An Evolutionary Model of Taste for Risk

Abstract

Economists take tastes as given. However, tastes must be derived from biological models of evolutionary survival; we exhibit those tastes which served to make our ancestors survive. In particular, economists have no theory which explains observed behavior towards risk; rather, we take behavior as a datum. In this paper we present a model which explains risk seeking by adolescents and risk aversion by mature males as the result of an evolutionary mechanism.While textbooks indicate that changes in tastes are a potential source of changes in demand, empirical and theoretical work ignores tastes. As a research methodology, this strategy has been extremely productivefor example, the work of Becker and his followers on areas of behavior as diverse as crime and marriage has given fruitful results without considering tastes at all (see Stigler and Becker (1977)). The presumption has been that tastes are constant (over space and time) and that therefore changes in behavior can be explained in terms of changes in relative prices. The other justification for ignoring changes in tastes is that we have no theory as to when and how tastes change, and thus it is impossible to make falsifiable statements on such changes.There exists, however, another body of literature which may have implications about tastes. This is the literature of "Sociobiology" (Wilson (1975))the emerging discipline dealing with biological determinants of social behavior. (See also Becker (1976) , Hirshleifer( 1977), Rubin, et. al. (1979), Tullock (1977), and Fredlund (1976) for contributions by economists to this literature, and Ghiselin (1974), for a contribution by a biologist using economic arguments.) Viewing human behavior in terms of evolution indicates that tastes may be the result of selection pressurethat is, the drives and goals of humans may have been selected for, in the sense that our ancestors who had such drives and desires in fact survived to become our ancestors, while their relatives with less fit (in the biological sense) goals did not survive or reproduce. (Coase (1 978) argues that sociobiology should enable us to determine the elements and form of the utility function.) In this sense, it is useful to view natural selection as maximizing, in an "as if" sense, for this methodology, if used correctly, would give valid predictions.In using biological arguments, it is important to specify the level of which selection operatesthat is, does selection operate at the level of 'The University of Georgia. The authors would like to thank two anonymous referees for helpful comments. 585Economic Inquiry Vol. XVII, Oct. I979

Gender differences in cooperation with group membership

“…The literature providing an evolutionary foundation for gender differences in preferences (see Rubin and Paul, 1979;Robson, 1996aRobson, , 1996b can provide some methodological insight. For example, the finding that females seem to be more risk averse has stimulated research trying to provide a foundation for selection of preferences.…”

Fund Managers—Why the Best Might Be the Worst: On the Evolutionary Vigor of Risk-Seeking Behavior

“…Robson (1992) assumes individual utility to directly depend on wealth (in a concave fashion) as well as on status, that is, the rank of one individual relative to others (in a convex fashion). Like in Rubin and Paul Il (1979), this implies a nonlinear utility function like the convex-concave-convex function discussed in Friedman and Savage (1948). Robson shows that in this setup, individuals may purchase insurance and gamble at the same time.…”

“…In one of the earliest contributions, Rubin and Paul Il (1979) present a simple, static model in which the goal of individuals is to achieve some threshold income, which is interpreted as the creation of offspring. Rubin and Paul Il argue that, if the functional dependency between evolutionary fitness and individual income is non-linear, maximizing the probability to meet the threshold can lead to a different behavior than maximizing expected income.…”

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“…On average there is a greater inclination to take risks among juveniles and young, particularly male, adults. Beyond early adulthood, risk aversion grows with increasing age (see Rubin and Paul 1979 and the references given there).…”