Economics is Psychology, which is Biology

I’m reading John Maynard-Smith’s Evolution and the Theory of Games.

If you want to understand economics, which is psychology, you have to understand biology.

Paradoxically, it has turned out that game theory is more readily applicable to biology than to the field of economic behavior for which it has originally designed. There are two reasons for this. First, the theory requires that the values of different outcomes (for example, financial rewards, the risk of death and the pleasures of a clear conscious) be measure on a single scale. In humans applications, this measure is provided by ‘utility’ – a somewhat artificial and uncomfortable concept: in biology, Darwinian fitness provides a natural and genuinely one-dimensional scale. Secondly, and more importantly, in seeking solution of a game, the concept of human rationality is replace it by that of evolutionary stability. The advantage here is that there are good theoretical reasons to expect populations to evolve to stables states, whereas there are grounds for doubting whether human beings always behave rationally.

John Maynard-Smith

PS: Get used to #bitcoin! It will prevail because it is an ‘evolutionary stable strategy’. A Hamilton’s ‘unbeatable strategy’.