Hayek, Oxytocin, and the Evolution of Trade

The Liberty Fund conference on "Hayek and the Problem of Scientific Knowledge" was good. The participants were from a wide range of disciplines--including economics, political science, philosophy, literature, journalism, and computer science. Our readings were selected writings by Hayek (Studies on the Abuse and Decline of Reason, "The Pretence of Knowledge," and "Three Sources of Human Values"), Michael Oakeshott ("Rationalism in Politics"), Leo Strauss ("Epilogue" from Essays on the Scientific Study of Politics), Ernst Mayr (What Makes Biology Unique?), and Paul Zak ("Moral Economics").

As is usual at a Liberty Fund conference, lots of good food and drinks at a beautiful resort location (Westward Look in Tucson) added to the fun of lively discussions with some smart people.

As is also usual at such conferences, I came away with lots of questions. I decided that I need to think more about three issues--Hayek's account of the open society as the repression of the tribal instincts of human nature, the evolution of oxytocin as one neural mechanism supporting morality and exchange in a free society, and the evolution of trade in prehistoric societies.

As I have indicated in various posts, I am not persuaded by Hayek's argument that the evolved instincts of human beings are adapted for life in a "closed society," and therefore the "open or free society" requires a cultural tradition of impersonal rules for an abstract society that suppresses those instincts, while the yearning for socialism and "social justice" manifests a desire to restore those primordial instincts.

Some of the discussants agreed with me on this. But the more devoted Hayekians disagreed, and their arguments in defense of Hayek on this point were reasonable. Isn't it true that most of our evolutionary history in small foraging groups adapted our ancestors for life in families and small face-to-face groups bound together by personal obligations and egalitarian levelling? Isn't the desire for collectivist societies the attempt to extend these small group norms over a large modern society? Doesn't modern liberty require that we live in two worlds--the world of families and small groups and the world of impersonal exchange--and that we must not impose the rules for one world on the other?

Those who agreed with me argued that even in small foraging groups, there was some individual autonomy, and individuals were inclined to resist domination by the arbitrary wills of others. In some respects, the modern liberal society revives the individual freedom of foraging societies, while combining that with all the advantages of modern civilization as based on global exchange networks. Our evolutionary ancestors were adapted for engaging in social exchange and detecting cheaters who violated the norms of fair exchange. Those evolved mental capacities for social engagement provided the psychological conditions in which the cultural evolution of a modern exchange society could succeed.

A related issue here concerns the evolutionary origins of trade. Hayek assumes that trade did not appear until the invention of agriculture about 10,000 years ago, and then it increased with the emergence of urban settlements about 5,000 years ago. If that's so, then there was no trade among prehistoric hunter-gatherers, and trade would have little or no support in genetically innate dispositions.

One discussant noted that Matt Ridley--in his new book The Rational Optimist--argues that exchange or trade is uniquely human and is responsible for the success of human civilization. Ridley sees evidence of exchange extending back long before the advent of agriculture. There is evidence of prehistoric tools, for example, that are made of materials that had to be transported over hundreds of miles, which suggests a network of trade. Moreover, there is some evidence that part of the superiority of our hominid ancestors over Neanderthals came from the human disposition to trade. Even if this disposition to trade arose as a cultural invention that did not depend on any specific genetic change, this prehistoric trading behavior had to express some generalized genetic capacities for learning how to trade.

Paul Zak has performed some game-theory experiments that seem to show that this disposition to exchange as based on trust is supported by the neuroactive hormone oxytocin. If so, then the ancient evolution of oxytocin in human beings and other mammals suggests deep evolutionary roots for extended human cooperation.

Zak argues that economic exchange depends upon moral values, because it depends upon the trust that makes cooperation possible. There is evidence that this disposition to trust and cooperation has evolved to be part of human nature, although the expression of that disposition varies in response to the cultural environment. We are now beginning to explain the neural mechanisms of this evolved moral nature. In particular, Zak has shown experimentally that oxytocin supports moral cooperation by promoting attachment to offspring, to reproductive partners, to friends, and even to strangers. What originally evolved to promote mammalian maternal care for offspring has been extended to embrace ever wider groups of individuals who benefit from exchange.

In contrast to Hayek, Zak sees economic exchange as rooted in evolved human nature. He writes:

Values are not specific to the West or East, nor are there broadly distinct Western and Eastern economic institutions. Rather, values across all cultures are simply variations on a theme that is deeply human, strongly represented physiologically, and evolutionarily old. Similarly, the kinds of market institutions that create wealth and enable happiness and freedom of choice are those that resonate with the social nature of human beings who have an innate sense of shared values of right, wrong, and fair. Modern economies cannot operate without these. (276)

Zak agrees with Hayek in seeing the modern transition from personal exchange to mostly impersonal exchange in markets as making possible the great increases in wealth and population since the Industrial Revolution. But in contrast to Hayek, Zak sees this cultural tradition of impersonal exchange as actualizing a potentiality of evolved human nature.

One can see this, Zak observes, in the research of Joe Henrich and colleagues who studied the play of the Ultimatum Game in small-scale societies around the world. Variations in the play of the game manifested variations in the cultural norms of the societies. The higher rates of fair offers in the game were associated with those societies that had high levels of market activity. It seemed that people who regularly engaged in trade learned that successful trading required that traders agree on a fair distribution of gains. The evolved neural mechanism of oxytocin as favoring trust will fluctuate in response to the social environment.

I need to think more about how the evolution of trade and oxytocin sustain cooperation in a free society.

I have pursued these questions in other posts.