What kinds of economics will intelligent aliens have?

Ahmet, a loyal MR reader, asks:

What aspects of a functional economy would you expect to find in a developed extraterrestrial civilization? Barter, money, interest, financial derivatives, options?

Adam Smith and Murray Rothbard and Olaf Stapledon spring to mind as sources.  Reciprocal barter most likely, and that means implicit interest rates at the very least.  But do dolphins have money?  Not obviously.  I can imagine a dolphin-like civilization which lacks money.  Dolphins seem to have relatively few goods of value, yet they are highly intelligent and have well-developed emotional lives, or at least they could be so even if you are for some reason skeptical about current-day dolphins.

Current dolphin goods seem to be food, sex, kids, and conversation, with a fairly tight PPF.  They don’t buy lampshades.  Most of “dolphin economic growth” seems to come from finding more and better food, getting more and better sex, finding safer environments for the children, and learning to enjoy other dolphins more.  It’s hard to store dolphin goods and thus it is hard for the Mengerian origin of money story to get underway.

The opposable thumb and life on land, combined with some very particular and indeed contingent signaling tendencies, gives greater scope to heterogeneous durable goods and thus eventually money.  You can think of “dolphin water” as a high tax on lots of potential inputs, though it serves as a large implicit subsidy to the fishing sector.

Without money financial derivatives are unlikely, though be careful because alien intelligence is likely to surprise us.

Bird-like creatures, which fly through the air, might have a greater chance than dolphins of developing money as a medium of exchange, in part because they avoid the water tax on durable assets.  It seems possible to handle worms and songs and sex with direct barter, so what would smarter crows (or would they be smarter?) want to trade?  What kinds of heterogeneities might they crave and toward what end?

Bee-like creatures are a different story altogether, because of their homogeneity (for the drones at least) and high level of genetically-induced cooperation.  The “economics of communication” is especially important for them.

This entire question points me back to wondering why the diversity of human preferences evolved to the extent it did.  Why don’t we just want a few things?

Comments

trading sardines?

Rothbard would probably say we can only use the action axiom but not the "empirical" axioms like disutility of labor. Not much can thus be derived.

Rothbard would probably say 'I can't believe there are aliens. It is logically impossible. Therefore they don't exist' and consider the matter dealt with.

"Why don’t we just want a few things?" Because we can (have more things)?

Dolphins may not buy lampshades, but if somebody developed underwater flat panel screens and Wii remotes adapted to fins, should we assuome not many dolphins would want one? I mean, I did not know I want a Wii before it existed, and I guess I was not the only one among those who now have one.

*imagines wakeboarding dolphin*

Go to a coed nude pool party with all you can eat seafood and see how long it takes you to get bored.

Therefore dolphins might be a market for entertainment of some sort.

Factoid: the dolphins who seek out humans and interact most with us are those dissatisfied with dolphin society. So most dolphin interactions are with the equivalent of dolphin goths.

Humans didn't have economies for most of our evolution, either. The most persuasive theory I've seen so far is that patriarchy came first, when men discovered their participation in the production of children and wanted to ensure paternity, leading to trade of women and goods and the idea of leaving an inheritance to their children.

The closest thing to human society is actually elephants, rather than dolphins. They have a concept of medicine, teach each other technology and cultivate salt licks. However, with community-based societies and relatively sufficient lives, they don't seem to, yet, have the concept of ownership.

Any sufficiently advanced extraterrestrial civilisation we may come in contact with in the near future will surely have developed technologies that allow them to live a post-scarcity lifestyle. As such, their economic system will be, in the strictest sense of the word, communist (that is to say, production based on need - for a given definition of need).

Of course, that doesn't answer the interesting hypothetical question of what economic systems they will have utilised before their transition to post-scarcity society. Here we are, perhaps, limited by our embedding in a lineage of economic systems stretching back thousands of years, which mostly contain monetary or money-like accounting systems.

'post-scarcity'? It looks to me like scarcity is an intrinsic feature of the universe we live in, what with space, matter, energy and information being finite. Now if you want to argue that advanced civilizations must necessarily engineer their members to be lacking in ambitious desires, or else face extinction, that would be interesting; but that would be more like a 'post-desire' lifestyle, not truly 'post-scarcity'.

Exactly, somethings can never be "post-scarcity", things like status.

Or time, either. Perhaps I should have elaborated more on what 'post-scarcity' means - see my other post. (Also, I don't think that status is finite, or indeed measurable.)

Sure, at the upper end of things, the (visible) universe is finite. However, that's not really important. There are somewhere between thirty and sixty stars for every person on earth *in our galaxy alone*. At some point, you reach a limit to the amount of consumption that any one person can possibly engage in. 'Post-scarcity' doesn't refer to actual infinite abundance, but rather to abundance which is far greater than the desire to consume. (See here for a more elaborate description: http://en.wikipedia.org/wiki/Post_scarcity)

In fact, we have arguably reached such a state in terms of information today, where the cost of reproducing bits is so small as to be virtually zero. Post-scarcity societies would have achieved the same thing with matter.

And yet I can't get the entire contents of JSTOR for free. Another example of something that should be free based on cost-only arguments might be text messaging, and yet it's relatively expensive (ludicrously so, really, on a per-bit basis). The issue is that since not *everything* is highly abundant (and never will be), there will always be an incentive for some agents to grab some of the consumer surplus in order to increase their own access to the still-scarce things. Cost is not as relevant in this case as the basically crooked timber of humanity.

>And yet I can’t get the entire contents of JSTOR for free.

That's true. Perhaps 'theoretically' would have been a better choice of words than arguably. The limitation of the supply of information is the only way to avoid the reduction of its cost to (practically) zero.

>The issue is that since not *everything* is highly abundant (and never will be)

Given that we're talking about advanced civilisations, I've presumed that they have access to something equivalent to the replicators of Star Trek - that is, something which can transmute elements and assemble them on a nano-scale. As such, there are very few things that are not highly abundant - the most obvious one I can think of is the radio spectrum, although energy is potential another one if you go high enough and don't consider leaving the planet. Everything else in such a society is incredibly abundant. So, unless someone decides to build a massive radio jammer that works on all frequencies, I can't see any way that the scenario you describe will come to pass. (And even then, what's to stop people building more powerful radio transmitters?)

Keith Chen & Laurie Santos have a behavioral economics primate lab at Yale, where the monkeys have learned to use money to buy treats off experimenters - marshmallows and jello cubes - and appear to respond as expected to price incentives. And, perhaps unsurprisingly, the "oldest profession" also appears to exist in the monkey world...

We already are in the monkey world. The primate world, that is...

LOL!! Love that name and comment. Brilliant!

"I can imagine a dolphin-like civilization which lacks money."

I think it slightly ironic that MR jumped the shark in a comment involving dolphins.

Robert Sawyer's 'Neanderthal Parallax' might have some interesting insights about this, especially your last point, Tyler. The basic plot is that, thanks to some sufficiently advanced technology, a wormhole (on Earth) opens between our universe and an alternate one in which Homo Neanderthalis became the planet's dominant hominid species. HN followed a developmental path very similar to that in the book's home universe, but differ substantially when it comes to economics - the HN seem to adhere to a communist-like system. The assertion, I think, is that HN has a much less aggressive/individualistic demeanor than Homo Sapiens, so the HN society felt it adequate to simply pool resources towards some notion of greater good. Individuals are assigned occupations based on perceived talent, and are judged (and sometimes rewarded) based on their contributions. Sawyer doesn't deal with this explicitly, but I get the sense that basic needs are provided for (up to and including sophisticated technological items).

The books could be criticized for putting forward a rather simplistic view of an alternate "peaceful" human society (the worldwide population is in the millions, mammoths and deer walk free through human settlements, and the HN simply don't use carbon fuels) but, taking a step back, Sawyer's got the makings of an interesting thought experiment...

Calculating God is one of the best SF books ever. But the Neanderthal books suck... I am not anti-gay in any way but Sawyer was pushing so hard to make the 'gay is normal' argument in the Neanderthal world that everything else in the book sounded phony, including the economics.

I would posit as suspect any statement that begins with "I'm not anti-gay, but...."

Especially ones that are, essentially, "I'm not anti-gay in any way, but that book had so many gay characters that I couldn't see past the gayness to any of the other ideas presented."

I would posit that you missed the point and your comment represents gayness of the internet reactionary sort.

An analogy.

I am not anti-alcohol, in fact a drinker of wine, but if a book persistently accented joys of drinking at the expense of the main plot, I would be bored and slightly disgusted by the author's monotony and too-obvious attempt to socially engineer his readers.

You can get fed up even on things you like, Anonymouse, if they are presented in a boring or obnoxious ways.

That is the point.

Austro-Centaurian Economics.

I think you mean Astro-Centaurian Economics

Perhaps I'm completely off the mark and haven't been keeping pace with current tops in extraterrestrial economics, but I'm guessing the guy who asked this question did not expect a response involving dolphins...

Then he hasn't read enough of the literature. Start with "The Hitchhiker's Guide."

I think shelter would be a big one for birds. I remember once, on a freezing cold morning in London, noticing a line-up of pigeons standing on the floor along by an interior wall at Liverpool St Station, with their feathers all fluffed up, alive but looking cold. I figured they had been sheltering overnight in the warmest spot they could find.

So - shelter, some way of warming up the shelter, decoration, air conditioning, perhaps an extra nest to put the older chicks in, rather than kicking them out right away. And caged birds seem to enjoy things like a mirror in the cage, so can assume some interest there from an aerial population, in mirrors and other intellectual puzzles.

They'd probably want to trade labor and risk.

Where you are in the flock matters a lot to the amount of power you need to put out to keep up, and it strongly effects your risk of predation.

This might also be true of dolphins, but I'm not so sure.

James Gould work on bee cognition seems to suggest a Hayekian use of knowledge in the hive. The hive has a map of its area that no one bee possesses http://en.wikipedia.org/wiki/Bee_learning_and_communication#Cognition

My guess is that advanced intelligence will have a merged consciousness and act as a super-organism.

Would you merge your consciousness with Sarah Palin/Bill Maher/Joseph Stalin/Charlie Sheen? Would they want to merge with you?

Count me out. I like thinking for myself.

Indeed. Human innovation is driven by variation and outliers. I'm not sure how a merged consciousness would work, but it sounds like it would effectively stamp out idea diversity and render the mind exactly average. I don't know if this would even be a bad thing, as I don't know the needs of a collective consciousness.

I suppose it rests on whether merging the consciousness of a stupid man with a genius creates an average man, or an even greater genius. ie. is it net consciousness / people or simply net consciousness.

Unless they have near instantaneous communication over many lightyears that wouldn't really work.

At light speed, an interstellar civilization would be more separated and hence eventually diverse than our own.

Any species will want more stable food supplies, at the least, and most will want shelter. Dolphin farmers would need capital to invest in fish farms, and eventually option markets would evolve to stablize their income. Bird species would invest in shelter (as Tracy W alludes). All Dolphins would be interested in goods that make raising dolphin babies easier, safer and more succesful (like weapons or defenses against sharks and killer whales). Dolphins might also appreciate the ocean-equivalent of Starbucks in order to facilitate friendly conversation. Creating those goods would require capital and specialization of labor.

I think money is inevitable. Financial derivatives are only inevitable if all species are equally foolish.

The major impediment to a dolphin, or any aquatic, civilization is probably a thermodynamic one. Due to the very high heat capacity of water, it is very difficult to achieve the localized application of energy necessary to bring about an arbitrary chemical combination (that is, negative entropy) which is required for creating differentiated goods.

On the other hand, it is actually possible to have a monetary exchange economy without a physical medium of exchange (Yap stone money comes to mind as an example). Dolphin fine brain structure may be uniquely adapted to remembering and tracking the "virtual accounts" of many other economic actors with which it interacts. Most primate species (including humans) practice a fuzzy sort of interpersonal accounting to keep track of favors performed. Perhaps dolphins (and also possibly elephants, reputed to have long memories) have developed this sort of accounting system to a fine degree, enough to call it "money". If so, favors may be lent "on credit," and a customary time discount may be applied. So we should not assume the absence of monetary exchange even though we do not see a physical medium.

They would have solved the calculation problem

This entire question points me back to wondering why the diversity of human preferences evolved to the extent it did. Why don’t we just want a few things?

We evolved in an environment where our wants were limited by our immediate resources. Our omnivorous digestive system allowed us to eat most anything, but as individuals we probably ate the dozen things that could be found within a few miles of home. Similarly with our preferences in general. Once we overcame our geographic limitations, the spandrels of our omnivorousness became apparent.

Matt Ridley addresses this idea (with respect to animals, not extraterrestrials) in The Rational Optimist:


Exchange needed to be invented. It does not come naturally to most animals. There is strikingly little use of barter in any other animal species. There is sharing within families, and there is food-for-sex exchange in many animals including insects and apes, but there are no cases in which one animal gives an unrelated animal one thing in exchange for a different thing. ‘No man ever saw a dog make fair and deliberate exchange of a bone with another dog,’ said Adam Smith.

And


Barter is a lot more portentous than reciprocity. After all, delousing aside, how many activities are there in life where it pays to do the same thing to each other in turn? ‘If I sew you a hide tunic today, you can sew me one tomorrow’ brings limited rewards and diminishing returns. ‘If I make the clothes, you catch the food’ brings increasing returns.

Of course, before you can invent the idea of exchanging one kind of thing for a different kind of thing, you have to have things. Meaning multiple types of objects/resources/artifacts of some durability than can be collected, stored and transported (and, potentially, exchanged). Dolphins, however smart they might be, seem to be stuck. They don't have dens or pouches or pockets -- there's nothing really that they can possess (other than, say, a fish in their mouths for a few moments before it's eaten).

It seems like some kinds of birds are closer to inventing exchange -- they have nests, of course, and food-caching birds remember locations places they have stored seeds, so they do have the equivalent of possessions. And crows are impressive problem-solvers and toolmakers:

http://www.youtube.com/watch?v=OYZnsO2ZgWo

You could imagine, perhaps, further evolution resulting in crows making tools of increasing sophistication and retaining them to build tool kits that might form the basis of exchange. But it took humans rather a very, very long time after inventing the stone hand ax to go beyond it. Also from Ridley:


Not only that; they made roughly the same tools in south and north Africa and everywhere in between. They took the design with them to the Near East and to the far north-west of Europe (though not to East Asia) and still it did not change. A million years across three continents making the same one tool. During those million years their brains grew in size by about one-third. Here’s the startling thing. The bodies and brains of the creatures that made Acheulean hand axes changed faster than their tools.

So the path from basic tools -> a steadily improving toolkit with accumulated innovations -> exchange is a long one.

Birds also don't have a central bank. So, in some ways they are ahead of us.

There's some evidence that any society with a per-capita income over US$16,000 per year is "post-scarcity". Above that income level, you don't see famines, and people are much less likely to leave their families for higher pay. By that argumnet, I would say that the US, Canada, western Europe, Japan and Singapore and a few other countries are all post-scarcity, yet all are recognizable capitalist systems.

Not per the definition that "things such as goods, services and information are free, or practically free," however.

"Why don’t we just want a few things?"

Maybe we want just two things: to be the same, and to be different.
All the other stuff we acquire is just us bouncing between these two aims.

"I'd insisted on leaving South Harbor with them. I told myself that somehow I was responsible for Nolan's state of mind. That I had filled his head with romantic notions about a whale capable not only of profound grief, which I believed, but also of calculated and vindictive actions, which I found hard to be believe, despite all that had happened." --Orca

One plausible "alien" economic system, and perhaps one for far future humans, is one based on tradition.

Market economic incentives have been functional in the "modern" era (which to historians means roughly from the Rennaisance to the present), after a long hiatus in the medieval period when they were far less central to the overall economic system, because technological change makes innovation in how goods and services are provided valuable to society. But, at some point, when scientists, and business people, and lawyers and legislators reach a point where there is little room for improvement, market incentives may cease to serve their purposes of encouraging people to develop maximally efficient economic systems and innovations will overwhelmingly prove to be detriments to efficiency rather than improvements in it. At that point, the economy may harden around a traditional means of organizing economic activity that maintains an optimal (or at least locally optimal in the sense that not minor perturbation can improve it) status quo.

Kate Elliot's Jaran series features such an alien society called the Chapalli, whose economy has become so fine tuned and optimized that shipping schedules (for example) remain unchanged for thousands of years.

I guess we don't want/like a few things because of evolution. Just like our genetic makeup is constantly changing through reproduction our brains are constantly looking for new things that might help our survival. Since judging what helps or not is very hard as 'things' get more complex, we are simply programmed to be attracted to anything new.

'more and better food, getting more and better sex, finding safer environments for the children, and learning to enjoy other dolphins more'

Then their model is far superior to ours.

Then their model is far superior to ours.

We have the same system. Maslow's hierarchy of need and all that.

Didn't Krugman get a Nobel prize for a paper on this topic and for being anti-Bush?

Explain "this topic"!

Seems like some notion of planetary structure (probably not the right word) must come into play. Human beings evolved in a reasonably seasonal environment with a good amount of volatility in natural production of food. Thus, storage (i.e. fat) necessary, which essentially frames some parameters around real interest rates. Dolphins (again, speaking from zero knowledge and therefore great confidence) have far less environmental variability. They have fat for insulation not storage, therefore more stable? This gives them very different real interest rates. So, if we go to "aliens" we have to ask: are the environmental variables ones that lend themselves to (a) a need for storage, (b) is there reliable storage of desirable end products, (c) are there non-depreciating, desirable products in relatively fixed supply that can serve as a store of value?

Imagine Earth with only land along the equator, and little weather variation, and people who had metabolisms like goldfish (you don't get fat, and too much food...ahem...just passes through)...would we have money?

To get beyond "food, sex, kids, and converstaion," you need to be able to store goods safely. How can dolphins manage that?

And speaking of storage, if you can't store food you end up spending a lot of time looking for it.

Imagine that humans could easily live underwater, and even take hand tools with them. With no help from the surface, what would the human economy look like?

We should anticipate that any aliens we encounter that are intelligent enough to have economics (and not just ecology) probably have either (1) superintelligent (by our standards) AI or aliens themselves, which probably resolve many aspects of the calculation problem in something like a planned economy (though perhaps with a multiplicity of planners), or (2) tribal economics, in which resources are shared, given, or in rare cases bartered, but all at a near subsistence level. We spent nearly a million years in tribal economics, but less than 500 in a recognizably capitalist system. It's hard to predict an improved economics, but it's not that hard to predict that future AI innovations are likely to create disruptive change, and presumably an improved economic system would require both some underlying technological innovation allowing it and disruption to move to that state.

It's unlikely we'd find them in the period of development in between those two outcomes, as we currently are, unless for some reason they were stuck there as a result of strong feedback loops, like intense emphasis on tradition, environmental limits, etc.

The big problem that evolution needs to solve in order for animals to be able to barter one thing for a different kind of thing is an ability to measure value:

http://unenumerated.blogspot.com/2006/01/estimating-value-of-favors.html

"Mutual grooming can remove ticks and fleas that an individual can't see or reach. But just how much grooming versus how many pieces of fruit constitutes a reciprocation that both sides will consider to be "fair," or in other words not a defection? Is twenty minutes of back-scratching worth one piece of fruit or two? And how big a piece? And just how long is twenty minutes anyway? In some cases this is relatively easy to solve, as with the delayed barter of blood for blood in vampire bats. These bats can come home from a hunting mission either overstuffed or starving. Overstuffed bats can regurgitate blood to feed hungry ones. The grateful recipient can remember the favor an return it in a future hunting trip when the tables might be turned."

As the grooming example suggests, animals that have evolved value-estimating brains can trade in services as well as goods. As Ridley suggests, this is a very hard problem for evolution to solve.

my question was motivated by a similar exercise in mathematics. the subject line of my mail to prof. cowen read "essentials in economy." i expect an developed et civilization to discover fundamental mathematical relations such as the value of pi or say the pythogorean theorem. these are what one could call essentials in mathematics. what are the analogies in economy? the aim of the exercise is to find out the answer to prof. cowen's question: "which few things in the economy are essential and necessary?"

there is a great werner herzog movie on life on Antarctica, called "Encounters at the end of the world" In the intro, he asks the question: "Why don't monkeys domesticate and use other animals, whereas there are some ants which enslave other ants?" On this line of thought, I would say some form organization of labor is essential. Some form of property rights would also be necessary.

What about the ownership of capital?Could one talk about it even in the absence of money?

I've thought a bit about the analogous question in physics.

The physics needed to do sublight travel needn't be complete or accurate, so long as it is good enough. We sent stuff into space knowing a lot less about fundamental physics than we do now. One could invest a lot less in atom smashing, and know a lot less and still have functional nuclear reactors. One could have workable space ships even with quite deficient ways of addressing general relativity.

www.princeton.edu/~pkrugman/interstellar.pdf

Most likely they will be Stalinist military dictatorships.

Be glad you live here.

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