genetic process. Therefore, the disappearance of individuals behaving genuinely altruistic in the next generation can be
compensated by the social capacity to replicate pure altruism in subsequent generations through existing social institutions. Genetic factors do not play any direct
role. Of course, indirectly they do, if only because evolution has determined the
human capacity for institutions.
• Pure altruism can also be based on a combination of socially-acquiring and
genetically-supported kin and reciprocal altruism. In this case, pure altruism is
more stable, because selfish altruism will stabilise the social institutions supporting and eliciting pure altruism.
The first mechanism is reinforced by the existence of a meta-norm. This is the
willingness to punish a person who did not enforce a particular norm. Note that this
is different from not following a norm. The idea is that a norm system is more stable
under certain meta-norms, or if it generates such meta-norms. Other mechanisms
to support a norm system are dominance, internalisation, deterrence, social proof,
membership, law and reputation (Axelrod, 1986).
Feldman and Laland (1996) state that the popular arguments against group
selection are false because they recognise only genetic inheritance, instead of dual
inheritance – cultural and genetic (see next section), which explains the enlargement
of differences among groups. This is further discussed in the next section.
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3.3 Dual inheritance
The previous sections indicate that co-operation and social institutions can have
several sources: (a) selfish or egoistic ones (mutual benefits), (b) kin altruism, (c)
reciprocal altruism, and (d) social learning and group selection. Here we will elaborate upon the last type. This will be done in the context of theories of cultural
evolution, also known as dual inheritance theory, cultural Darwinism and evolutionary anthropology (Boyd and Richerson, 1985).
Theories of cultural evolution make ample use of both sociobiological and group
selection concepts and mechanisms. According to the dual inheritance theory of
Boyd and Richerson (1992), evolution is the basis of all human behaviour, but
should be extended with cultural acquiring or learning. This means that elements
of individual behaviour are subject to cultural transmission (Cavalli-Sforza and
Feldman, 1981). Culture is thus regarded as a system of inheritance analogous to
genetic inheritance. The core question in the context of culture and evolution is:
why is there so much diversity of human behaviour at the level of individuals and
cultures? Genetic selection and cultural selection interact. Cultural selection can,
for example, weaken natural selection pressure: e.g., a social welfare state creates
a less harsh environment, in which physically and mentally weaker individuals can
survive more easily. Dual inheritance theory and its formal models of combined
genetic and cultural transmission account for this interaction of genetic and cultural
selection and therefore go beyond sociobiology. These models show that the mean
and distribution of features of human individuals can shift away from the phenotype
favoured by genetic selection toward that favoured by cultural selection, as long as
cultural selection forces are relatively strong.
The forces of cultural evolution are shaped by the transmission of behaviour
modified by a number of mechanisms. One can classify these as follows (see CavalliSforza and Feldman, 1981; and Boyd and Richerson, 1985):
1. Random cultural variation. Cultural transmission involves ‘errors’ of various
kinds. In fact, the rate of culturally transmitted errors seems much higher than
that of genetic mutation.
2. Institutional drift. In small groups, cultural and institutional mutations may have
a large impact, causing the respective culture to be less stable. Small, isolated
human societies provide examples of this. Note the similarity with the biological
notion of genetic or molecular drift.
3. Biased social transmission. Individuals are predisposed to adopt certain preexisting cultural variants, and so these will increase in frequency. Boyd and
Richerson distinguish between three types: (a) direct bias, where the adoption of
cultural variants depends on the properties (attractiveness) of the variants (e.g.,
food characteristics); (b) indirect bias, the imitation of certain characteristics
(e.g., style of dressing) that are perceived to be associated with others that
are regarded as attractive (e.g., fame, wealth, happiness); and (c) frequency
dependent bias, where imitation of the majority is dominant. Direct bias is
more effective but involves more time and costs than the other two transmission
mechanisms.
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4. Guided (Lamarckian) variation. Humans can consciously and purposefully
change their behaviour, rules and norms through learning by doing (trial-anderror) and communication. This involves self-generation of alternatives, distinguishing it from 3a, although involving possibly the same or similar cognitive
capabilities. It is often referred to as the Lamarckian aspect of cultural evolution,
because it is a source of purposeful creation of variety.
5. Genetic-cultural (Darwinian) coevolution. Cultural traits have an impact on the
survival and reproduction, or the fitness of individuals, and in turn are influenced
by these. For instance, certain food habits include tastes that are not easily learned
but must have been selected, as they are related to toxicity. Another example
is the evolution of co-operation, possibly involving group selection. Boyd and
Richerson refer to this as “natural selection of cultural variants” (see further
Sect. 3.5).
Mechanisms 3 and 4 are especially important in explaining the rapid pace of
change in social organisation, subcultures and institutions in our modern world.
Mechanism 3 involves social learning, traditionally the domain of social psychology. Social learning occurs through various mechanisms. Vertical cultural transmission (parent to child) dominates at young ages. Horizontal (from peers) and
oblique (from non-parental adults, such as teachers) cultural transmission become
more important as children get older. It should be noted that an empirical distinction between vertical cultural transmission and genetic transmission is difficult,
as the majority of parents are biological parents. The combination and synergy
of both transmission types supports the empirically assessed high parent-offspring
correlation for many cultural traits, such as for religion, political preferences, and
food habits. The effectiveness of horizontal and oblique cultural transmission is
indicated by various other empirical regularities.
Genetic and cultural inheritance have some important differences (Boyd and
Richerson, 1985, pp. 7–8). ‘Cultural mating’ is different from biological or genetic
mating. First of all, an individual (‘cultural offspring’) has more ‘cultural parents’
than genetic parents. In the ‘cultural mating family,’ not only the nuclear family
but also the extended family, leaders, and prestigious individuals may be influential in the cultural development of an individual, though generally with declining
importance. Nowadays, with advanced communication and transport technologies
(television, internet, travel), influences become more complex and less localised.
The difference between genetic and cultural inheritance is further linked to the earlier distinction between horizontal and vertical transmission. The first of these is
akin to the spreading of a disease, as in the case of fashions and technology. Not
surprisingly, epidemiological models can be used to describe it. The second type of
transmission is determined by genetic ties. Thus, information is flowing from parent
to child, or vice versa, and from one generation to the next. Both horizontal and
vertical transmission occur in cultural evolution, whereas biological evolution is
dominated by vertical transmission, simply because horizontal genetic transmission
is extremely rare in nature – with the exception of some types of bacteria.
The temporal characteristics of cultural evolution differ from those of genetic
evolution in many respects. Cultural transmission of behaviour is faster and more
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flexible than genetic transmission, implying that culture can never be subject to
detailed genetic control. It also implies that sociobiology cannot provide a complete
underpinning of cultural and social theory, but only can identify the boundaries of
cultural evolution. Generations in cultural evolution can be longer than in biological
evolution. For instance, parents are also grandparents and thus transmit culture to
their children and grandchildren. Children may even influence their parents, and
in general younger people can influence older ones. This illustrates that cultural
evolution is more difficult and less predictable than biological evolution. In addition,
cultural transmission is a slow process that takes much time. In fact, it never stops
during one’s life. These features are opposed to genetic transmission, which occurs
in a single moment, known as conception.
Most notable and relevant in the present global-economic context is the evolution of co-operation among ever larger groups of human individuals. Ben-Ner
and Putterman (2000, p. 92) note that “[t]he universality of maternal and, more
broadly, of kin altruism across human cultures is an illustration of the fact that
organic evolution can produce organisms that are not strictly self-interested. But
more remarkable and of at least equal importance to economics and other social
sciences is the phenomenon of reciprocal co-operation among nonkin.” Diamond
(1997) identifies four main stages of social structure that humankind can be considered to have moved through over the last 13,000 years. Throughout history, non-kin
relationships increased in importance.
1. Family/band: this covers 5 to 80 people; is kin-based; consists of extended
families or several related ones; everyone knows one another; conflict resolution
is informal; the life style is nomadic.
2. Tribe: hundreds of people: kin-based clans; everyone knows one another; informal conflict resolution; sedentary life style, restricted to one village.
3. Chiefdom: thousands of people; centralised conflict resolution; one or more
villages; one ethnicity.
4. State: more than 50,000 people: many villages and cities; laws, judges and
police; possibly multiple ethnicities.
Given the current process of globalisation, we could add a fifth stage in which
communication and co-operation lead to the emergence of supra-national or even
world institutions. This involves billions of people and multiple ethnicities, and a
large number of institutions, which deal with, among other things, international
trade (WTO), international agreements, military co-operation and conflict resolution (UN), economic development and poverty (IMF, World Bank), and socioeconomic integration (e.g., the EU).
3.4 Economic evolution and self-organisation
In a historical context, one may see economic evolution as a process that closely
follows or is even integrated with cultural evolution, depending on how one defines
and demarcates the latter. Two important transitions in human history from a cultural as well as economic perspective are the transition from the hunter-gatherer
to the agriculture era, and the Industrial Revolution (or industrialization). Both
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involved many institutional changes, such as the emergence of markets and trade,
(re)stratification of society, new types of human organisation and co-operation, new
social norms and rules, and new types of public regulation. Economic evolution
can occur at a very fast pace. The significant economic and institutional changes
that have occurred since the Industrial Revolution, only less than 250 years ago,
illustrate this.
The economic literature on evolution has focused on firms and technology
rather than social and public institutions (see Nelson and Winter, 1982; Dosi et al.
1988). An exception is Nelson (1995), who presents a more encompassing view of
evolution, including cultural, ethical, institutional and legal issues. The evolution
of institutions has received some attention in the context of common property or
common-pool resources such as fisheries (Ostrom, 1990; Bromley, 1992; Ledyard,
1995; Sethi and Somanathan, 1996). A central question is whether resource conflicts and overuse should be responded to with strict policies set by higher-level
governments, or rather one should rely on the endogenous formation of use regimes.
An evolutionary perspective suggests that externally imposed rules and monitoring can reduce and destabilise co-operation or even destroy it completely (Ostrom,
2000). When monitoring is imperfect, stimulating norms through communication
is certainly more desirable than external regulation. The latter is only desirable if
monitoring and sanctioning can be well developed. The self-organisation process
underlying the emergence of norms is still not entirely understood – for instance,
the influence of the size of the group and the extent of heterogeneity are still unclear.
Insights on co-operation and sanctioning behaviour in small groups are studied within a framework of evolutionary game theory by Sethi and Somanathan
(1996). They consider the problem of changing norms in the context of competing users of a commonly owned renewable resource, some of which punish others
who do not co-operate. Sethi and Somanathan find that their theoretical model of
frequent communication among self-interested members of small informal group
of resource users can describe reality satisfactorily, in particular noting that cooperative behaviour patterns are persistent. However, instability can arise when
certain parameters change, for instance, the resource price, and interestingly also
the implementation of other external rules (state property, open access) by an external regulator. In the latter case, norms may erode, ultimately leading to resource
extinction. A spatially explicit model analysis shows that cooperative outcomes
are more likely than suggested by a non-spatial analysis performed by Sethi and
Somathan (Noailly et al., 2003).
Axelrod (1997) studies the ‘emergent properties’ of locally interacting agents.
An important question is the way in which independent actors sometimes co-operate
to an extent that they give up most of their independence, resulting in a new level of
organisation. Simple rules of punishment combined with mechanisms to increase
or decrease commitments can lead to clusters of actors that co-operate as one
independent agent. In another study, Axelrod (1997) applied the multi-agent based
framework to investigate the process of social influence and the emergence of shared
culture. By accounting for different dimensions or features that characterise people,
his simulations indicate that the number of stable homogeneous regions decreases
with the number of features, increases with the number of alternative traits per
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feature, decreases with the range of interactions, and decreases as the geographic
territory grows beyond a certain size. Unlike those models that describe culture
as a continuous dimension or as one variable with a single pair of alternatives,
Axelrod’s model does not converge towards homogeneity. Instead, cultural variety
is sustained.
Nelson and Winter (1982) suggested that policy making is ‘a continuing evolutionary process’ of the formation of organisational and institutional structures.
Therefore, the design of good policy is to a large degree the design of an organisational structure capable of learning and adjusting behaviour in response to what
is learned. Such ideas have received some attention in the context of natural resource and ecosystem management, where the notion of adaptive management has
become popular. This is based on the belief that complex, uncertain and uncontrollable systems, such as ecosystems and economies, require a certain combination of
experimental research, monitoring and policy learning (e.g., Holling et al., 1978;
Walters, 1986; Gunderson et al., 1995). Adaptive management is based on a participation of relevant stakeholders and is supported by relevant disciplines, such that
learning can occur through both experts and stakeholders.
3.5 Cultural-genetic coevolution
A correct long-term perspective on institutions should acknowledge that genetic
evolution of humans and cultural evolution are, ultimately, interactive. Indeed,
all evolution is coevolution, because it is virtually impossible that one species
evolves over a long period of time in the absence of any evolution in species and
ecosystems with which it interacts. Nevertheless, biological evolution is generally
much slower than cultural, social and economic evolution. As a result, culturalgenetic coevolution is difficult to observe. This does not mean, however, that it
does not exist. There is both theoretical and empirical support – for instance, in
human genetics, behavioural ecology, primatology and evolutionary psychology
– for the idea that a joint and interactive evolution of the genetic composition of
humans, their behaviour, their culture and their environment has occurred. Different
phases of this coevolutionary history are the hunter-gatherer era, the agricultural
era, and the industrial era. For a complete picture of developments in the very long
term, the categorisation of Durham (1991) offers a good starting point. It includes
two interactive and three non-interactive relationships between genes and culture:
• Genetic mediation: genetic changes affect cultural evolution. One can regard this
as suggesting that biological limits are critical or operative. The ability to talk,
for instance, allowed for more subtle forms of communication and co-operation
among humans, ultimately leading to advanced and cumulative social learning.
• Cultural mediation: cultural changes affect genetic evolution. This can be considered as culture changing the biological limits. For example, domestication
of animals and our close proximity to them led to the spread of contagious
diseases, and ultimately to human genetic resistance against these diseases (Diamond, 1997). Domestication of animals and dairying ultimately also led to a
larger proportion of individuals capable of adult lactose absorption.
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• Enhancement: cultural change reinforces natural evolution. This means that cultural and biological factors or effects add up. For example, a taboo on incest
reduced the chance of unfavourable combinations of alleles. Another example is
the spread of agriculture due to the intrinsic growth of the population of farmers (natural selection: higher survival and offspring due to more food) and the
transformation of hunter-gatherers into farmers (cultural selection: imitation of
successful strategy).
• Opposition: cultural change goes against natural evolution, i.e. they are negatively additive. For example, the direction of progress in health care allows
individuals who may have perished under ‘natural conditions’ to survive and
reproduce.
• Neutrality: cultural change is independent of biological evolution or selection.
One can regard the biological limits as non-critical or non-effective. Perhaps a
major and increasing part of (higher) culture falls into this category.
Whether the latter relationship is dominant has divided biologists and social
scientists most strongly. Wilson (1978, p. 167) has made a clear statement of it:
“The genes hold culture on a leash. The leash is very long, but inevitably values will
be constrained in accordance with their effect on the human gene pool”. Durham
(1991, p. 35) links three questions to this statement: Is the leash the same length at
all times and places? The answer is probably no. Can the causal chain of the leash
be reversed, so that culture leads genetic evolution? The answer is yes in the case of
the cultural mediation mode. Is the leash ever so long as to be ineffective, providing
no boundaries to cultural evolution? Perhaps it is safe to say that, in the long run,
culture cannot escape the genetic leash. Of course, this just shifts the question to
what is the relevant time scale.
An understanding of the neutral mode can be enhanced by examining the role of
positive feedbacks that lead to more complex systems. In this context, concepts such
as meta-system transitions (Heylighen, 1996) and autocatalytic cycles (Kauffman,
1993) have been proposed. The beginning of the Agricultural and Industrial Revolutions show many such positive feedbacks. More recently, the advent of computers
and information technology has created a growth cycle involving positive feedback
through the incorporation of more and more individuals in a global network of
communication and co-operation.
An interesting example with far-reaching implications of the “enhancement
mode” has been proposed by Galor and Moav (2002). Their thesis is that the struggle for survival that characterised most of human existence generated an evolutionary advantage to human traits that was complementary to the growth process,
which in turn triggered the take-off from an epoch of stagnation to sustained economic growth. At first sight, one might think that, unlike genetic evolution of certain
physical features that depend on variations of a single or few genes (lactose and
gluten tolerance, sickle cell trait), the interaction between human genetic evolution
and economic growth finds little support in evolutionary biology and theories of
cultural evolution. The reason is that human behaviour involves so many genes that
its evolutionary timescale does not match that of economic growth. In particular,
Galor and Moav’s view seems to overlook the fact that economic growth is a phe-
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nomenon that arose long after Homo sapiens had evolved (at least several hundred
thousand years ago), and even much later than the rise of agriculture (about 13,000
years ago). Significant economic growth did not actually arise until the end of the
Middle Ages, and sustained growth not until the Industrial Revolution was set in
motion some 250 years ago.
Nevertheless, selection (and possibly recombination) effects may have changed
the distribution of certain parental care characteristics, notably the trade-off between
quantity of offspring and quality of parental care. In modern economic growth
jargon, such quality improvements can be regarded as an early or even ancient type
of investment in human capital. In particular, the gradual emergence of the smaller
family since the rise of agriculture may have played an important role in this.
Hitherto, larger groups, such as tribes built around one or more extended families,
exerted a dominant influence on human evolution. Galor and Moav (2002) argue
that human organisation by way of smaller families fostered a strategy that focused
relatively much attention on parental investment in quality of offspring, such as
education. Together with the sufficiently large size of the communicating human
population, this led, through technological innovation, to the essential impetus
for the take-off of the Industrial Revolution. This may be termed an ‘endogenous
evolutionary theory’ of the Industrial Revolution. Note that the selection pressure
was effective during the preceding “Malthusian era” because the majority of people
were living at a subsistence consumption level.
One explanation that the authors cannot exclude, however, is that the change
in parental care has culturally rather than genetically evolved. This implies that the
theory needs to be tested empirically, which is a difficult if not impossible task.
But perhaps this is not really problematic, because the theory works in a similar
way for both cultural and genetic selection, and may even be formulated to include both. Finally, with the Industrial Revolution, the selection forces changed
through institutionalised educational systems as well as incomes-consumption levels far exceeding subsistence levels. As a result, a new ‘evolutionary regime’ applies
nowadays, at least in the developed part of the world.
These considerations lead to the general question as to whether current human
culture – supported by advanced medical, informational and other technologies
– has moved to a level that is completely independent of natural evolution. The
answer to this question is a definite ‘no,’ since there is considerable variation in the
number of offspring among individuals, groups and countries, which creates room
for natural selection at a genetic level. It is, however, difficult to predict where this
will lead. It is clear that, genetically and behaviourally, we are still predominantly
hunter-gatherers. But in line with the previous discussion, it cannot be excluded
that over thousands of years we have adopted new strategies that find support in
genetic changes. This period covers several hundreds of generations, allowing for
significant evolutionary (selection, recombination and mutation) effects since the
Neolithic revolution. Even the industrial era, covering only about ten generations,
is already sufficiently long to allow the trace of selection effects. This perspective
raises interesting hypotheses and questions, which can only be tested through cooperation of economists and biologists, notably human geneticists. This should
address factors such as group and family size (e.g., tribes, extended family, nuclear
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family), life expectancy, parental investment (wealth and knowledge), and effects
of these factors in later generations.4
4 A comparison with non-evolutionary theories of institutional change
Institutional economics has developed as a separate branch of economic theory
(Kapp, 1976; Hodgson, 1988; Commons, 1990; Tool, 1993; Swedberg, 1994).
Within institutional economics, usually a distinction is made between old (Veblen,
Mitchell, Commons) and new streams (Myrdal, North, Olson, Williamson).5 Many
institutional theories in economics emphasise dynamics of institutions, and even
use the terminology ‘evolution’, although often in a non-specific and loose manner.
Hodgson (1993) has argued that the frontier of evolutionary economics is not very
distinct. Nevertheless, this seems to apply more to informal types of evolutionary
analysis than formal approaches that explicitly describe populations, diversity, selection and innovation. In the following, we present a schematic account of the
main differences between evolutionary and other theories of institutional change.
Economics has generally regarded institutions as constraints, emphasising the
role of markets and property rights. Transactions costs are often claimed by institutional economists to be their intellectual focal point. Institutional change is
commonly framed as a control problem rather than an endogenous phenomenon.
An exception is the Coase theorem, which states that, in the presence of negative
externalities, negotiations among rational agents can lead to socially optimal outcomes. Applied institutional analysis has focused on the liberalisation of markets
(energy, public services), the fighting against imperfect competition (anti-cartel
legislation), and the taking away of barriers to market entry (property rights, international trade agreements). In addition, interest in the creation of new markets has
taken flight, notably in the context of environmental policy (tradable permits) and
semi-public goods (auctions to sell wavelengths for telephone communication).
Essential for the optimistic tone coming out of this literature on public policy and
market liberalisation and creation, has been the core assumption that individuals
are rational – i.e. purely selfish and able to solve complex decision problems. This
allows a predetermined optimal institutional arrangement, without the necessity of
internal diversity. Evidently, all evolutionary approaches deny the validity of the
assumption of unbounded or perfect rationality.
Some approaches, such as that of the Historical School, describe institutional
change, but leave it unexplained, at least in terms of a general mechanism. Often,
institutional change is considered as influenced by exogenous factors, or as a deliberate choice among options, such as contracts (Bromley, 1989) – which is very
4
Globalisation tends to ‘homogenise’ cultures, which in effect reduces diversity of human cultures
and behavioural strategies that have taken centuries to millennia to evolve. Durham (1991) argues that
we should try to learn about and from cultural diversity before it is too late, and that its study will
probably enhance understanding of, tolerance for, and valuation of cultural diversity. It is possible that
certain cultural diversity has become an outdated ‘adaptive toolbox’ because our economy has shifted
the emphasis from agriculture to industry and ICT. This may elicit appropriate types of new diversity.
5 Space does not allow, and purpose does not require us to provide, a complete overview of the
economic literature on institutions here. For a comprehensive survey, see Hodgson (1988).
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close to the traditional economic optimisation perspective. Institutional economics
pays much more attention to historical patterns and detailed descriptions of institutions, but generally does not succeed in translating this into a forward looking
dynamic model. Hierarchical processes of learning and changing norms and rules
(teleological processes) are often stressed (Stein, 1997). This can be linked to the
evolutionary concept of ‘emergence’: higher-level social structures emerge, often
repeatedly at different levels, from the complex interactions among individuals,
their habits and accumulated knowledge. Specific anthropologically oriented theories focus on local communities and societies, which are often considered as organic
and influenced by other societies (Bush, 1987; Edgren, 1996).
Evolutionary theories of institutional change try to capture the idea that there
is a diversity of potential and actual institutions, which allows for their selection.
Moreover, new institutions arise, often unplanned, through innovation, regrouping
of individuals, or integration of different levels or scales of human organisation
(local to international). Often this happens in response to changes in other areas
of the economy or even the environment. This leads to the notion of coevolution. Selection and variety creation (innovation) are cornerstones of these theories,
whereas path dependence and lock-in are typical implications. Non-evolutionary
institutional theories are limited to mechanistic changes that assume unchanging
structure below the population level. Inclusion of a changing population structure
would, by definition, move them into the realm of evolutionary approaches.
Altruism is a central issue in both evolutionary and institutional theories. However, in the latter, it is often linked to social-cultural conditions, such as:
• Wealth: being altruistic is easier when one is relatively well off.
• Family background: copying the behaviour learned in a family setting when
acting in relationships with non-family.
• Education and religion: using reward and punishment to satisfy a general, prevailing norm in one’s social group; and socially acquiring empathy through experience with reciprocal altruism.
• Distance: both social and geographical distances, with the ‘giver’ having an
important influence on cultural bonds and altruistic actions.
Some of these elements of institutional approaches can be fruitfully combined
with evolutionary approaches to address institutional change.
Finally, some of the statistical-econometric work on historical institutions
(‘cliometrics’) can also be linked to the evolutionary approach. North (e.g., 1990)
studied the role of institutional variation in such a way. This did not, however,
give rise to evolutionary theories explaining how this variation changed over time,
for instance, by identifying selection and innovation mechanisms. In recent work,
North strongly argues in favour of using evolutionary approaches to deal with the
path dependency of institutional change in economic history (North, 1997).
5 A coevolutionary framework for analysis of institutional change
Here we will outline a coevolutionary framework to understand and describe changing institutions. We consider it essential to include individual and group selection
Coevolution of economic behaviour and institutions
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mechanisms. Although both have received much criticism, evidently a description
of human societies should include at least one and most likely a combination of
them. A number of relationships that define the complex coevolutionary process
between individuals and institutions can be identified. The impact of institutions
on individuals includes the following mechanisms:
• Institutions influence, enable or constrain behaviour of individuals.
• Institutions select among the diversity of individual behaviours and preferences.
• Alternative institutions compete in different stages: conception, design, implementation, and ex post evaluation.
• Enforcing of norms occurs through rewarding or punishing of individuals that
do (not) follow the norms.
• Meta-norms may be present, which means that (non-)enforcers of a norm are
rewarded (punished).
The impact in the opposite direction includes the following mechanisms:
• Interactions among individuals influence institutions: altruism, co-operation.
• Individuals form groups, depending on the size of the population. Note that
groups and institutions are tightly connected, as isolated individuals do not need
to co-operate or avoid conflicts through institutional arrangements.
• Groups influence individuals and institutions.
• Altruism can benefit (selfish) or harm (genuine) the respective individual.
• Co-operation between individuals can be voluntary (spontaneous) or enforced
(regulation, norms).
• Co-operation can be beneficial, disadvantageous or neutral to the participating
individuals.
Table 1 shows different views on the factors of influence on human behaviour
and their social institutions. The ‘pure environment’ view covers various types of
learning, including guided variation and biased transmission. According to this
view, all diversity of cultures is due to diversity of environmental conditions. The
‘pure genes’ view reflects an ultra-sociobiological view. The ‘genes + culture’ view
states that cultural transmission dominates in the short run and genetic transmission
in the long run. According to Boyd and Richerson (1985) these latter transmission
mechanisms are, however, so indirect that the genetic influence on culture is implicit and difficult to prove. Nevertheless, some cultural habits are directly related
to survival and reproduction – think of the role division and interaction among men
and women, and food habits. Others, however, such as fine arts, have a less evident
impact. Feldman and Laland (1996) argue that cultural evolution is most effective
in environments that change slowly relative to the lifetime of individual generations. In rapidly changing environments, social learning has no adaptive value, as
information becomes outdated – differs too much between parents and offspring.
Only very rapid evolution, such as certain types of current technological evolution,
could accommodate such rapid environmental changes. In static or very slowly
changing environments, cultural transmission has no adaptive advantage over genetic transmission, since genetic adaptations are capable of keeping up with, and
accommodating, environmental changes.
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Table 1. Possible factors of influence on behavioural variation in humans
Genetic variation
unimportant
Genetic variation important
Heritable cultural
variation unimportant
Pure environment
Heritable cultural
variation important
Environment + culture
Pure genes
Genes + culture
Source: Boyd and Richerson (1985, Table 5.5, p. 158).
The conditions in the rows and columns of Table 1 provide guidance for understanding which factors need to be taken into account in an analysis of institutional
change. In addition, the typology is useful in a comparative analysis of institutions
across cultures or countries. Siebenhüner (2000) suggests that such comparative
studies can possibly shine more light on the genetic basis of human cultures and
institutions. This would require co-operation among economics, sociology and anthropology. Ben-Ner and Putterman (1998, 2000) argue that evolutionary psychology opens the possibility of an important new research programme in economics,
namely the influence of the environment on individual preferences. ‘Environment’
should here probably be interpreted broadly, covering physical and geographical
features, environmental and natural resources, artefacts and technology, and other
individuals (social-environment). Jackson (2000), Siebenhüner (2000), and Sethi
and Somanathan (1996) have actually examined the role of environmental and natural resources. In particular, they have looked for an answer to the questions of
why environmental problems exist, and whether human behaviour can be brought
in line with the requirements for realising environmentally-sustainable long run
development of the (global) economy. This line of thinking stresses that current
artefacts and natural environments differ considerably from those prevailing during the period in which we evolved. In addition, consumption beyond basic needs
satisfaction is found to be dominated by a striving for possession of ‘positional
goods’, which in an evolutionary context can be interpreted as founded in trying to
increase one’s fitness, or, more simply, finding a partner.
So far, few theoretical analyses have actually incorporated endogenous institutions and norms. One important reason may be that the analysis of norms in
economics is dominated by evolutionary game theory, which employs the most
aggregate type of evolutionary modelling. Moreover, it focuses the attention entirely on selection, excluding innovation. Since continuous selection exerted upon
a given amount of diversity always leads to an equilibrium, the often used term
‘equilibrium selection theory’ is more appropriate here than evolutionary theory.
Incorporating changing institutions in an evolutionary context essentially means
an extension of traditional evolutionary models with endogenous institutions. Doing this at an aggregate level, such as in evolutionary game theory, means that
the standard replicator mechanism or any other representation of the population
distribution dynamics needs to be extended, with a dynamic equation describing
institutional change. If one aims to formalise the entire set of two-way interactions
between individuals and institutions, then a multi-layered structure is required. This
can probably only be realised with numerical multi-agent models.
Coevolution of economic behaviour and institutions
311
Table 2. Coevolution of institutions and behaviour: layers and dimensions
Level
Genes
Components
Population, variety
Relationships
Organisational structure
(network/hierarchy)
Individuals
Population, variety,
preferences, profit motive, habit/routine, altruism (kin, reciprocal,
genuine), reputation
Empathy, sympathy, reciprocity (strong/weak), frequency and intensity of interactions
Groups
Population,
variety, size,
organisational
structure
(network/hierarchy),
firms, government,
NGO’s, family,
power distribution,
emergent properties,
collective goals
Contract, agreement, market,
firm, government
(legislation, property
right), NGO’s, fashion,
rules (formal/informal)
religion,
technical
standard, norm (moral
value), meta-norm
Isolation
(geographical, cultural),
distance
(geographical/cultural),
externalities
Institution(s)
Organisational structure
(network/hierarchy)
Processes
Kin selection,
mutation, recombination, genetic
mediation
Competition,
co-operation,
communication,
negotiation,
imitation (direct
bias, frequency
dependent bias,
indirect bias),
horizontal and vertical transmission, enforcement
(reward/punishment),
retaliation
Organisational learning, group selection,
cultural mediation,
globalisation, metasystem transition
(emergent properties)
Competition (design,
operation), replication, regulation
(rules, monitoring,
enforcement), metasystem transition
(emergent properties)
One can define four many layers of evolution among which interactions occur,
namely genetic, individual, group and institutional. Table 2 identifies components,
relationships and processes for each of these. In addition, the typology of culturalgenetic coevolution of Durham (1991), presented in Section 3.5, is relevant.
6 Conclusions
The rise of evolutionary thinking in the social sciences goes along with a sharp
increase in interest in changing institutions. Various evolutionary concepts and
theories have been proposed to provide a basis for thinking about institutions,
norms and their dynamics: sociobiology and recently evolutionary psychology,
312
J.C.J.M. van den Bergh and S. Stagl
group selection theory, dual inheritance theory, theories of economic evolution and
self-organisation, and culture-genetic coevolutionary theory. These offer complementary inputs to an evolutionary perspective on individual behaviour and social
institutions. Sociobiology focuses attention on kin selection and inclusive fitness,
and to some extent on reciprocal altruism. Higher culture and institutional organisation, including non-kin social relationships, are considered to originate from kin
relationships. Evolutionary psychology adds a specific human dimension to this,
based on the idea that genetically humans are still Pleistocene hunter-gatherers,
reflected by the presence of particular automatic behavioural strategies. Group selection theory suggests that social incentive systems of punishment and reward
are able to elicit true altruism, and are not necessarily founded in kinship or reciprocity. Cultural evolutionary theory emphasises the role of horizontal transmission
mechanisms (through peers) in social organisation, and the fact that humans can
consciously and purposefully change their rules and norms. In addition, they stress
that individuals tend to adopt certain pre-existing cultural variants, so that these
will increase in frequency. Various types of more or less costly imitation processes
play a role in this. Finally, positive and negative interactions between cultural and
biological evolution may occur, giving rise to cultural-genetic coevolution. A coevolutionary perspective in a strict sense relates to the interaction of populations of
economic-cultural agents and populations of institutional arrangements. Observed
institutional variation can thus be explained on the basis of genetic, environmental
and purely cultural factors. It has turned out to be difficult to decompose these,
especially where social and genetic transmission strongly correlate, notably due to
the overlap between vertical genetic and cultural transmission and between parents
and offspring.
The economic literature on evolution deals mainly with firms and technology,
and to a lesser extent with social and public institutions. Social and public policy
issues focus on equity arrangements, evolution of norms as a decentralised policy
to deal with sustainable exploitation of public goods such as natural resources, and
adaptive management as an experimental policy approach to foster learning. In
addition, evolutionary economics studies the economic rationale of co-operation
and altruism by assessing associated costs and benefits. Whereas economics traditionally has been interested in institutions for reasons of enhancing efficiency of
production and resource use, from an evolutionary angle institutions can be regarded
as contributing to stability, resilience and adaptability as well. Institutions such as
education and R&D have indeed accelerated the speed of innovation through cooperation and recombination. This in turn has allowed firms to adapt more quickly
to changing economic and environmental circumstances, and in general has contributed to the increasingly fast pace of cultural-economic evolution.
Many non-evolutionary theories have been proposed to study the dynamics of
institutions. However, even if the frontier of evolutionary economics is not always
very sharp, it seems useful to distinguish between approaches based on populationselection mechanisms and others. Most of the latter theories leave institutional
change unexplained, or explain it in a mechanistic way. Both neoclassical and contractual theories regard institutional change as a control or choice problem, rather
than an endogenous, historical phenomenon. Evolutionary theories present causal
Coevolution of economic behaviour and institutions
313
explanations that open the black box of institutional change, by allowing for competition among institutions and regarding interaction among individuals, such as
grouping and co-operation (coalition-formation), as leading to the emergence of
institutions. The process of emergence is both difficult to understand and to model.
A framework was proposed to explain the dynamics of behaviour and institutions,
based on including various feedback mechanisms, resulting from multiple, interacting layers of genes, individuals, groups and institutions, as well as norms and
meta-norms. The result is a multi-level system, implying that simple evolutionary game models are insufficient to formalise the entire framework, even if they
could serve a useful purpose in clarifying certain features. However, numerical approaches allowing for more descriptive complexity seem unavoidable in a serious
and complete theoretical study of the evolution of institutions.
Various applications of the framework can be foreseen: the dynamic interaction
between business management, consumers and public regulation; the impact of
globalisation on international agreements; the evolution of individual preferences
in a social context; altruistic behaviour of consumers-citizens; and the impact of
globalisation on ‘distance’ between individuals and institutions and indirectly on
altruism. Evidently, this list is far from exhaustive.
Acknowledgements. We thank John Foster, John Gowdy and an anonymous referee for helpful comments on earlier versions of this paper.
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