Generative Economics

Darwin’s theory of evolution includes two generative components: mutation and natural selection. Mutation generates genetic variants and hence phenotypes; natural selection operates on these to produce differential survival. Neither of these generative processes involves intention or intelligence. Thus we have biological novelty without intentional intelligent design. Both processes are blind and driven by non-mental causes. We have creativity without a creator. But Darwin also recognized what he calls artificial selection, as with the selective breeding of dogs (or horses and flowers). Here human beings intentionally direct the course of evolution according to their own preferences, producing dog breeds that would not arise by natural selection. This is not selection by nature but selection by human design and desire. Of course, the process of generation is still natural not artificial: dog breeders rely on the genes to generate dog variants. They don’t make poodles from scratch; they just interbreed dogs and let the genes do their work. So here we have a case of natural generation and artificial selection to be added to the far more common case of natural generation and natural selection. Dog breeders don’t even know how to generate dog variants artificially; they depend upon natural reproduction.

            In principle there could be artificial generation combined with natural selection: a type of intelligence creates an organism and then turns it loose in the world to the tender mercies of nature. You could genetically engineer organisms and then let nature select the good from the bad. In effect that is what happens with many human artifacts: they are intelligently created but left for nature mindlessly to destroy or preserve (as with architectural ruins and plastic bags). What about artificial design combined with artificial selection? Can there be intelligently created entities that are then intelligently selected? Of course there can: machines created by humans and selected by humans to be used as they see fit. Motorcars are propagated by these two modes of generation: first they are designed and manufactured by the use of intelligence; then they are bought and sold in the marketplace by a process of intelligent selection, intentionally and consciously. So there are four logical possibilities in all: natural generation and natural selection, natural generation and artificial selection, artificial generation and natural selection, and artificial generation and artificial selection. Entities can come into existence and reproduce (or be reproduced) by any of these four methods.

            There is something strange in Darwin’s terminology, because so-called artificial selection is itself a natural process. The mind is natural and it is what directs selective breeding; there is nothing super-natural going on here.[1] Bees select flowers and hence direct the course of flower evolution: this is not “artificial”. When humans selectively breed animals for their own purposes this is an aspect of their species-specific nature. It would be better to speak of intentional intelligent selection versus selection that is neither. For intelligence is part of nature too. Still, we can keep the terminology for convenience. The question I am interested in is the nature of economic activity; and what I want to maintain is that economic activity is continuous with biology. It is just another form of biological generation. Now it is true that (so far as I know) other animals don’t engage in economic activity, though it would serve my purpose if they did; but that doesn’t prevent us from imagining such activity in animals. So suppose we encountered a species of bird that manufactures nests that it exchanges with other birds for food. Instead of just building a nest for its own use, it builds nests “for sale”. This has become part of its genetic make-up, as much as nest-building itself. We can think of it as instinctual and automatic, like birdsong, and not as reflective and flexible: birds that exchanged nests for food in the past (as a result of some mutation) did better than birds that kept their nests to themselves. Thus a primitive bird economy develops. In such a case we would say that the entire process is part of the bird’s biological endowment. The “buyer” birds would select nests according to their own criteria and a form of competition might develop, which would lead to a selection process. In just such a way human commerce might have originated: humans capable of exchange do better than humans incapable of it. This would also be as biological as digestion and sexual reproduction, whatever the later elaborations (banks, money). It is a form of social behavior rooted in biological imperatives.

So there are two principles of generation at work here: generating the nests and their being selected. Both are “artificial” in Darwin’s strained sense, since they involved goal-directed action. The bird makes the nest not its genes and other birds do the selecting not brute nature. But this doesn’t exclude the phenomenon from the realm of biology. Or again, consider those ants that enslave other ant populations: these “brood parasites” seize the eggs of other ants and bring them back to their own nest where they carry out the work of their “slave-owners”.  Again, I don’t know of any documented cases of ants that then trade their slaves with other ant slave-owners, but the idea is not beyond reason. What if we encountered an ant species that did just that, perhaps because they were better raiders than their potential trading partners? The “buyers” exchange food for slaves, which they find a bargain. This would be an entirely biological arrangement, not introducing any new non-natural principle into biology. Some ants are natural-born slave-traders! No doubt this is deplorable of them, but it is biologically possible. They thus have a nice little economy going here—a system of exchange trading one sort of good for another.

            I don’t think it is farfetched to suggest that human economies are analogous. Perhaps they even arose from some such primitive beginnings way back with our ancient ancestors in Africa. In any case, we can say that human productivity and the capacity for economic exchange are part of our biological nature. It turns out that the biological realm includes more than just natural generation and natural selection (in Darwin’s restricted sense); it includes the kind of intentional intelligent design and exchange that we find in human social groups. We can imagine our remote ancestors exchanging primitive tools for other tools or for food; we now do it with computers and cars. Thus from a lofty philosophical perspective economics is a branch of biology involving the basic twin generative processes: first make the product, then sell the product (ensure it is selected by purchasers). There is no discontinuity between genes and nature, on the one hand, and products and purchasers, on the other. There is a smooth transition from natural selection through artificial selection through economic selection. Darwin also included sexual selection in his list of types of selection; I am adding economic selection. Both of these are selection by conscious agents (peacocks and purchasers), but that doesn’t make them beyond the range of biology. Minds are a part of biology too. The dichotomy of culture and biology is artificial and misleading; economics belongs with both.[2] That is, economic culture is just another type of biological phenomenon. It is the same with business culture: that too is continuous with biology. Specifically, it involves the two generative components I have identified: creating the product and then marketing it, i.e. offering it up for selection by purchasers. The structure is the same. Markets are arenas of voluntary action, to be sure, but that doesn’t put them outside of biology or nature. In particular, economics is a generative science in the sense that biology is: it involves the generation of entities from raw materials and the generation of further entities by means of market forces. Production is like embryogenesis and buying and selling is like the selective survival of the fittest. Products go extinct if no one buys them, as animals go extinct if nature stops selecting them. We might even say that the Darwinian notion of natural competition is modeled on the notion of economic competition. Animals compete with each other in much the same way that products do. And of course the two intersect, as when animals are bought and sold (some breeds do better in the marketplace than others).

            Just as Darwin’s theory is a theory of evolutionary change, so too economics is concerned with economic change—with how goods and services succeed each other in time. It is a dynamic science not a static science. The idea of a purely structural economics is a misguided one: economies are changing evolving structures just like animal species. The change can be slow judged by human standards, but the entire biological world is in constant flux; so too is the economic world. Supply and demand are forever changing. From a meta-economic point of view, then, economics shares the basic structure of biology (the same is true of linguistics and psychology—and even philosophy). In linguistics we are used to the idea that a grammar generates an infinite array of sentences—it is not merely a structural description; in economics too we should also think of economic mechanisms as generative—of products and of their adoption. A successful product is very like a thriving organism: there will be many instances of them and they will outperform the competition. This is the theoretical framework to adopt when considering the foundations of economics as a science. Economics is a generative biological science (so it is not like mathematics or logic). Capitalism, say, is a species of economic system that replaced feudalism, as mammals replaced dinosaurs. And it is still evolving into variant forms.

            Let me suggest another analogy: verbal communication. A speaker is engaged on two generative tasks: (a) producing a grammatically well-formed sentence and (b) ensuring that she is understood by the hearer. The former does not entail the latter, which requires an additional generative effort—sufficient volume, getting the hearer’s attention, saying something interesting, etc. Similarly, the genes must produce an anatomically well-formed organism and one that will survive the pressures of natural selection—particularly, those arising from competition for resources and mates. Similarly again, a product must not only be functionally well designed but must also achieve market penetration in a competitive economic environment. The entrepreneur is like a speaker striving to be heard in a cacophonous world: she needs a sound product but also the means to be heard by potential consumers. It is necessary to generate supply anddemand (hence advertising etc.). Whether an animal will survive depends on the world it confronts as well as on its internal structure; but the same is true of a product. A speaker faces the same problem: first produce a good sentence but then ensure it is heard and understood. You have to create understanding as well as what is understood. These are different (though connected) tasks. So economics is not just a generative science; it is a doubly generative science.[3]

Colin McGinn

[1] I discuss this in “The Language of Evolution”, Philosophical Provocations (2017).

[2] I defend this view in “Biology and Culture: an Untenable Dualism”.

[3] This essay is a sequel to my earlier essay, “Memes, Behavioral Contagion, and the Zeitgeist”.

Elements of Economics

Economics is aptly defined as the science of scarcity (we could say “systematic study” if “science” seems too strong). Philosophy of economics is then the philosophy of scarcity, or of the science thereof. It is in this vein that I write the present words. What, then, is scarcity? Here is a good definition: “Insufficiency of supply; lack of availability, esp. of a commodity, in proportion to demand; shortage” (Shorter OED). It does not mean the same as “rare”, which means “occurring very infrequently”; “scarce” connotes a lack of quantity relative to demand, not just statistical infrequency. Things can be rare without being scarce in the economist’s sense (e.g., the excrement of a dwindling species), because there is little or no demand for the thing. When we speak of demand, we don’t mean primarily a speech act of demanding (“I demand a pound of apples!”); we mean desire or need—preference, utility, degree of wellbeing. We mean a psychological state, expressible in demand behavior. So, we can say that scarcity is proportional to desire and availability: if desire is high and availability low, then the commodity is scarce; if desire is low and availability high, then the commodity is not scarce. Some commodities are not scarce at all: space, time, air, ground to walk on—we have as much of these things as we want (in normal circumstances). Economics is the study of scarcity in this sense: human action in relation to commodity shortfall (I include services under “commodity”); it is about what happens when scarcity obtains. If there is no scarcity, there is no economics, either the science or the behavior. Economic action is action under conditions of scarcity, not plenty. There is no economics in heaven; economics results from finite resources, insufficient goods, shortages of supply. (In hell by contrast everything desirable is scarce and everything undesirable is plentiful, especially pain.) In the real world, scarcity is a natural fact, a fact of nature, and economics deals with the human response to it.

It might be retorted that this definition is both too narrow and too wide. Too narrow because of non-human economic agents (animals, aliens), and too wide because it includes types of behavior not normally classified as economic. The first complaint is entirely correct: we want to make room for animal economic action, though it may be primitive and disputable (e.g., cleaner fish symbiosis), and clearly non-human intelligent aliens could have economies. So, let’s expand the definition to include non-human creatures that live under conditions of scarcity (though I will continue to speak of human agents for convenience). The second complaint is more difficult to resolve and calls for some revision of intuitions and common speech. Consider a predatory tiger hunting for food: the food is scarce relative to the tiger’s desire, but should we say that chasing and killing the prey is an economic act? The tiger is responding to scarcity in a desirable commodity, and is making a sacrifice in order to obtain the commodity in question (“paying a price” in energy expenditure and risk); but the prey animal is not doing anything similar—there is nothing in it for it. There is no exchange of goods, no voluntary mutually beneficial transaction; there is just the predator forcibly taking the life of the prey (compare simple robbery). So, is this an example of economic activity? There is scarcity, need, actual cost, and opportunity cost, so far as the tiger is concerned; but the prey animal is operating under no such set of conditions—it is simply running for its life. If the prey animal were to offer part of itself to the tiger, thus sparing the tiger the cost of chasing it, while preserving its own life, then we might have a case of economic exchange; but no such thing is going on as things actually are. I propose that we describe such a case as “asymmetric economic behavior”: it is an economic calculation for the tiger, but not for the prey. There is no economic exchange, but one party is acting under economic imperatives—coping with scarcity by sacrificing some of its own well-being (its own wealth, we might say). In the same way a human robber is acting under economic constraints by responding to scarcity by acts that carry costs (including opportunity costs). He is thinkingeconomically. True, this is not your typical purchase, but it does meet the conditions for cost-benefit calculation under scarcity. We can then define normal economic exchange as “symmetric economic behavior”, acknowledging a real distinction within the class of economic actions. The case is similar to the question of whether economic action is possible for an individual in isolation: can there be a “private economy”, an economy consisting of a single individual? It might seem that this ought not to be possible, but further reflection suggests that it is just an outlying case not typically encountered but conceptually possible. For consider a man alone on a desert island providing for himself: he lives under conditions of scarcity and must weigh his productive options—should he hunt, fish, farm, or just pick fruit? How much effort should he put into constructing his dwelling? He is a producer and consumer with limited resources and finite supplies of energy; he must provide for his future self under the same constraints as apply to interpersonal production and consumption. He is semi-economic man, but recognizably engaging in economic behavior: he is coping with scarcity by standard economic means—capital, labor, costs, production and consumption. He doesn’t buy anything from anyone else, but that is not essential to economic activity: the key point is that he is responding to scarcity by adopting economic methods. He knows his supply and demand, and he pays the price in terms of labor (he pays for desire satisfaction in the currency of labor, mental and physical). The basic elements are there. In particular, he must always be conscious of opportunity costs, just like any spender of money in a department store; he is always trying to get the best bang for his laborious buck. He plans ways to maximize his utilities given the prevailing scarcities. He may come to the conclusion that hunting for meat is just not economical given the realities of the chase; he is better off fishing or fruit-picking. The OED defines “economics” as “the branch of knowledge concerned with the production, consumption, and transfer of wealth”; by that definition the solitary individual can be classified as part of the subject-matter of economics (he even transfers wealth to his future self in the shape of stored food and re-usable tools). We should not let our conception of the economic be too tightly defined by reference to post-industrial money-centered economies; the basic concepts are more general, more primordial.

Inflation is not itself an essentially monetary phenomenon. Even in a bartering economy inflation can occur. A glut of apples will decrease the purchasing power of apples, as will the introduction of cheap labor into an economy (either wage labor or slave labor). You may find yourself having to do more to obtain less—work longer hours, skip vacations. It might be necessary to fight inflation by reducing the supply of apples or cheap labor (cf. printing less money). The same laws of supply and demand apply to money and to commodities. Banks don’t depend for their existence on money either: you could deposit your commodities in a bank too, earning interest on them, as the bank loans out deposits to interest-paying borrowers. There could be bank runs and financial crises (banks don’t have enough apples on deposit to pay for all the apple withdrawals). Money is just a contingent feature of economies. You could be taxed on your apple possessions and even on your labor resources (e.g., everyone has to pay a flat tax by working on the roads a few hours a week). A society could teach economics to students without even mentioning money (they don’t use the stuff); money is just one form that economic action takes. Economics is scarcity science not money science. When the singer sings that all he wants is money (“Money don’t get everything it’s true, but what it don’t get I can’t use”), he misspeaks; what he means is that he wants the opposite of scarcity—he wants not to be short of what he wants. Poverty is scarcity, desire dissatisfaction (“I can’t get no satisfaction” is more accurate), not a lack of funds.

There is another verbal deformation endemic to the way we talk economically: the division into consumer and producer. You would think there are two classes of people in an economy—those who produce (capitalists, manufacturers, entrepreneurs) and those who consume (customers, buyers, clients). But this is a misconception: everyone is both a producer and a consumer in the very act of economic exchange. First, note that sellers are not always makers of products (concrete consumer goods); people also sell their labor, their expertise, their talent. Philosophy professors are producers, as are actors and doctors and lawyers (et al). Nor is all consumption consumption (food being the paradigm): we “consume” lectures, pop songs, dental treatment, massages. We might better speak of “makers” and “takers”. Then we can say that every act of making is an act of taking, and vice versa. When you give me something I also give you something: you sell to me, but I also sell to you—in that very act. For example, I go to the supermarket to buy groceries: I buy from them, but they also buy from me—they buy my money with their foodstuffs. In exchange for my money, they give me food: they bought my money with their food. My money represents my labor, so they are buying the fruits of my labor with the fruits of their labor. They are consumers of my goods (in the form of money) as I am a consumer of their goods. The relationship is completely symmetrical. It is not that I am the passive (idle) consumer while they are the active (hardworking) producer; they are also the passive consumer of my money, in which I was actively productive. Everyone is simultaneously producer and consumer. I could go into a supermarket and say, “Would you like to purchase some of my money with your food items?” and not speak amiss. It is just a convention that we speak as we do, but it masks the realities of economic life. The relationship is not like speaker and hearer; in economic exchange every act is both an act of consumption and an act of production. The supermarket consumes my money in the very act of my consuming its food. One role entails the other. The two roles are indissoluble. So, it would be quite wrong to say that economies are divided into producers and consumers. Again, the model of industrial economies has too great a hold on the way we understand economic reality; and the institution of money disguises the nature of economic exchange. If I went into the supermarket ready to give philosophical lectures for food, that would convey the realities more clearly; the medium of money is incidental to the proceedings.

Economic reality should really be conceived as split-level. At the level of logical form, so to speak, it is all about scarcity, desire, supply, demand, markets, cost (actual and opportunity), production and consumption, conserving and using, materials and labor; but at the level of existing speech, as it were, it superimposes money, high-street banks, stocks and shares, exports and imports, bosses and workers, profits and taxes—all the apparatus of modern economies. I have tried to sort out the essential and foundational from the contingent and superimposed. Of course, it is worthwhile to study contemporary encrustations, but also worthwhile to distill out the underlying realities. Apart from anything else, it makes the subject more interesting. The science of scarcity need not be the “dismal science”.[1] Current expositions make it sound dry and dull, forbiddingly technical, remote from the human condition; but viewed more philosophically it connects with human life at a more visceral level. We live in a world of scarcity, a world brimming with unsatisfied desire. That is the basic subject-matter of economics, scientific and philosophical.

[1] Thomas Carlyle didn’t mean by this phrase that economics is dismal qua science (though that is often what it means to people today); he meant that it contains depressing truths about the human condition. I would describe it as a “pitiful science” in that it evokes pity for the life of man (and other animals) simply because scarcity is a terrible burden. Its most immediate impact is hunger. Hunger is the central fact around which economics is built.

Bounds of Sense

Quine once described Strawson as applying his “limpid vernacular” to the technicalities of logic (in a review of Strawson’s Introduction to Logical Theory). One might hope that he would do the same in exegesis of Kant in The Bounds of Sense. However, in that work we are treated to such tortuous locutions as “necessary conditions of the possibility of any experience of objective reality such as we can render intelligible to ourselves” (119): why not simply “necessary conditions of experience” and “intelligible”? We seek the necessary conditions of experience (adding “the possibility of” is redundant) and we want to know what kinds of experience are intelligible (whether we can “render” them “intelligible to ourselves” is another question, depending on our powers of self-directed persuasion). Further, what is meant by “experience” here? Strawson regularly alternates this word with “empirical knowledge”, including scientific knowledge; but these are different things, one perceptual, the other conceptual-propositional-cognitive (as in knowledge of scientific theories). It seems clear that he is mainly thinking of visual experience as delivered by adult human eyes, but is generalizing beyond that domain. Does he wish to include emotional experience, or olfactory, or ethical, or imaginative, or experience of pain and pleasure? The doctrine of the necessity of spatiotemporal content is clearly more convincing for the visual sense than these other types of experience (especially the spatial component), so we shouldn’t be lulled into accepting a perfectly general thesis based on one instance of it. And what kind of spatial content is deemed essential to experience as such—extension, ordering, continuity, dimensionality, unity, objectivity, infinity? Some experience might be weakly spatial (smell and taste) while other experience is more strongly spatial (looking into the distance on a bright clear day). Imaginative experience prescinds from space considerably, dispensing with spatial relations to other objects. Emotions have little to do with space compared to normal binocular vision. And some forms of vision are more spatially rich than other forms—think of the etiolated visual experience of closed eyes in the dark. The question is a lot messier than Strawson allows, much less clearly defined. Could we ask the same question equally of sensation, perception, sentience, appearance, seeming, consciousness? Might we not get different answers depending on what term we choose? The term “experience” is vague and general, so we don’t know quite what Strawson (channeling Kant) is considering. Is memory included—and what kind of memory? Is mathematical reasoning included? What about logical “experience”? We need more limpid vernacular to tie the question down, more ordinary language philosophy.

About one thing Strawson is crystal clear: Kant thinks that reality itself is not spatiotemporal and Strawson himself rejects that claim. The phenomenal world is deemed spatiotemporal in its essence, but the noumenal world is non-spatiotemporal in its essence, according to Kant. This doctrine is hard to take seriously, as Strawson indicates. How could Kant know this given that (as he thinks) we have no access to the nature of the reality that exists outside our minds? How can we use our sense experience to navigate the objective world if their essences are so different—doesn’t there have to be at least some kind of correlation? Why would we be designed (by God or nature) to represent reality so faultily? What possible reason could be given for removing things in themselves from space and time? The idea that space and time are “in us” but only in us is unmotivated, bizarre, and preposterous; and certainly not required by the Kantian apparatus of phenomenal space and time (intuitions, sensibility, the understanding, the categories, etc.). It may be that phenomenal space and noumenal space are not the same (Euclidian and non-Euclidian, say), but there has to be someveridical relation between them; denying this is gratuitous and disastrous. I would say that concrete, causal, law-governed reality is clearly spatiotemporal, necessarily so—we can make nothing else “intelligible to ourselves”. That is indeed why sense experience is spatiotemporally imbued (to the extent that it is): this is just a scientific fact, a fact of biology and evolution, of the body and brain. Animals experience the world spatiotemporally because that is the real nature of the world in which they have to survive.

So, we can say, lamely but limpidly, that objective reality is necessarily spatiotemporal and that sense experience is variously and to some degree spatiotemporal. There is no simple binary opposition here: animal sentience is spatiotemporal in many ways and to different degrees (possibly going down to zero). But what about language—meaning, linguistic sense? Curiously, Strawson says little about this in The Bounds of Sense(despite the pre-existence of Individuals). The answer again is mixed and unsystematic, even more so than in the case of sentience. True, we often speak of extended objects in space standing in spatial relations within a unified and ordered spatial manifold (what we call Space). But we also speak of things that are ambiguously and problematically related to space: states of consciousness, numbers, values. Reference is not a purely spatial act. Nor is syntax or grammar best defined in spatial terms. Sounds are not, in themselves and essentially, extended things. Senses are not laid out in space. Language has one foot in space, so to speak, but it also dallies with the non-spatial. Spatial reductionism is a misguided metaphysics. The real is not co-terminus with the extended. It is certainly not a necessary conceptual truth. Language is not, then, subject to Kantian requirements regarding space, even phenomenally. The Kantian project, pushed to extremes, is really an exercise in hyperbole, in which Strawson colludes (as befits an interpreter) but to which he does not wholly succumb. The idea that space is the general form of all our representations is a philosophical exaggeration, like many philosophical theories.[1]

[1] As to time, from the fact that all mental acts occur in time it doesn’t follow that they are of time—that time is an aspect of their content. All events occur in time, but it would be strange to say that they all represent time. It is also misleading to employ the term “spatiotemporal” uncritically: time and space are really very different things, and what holds of time might well not hold of space. Roughly speaking, time is more all-embracing than space. Not everything is space-like and not all mental representation is as of space. Certainly, we cannot derive the necessity of spatial content from the mere existence of the particular-general distinction, as Kant hoped.