1. Human Nature and Economics

2. Good and Bad
Write a list of 5 behaviors characteristic of a good person
Write list of 5 behaviors characteristic of a bad person

3. Why Study Human Nature?
To what extent are desirable ends constrained by human nature?
Is insatiability a human characteristic?
Biophilia: have humans evolved to value nature?
Social animals—is fairness a desirable end? Do we care about others for their sake, not our own?
Discounting

4. Why Study Human Nature?
To what extent are allocative mechanisms constrained by human nature?
Are we inherently competitive, cooperative, or both?
Are we rational, emotional, or both?
Are people the same everywhere?

5. Will Competition or Cooperation Solve Society’s Current Crises?
Global Climate Change (finite waste sinks, finite services)
Natural resource depletion/biodiversity loss (finite raw material sources, finite services)
Peak Oil (finite energy sources)
Threat of global pandemics
Benefits non-rival and/or non-excludable
Solutions demand cooperation
Counter examples?

10. What is the conventional economic model of human nature?
Homo-economicus
Self-interested
Insatiable
Rational
Competitive
Is this closer to your depiction of a good person or a bad person?

11. Market Economics Driven by Competition
Assumes humans insatiable, always act in rational self interest, do not care what happens to others
Must design a system that leads to greatest good for greatest number
Rewards greed and selfish behavior
Invisible hand
“Virtue of Selfishness”
How do we test market theory?

12. How do we test these assumptions?
Study history
Game theory and games
Experimental economics
Neuro-economics
Psychology and economics
Evolutionary biology

13. Are People Insatiable?
Insatiable!

14. Evidence from history, evolution and behavioral economics
Hunter-gatherer economies
Absolute vs. relative wealth
Widow birds
Status treadmill
Alternative forms of status

15. Human Needs Market goods only one of many human needs
Needs consistent across time and cultures
How we satisfy them differs
Satiation occurs
Pseudo-satisfiers

16. Are People Rational?

17. Split into two groups. Group 2 leave room

18. Group 1 Serious flu will kill 6000 people
Choice A: Conventional vaccine will save 2000 people
Choice B: Experimental vaccine has 1/3 chance of saving everyone, 2/3 chance of saving no one
Mark your choice and leave room

19. Group 2 Serious flu will kill 6000 people Mark your choice
Choice A: Conventional vaccine will result in death of 4000 people
Choice B: Experimental vaccine has 1/3 chance of saving everyone, 2/3 chance of saving no one
Mark your choice

20. Are People Rational or Emotional?
Out of control trolley
Losses vs. gains
WTP vs. WTA
Is perfect rationality possible in a complex world?

21. Do people care about the future?

22. What are our attitudes towards the future? Discounting
Would you rather have $10 today, or $12 in one month?
The discount rate
Opportunity costs and investments
Pure time preference
Uncertainty
Richer future
∑(Bt-Ct)(1+r)-t
What happens in your brain when you discount?
Who discounts the most?

23. How do we Discount? Hyperbolic discounting Social discount rates
Would you prefer $10 in 5 years, or $12 in 5 years and one month?
Social discount rates
Discounting the distant future
What happens in our brains when we discount?
Should we discount?

24. Are we Purely Self-interested?
Game theory and experimental economics
Ultimatum game
Dictatorship game
Public goods game

25. Or do we care about others?
H. comunicus, concern for fairness and community preferences
H. naturalis, concern for sustainability and whole system preferences

26. Are we Competitive or Cooperative
Are we Competitive or Cooperative? Evidence from Neuroscience and behavioral econ
Neurotransmitters
Dopamine
Oxytocin
Neuroeconomics and prisoner's dilemma
Investment game
Oxytocin and trust
Altruistic punishment
Tit for tat

27. Evidence From Evolution
Kin selection: Altruism, empathy, reciprocity evolve if RB/C > 1
C= cost of empathic behavior to individual
B=benefit to others
R= degree of relatedness
Group selection vs. individual selection
Pseudomonas species
Encompasses kin selection
Cooperation and energy abundance
Dictyostelium discoideum (amoeba)
Myxococcus xanthus (self-organized, predatory, saprotrophic, single-species biofilm called a swarm)
In humans, genetic and cultural evolution interact

28. Are People the Same Everywhere?
Ultimatum game across cultures

29. Why Does this Matter? Desirable ends Allocative mechanisms
Humans are satiable
We have a broad range of needs
Desired ends are in relationship to what others have
Allocative mechanisms
Non-rival resources are best provided through cooperation, and we are highly adapted to cooperate
Rival resources may be effectively allocated through competition
Modeling humans as solely cooperative or solely competitive is entirely inappropriate