Economic growth and evolution: parental preference for quality and quantity of offspring



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ECONOMICS

ECONOMIC GROWTH AND EVOLUTION: PARENTAL PREFERENCE FOR QUALITY AND QUANTITY OF OFFSPRING
by
Jason Collins

Business School

The University of Western Australia
and
Boris Baer

Plant Energy Biology

ARC Centre of Excellence

The University of Western Australia
and
Ernst Juerg Weber

Business School

The University of Western Australia

DISCUSSION PAPER 11.05

Economic Growth and Evolution:
Parental Preference for Quality and Quantity of Offspring

by

Jason Collins


The Business School
University of Western Australia

and


Boris Baer
Plant Energy Biology
ARC Centre of Excellence
The University of Western Australia

and


Ernst Juerg Weber
Business School
The University of Western Australia

Draft version: 5 May 2011

DISCUSSION PAPER 11.05

Abstract

This paper presents a quantitative analysis of the model developed in Galor and Moav, Natural Selection and the Origin of Economic Growth (2002), in which agents vary genetically in their preference for quality and quantity of children. We simulate a parametric form of the model, enabling examination of the transition from Malthusian stagnation to modern rates of economic growth. The simulations allow an assessment of the strength of the biological foundations of the model and demonstrate the susceptibility of the modern high-growth state to invasion by cheaters. Extending the model from two to three genotypes suggests the possibility of a return to Malthusian conditions rather than a permanent state of modern growth.



Key words: Evolution, Growth, Natural selection, Education, Human capital

For their comments, we thank participants in seminars with the University of Western Australia economics discipline, UWA Centre for Evolutionary Biology and ETH Zurich experimental ecology and theoretical biology groups.


    1. Introduction


Over the past thirty years, there has been an increasing scientific interest in using evolutionary theory to explain human economic behaviour. Since the advocacy of this approach by Becker (1976) and Hirshleifer (1977), Darwinian (1859) thinking has been used to explain the evolution of human risk preference (Rubin & Paul II 1979), time preference (Hansson & Stuart 1990, Rogers 1994, Robson & Samuelson 2007, Robson & Szentes 2008), and the shape of utility functions (Netzer 2009).1 More recently, evolutionary theory has been applied to the emergence of modern economic growth.

Galor and Moav (2002) developed a unified growth model in which natural selection favours traits that affect the economic environment. This model was the first to use frequency changes of heritable traits to explain the shift of human populations from Malthusian stagnation to modern economic growth. Galor and Moav proposed a gene-encoded preference for quality or quantity of children, which is similar to r/K selection in behavioural ecology. The quantity-quality trade-off has been hypothesised as an economic factor by, among others, Becker (1960), and Becker and Lewis (1974). Becker et al. (1990) considered the link between the quantity-quality trade-off and economic growth.2

In the Galor and Moav model, individuals who invest in the education of their children have an evolutionary advantage in the early stages of economic development. As technological progress depends on human capital and the returns to education increase with technological progress, this positive feedback ultimately results in an escape from Malthusian stagnation. Galor and Moav noted that natural selection might favour other growth promoting traits. For example, Galor and Michalopoulos (2011) suggested that entrepreneurial spirit creates an evolutionary advantage in the early stages of economic development, while less entrepreneurially spirited individuals do well in mature economies. The positive feedback between entrepreneurial spirit and economic development lifts the economy out of Malthusian stagnation.

Galore and Moav (2002) investigated the dynamics of their model analytically using phase diagrams. In this paper, their model is analysed numerically by simulation. The method is similar to the one that Lagerlof (2006) used to simulate the model of Galor and Weil (2000).3 The advantage of simulation is that it allows exploration of a richer specification of models for which there exists no closed-form solution. In particular, it will be possible to consider more than two genotypes with different preference for quality and quantity of children, which may emerge either though migration or mutation. This allows a demonstration of the susceptibility of the modern high-growth state to invasion by cheaters. The extended model suggests the possibility of a return to Malthusian conditions after the modern period of economic growth rather than a permanent continuation of growth.


    1. Background


Besides Galor and Moav (2002), several other authors applied evolutionary theory in the analysis of economic growth and the transition from the Malthusian state to modern rates of growth. In their seminal paper on the evolution of preferences for saving and labour supply, Hansson and Stuart (1990) proposed that human preferences depend on the availability of resources. Harsh natural environments select for genotypes that have a stronger preference for saving, leading to an equilibrium with low population density and high per-capita capital. Selected traits include a preference for work and accumulation of physical capital. This might explain why humans left the Malthusian state first in regions with harsh winters.

Clark (2007) suggested that selection for certain heritable characteristics accounted for the Industrial Revolution. While open as to whether these traits were transmitted genetically or culturally, he found higher reproductive success among wealthy males in England between 1250 and 1800.4 He hypothesised that individuals with favoured traits such as a propensity to hard work and saving increased in frequency during this time. This change in population composition could then have provided the basis for the Industrial Revolution.

The increasing availability of population genetic data, such as Cavalli-Sforza et al. (1994), has led to more research. Spolaore and Wacziarg (2009) linked differences in economic development with the genetic distance between populations, which depends on the time elapsed since two populations shared a common ancestor. They proposed that genetic distance increases income differences because it may act as a barrier to the diffusion of technological development between populations. As genetic distance is based on neutral genes that are not subject to selection pressure, their hypothesis does not rely on any difference in economic traits between populations. Differences in income may arise merely by chance and the failure of technological advances to diffuse through the genetic distance barrier.

Recently, Ashraf and Galor (2010) proposed that the geographic distance of a population from Africa has affected the level of growth and development across regions. They found that populations with elevated or reduced genetic diversity have experienced the lowest level of economic development since the Industrial Revolution.5 Indigenous populations of the Americas have the lowest level of genetic diversity due to the founder effect, whereas Africans have the highest.6 The hump-shaped relationship between genetic diversity and economic development is due to a trade-off between the costs and benefits of genetic diversity. A high level of genetic diversity expands the production possibilities through complementarities in knowledge production but disrupts the diffusion of technology due to lower levels of trust and cooperation between dissimilar individuals.




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