Central thesis of behavioral economics

An evolutionary take on behavioral economics

But it still leaves open the question of where these heuristics and other decision making tools come from. And this is where we get to the fifth level — what I will call evolutionary rationality.

The toolbox that we use today has been honed by millennia of natural selection. Anticipating two common responses to this point, I am not going to spend today trying to convince the doubters in the audience that the human mind is a product of evolution — although I am happy to do that over a drink later. And I will highlight that humans are cultural and well as biological creatures. That we have a range of universal instincts and preferences shaped by natural selection does not say that culture is not important.

What we see is a combination of evolved preferences, social norms, technologies and the like, each interacting with and shaping the others. Yes environment matters, but if you ignore the biology, you will do a poor job of understanding why consumers act the way they do. For a start, it tells us something about our objectives. Those who are in the audience today — all of your ancestors, without fail, have managed to do two things: survive to reproductive age, and reproduce. As little as you might like to think about it, your parents, grandparents and so on all the way back until the evolution of sex have always successfully attracted a partner to reproduce with.

This does not mean that we literally walk around assessing every action by whether it aids survival or reproduction. Instead, evolution shapes proximate mechanisms that lead to that ultimate goal. And consumer preferences are manifestations of our innate needs and preferences. For example, on survival — we are obsessed with food — and in particular, crave sweet and fatty foods — which in historical times increased survival.

Most of the successful global fast-food restaurants target those evolved tastes in fact, you could say that the market has evolved to match those propensities.


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We have an innate sense of danger — for example, we and other animals are quicker at detecting snakes than other stimuli, even when we have never seen them before. On reproduction, we enjoy sex — which has obvious reproductive benefits, at least before the spread of effective contraception. We accumulate resources far beyond those required for survival. And so on.

Before going on, however, I should say that the shaping of proximate rather than ultimate mechanisms for survival and reproduction has some interesting consequences. Our evolved traits and preferences were shaped in times vastly different to today. Our taste for food was shaped at a time when calories were generally scarce and provided in the form of meat, tubers, nuts, vegetables and Glyptodons.

Today, we are effectively calorie unconstrained. This backfiring of our evolved traits and preferences is known as mismatch. Sometimes the tool works. So what does evolutionary biology tell us about human decision making, behavioural economics and marketing?

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First, the driver was male. Yes, men and women are different — we will touch on the reasons for this in a moment — although I expect most marketers already knew this. Females — and in biology, this is in part how females are defined — produce a large immobile egg. Males produce a smaller gamete — sperm. The egg is the scarce resource.

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Women are born with a million or so eggs, but they release only one or so a month. Men produce 1, sperm a second. Each man in this room will produce enough sperm during this talk to fertilise every egg the women in this room will ever produce. Then there is what happens when a sperm and an egg are joined. The woman spends nine months carrying the baby — and is unable to reproduce during that time.

She then provides the majority of infant care. Men are less constrained by any such barriers. Then throw in that women are certain of maternity, whereas men may not be certain of paternity, and you have vastly different patterns of reproduction between the sexes. More men than women have zero children — the worst possible evolutionary outcome. A man who applies no standards to a mate choice may still go without.

A woman would never have that problem. As one example, approximately 16 million men in central Asia carry the same Y chromosome — the Y chromosome is passed from down the male lineage from father to son. This chromosome originated in Mongolia around AD with around 8 per cent of the men in the region carrying it 0. One possibility is that this chromosome was so successful as it was carried by Genghis Khan and his close relatives.

Genghis had multiple wives and a harem. He may have fathered thousands of children. Whether that number is accurate or not, it is feasible that Kublai Khan could have been having hundreds of children a year. No woman could ever have that level of success — but for men, the evolutionary rewards to success can be vast.

This brings us back to our Ferrari driver. As a male, the risk-reward calculation in evolutionary terms is quite different from women. Men face a higher probability of evolutionary oblivion, and small chance of an evolutionary extravaganza.

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It makes sense to take risks that may lead to inordinate evolutionary success — or at least to avoid evolutionary oblivion. One of my favourite examples of this comes from research by Richard Ronay and Bill von Hippel.

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They got some young male skateboarders to perform tricks, including a difficult trick that they could complete only half the time. First, this risk taking should be seen in the context of what they are trying to achieve — attracting the female. So much of economics — and behavioural economics — is looking at the wrong objective. Second, this change in risk preference in the presence of a women points to one of the most important findings in evolutionary psychology — our decision-making changes with the immediate context. We might be considered to be different personalities.

Evolution has not shaped an all-knowing computer, but rather a modular computer for making different decisions based on different contexts. As an example of this, show one group of people the movie The Shining, the other half a romantic movie starring Ethan Hawke. Then manipulate the ads they see during the movies to either accentuate the uniqueness of the product, or its popularity. Those watching The Shining are more likely to prefer popular products — safety in numbers as their danger avoidance personality is triggered. For those watching the romantic movie, they wanted unique products so that they would stand out from the crowd.

Their mating motives have been triggered.

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You effectively get a change in preferences based on which movie they are watching and which self is answering the questions about the products. The effectiveness of social proof varied with context. The largest discount for the initial delay. And if I asked you to revise your choice in the second question at the one year mark, I am effectively asking you the first question and some of you might change your mind.

On the one hand this seems irrational. The men who had seen the attractive faces became more severe discounters than those who had seen the cars.

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They became focused on the present — the mating opportunity. The women did not become increasingly severe discounters in this experiment — although there may be a smaller effect that the experiment did not have the power to detect. So here, what might be called a very strong present bias has a degree of rationality to it in that the objective of the participants is mating.

If they did manage to capitalise on that moment and manage to mate, their evolutionary future is set. An extreme example of this is seen in other species. A male black widow or preying mantis would allow themselves to be eaten at the moment of mating — this picture is of a male preying mantis getting lucky but losing his head as a consequence — massive present bias in terms of the typical measures an economist might use, highly rational from an evolutionary perspective.

He wrote this because, to him, the tail simply did not make any sense.

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It harmed the peacocks chance of survival. Why would a female mate with a long-tailed male and subject her long-tailed son to the same dilemma. Only a high quality peacock can bear the cost. Biologists argued about whether signals could be honest because they create a handicap for fifteen or so years after Zahavi espoused this theory.

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