How Do Societies Avoid Collapse?

Property & Environment Research Center
June 7, 2013

Economic research has long been subject to a pitfall: it lacks a laboratory in which to carry out simple experiments. Unlike sciences such as physics or chemistry, economic data are messy, imperfectly measured, and affected by any number of unknown variables. This makes it difficult to understand how humans and markets actually work.

The field of experimental economics attempts to address these challenges. Using controlled laboratory experiments and computer programs, researchers are able to take a more scientific approach to understand human behavior, and they are often uncovering new revelations about the way human societies work. Long-time friend of PERC and former board member Vernon Smith won the 2002 Nobel Prize in economics for his experimental economics research, which sought to go beyond mathematical abstractions and understand the role human institutions play in creating social rules and order.

Bart Wilson is a colleague and coauthor of Vernon Smith at the Economic Science Institute at Chapman University and a 2013 PERC Lone Mountain Fellow. This week, Bart visited PERC to explore how societies form rules and order. He even tested a laboratory experiment on the PERC staff to further demonstrate how human institutions emerge and how those institutions respond to sudden and dramatic changes. The experiment reveals something about how societies avoid collapse.

Here’s how it worked: Each PERC participant was provided a laptop and given instructions on how to navigate a virtual world resembling early human agricultural settlements. Players must harvest renewable resources—either green or yellow patches—to maintain a health rating. Each colored patch has a numerical value. The more health earned throughout the game, the more reward paid at the end of the experiment. The game is divided into “weeks” in which players can harvest and consume one resource per week.

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The Economic Sense in Game of Thrones

by Matt McCaffrey and Carmen Dorobăț

Mises Daily
June 7, 2013

[Editor's Note: This article is spoiler-free.]

The popular HBO series Game of Thrones is ending its third season this Sunday, amid fan concerns over its rapidly dwindling cast of characters. The show is based on George R.R. Martin’s intricate fantasy series, A Song of Ice and Fire, which has become an inspiration for commentary of all stripes. And while its complex and morally ambiguous characters have attracted many political and literary analysts, there are important economic lessons to be learned from the books as well.

Martin’s story touches on a variety of economic issues, from the implications of not having an economic system at all, to the problems of money and public finance. In another article (and in an interview), we have discussed these latter problems, and explained how the rulers of the continent of Westeros resort to the traditional methods of public finance: taxation, borrowing, and inflation.

The Political and Economic Means

In this article we will be discussing some of the other economic implications of the series, especially ideas about the social order and the role that peaceful cooperation, trade, and money play in the organization of society. Franz Oppenheimer famously distinguished between the “political means” and the “economic means” of organizing society. The former involves the forcible redistribution of wealth; wealth, however, is only created by those involved in the economic means of organization, which consists of peaceful production, trade, and exchange (1926, pp. 24-27).

This distinction shines through quite clearly in A Song of Ice and Fire. For instance, peoples as different as the Dothraki and the ironmen are stark examples (no pun intended) of the political means. Both societies produce little or nothing of their own, instead thriving on violence and plunder. A perfect illustration is found in the “words” (motto) of House Greyjoy, which proclaim, “We Do Not Sow.” The implication of course is that the men of the Iron Islands only reap the fruits of what others have sown.[1] The Greyjoy words are a very apt description of the state, which is a fundamentally parasitic institution depending for its survival on the plundering of a productive populace.

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Darwin, the Greatest Psychologist

by Allen Frances

Project Syndicate
June 4, 2013

Most people do not think of Charles Darwin as a psychologist. In fact, his work revolutionized the field. Before Darwin, philosophical speculation shaped our psychological understanding. But even great philosophers – Plato, Aristotle, Hobbes, Hume, Locke, Kant, Schopenhauer, Nietzsche, and others – could only describe current mental events and behaviors; they could not explain their causes.

Darwin provided the profound understanding that evolution has influenced the shape of our minds as strongly as it has the shape of our bodies. Since humans evolved from the same primate ancestor as modern chimpanzees or gorillas, he suggested one could learn more by comparing human instincts, emotions, and behaviors to those of animals than one can surmise from subjective speculation. As he put it, “he who understands baboon would do more towards metaphysics than Locke.”

Philosophy is inadequate to understand the roots of human psychology, because self-reflection does not make us aware of the forces that drive most of our reactions to the environment. Rather, we are subject to inborn tendencies, which develop through the reciprocally influential forces of natural and sexual selection.

Natural selection is the process by which the variants within a species that are best adapted to survive in their environment win the reproductive contest – at least until an even better-adapted variant comes along. The traits that enable people to feed and protect themselves increase the likelihood that they will live long enough to produce offspring, whom they will be able to feed and protect until maturity.

In a sense, sexual selection is the psychological extension of natural selection. But, instead of gaining an advantage from traits that enhance one’s ability to survive, one gains an advantage from qualities that potential mates have evolved to find appealing.

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