Economics: Will The Behavioral Economists Shut Up?

 

(Drivebycuriosity) - Classical economists like Adam Smith, Hayek and Milton Friedman believed that humans behave rational and follow their self interest. Classical Economics is build on the insight that people want more of what is cheap and less of what is expensive, or would prefer (by same risk, stress, time etc) a higher income to a lower one. But in the recent years it became fashionable to deny rational behavior and a cult named Behavioral Economics gained followers. They claim that humans behave irrational, and Prof. Richard Thaler, one of the loudest deniers of rational economics, received the Nobel Prize for Economics in the year 2017.

Who is right? We can find some answers when we look way back in history. Max Bennett tells in his wonderful book  "A "Brief History Of Intelligence" (amazon ) that the early primates had a unique diet: they were frugivores. "Their fruit-based diets came with several surprising cognitive challenges and require rational conduct", explains Bennett. 

There is only a small window of time when fruit is ripe and has not yet fallen to the forest floor. For many of the fruits these primates ate, this window is less than seventy-two hours. Some trees of offer ripe fruit for less than three weeks of the year. Some fruit trees has few animal competitors (such as bananas in their hard-to-open skin), while other fruit has many animal competitors (such as figs). 

These popular fruits are likely to disappear quickly, as many different animals feed on them once their are ripen. Primates needed to keep track of all the fruit in a large area of forest and any given day know which fruit was likely to be ripe; and of the fruit that was ripe, which was likely the most popular and hence disappear first.

 

                   Planning In Advance  

Bennett also reports that chimpanzees plan their nighttime nesting locations in preparation for foraging on the subsequent day. For fruits that are more popular, such as figs, they will go out of their way to plan where they sleep to be en route to these fruits.  

A frugivore must plan its trips in advance before its hungry. Setting up a camp en route to a nearby popular fruit patch the night before require anticipating the fact that you will be hungry tomorrow if you don`t take preemptive steps tonight to get to food early.     

Other mammals, such as mice, clearly stock up on food as winter months approach, storing vast reserves of nuts in their burrows to survive the long stretch when trees produce little to no food.

 

              Contemporary Studies 

The rational behavior of animals, including humans, is also proven be contemporary studies. For instance the "Guardian" describes the rational behavior of Kelly, a dolphin, who lives in a research institute in Mississippi (   theguardian): 

"All the dolphins at the institute are trained to hold onto any litter that falls into their pools until they see a trainer, when they can trade the litter for fish. In this way, the dolphins help to keep their pools clean. Kelly has taken this task one step further. When people drop paper into the water she hides it under a rock at the bottom of the pool. The next time a trainer passes, she goes down to the rock and tears off a piece of paper to give to the trainer. After a fish reward, she goes back down, tears off another piece of paper, gets another fish, and so on.

…Her cunning has not stopped there. One day, when a gull flew into her pool, she grabbed it, waited for the trainers and then gave it to them. It was a large bird and so the trainers gave her lots of fish. This seemed to give Kelly a new idea. The next time she was fed, instead of eating the last fish, she took it to the bottom of the pool and hid it under the rock where she had been hiding the paper. When no trainers were present, she brought the fish to the surface and used it to lure the gulls, which she would catch to get even more fish. After mastering this lucrative strategy, she taught her calf, who taught other calves, and so gull-baiting has become a hot game among the dolphins.
The dolphins are not only gaming the system they are saving and using a capital structure to increase total output".

      The Rules Of Supply And Demand


Kelly certainly behaves rational. The dolphin is spending energy & time to get more food, a strategy which is called profit maximizing. And dolphins aren`t alone. Researchers from the Max Planck Society discovered that at least some birds, the African Grey Parrots, also behave rational and follow their self-interest (phys.org). 

They report: "The birds have learned how to trade a token for food: one each for a low, medium or high-value food. The task was to choose between an instant food reward and a token that they could exchange for higher quality food. In controlled tasks, however, selecting a token resulted in an equal or lower payoff. The parrots only rejected the immediate reward and chose the token, if the token's value corresponded to a higher quality food compared to that of the immediately accessible food. The results show that parrots are capable of deliberate and profit-maximizing decisions."

Animals also respond to rising prices and consume less of something when it gets more expensive. Animals don´t use money of course, but they pay by burning energy and spending time to get some preferred food. 

The Dictionary of Animal Behavior says, if an animal expends a certain amount of energy on a particular activity, then it usually does less of that activity if the energy requirement is increased (oxfordreference). 

Studies also show that animals invest in auspicious assets the same way stock market investors do. Researchers from the University of British Columbia and Warsaw University of Life Sciences found that dairy cows are willing to expend energy (for instance for opening a gate) to gain access to a grooming brush (phys.org).

 

                 Biological Markets 

 Scientists are observing "biological markets" where animals trade goods (food) and services (grooming, shelter, protection etc.), following the economic rule of "supply and demand" (ronaldnoe). For instance 'helper wasps' raise the offspring of dominant breeders in small social groups in return for belonging in the nest (sciencedaily).  

Scientists from the University of Sussex noticed that "the helper wasps provide less help to their own 'bosses' (the dominant breeders) when alternative nesting options are available. The dominant wasps then compete to give the helper wasps the 'best deal', by allowing them to work less hard, to ensure they stay in their particular nest".

It is unclear if animals really think. They may just follow their instincts which are shaped by evolution. But anyway, if a species would behave irrationally it would lose against their competitors (getting less food and inferior shelter for instance) and would have gone extinct over time. The best strategy wins and their genes survive. This way animals inherited behavior which leads them to act economically.

Will the Behavioral Economists shut up?