15.

481x Financial Market Dynamics

and Human Behavior
Andrew W. Lo, MIT
Unit 5: Evolution and the Origin of Behavior
Lecture: Sociobiology & Evolutionary Psychology
Sociobiology and
Evolutionary
Psychology
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The Sociobiology of Altruism
If Genes Are Selfish, Why Are Some Organisms Selfless?
§ Altruism: helping others at your own expense
– Reduces your reproductive potential
– Increases the reproductive potential of others
§ Why hasn’t evolution eliminated it?
§ Successful in the natural world: bees, ants, humans

© 2020 by Andrew W. Lo
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 15.481
The Sociobiology of Altruism
Kin Selection: W.D. Hamilton (1964)
§ Hamilton’s rule: altruism occurs when rB > c
Ø r = relatedness (siblings 50%; cousins 12.5%)
Ø B = reproductive benefit
Ø c = reproductive cost
§ “I would lay down my life for two brothers or eight cousins.”
§ Explains many (not all) social insects
– Unusual genetic system: sisters are 75% related
– Help queen to produce more sisters instead of daughters

© 2020 by Andrew W. Lo
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 15.481
The Sociobiology of Altruism
Reciprocal Altruism: Robert Trivers (1971)
§ Altruism now for possibility of return altruism in future
– Requires repeated interactions
– Requires method to detect cheating
§ Parties need not be closely related
– Blood sharing in bats
– Grooming in monkeys
December 26, 1914: British and
– Truces between humans German troops in No Man’s Land

© 2020 by Andrew W. Lo
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 15.481
The Sociobiology of Altruism
Evolutionary Game Theory: John Maynard Smith (1973)
§ Evolutionary Stable Strategy
– If adopted by a population, resistant to new mutations
§ Pure altruism is almost always outcompeted
§ Tit-for-tat strategy models reciprocal altruism
– I do to you what you last did to me (positive or negative)
§ Tit-for-tat persists under many different conditions
– Not quite ESS, but evolutionarily robust
§ Evolution of cooperation: Axelrod and Hamilton (1981)
© 2020 by Andrew W. Lo
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 15.481
Evolutionary Psychology
Applying Evolution to Cognition
§ Symons (1979), Tooby and Cosmides (1992)
§ Cosmides and Tooby’s (1997) five principles:
1. The brain is a physical system. It functions as a computer. Its circuits are designed to
generate behavior that is appropriate to your environmental circumstances.
2. Our neural circuits were designed by natural selection to solve problems that our
ancestors faced during our species' evolutionary history.
3. Consciousness is just the tip of the iceberg; most of what goes on in your mind is hidden
from you. As a result, your conscious experience can mislead you into thinking that our
circuitry is simpler that it really is. Most problems that you experience as easy to solve are
very difficult to solve—they require very complicated neural circuitry
4. Different neural circuits are specialized for solving different adaptive problems.
5. Our modern skulls house a stone age mind.
© 2020 by Andrew W. Lo
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 15.481
Evolutionary Psychology
Öhman and Mineka (2003)
§ Hypothesis: an evolved module for fear of snakes
§ Is it an adaptation? Three criteria:
– Is it variable in the population? Yes: 38% of women, 12% of men
– Is it heritable? Unknown, but found across related species
– Does it lead to variations in reproductive success? Yes (life or death)
§ Stability: is it at least as successful as alternatives? Yes
§ Does it work in past environments? Yes
§ Conclusion: the fear of snake module is a strong evolutionary psychology
hypothesis
§ Hard part: further testing
© 2020 by Andrew W. Lo
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 15.481
Evolutionary Psychology
Hurlbert and Ling (2007)
§ Hypothesis: women have evolved to prefer red/pink
§ Is it an adaptation?
– Is it variable in the population? Yes: 70% of women, 45% of men
– Is it heritable? Unknown (authors note culturally dependent
reactions)
– Does it lead to variations in reproductive success? Unknown
§ Stability: is it as successful as alternatives? Unknown
§ Does it work in past environments?
© 2020 by Andrew W. Lo
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 15.481
Evolutionary Psychology
Hurlbert and Ling (2007)
“We speculate that this sex difference arose from sex-specific functional specializations in the
evolutionary division of labour. The hunter-gatherer theory proposes that female brains should be
specialized for gathering-related tasks and is supported by studies of visual spatial abilities. Trichromacy
and the L–M opponent channel are ‘modern’ adaptations in primate evolution thought to have evolved to
facilitate the identification of ripe, yellow fruit or edible red leaves embedded in green foliage. It is
therefore plausible that, in specializing for gathering, the female brain honed the trichromatic
adaptations, and these underpin the female preference for objects ‘redder’ than the background. As a
gatherer, the female would also need to be more aware of color information than the hunter. This
requirement would emerge as greater certainty and more stability in female color preference, which we
find.
An alternative explanation for the evolution of trichromacy is the need to discriminate subtle changes in
skin color due to emotional states and social-sexual signals; again, females may have honed these
adaptations for their roles as care-givers and ‘empathizers’.”

© 2020 by Andrew W. Lo
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 15.481
Evolutionary Psychology
Hurlbert and Ling (2007)
“In the 18th century, it was perfectly masculine for a man to wear a
pink silk suit with floral embroidery,” says fashion scholar Valerie
Steele, director of The Museum at the Fashion Institute Technology
and author of several books on fashion. Steele says pink was initially
“considered slightly masculine as a diminutive of red,” which was
thought to be a “warlike” color.

§ Conclusion: the female evolutionary preference for pink is a

weak evolutionary psychology hypothesis
© 2020 by Andrew W. Lo
Lecture 5 Slide 11
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Are Business Behaviors Adaptive?
§ Evolutionary psychology can be applied to business
contexts
§ Nature and nurture
§ Several important evolutionary developments:
– Reciprocity, barter, legal contracts, limited liability,
currency, accounting, credit, brokerage, markets
§ Behaviors surrounding these activities have also evolved
§ How?
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Lecture 5 Slide 12
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 15.481
Next Time

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Lecture 5 Slide 13
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