A colleague sent me this very interesting paper by John Gowdy, who I’ve encountered previously through an essay he wrote for Conservation Biology last year – ‘What Every Conservation Biologist Should Know about Economic Theory’.
This particular essay had a big influence on my understanding of economics, and spurred me to string together some semi-coherent thoughts on the topic earlier this year. Gowdy argues that the mainstream model of economic thought is essentially incompatible with biodiversity conservation since it relies on “unrealistic and inappropriate assumptions about human behavior and biophysical reality”. In particular, he raises questions about common applications of economics to biodiversity conservation, including: economic valuation of ecosystems and biodiversity, assumptions about reversibility and substitutability, discounting and marginal analysis.
All very important food for thought, although I’m left wondering how I can incorporate Gowdy’s recommendations in my own work, given he argues it is “necessary to discard the current core economic model” before economics can usefully be applied to a range of sustainability, climate and biodiversity related questions. This somewhat reminds me of the actions suggested by a certain keynote speaker at this year’s International Congress for Conservation Biology, which were something like: 1. Reverse biodiversity loss, and 2. Reduce greenhouse gas emissions to pre-industrial levels. We might be able to add: 3. Reject mainstream economic model to that list. I should be able to tackle Number 1 before lunch.
Back to the first paper. There were some fascinating nuggets of information about human behaviour, which run counter to the ‘rational economic man‘ model of human decision making assumed in mainstream economics and decision theory (including decision theory as applied to conservation).
For example, Gowdy argues that model of rational economic man is not supported in any culture studied, based on findings from the Ultimatum Game. In this experiment, one player proposes how to divide the sum between the two players, which the second player can either accept or reject – but if the offer is rejected, both players receive nothing. Mainstream theory would dictate that the second player should accept any offer (since something is better than nothing), yet this often is not the case.
Results from this game as well as from a variety of other game theoretic experiments showed that, in a variety of settings and under a variety of assumptions, other-regarding motives are a better predictor of behavior than those embodied in Homo economicus. Humans regularly exhibit a culturally conditioned sense of fairness, and they are willing to enforce cultural norms even at economic cost to themselves. Cross-cultural UG experiments also show that cultural norms vary and that they dramatically affect the average amount offered in the game and the rates of rejection (Henrich et al., 2001).
Gowdy goes on describe an experiment where ducks were shown to ascribe more closely than humans to the rational economic model.
Harper (1982) tested the ability of a ﬂock of ducks to achieve a stable Nash equilibriumwhen fed balls of bread. Every morning two researchers would stand on the bank of the pond where the ducks were and throw out 5 g dough balls at different intervals. Expected utility theory would predict that the ducks would distribute themselves between the two feeders in such as way that, N1/r1=N2/r2, where Ni is the number of ducks and ri is the expected (bread) payoff from standing in front of one of the feeders. Thus if there are 33 ducks participating and if one experimenter throws a 5 g ball of dough every 15 s and the other experimenter throws a 5 g ball of dough every 30 s, there should be 22 ducks in front of the ﬁrst experimenter and 11 in front of the other. In fact this is what happened. The ducks re-arranged their numbers efﬁciently as the payoffs were changed. Furthermore, if the experimenters changed the speed of throwing the dough balls, the ducks would quickly and efﬁciently readjust their numbers.
Regarding the claims for human “rationality”, it is ironic that a large body of evidence suggests that “lower” animals act more in accordance with the economic model of rational choice than humans do.
One final quote, which Gowdy borrows from Nelson (2005):
Deﬁning economics as the study of rational choice, neoclassical economics treats human physical bodies, their needs,and their evolved actual psychology of thought and action as rather irrelevant. The notion that humans are created as rational decision-makers is, from a physical anthropology point of view, just as ludicrous as the notion that humans were created on the sixth day.
I enjoy reading papers that are a bit outside the general field of conservation biology, but always try to think of how to relate it back to my own work. A couple of things stood out – first the potential problem of “crowding out” altruistic and corporative behaviour through extrinsic incentives. An example of this might be offering a monetary incentive or some other kind of market based instrument to encourage stewardship of a public good (i.e biodiversity), when there may already be significant voluntary contributions made by the public to preserve the good. As argued by Reeson and Tisdell (2008):
…where some people are already making voluntary contributions, motivated largely intrinsically, there is a signiﬁcant danger that introducing extrinsic incentives will crowd out these voluntary contributions. In such circumstances, policies intended to promote public good contributions may be ineffective or even result in a decline in the supply of the public good.
I’ve read very little about the effects of different factors on motivation, but it’s obviously all very relevant to environmental decision making. In the mean time I’ll learn what I can from my friend Anna, whose PhD is about how to encourage pro-environmental behaviour.
Gowdy also briefly mentions the concept of hyperbolic discounting, but I think I’ll touch on that in another post.
Gowdy, J. 2008. Behavioral economics and climate change policy. Journal of Economic Behavior & Organization 68:632-644. doi: 10.1016/j.jebo.2008.06.011.