1 Economics and the potential role of biology

How does one write a biological economics article? The goal of biological economics is to synthesize, reconcile, and improve the two main economic schools of thought: neoclassical and behavioral. And while the guidelines for writing a neoclassical or behavioral economics article are clear, there is no similar guide for biological economics. This paper fills that void by creating a template — a “how-to” guide — for writing a biological economics article.

The instructions for writing a neoclassical economics article have been described as: “The combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, form the heart of the economic approach.” (Becker, 1976. p. 5).

The guidelines for a behavioral economic article are described (and demonstrated) in the first ‘anomalies’ article, “An empirical result is anomalous if it is difficult to ‘rationalize,’ or if implausible assumptions are necessary to explain it within the paradigm.” (Thaler, 1987, p. 198).

In the neoclassical view, all decisions are assumed to be optimal, maximizing some notion of happiness or ‘utility.’ A behavioral economics article documents a divergence between actual human behavior and that predicted by neoclassical economics.

This paper lays out a process for writing a biological economics article. A biological economics article integrates insights from biology into economics, reconciling those behaviors misunderstood or poorly understood within economics with the well-established theoretical and empirical natural science foundations that make sense of them.

Here are the four steps, summarized from Ordinaries 8, the ‘cashew conundrum’ (Burnham & Phelan, 2022).

Step 1: Identify an important human behavior that is poorly understood.

The cashew conundrum is the observation that Richard Thaler’s dinner guests were happier when pre-dinner cashews were made less accessible. The cashew conundrum is important because it was the seminal event in creating behavioral economics, and led to Professor Thaler’s Nobel Prize.

Step 2: Summarize the current state of economics with respect to the target behavior.

Economics is divided and confused about the cashew conundrum. Neoclassical economists assume that eating pre-dinner snacks — even in quantities that “ruin” dinner — is optimal. Behavioral economists observe that people seem unhappy with their own overeating behavior at times, and can be made happier by the removal of options (the cashews in this case).

Step 3: Utilize natural science insights to inform our understanding of the behavior.

Humans and our pre-human ancestors came to have ravenous appetites as an evolutionary adaptation to chronic, unreliable food availability and recurrent famine. Humans have specific, powerful neural mechanisms that prod us to eat, and, in particular, to seek out high-calorie, low-effort foods, such as roasted, shelled cashews. People with access to food tend to overeat because these biological mechanisms, selected to avoid starvation, are now mismatched with modern settings characterized by plentiful, calorically-dense food.

Step 4: Revisit the economics of the target behavior with insights from biology.

Neoclassical economics is wrong to assume efficient and non-conscious maximization in an evolutionarily novel world. The genes underlying our behaviors evolved in a world of hunger and starvation. As a result, we tend to overeat in environments with surplus food. Behavioral economics is right to note the pervasive situation that people often overeat, but limited in documenting the conundrum without providing insight to its cause or its solution.

2 Motivation for Biological Economics

Economics without biology exists in a state of dissonant crisis. The core axioms of the field are disputed. Undergraduate textbooks continue to teach standard, neoclassical economics while paying lip-service to behavioral economics.

The schism within economics has persisted since the first papers by Kahneman and Tversky were published almost half a century ago (see, for example, Kahneman & Tversky, 1973). Most economists, however, carry on with work that is unrelated to the fundamental issues at the foundation of economics.

Table 1 contains a summary of the current state of economics, in the absence of insights from the natural sciences.

Table 1 Economics is lost without the natural sciences (Adapted from Burnham 2016; Burnham & Phelan, 2019, Burnham & Phelan, 2021c)
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In Ordinaries 1 (Burnham & Phelan, 2019), we place economics within a Kuhnian three-phase framework of scientific revolution (Kuhn, 2012). Phase 1: Neoclassical economics is the outdated, flawed model. Phase 2: Behavioral economics documents the anomalies that demonstrate the shortcomings of the neoclassical economic model. Phase 3: Biological economics, we argue, provides a modern synthesis and path forward to a better economics that incorporates both neoclassical and behavioral insights.

3 Target behaviors for biological economics

The goal of biological economics is to improve the understanding of behaviors that are currently misunderstood by economics. These behaviors typically involve some form of inefficiency or self-destruction. Candidate behaviors for a biological economics article can be usefully divided into two categories.

3.1 “Anomalies” as target behavior

The first type of target behaviors for a biological economics article is those already identified as “anomalies” by behavioral economics. Behavioral anomalies document deviations between actual human behavior and that predicted by neoclassical theory.

As noted, Ordinaries 8 (Burnham & Phelan, 2022) discusses the ‘cashew conundrum,’ the anomaly that launched Richard Thaler to his Nobel Prize. Ordinaries 4 (Burnham & Phelan, 2020c) covers the behavioral economic literature documenting divergences between actual human behavior and neoclassical economic models of discounting — making choices over different time periods.

Behavioral economic anomalies can be subtle to demonstrate as the parameter assumed to be optimized in standard theory is invisible, inconsistently defined, and challenging to quantify. Consider the following question from a Harvard graduate economics exam. “Professor Schumpeter drives to the Harvard campus every day taking a route that is 30 minutes longer than the shortest route. Comment.”

The Harvard exam question was posed by Professor Stephen Marglin, a critic of neoclassical economics. The correct answer, we assume (we saw no answer key), is that it is not possible to label the longer-than-necessary commute as wrong or sub-optimal because even though the longer path is inefficient by one measure, it might produce more happiness or utility.

The take-home-message we took from the ‘scenic route home’ question is that many seemingly bad choices are nonetheless consistent with neoclassical economics. Because the entity being optimized is an invisible utility, it is challenging — often impossible — to falsify aspects of the neoclassical model. Accordingly, behavioral economics commonly side-steps big and obviously bad behaviors, to instead focus on insignificant behaviors chosen, not for their importance, but because they unambiguously contradict neoclassical theory.

Consider again the cashew conundrum, the observation that people sometimes eat too much before dinner and later wish they had eaten less. This seemingly obvious statement led to a Nobel Prize. How can common sense lead to the podium in Stockholm?

The answer is that — while the cashew conundrum is obvious to your child and was obvious thousands of years ago to Plato and Homer — it directly contradicts a core assumption of neoclassical economics. For a rational maximizer, having more options can never be worse than having fewer. People are assumed to pick the best feasible option, therefore, adding more options can only improve the situation.

The salient insight in the cashew conundrum is, therefore, that having fewer options improved the situation for the people at Richard Thaler’s dinner party. The guests stated that they were happier not having the option to eat pre-dinner cashews. Thus, a violation of the assumption that people are rational optimizers. (While this insight is new to economics, it is not new to people. In the Odyssey, the famous ‘mast-strapping’ scene illustrates that fewer options can lead to better, and preferable, outcomes.)

Target behavior type 1 for a biological economic article is a behavioral economic anomaly.

3.2 Self-destruction as target behavior

The second type of target behavior for a biological economics article is some form of apparent self-destruction. These include suicide, drug addiction, unheathy lifestyles, and compulsive gambling.

Apparently-self-destructive behaviors are not violations of neoclassical economic theory; nor are they ‘anomalies’ in behavioral economics.

Consider, as an example, compulsive gambling disorder. A small percentage – estimated at 0.5% of adults (Potenza et al., 2019) – gamble so heavily as to essentially destroy their lives. Compulsive gamblers tend to become broke, divorced, homeless, and suicidal. According to the Diagnostic and Statistical Manual of Mental Disorders (2013), gambling is classified medically as a compulsive disorder if it includes attributes such as:

  • Needs to gamble with increasing amounts of money in order to achieve the desired excitement.

  • Has made repeated unsuccessful efforts to control, cut back, or stop gambling.

  • Often gambles when feeling distressed (e.g., helpless, guilty, anxious, depressed).

  • After losing money gambling, often returns another day to get even (“chasing” one’s losses).

  • Lies to conceal the extent of involvement with gambling.

Regardless of the magnitude of financial and personal losses, however, a neoclassical economist never classifies gambling as a disorder. Remember that all decisions are optimal by assumption. People who gamble — according to neoclassical economics — simply have a taste for risk.

This “gambling is utility-maximization” notion is captured by a fictional character in the movie Lost in America. Having lost the family’s full net worth (their “nest egg”), the gambler says, “I’ve never had that feeling before, the feeling that I was completely in control. I was the one. I didn’t need anything. I didn’t care. I didn’t have any problems.”

Spoken like a Nobel-prize-winning neoclassical economist - utility is maximized, even as the gambler and the family are destroyed.

While it isn’t surprising that neoclassical economists view compulsive gambling as optimal — after all, every decision is optimal in their world — it is perhaps surprising that compulsive gambling is not an “anomaly” according to behavioral economics.

Why is compulsive gambling not a behavioral economic anomaly? The answer is that behavioral economics is an intellectual artifact, created and existing entirely in opposition to neoclassical economics. Recall that an anomaly is defined as, “An empirical result is anomalous if it is difficult to “rationalize,” or if implausible assumptions are necessary to explain it within the paradigm.” (Thaler, 1987, p. 198).

The key phrase is “within the paradigm.” In order to qualify as an anomaly, a behavior must violate some prediction of standard neoclassical theory. Since neoclassical theory makes no prediction regarding risk-taking behavior, no individual risky decision can ever be a violation. (Risky decisions can, however, become anomalies through internal inconsistencies.)

Thus, compulsive gambling disorder is neither a violation of neoclassical economic theory nor an anomaly of behavioral economics.

Compulsive gambling remains, however, an interesting target behavior for biological economics. Independent from existing economic theory, it is interesting to ask why many people enjoy money-losing activities, and why some gamblers love those activities so much as to make choices that result in the loss of their jobs, spouses, and children.

3.3 Summary of target behaviors for biological economics

Table 2 summarizes some examples of the two types of target behaviors for biological economics.

Table 2 Examples of target behaviors for biological economics articles
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4 Economic views of the target behavior without biology

The next section of a biological economics article summarizes the situation within the field of economics without insights from the natural sciences. In such cases, the current state is that economics offers either an incoherent view of the target behavior or fails to provide an explanation for its existence.

We consider each type of target behavior separately.

4.1 Economics of anomalies without the natural sciences

We begin with a specific example from Ordinaries 5 on discounting — making decisions that have impacts on multiple time periods (see Table 3).

Table 3 The economics of discounting without biology (Burnham & Phelan, 2021a)
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The current state of economics with regard to discounting is disagreement. Neoclassical economics assumes optimal discounting, while behavioral economics documents divergences between actual human behavior and that predicted by neoclassical economics. There has been no reconciliation of these divergences in more than 40 years. (See Thaler 1981 for an early paper on discounting.)

The current state of economics regarding every behavioral anomaly is the same as it is for discounting. Everything is optimal to neoclassical economics while, in sharp contrast, behavioral economics documents divergences between actual human behavior and that predicted by neoclassical theory. The early behavioral papers date back to the 1970s and 1980s and there has been no reconciliation within economics.

4.2 Economics of self-destruction without the natural sciences

The current state of economics regarding self-destructive behavior is similar to that of anomalies. We start with the example from Ordinaries 6 covering dietary fat (see Table 4).

Table 4 The economics of unhealthful diets without biology (Burnham & Phelan, 2021b)
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The current state of economics with regard to unhealthful food choices is disagreement. Neoclassical economics assumes optimal food choice. Even if Big Macs kill the people who eat them, choosing to eat them is not a violation of utility maximization. While eating foods that kill us is not technically a behaviorally anomaly, some behavioral economics work proffers guidance to help people improve their diets (e.g., Heshmat, 2011).

The economics of every self-destructive behavior has the same theme. Everything is optimal in neoclassical economics. Furthermore, self-destructive actions are not usually included in the cataloging of behavioral economic anomalies. There are, nonetheless, some behavioral economic articles addressing self-destructive behaviors (see, for example, Bickel et al., 2014 on addiction, Bauer & Capron, 2020 on suicide).

Economics without the natural sciences is a lost field. In every case, neoclassical economists assert that the behavior is optimal. Behavioral economics, conversely, argues that the behavior is not optimal. Overall, economics slouches forward with two opposing sets of core assumptions, and there has been little movement toward any reconciliation or synthesis.

5 Using biology to understand human behavior

The next section in a biological economics paper applies the approach, methodologies, and findings of the natural sciences to the target behavior. The specifics of this section of a biological economics paper will vary based on the behavior. There are, however, unifying themes. In particular, adaptation via natural selection moves populations toward maximization, while the biological mechanisms created by selection, sometimes fail to maximize.

5.1 Natural selection favors maximization of reproductive success

“Ultimate” causation explains a behavior in terms of the behavior’s impact on the relative reproductive success of the individuals engaging in it (relative to alternative behaviors). In most cases, investigations of ultimate causation of behaviors, within populations of animals in evolutionary equilibrium, will favor neoclassical economic views.

How does one apply ultimate causation in a biological economics article? Here is an excerpt from Ordinaries 5 (Burnham & Phelan, 2021a) on discounting:

Animals in the wild are not impatient. Quite to the contrary, natural selection has produced mechanisms where a wide-variety of animals defer consumption today in return for even a much smaller amount in the future. These systems show evidence of sophisticated trade-offs in the discounting behavior. The associated brain regions and neurological mechanisms for these behaviors are well-understood.

…

[Natural selection] can produce populations in sync with their environment that make sophisticated trade-offs between different time periods. Natural selection can, and has, favored appropriate levels of discounting.

Natural selection favors optimal and consistent discounting, exactly as assumed by neoclassical economics.

Similarly, natural selection also favors ‘healthy’ dietary preferences. Selection favors people getting maximum pleasure from eating foods that will lead to health and vigor — and, as a consequence — result in maximization of relative reproductive success. Here is an excerpt from Ordinaries 6 (Burnham & Phelan, 2021b) on the consumption of Big Macs and other fatty foods:

That’s where taste comes in, and is where food preferences generate outcomes that can improve organisms’ evolutionary fitness. Within populations, the individuals that enjoy and consume more nutritious foods and energetically-dense items are more successful when it comes to relative survival and reproduction rates. Over evolutionary time, natural selection can create a finely-tuned system for locating and consuming optimal diets.

…

As hunter-gatherers, a reward system for finding and consuming calories, with an emphasis on fats, was an effective mechanism for enhancing evolutionary success. For our hunter-gatherer ancestors, when it came to food, our preferences led us to optimum, appropriate behaviors.

Natural selection favors people consuming optimal diets, exactly as assumed by neoclassical economics. But this does not mean that we always will observe optimal behaviors (or should expect to).

5.2 Non-maximizing behavior derives from mechanism and mismatch

“Proximate” causation explains behavior in terms of specific physiological and neural machinery and its interaction with environmental cues. As noted, natural selection favors optimization. However, behavior is produced by specific biological systems: mechanisms (Burnham & Phelan, 2021c). These mechanisms commonly create behavior that is contingently activated by specific environments.

Consider the adaptive value of using environmental cues to alter behavior. A spider can sit motionless for long periods until it senses prey in the web. Only in response to sensing prey does the spider spring into action to wrap up and incapacitate its food. Being built to exhibit conditional behavior confers flexibility and so is better than fixed behavior. A spider that never moved would starve. Conversely, a spider that moved all the time would waste energy and scare off prey.

Behavior that is flexibly activated by environmental cues is an effective adaptation to increase evolutionary payoffs. However, any system that uses cues to activate conditional behavior, is susceptible to producing inappropriate or destructive behaviors when it receives false signals.

The Portia genus of spiders hunts other spiders by exploiting the flexible behavior of those other spiders. Practicing what is labeled ‘aggressive mimicry,’ the Portia enters the web of a spider of a different species, and simulates the movement in the web of a true item of prey. When the host spider comes to wrap and eat a fly or other tasty morsel, the Portia eats the host spider (Jackson & Wilcox, 1998).

Behavior is produced by cues received as signals conveying information about the world. The host spider doesn’t actually see a prey item. Rather, it infers that prey is caught in the web because of a set of signals. More generally, behavior is produced by stimulation of particular neural mechanisms. These mechanisms evolved to maximize reproductive success — and usually do — but can produce destructive behavior in some circumstances.

So, too, is the situation for humans. The anomalies of behavior economics as well as self-destructive human behaviors are produced by specific mechanisms operating in particular environments. The natural science exploration of a target behavior in a biological economics article includes investigation of the relevant behavior-generating mechanisms.

Here is some of the discussion of discounting mechanisms from Ordinaries 5 (Burnham & Phelan, 2021a):

Looking inside the blue jay’s brain, when the first food items are found, the bird receives more pleasure from eating than burying. As the bird’s stomach fills, the bird’s brain does a sophisticated, but nonconscious, calculation of the trade-off between food today and food in the future. When the unseen calculation’s result shifts to favor caching, the bird receives more dopamine for burying food than from eating. These neuronal and hormonal pathways have been studied extensively in rodents.

…

The neurological systems that modulate food storage are sophisticated and have been studied extensively. Food-storing birds return to the specific locations of their own caches. Memories of the locations are stored in the hippocampus. Populations of black-capped chickadees (Poecile atricapillus) in environments with less food had ‘significantly larger hippocampal volumes’. .. Similarly, experimental interference with hippocampal function in the same species reduces the accuracy of returning to caches, but does not reduce the amount of stored food.

The neural mechanisms for discounting have been extensively studied. These mechanisms were selected to produce optimal and consistent discounting and, in natural settings, they do. This is consistent with the assumptions of neoclassical economics. In evolutionarily novel settings such as laboratories, however, the same mechanisms can be “tricked” or otherwise manipulated to produce inconsistent and apparently impatient discounting (consistent with the observations of behavioral economics).

Similarly, the neural mechanisms for eating have been extensively studied. In natural settings, these mechanisms tend to produce optimal diets, consistent with the assumptions of neoclassical economics. And in evolutionarily novel settings, such as cities, for example, the same mechanisms produce over-consumption of dietary fat (consistent with the observations of behavioral economics).

We can understand human taste preference for dietary fat by investigating the mechanism of food preferences. Here is an excerpt from Ordinaries 6 (Burnham & Phelan, 2021b):

Their [mouse] food preferences closely reflect the net energetic payoff of each seed type to the mouse. These reflect what is termed the “E/h” value for each type, where E is the caloric density of the food and h is the handling time for each type. Preference for maximizing E/h conforms to the most fundamental prediction of optimal foraging theory.

…

Humans, too, have food preferences. And ethnographic tests of optimal foraging theory hypotheses have given us useful insights into these preferences. Across numerous studies, researchers have documented that food choices are largely consistent with diet-breadth models predicting: 1) maximization of net energy returns per unit handling time, 2) preferentially foraging within locales with higher yields, and 3) altering foraging sites in response to shifts in relative yields.

…

Put simply, love of high calorie, energy-dense foods — specifically dietary fat — is an adaptation. Our hearty appetites are nothing more than an incentive system to get us to eat.

As with discounting, biological investigations reveal the specific physiological and neural machinery that creates behavior. Detailed investigation into mechanism reveals the optimizing pressure of natural selection, and the specific reasons for behaviors that puzzle economists.

6 Biological economics

The last section of a biological economics article reviews the current state of economics and then extends that knowledge, using the insights from biology developed in the prior section. The outcome is a reconciliation and extension of neoclassical and behavioral economic views: the biological perspective explains and integrates the evolutionary pressure to maximize as well as the predictable reality of failures to maximize.

For example, here is the final table from Ordinaries 5 on discounting.

Table 5 The economics of discounting with biology (Burnham & Phelan, 2021a)
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Biology explains and reconciles neoclassical and behavioral economic views. In the case of discounting, neoclassical economics assumes exponential discounting while behavioral economics argues for hyperbolic discounting. Biology argues that natural selection favors exponential discounting, but that people in evolutionary-novel modern environments are neither exponential nor hyperbolic discounters.

Similarly, biology improves the understanding of the consumption of dietary fat, which leads to morbidity and early mortality. Table 6 is reproduced from Ordinaries 6.

Table 6 The economics of unhealthful diets with biology (Burnham and Phelan, 2021b)
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Biology explains and reconciles neoclassical and behavioral economics views of dietary choices. In the case of food choice, neoclassical economics assumes optimal diet choice, where the goal is happiness. Biological views show that natural selection favors the evolution of preferences which led to optimal diets for our ancestors. However, our tastes are mismatched to current food variety and abundance. People in modern environments eat foods (and amounts of foods) that cause sickness and premature death.

7 Toward a neo-darwinian synthesis of economics

Biological economics resolves the conflict within economics. Natural selection does indeed favor efficient and nonconscious optimization, exactly as assumed by neoclassical economics. However, decisions are made in physical brains using specific neural machinery. This neural decision-making machinery sometimes makes non-optimal decisions, particularly when operating in novel environments.

Genetic mismatch is a unifying theme of biological economics (Burnham & Phelan, 2020a). An organism can become mismatched — out of sync — when the environment changes more rapidly than natural selection can adapt the population. Under conditions of mismatch — when the organism is in a novel environment — natural selection provides no support for maximization or behavior that is adaptive.

For example, humans, in the novel environment of space, need to be trained how to sleep. Monkeys, in a novel environment that includes cocaine, do not eat. And Giant Pandas, in the novel environment of a zoo, must be coaxed into reproduction. If any behaviors were hard-wired by natural selection to maximize, they would likely include sleeping, eating, and reproducing. Yet most behavior is not hard-wired, but rather designed to be elicited in response to signals from the environment.

Humans in space, monkeys with access to drugs, pandas in zoos — all behave in a manner that is decidedly “non-optimal.” This is exactly as biologists would expect because there has been no evolutionary selection for sleeping well in space, or for living in cages with cocaine or in zoos. It is entirely unsurprising that organisms fail to maximize in these evolutionarily novel circumstances.

Humans today suffer from significant mismatch. Cities and other modern environments differ in systematic and important ways from the human ancestral environment. As such, the mechanisms that are part of our biology end up pushing us toward choices that lead to unhappiness, sickness, and premature death.

In fact, animals in novel environments do not consistently or predictably maximize anything. Not happiness, lifespan, number of offspring, biomass, or any other variable.

Thus, the neoclassical assumption of optimization is unsupported by biology and simply incorrect. In 2021, for example, 107,000 people died from drug overdoses in the United States (CDC, 2022). These deaths were the result of mismatch between human reinforcement mechanisms in the brain and novel, engineered substances — such as fentanyl — that short-circuit and hijack motivational pathways.

The neoclassical assumption of effortless and efficient optimization is wrong. Does that mean that behavioral economics is right?

Yes, behavioral economics is right – but only in a narrow sense. Behavioral economics is correct in noting that myriad human behaviors are not optimal by any definition. The observation that an organism in a novel environment does not maximize, however, is obvious. Further, in the absence of any explanatory framework, mere documentation of behavioral economic anomalies is, at best, a first step.

Biological economics is the next significant step forward for economics. The natural science approach integrates evolutionary theory, the study of physiological mechanisms, research on non-human animal behavior, as well as relevant portions of archeology, anthropology and neurobiology (see prior ordinaries articles, Burnham & Phelan, 2019, 2020a, 2020b, 2020c, 2021a, 2021b, 2021c, 2022). Reconciling economics with biologically-derived understanding of human behavior provides a framework for interpreting and predicting behavior across the complete range of environments and situations.