nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2020‒01‒27
ten papers chosen by
Matthew Baker
City University of New York

  1. The Evolution of Morals under Indirect Reciprocity By Alexia Gaudeul; Claudia Keser; Stephan Müller
  2. Veblen's Evolutionary Methodology and Its Implications for Heterodox Economics in the Calculable Future By Jo, Tae-Hee
  3. The Surprising Capacity of the Company You Keep: Revealing Group Cohesion as a Powerful Factor of Team Production By Simon Gaechter; Chris Starmer; Fabio Tufano
  4. Evolutionary Equilibrium in Contests with Stochastic Participation: Entry, Effort and Overdissipation By Yiquan Gu; Burkhard Hehenkamp; Wolfgang Leininger
  5. Personal preferences in networks By Orlova, Olena
  6. Evolving ab initio trading strategies in heterogeneous environments By David Rushing Dewhurst; Yi Li; Alexander Bogdan; Jasmine Geng
  7. Becoming Friends or Foes? How Competitive Environments Shape Social Preferences By Eugen Dimant; Kyle Hyndman
  8. The Rational Group By Franz Dietrich
  9. Development, Fertility and Childbearing Age: A Unified Growth Theory By Hippolyte d'Albis; Angela Greulich; Grégory Ponthière
  10. Social Epistemology By Franz Dietrich; Kai Spiekermann

  1. By: Alexia Gaudeul; Claudia Keser; Stephan Müller
    Abstract: We theoretically and experimentally study the evolution of strategies reflecting different moral judgments under indirect reciprocity. We fully characterize the evolutionary stable equilibria. In all cooperative equilibria multiple strategies coexist. This offers an explanation for the heterogeneity in moral judgments among humans. The prescribed behavior of the equilibrium strategies can rationalize the design of empirical examples of reputation systems, which are set up to resolve problems of moral hazard. In our laboratory experiment, we find that more than 75% of participants play strategies that belong to the predicted equilibrium set.
    Keywords: Indirect Reciprocity,Cooperation,Evolution,Experiment,
    JEL: C73 C91 D83
    Date: 2019–12–10
  2. By: Jo, Tae-Hee
    Abstract: Critics have repeatedly claimed that heterodox economics has failed in that it has limited acceptance by the mainstream of the economics profession and little influence on other approaches and policies. They blame heterodox economists for their own failure. I subject this claim to critical examination from the perspective of Veblen’s evolutionary methodology. Veblen’s theory of the business enterprise will be used as an example, which exemplifies the case that a ‘blasphemous’ theory is ignored and marginalized even though it provides rich insights into economy and society. Heterodox economics has shown a similar path. It is also argued that social science does not follow the biological principle of natural selection. What survives does not necessarily mean the fittest in the social realm. The history of science is replete with paradoxical incidents that an incoherent, irrelevant, or even wrong theory becomes dominant and widely accepted because it is one that serves the vested interests in academia and society. Economics is no exception.
    Keywords: Thorstein Veblen, Evolution, Business Enterprise, Heterodox Economics
    JEL: B15 B25 B50 D21
    Date: 2019–12–18
  3. By: Simon Gaechter (University of Nottingham); Chris Starmer (University of Nottingham); Fabio Tufano (University of Nottingham)
    Abstract: We introduce the concept of “group cohesion†to study the economic consequences of social relationships in team production. We measure group cohesion, adapting the “oneness scale†from psychology to group level. A series of experiments, including a pre-registered replication, reveals that higher cohesion groups are more likely to achieve Pareto-superior outcomes in weak-link coordination games. Judged against benchmarks, the effects of cohesion are economically large. We identify beliefs rather than social preferences as a primary mechanism explaining the effects of cohesion. Our comprehensive evidence establishes group cohesion as a powerful production factor and a useful new tool of economic research.
    Keywords: Group Cohesion, Oneness
    Date: 2019
  4. By: Yiquan Gu; Burkhard Hehenkamp; Wolfgang Leininger
    Abstract: This paper examines the evolutionary stability of behaviour in contests where players’ participation can be stochastic. We find, for exogenously given participation probabilities, players exert more effort under the concept of a finite-population evolutionarily stable strategy (FPESS) than under Nash equilibrium (NE). We show that there is exante overdissipation under FPESS for sufficiently large participation probabilities, if, and only if, the impact function is convex. With costly endogenous entry, players enter the contest with a higher probability and exert more effort under FPESS than under NE. Importantly, under endogenous entry, overdissipation can occur for all (Tullock) contest success functions, in particular those with concave impact functions.
    Keywords: Contests with Stochastic Participation; Overdissipation; Evolutionarily Stable Strategy; Finite Population; Endogenous Entry
    JEL: C73 D72
    Date: 2018–10
  5. By: Orlova, Olena (Center for Mathematical Economics, Bielefeld University)
    Abstract: We consider a network of players endowed with individual preferences and involved in interactions of various patterns. We show that their ability to make choices according to their preferences is limited, in a specific way, by their involvement in the network. The earlier literature demonstrated the conflict between individuality and peer pressure. We show that such a conflict is also present in contexts in which players do not necessarily aim at conformity with their peers. We investigate the consequences of preference heterogeneity for different interaction patterns, characterize corresponding equilibria and outline the class of games in which following own preferences is the unique Nash equilibrium. The introduction of personal preferences changes equilibrium outcomes in a non-trivial fashion: some equilibria disappear, while other, qualitatively new, appear. These results are robust to both independent and interdependent relationship between personal and social utility components.
    Date: 2020–01–13
  6. By: David Rushing Dewhurst; Yi Li; Alexander Bogdan; Jasmine Geng
    Abstract: Securities markets are quintessential complex adaptive systems in which heterogeneous agents compete in an attempt to maximize returns. Species of trading agents are also subject to evolutionary pressure as entire classes of strategies become obsolete and new classes emerge. Using an agent-based model of interacting heterogeneous agents as a flexible environment that can endogenously model many diverse market conditions, we subject deep neural networks to evolutionary pressure to create dominant trading agents. After analyzing the performance of these agents and noting the emergence of anomalous superdiffusion through the evolutionary process, we construct a method to turn high-fitness agents into trading algorithms. We backtest these trading algorithms on real high-frequency foreign exchange data, demonstrating that elite trading algorithms are consistently profitable in a variety of market conditions---even though these algorithms had never before been exposed to real financial data. These results provide evidence to suggest that developing \textit{ab initio} trading strategies by repeated simulation and evolution in a mechanistic market model may be a practical alternative to explicitly training models with past observed market data.
    Date: 2019–12
  7. By: Eugen Dimant (University of Pennsylvania); Kyle Hyndman (University of Texas Dallas)
    Abstract: We study the interaction between competition and social proximity on altruism, trust, and reciprocity. We decompose the behavioral channels by utilizing variants of both the Trust Game and the Dictator Game in a design that systematically controls the transmission of relevant information. Our results suggest that competitive environments, and in particular the outcomes thereof when competitors are socially proximate, affect social preferences. Within the context of the Trust Game, we find that winning makes individuals more trusting, less reciprocal, and less altruistic. In order to decompose the underlying mechanism of decision-makers, we subsequently use the Dictator Game and find that knowledge about winning the competition decreases giving, especially with increased proximity between competitors. From this we can conclude that the observed increase in trust is guided by self-serving concerns to maximize the total pie rather than altruistic concerns to compensate the competitor who lost the competition. Our results provide helpful insights into the structure of incentives within institutions and companies, which is known to affect performance.
    Keywords: Altruism, Competition, Reciprocity, Social Proximity, Trust
    Date: 2019
  8. By: Franz Dietrich (CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Can a group be a standard rational agent? This would require the group to hold aggregate preferences which maximise expected utility and change only by Bayesian updating. Group rationality is possible, but the only preference aggregation rules which support it (and are minimally Paretian and continuous) are the linear-geometric rules, which combine individual tastes linearly and individual beliefs geometrically.
    Date: 2020–01–08
  9. By: Hippolyte d'Albis (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Angela Greulich (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, INED - Institut national d'études démographiques); Grégory Ponthière (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)
    Abstract: During the last century, fertility has exhibited, in industrialized economies, two distinct trends: the cohort total fertility rate follows a decreasing pattern, while the cohort average age at motherhood exhibits a U-shaped pattern. This paper proposes a Unified Growth Theory aimed at rationalizing those two demographic stylized facts. We develop a three-period OLG model with two periods of fertility, and show how a traditional economy, where individuals do not invest in education, and where income rises push towards advancing births, can progressively converge towards a modern economy, where individuals invest in education, and where income rises encourage postponing births. Our findings are illustrated numerically by replicating the dynamics of the quantum and the tempo of births for cohorts 1906-1975 of the Human Fertility Database.
    Keywords: regime shift,fertility,childbearing age,births postponement,human capital
    Date: 2018–07
  10. By: Franz Dietrich (CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Kai Spiekermann (LSE - London School of Economics and Political Science)
    Abstract: Social epistemology studies knowledge in social contexts. Knowledge is 'social' when its holder communicates with or learns from others (Epistemology in groups), or when its holder is a group as a whole, literally or metaphorically (Epistemology of groups). Group knowledge can emerge explicitly, through aggregation procedures like voting, or implicitly, through institutions like deliberation or prediction markets. In the truth-tracking paradigm, group beliefs aim at truth, and group decisions at 'correctness', in virtue of external facts that are empirical or normative, real or constructed, universal or relativistic, etc. Procedures and institutions are evaluated by epistemic performance: Are they truth-conducive? Do groups become 'wiser' than their members? We review several procedures and institutions, discussing epistemic successes and failures. Jury theorems provide formal arguments for epistemic success. Some jury theorems misleadingly conclude that 'huge groups are infallible', an artifact of inappropriate premises. Others have defensible premises, and still conclude that groups outperform individuals, without being infallible.
    Date: 2020

This nep-evo issue is ©2020 by Matthew Baker. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.