Synopsis
The policy recommendations of most economists are driven by a view of economic reality embodied in Walrasian general equilibrium theory. Ironically, the Walrasian system has been all but abandoned by leading economic theorists. It has been demonstrated to be theoretically untenable, its basic assumptions about human decision making have been empirically falsified, and it consistently makes poor predictions of economic behavior. The current revolution in welfare economics offers opportunities on two related fronts for an evolutionary perspective on human behavior to reshape economic theory and policy. The first opportunity is to incorporate empirically-based information about human behavior to the study of human wants and their formation. This includes information about the evolution of the genetic component of decision making as well as the cultural dimensions of behavior. Expanding the role of economic analysis beyond stylized market behavior to focus on well-being (real utility) has far-reaching consequences for microeconomic policy. Secondly, abandoning the Walrasian model also means rethinking the microfoundations approach to the economic analysis of sustainability. This opens the door for economists to engage with the growing body of research on the evolution of whole societies. One link between the evolution of human behavior and the evolution of human societies is the psychological phenomenon of considering sunk costs. Understanding and overcoming the sunk cost fallacy may be the key to creating a sustainable society.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References cited
Hal Arkes Peter Ayton (1999) ArticleTitleThe sunk cost and Concorde effects: are humans less rational than lower animals? Psychological Bulletin 125 591–600 Occurrence Handle10.1037/0033-2909.125.5.591
Hal Arkes C. Blumer (1985) ArticleTitleThe psychology of sunk costs Organizational Behavior and Human Decision Processes 35 124–140 Occurrence Handle10.1016/0749-5978(85)90049-4
Kenneth Arrow Partha Dasgupta L. Goulder Gretchen Daily Paul Ehrlich Geoffrey Heal S. Levin Karl-Goren Mäler Stephen Schneider David Starrett Brian Walker (2004) ArticleTitleAre we consuming too much? Journal of Economic Perspectives 18 147–172 Occurrence Handle10.1257/0895330042162377
Paul Bahn John Flenley (1992) Easter island, earth island Thames and Hudson London and New York
Jeroen C. J. M Bergh Particlevan den John Gowdy (2003) ArticleTitleThe microfoundations of macroeconomics: An evolutionary perspective Cambridge Journal of Economics 27 65–85 Occurrence Handle10.1093/cje/27.1.65
Robin Boadway (1974) ArticleTitleThe welfare foundations of cost-benefit analysis Economic Journal 84 926–939
Samuel Bowles (2004) Microeconomics: behavior, institutions, and evolution Russell Sage Foundation Princeton, NJ
Samuel Bowles Herbert Gintis (2000) ArticleTitleWalrasian economics in retrospect Quarterly Journal of 115 IssueID4 1411–1439 Occurrence Handle10.1162/003355300555006
Robert Boyd Peter Richerson (1992) ArticleTitlePunishment allows the evolution of cooperation (or anything else) in sizable groups Journal of Ethology and Sociobiology 13 171–195 Occurrence Handle10.1016/0162-3095(92)90032-Y
James Brander Scott Taylor (1998) ArticleTitleThe simple economics of Easter Island: A Ricardo-Malthus model of renewable resource use American Economic Review 88 119–38
Kjell Brekke (1997) ArticleTitleThe numeraire matters in cost-benefit analysis Journal of Public Economics 64 117–123 Occurrence Handle10.1016/S0047-2727(96)01610-6
Philip Brickman Dan Coates Ronnie Janoff-Bulman (1978) ArticleTitleLottery winners and accident victims: is happiness relative? Journal of Personality and Social Psychology 36 917–927 Occurrence Handle10.1037//0022-3514.36.8.917
Brown, Paul. (2004). Scientists bewildered by sharp rise of CO2 in atmosphere for second year running. The Guardian, October 11.
John Chipman James Moore (1976) ArticleTitleWhy an increase in GNP need not imply an improvement in potential welfare Kyklos 29 391–418
John Chipman James Moore (1978) ArticleTitleThe new welfare economics 1939–1974 International Economic Review 19 547–584
David Colander (2000) ArticleTitleThe death of neoclassical economics Journal of the History of Economic Thought 22 127–143 Occurrence Handle10.1080/10427710050025330
Peter Corning (2000) ArticleTitleBiological adaptation in human societies:A ‘basic needs’ approach Journal of Bioeconomics 2 41–86 Occurrence Handle10.1023/A:1010027222840
Peter Corning (2003) Nature’s magic University of Chicago Press Chicago
Richard Dawkins T. Carlisle (1976) ArticleTitleParental investment, mate desertion and a fallacy Nature 262 131–133 Occurrence Handle10.1038/262131a0
Edward Decci Richard Ryan (1985) Intrinsic motivation and self-determination in human behavior Plenum Press New York and London
Diamond, Jared. (1997). Paradises lost. Discover 18(November):69–78.
Diamond, Jared. (2000). Ecological collapses of pre-industrial societies. Tanner Lectures on Human Values, Stanford University, May 22–24. http:/www.tannerlectures.utah.edu/lectures/Diamond-01.pdf
Jon Erickson John Gowdy (2000) ArticleTitleResource use, institutions and sustainability: A tale of two Pacific island cultures Land Economics 76 345–354
Richard Easterlin (1974) Does economic growth improve the human lot? Some empirical evidence P. David M. Reder (Eds) Nations and Happiness in Economic Growth: Essays in Honor of Moses Abramowitz Academic Press New York 89–125
E. Fantino (2004) ArticleTitleBehavior-analytic approaches to decision making Behavioral Processes 66 279–288 Occurrence Handle10.1016/j.beproc.2004.03.009
Alexander Field (1998) Sunk costs, water over the dam and other liquid parables K. Dennis (Eds) Rationality in Economics: Alternative Perspectives Kluwer Boston 123–136
Firth, Raymond. (1936). We, the Tikopia. Allen and Unwin, London.
Raymond Firth (1939) Primitive Polynesian economy Routledge London
Firth, Raymond. (1967). The work of the gods in Tikopia. University of London, Athlone Press, London, chapter 7, “The Proclamation at Rarokoka.”
Robert Frank Ben Bernanke (2004) Principles of economics EditionNumber2 McGraw-Hill New York
Bruno Frey (1997) ArticleTitleA constitution of knaves crowds out civic virtues Economic Journal 107 1043–1053 Occurrence Handle10.1111/1468-0297.00205
Bruno Frey Felix Oberholtzer-Gee (1997) ArticleTitleThe cost of price incentives: an empirical analysis of motivation crowding out American Economic Review 87 746–755
Bruno Frey Alan Stutzer (2002) ArticleTitleWhat can economists learn from happiness research? Journal of Economic Literature 40 402–435 Occurrence Handle10.1257/002205102320161320
Herbert Gintis (2000) ArticleTitleBeyond Homo economicus: evidence from experimental economics Ecological Economics 35 311–322 Occurrence Handle10.1016/S0921-8009(00)00216-0
Herbert Gintis (2001) Game theory evolving Princeton University Press Princeton, NJ
John Gowdy (2004a) ArticleTitleAltruism, evolution, and welfare economics The Journal of Economic Behavior and Organization 53 69–73 Occurrence Handle10.1016/S0167-2681(03)00105-7
John Gowdy (2004b) ArticleTitleThe revolution in welfare economics and its implications for environmental valuation Land Economics 80 39–257
John Gowdy (2005) ArticleTitleToward a new welfare economics of sustainabiity Ecological Economics 53 211–222 Occurrence Handle10.1016/j.ecolecon.2004.08.007
John Gowdy Raluca Iorgulescu Stephen Onyeiwu (2003) ArticleTitleFairness and retaliation in a rural Nigerian village The Journal of Economic Behavior and Organization 52 469–479 Occurrence Handle10.1016/S0167-2681(03)00026-X
John Gowdy Irmi Seidl (2004) ArticleTitleEconomic man and selfish genes: the relevance of group selection to economic policy Journal of Socio-Economics 33 343–358 Occurrence Handle10.1016/j.socec.2003.12.026
Werner Guth Roly Schmittberger Bernd Schwarz (1982) ArticleTitleAn experimental analysis of ultimatum game bargaining Journal of Economic Behavior and Organization 3 367–88 Occurrence Handle10.1016/0167-2681(82)90011-7
Charles Hall Cutler Cleveland Robert Kaufman (1992) Energy and resource quality: the ecology of the economic process University of Colorado Press Niwot CO
Hansen, James, Larissa Nazarenko, Reto Ruedy, Makiko Sato, Josh Willis, Anthony Del Genio, Dorothy Koch, Andrew Lacis, Ken Lo, Surabi Menon, Tica Novakov, Judith Perlwitz, Gary Russell, Gavin A. Schmidt, Nicholas Tausnev. (2005). Earth’s energy imbalance:confirmation and implications. Sciencexpress, April 29. www.sciencexpress.org.
Alan Harberger (1971) ArticleTitleThree basic postulates for applied welfare economics: an interpretive essay Journal of Economic Literature 9 785–797
John Hartwick (1977) ArticleTitleIntergenerational equity and the investing of rents from exhaustible resources American Economic Review 67 972–974
Joseph Henrich Robert Boyd (1998) ArticleTitleThe evolution of conformist transmission and the emergence of between group differences Evolution and Human Behavior 19 215–242 Occurrence Handle10.1016/S1090-5138(98)00018-X
Joseph Henrich Francisco Gil-White (2001) ArticleTitleThe evolution of prestige: freely conferred deference as a mechanism for enhancing the benefits of cultural transmission Evolution and Human Behavior 22 165–196 Occurrence Handle10.1016/S1090-5138(00)00071-4
Joseph Henrich Robert Boyd Sam Bowles Colin Camerer Ernst Fehr Herbert Gintis Robert McElreath (2001) ArticleTitleIn search of Homo economicus: behavioral experiments in 15 small-scale societies American Economic Review 91 73–78 Occurrence Handle10.1257/aer.91.2.73
Hodgson, Geoffrey, Thorbjørn Knudsen. (2004). Why we need a generalized Darwinism: and why generalised Darwinism is not enough. Paper presented at the workshop ‘Evolutionary Concepts in Economics and Biology’, Max Planck Institute for Research into Economic Systems, Evolutionary Economics Group, Jena, Germany, December 2–4.
Ed Hopkins Tatiana Kornienk (2004) ArticleTitleRunning to keep in the same place: consumer choice as a game of status American Economic Review 94 1085–1107 Occurrence Handle10.1257/0002828042002705
Marco Janssen Timothy Kohler Marten Scheffer (2003) ArticleTitleSunk-cost effects and vulnerability to collapse in ancient societies Current Anthropology 44 722–728 Occurrence Handle10.1086/379261
Nicholas Kaldor (1939) ArticleTitleWelfare propositions of economics and interpersonal comparisons of utility Economic Journal 49 549–552
Patrick Kirch (1997) Epilogue: islands as microcosms of global change P. Kirch T. Hunt (Eds) Historical Ecology in the Pacific Islands Yale University Press New Haven CT 284–286
Patrick Kirch (2000) On the road of the winds: an archaeological history of the Pacific Islands before European contact University of California Press Berkeley CA
Patrick Kirch John Flenley David Steadman D. Lamont S. Dawson (1992) ArticleTitleAncient environmental degradation: prehistoric human impacts on an island ecosystem: Mangaia, Central Polynesia National Geographic Research and Exploration 8 166–179
Kirch, Patrick, Douglas Yen. (1982). Tikopia: prehistory and ecology of a Polynesian outlier. Bernice P. Bishop Museum Bulletin 238, Honolulu HI.
Janet T. Landa (1981) ArticleTitleA theory of the ethnically homogeneous middleman group: an institutional alternative to contract law Journal of Legal Studies 10 349–367 Occurrence Handle10.1086/467685
Janet Landa (1999) ArticleTitleBioeconomics of some nonhuman and human societies: A new Institutional economics approach Journal of Bioeconomics 1 95–113 Occurrence Handle10.1023/A:1010018409737
Layard, Richard. (2003). Happiness: has social science got a clue? Lionel Robbins Memorial Lecture Series, London School of Economics, March 3, 4 and 5.
I.M.D. Little (1950) A critique of welfare economics Oxford Press Oxford UK
David Lykken Auke Tellegen (1996) ArticleTitleHappiness is a stochastic phenomenon Psychological Sciences 7 186–189 Occurrence Handle10.1111/j.1467-9280.1996.tb00355.x
Dario Maestripieri Enrico Alleva (1991) ArticleTitleLitter defense and parental investment allocation in house mice Behavioral Processes 56 223–230 Occurrence Handle10.1016/0376-6357(91)90052-2
Meyer, Stephen. (2004). End of the wild. Boston Review 29(2), April/May.
Ezra Mishan (1980) ArticleTitleHow valid are economic valuations of allocative changes? Journal of Economic Issues 21 143–161
Yew-Kwang Ng (1987) ArticleTitleDiamonds are a government’s best friend: burden-free taxes on goods valued for their values American Economic Review 77 186–191
Yew-Kwang Ng (1997) ArticleTitleA case for happiness, cardinalism, and interpersonal comparability Economic Journal 107 1848–1858 Occurrence Handle10.1111/1468-0297.00262
William Nordhaus (2001) ArticleTitleGlobal warming economics Science 294 1283–1284 Occurrence Handle10.1126/science.1065007
Martin Nowak Karen Page Karl Sigmund (2000) ArticleTitleFairness versus reason in the ultimatum game Science 289 1773–1775 Occurrence Handle10.1126/science.289.5485.1773
Peter Richerson Robert Boyd Richard Bettinger (2001) ArticleTitleWas agriculture impossible during the pleistocene but mandatory during the holocene? a climate change hypothesis American Antiquity 66 387–411 Occurrence Handle10.2307/2694241
Paul Samuelson (1950) ArticleTitleEvaluation of real national income Oxford Economic Papers 2 1–29
Tibor Scitovsky (1941) ArticleTitleA note on welfare propositions in economics Review of Economic Studies 9 77–88
Amyarta Sen (1977) ArticleTitleRational fools: a critique of the behavioral foundations of economic theory Philosophy and Public Affairs 6 317–344
Solow, Robert. (1974). Intergenerational equity and exhaustible resources. Review of Economic Studies, Symposium Issue, 29–46.
Sara Solnick David Hemenway (1998) ArticleTitleIs more always better? a survey on positional concerns Journal of Economic Behavior and Organization 37 373–383 Occurrence Handle10.1016/S0167-2681(98)00089-4
Kotaro Suzumara (1999) ArticleTitleParetian welfare judgements and Bergsonian social choice Economic Journal 109 204–221 Occurrence Handle10.1111/1468-0297.00428
Joseph Tainter (1988) The collapse of complex societies Cambridge University Press Cambridge, UK
Joseph Tainter (2000) ArticleTitleProblem solving: complexity, history, sustainability Population and Environment: A Journal of Interdisciplinary Studies 22 3–41
Tainter, Joseph, Tim Allen, Armanda Little, Thomas Hoekstra. (2003). Resource transitions and energy gain: contexts and organization. Conservation Ecology 7(3) [online] URL: http://www. consecol.org/vol7/iss3/art4.
Richard Thaler (1980) ArticleTitleToward a positive theory of consumer choice Journal of Economic Behavior and Organization 1 39–60 Occurrence Handle10.1016/0167-2681(80)90051-7
Richard Titmuss (1971) The gift relationship:from human blood to social policy Pantheon Books New York
Trivers, Robert. (1972). Parental investment and sexual selection. Pp. 136–179 in R. Trivers (ed.) Sexual Selection and the Descent of Man 1871–1971. Aldine, Chicago.
Trivers, Robert. (1996). Foreward. Pp. v-vii in R. Dawkins, The Selfish Gene. Oxford University Press, Oxford
van Tilberg, JoAnn. (1994). Easter Island: archaeology, ecology and culture. British Museum Press, London.
Leon Walras (1874) Elements of pure economics Guillaumin Paris
Harvey Weiss Raymond Bradley (2001) ArticleTitleWhat drives societal collapse? Science 291 609–610 Occurrence Handle10.1126/science.1058775
Christer Wiklund (1990) ArticleTitleOffspring protection by Merlin (Falco columbarius) females: the importance of brood size and expected offspring survival for defense of the young Behavioral Ecology and Sociobiology 26 217–223 Occurrence Handle10.1007/BF00172089
Glen Whyte (1993) ArticleTitleEscalating commitment in individual and group decision making: A prospect theory approach Organizational Behavior and Human Decision Processes 54 430–455 Occurrence Handle10.1006/obhd.1993.1018
Ulrich Witt (2003) The evolving economy:essays on the evolutionary approach to economics Edward Elgar Aldershot
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Gowdy, J.M. Evolutionary Theory and Economic Policy with Reference to Sustainability. J Bioecon 8, 1–19 (2006). https://doi.org/10.1007/s10818-006-7213-0
Issue Date:
DOI: https://doi.org/10.1007/s10818-006-7213-0