Wednesday, June 22, 2011

Humans Born Capitalists

Bastiat noted that "Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place." von Mises and Hayek championed this insight to note how private property was essential to economic efficiency via its decentralizing nature, and Hernando de Soto applied this to problems in the third world.

While the NYTimes likes to put scare quotes around 'property rights' when discussing eminent domain as if it's some newfangled right wing obsession, the following following psychology experiment suggests it's human nature:

Rather than being learned from parents, a concept of property rights may automatically grow out of 2- to 3-year-olds’ ideas about bodily rights, such as assuming that another person can’t touch or control one’s body for no reason, Friedman proposed.
Friedman’s team presented a simple quandary to 40 preschoolers, ages 4 and 5, and to 44 adults. Participants saw an image of a cartoon boy holding a crayon who appeared above the word “user” and a cartoon girl who appeared above the word “owner.” After hearing from an experimenter that the girl wanted her crayon back, volunteers were asked to rule on which cartoon child should get the prized object.

About 75 percent of 4- and 5-year-olds decided in favor of the owner, versus about 20 percent of adults.


Johannes said...

It's kind of silly to attribute a feature to "human nature" (whatever that means) simply because it is displayed by 4-5 year olds. At that age, humans have had plenty of exposure to cultural/social norms and conventions, which would tend to influence their decision.

Eric Falkenstein said...

I suppose its the same oppressive phallocentrism pushing boys to like trucks, girls liking dolls.

Jennifer said...

Eric - this post does not seem quite up to your usual thoughtful standards.

I second Johannes. First, 4-5 year olds already are reflecting local values and customs. (It's my understanding that children in Asian cultures, for example, cry less often than American children. I doubt this is just genes.) Second, there are many behaviors in the 2-5 year range that would be fairly damaging if carried into adulthood, such as my 2 year old's habit of randomly smacking her brother on the head with the largest toy at hand or my 4 year old's refusal to wear clothing. I view my job as a parent to try to override my children's generally uncivilized tendencies and do so within the boundaries of my cultural norms, which include the concept of private ownership.

Jennifer said...

(And as for gender based toy preferences, I do think, and have read evidence, that boys and girls are different but there also considerable intra-gender difference as well. I will say my daughter and son do not differ enormously in their toy preferences. And even though I try to be even handed, I often notice myself pushing certain behaviors or toys along gender lines.)

Anonymous said...

The post is preposterous for reasons Johannes laid out above.

Eric, your response to Johannes shows how you've left your rational mind behind here, and are merely following your ideological bias wherever it leads. Stick to finance, dude.

Eric Falkenstein said...

preferences are important, and its important to know what they are. We have many innate preferences, and learn many rules that constrain these desires to reach our goals via repeated interactions. Thus, our childish selfishness is enlightened over time because it is short-sighted, and an expanded view of the benefits of honesty and generosity pay us back better than seeking immediate gains at every opportunity.

The risk premium according to standard theory is based on the belief that all we care about is wealth, independent of other's wealth, with diminishing marginal utility. I disagree, and find we care more about relative status, which is why a risk premium does not exist in 95% of places where it should. 'Is' does not imply 'ought', but it does constrain it because we can only go against fundamental preferences so much. This was most famously highlighted when Marxists actually believed in changing human nature, something we now realize was impossible after experiencing real horrors.

My mom believed in the standard blank slate stuff and tried to push me into dolls, didn't give me violent toys, let me join boy scouts or karate. I don't meddle with my two boys and 1 girl's play toys, which while not absolute, are pretty stereotypical for their gender.

Anonymous said...

This has got to be one of the dumbest experiments ever. I wonder what the result would be if they labeled the two kids as owner and slave and asked whether it was ok for the slave to work for the owner. Anyone with kids would tell you that you've got to be insane to think that you could get consistent beliefs about anything from a 4 year old.

". On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place."

No, it wasn't. You'd have to be completely ignorant of history to not know that except for the recent past pillaging, rape and slavery was pervasive and a way of life.

J said...

Who would not side with that cute and purposeful blonde versus the angry creature in the blue dress (a boy? are you sure?)... Are you sure this was a scientific experiment?

Johannes said...

I do think that it is very interesting to ask which preferences should be considered "human nature" --- that such a set might include the preference for relative status seems highly plausible to me, both from a biological/evolutionary perspective, and for reasons related to your risk-premium argument.

It is another matter entirely whether one can identify examples of human nature by observing a small set of (presumably rather culturally homogeneous) 4-5-year-olds. To make that case, one would crucially have to observe a culturally diverse set of 4-5-year-olds. Even then, one would in my opinion say something about the nature of 4-5-year-olds rather than the nature of humans in general.

stephen said...

I love it when we learn that, on average, children hold some beliefs or preferences that differ from adults (especially when those beliefs aren’t the “right” ones) and the response is that’s what they were taught. Presumably by the adults who disagree! After all, children are exposed to some culture right? And also some anecdote about my kids, and this guy I know.

Anonymous #5 said...

This is very Chicago school, and why haters of unregulated market (Nazis, fascists, communists), not England or renaissance Holland, had lots of slave labor.

You've got to be kidding me. Yes, people's positions on slavery are fundamentally determined by their views on unregulated markets.

Not only is this a remarkably childish view of human morality, it flies in the face of American history. "Don't tread on me," as an American political ideal, is much more closely linked to protecting slavery and a racial caste system than the opposite.

Johannes said...

Drifting away from ideology, the Domar serdom model presents an interesting economical argument for why slavery might have been more likely to be adopted in certain societies:

"A key variable in Domar's analysis is the land-labor ratio. According to the model a high land-labor ratio would normally entail competition among landlords for workers, which would in turn drive up the wage rate and lower land rents. On the other hand, if land-labor ratio is low then the price of labor would be close to the subsistence level that would have to be paid by landlords even to their slaves or serfs. As a result, only if the land-labor ratio is high do landlords have a significant economic incentive to organize themselves politically and force the institutions of serfdom or outright slavery on the laborers." (

Anonymous #5 said...

Eric, I said exactly what I said, if you want to object to it I don't really see a need to invent various strawmen and shoot them down.

By the way, I love the premise of this post, which is that humans are naturally born capitalists, but as a result of some supernatural infection, eventually end up with a wider range of views. Krypton brought us socialism, slavery, and Obamacare!

Anonymous #5 said...

Ah screw it. Why shouldn't members of one race be enslaved by members of another race? Why do we have to pretend that all people are equal, when our eyes tell us that there are obvious differences between people, and more to the point obvious differences between races? Not only is there something to be said for the idea that might makes right (unfortunate but true; we have to live in reality, not utopia), but what makes it unnatural for slavery to exist, when slavery has existed in various forms for thousands of years?

The Founding Fathers, who were the wisest leaders any country has ever had, owned slaves. They wrote the American Constitution, the greatest tribute to freedom and liberty ever enacted, and included it in provisions that protected the property rights of slaveowners in case their property escaped to a different territory.

Many Americans became wealthy on the backs of slave labor, but anyone who thinks that there was something wrong with this is surely in the grips of class envy -- slavery was not illegal, and so American capitalists simply worked the system in accordance with the laws of profit maximization. In doing so, they maximized social welfare and created a Pareto optimal world.

Moreover, once an economic system built on slavery was in place, it would have been irresponsible for the federal government to suddenly regulate slavery out of existence. This would have created an uncertain economic environment, which would surely lead to high unemployment and slow GDP growth. Instead, slaveowners should have been fairly compensated for their losses, in accordance with our respect for property rights and the rule of law.

Pretty impressive, don't you think? Imagine how much more convincing this defense of slavery would have been if I had sprinkled in some references to environmental regulation, higher marginal tax rates, and affirmative action!

Eric Falkenstein said...

anon:'Eric, I said exactly what I said'

That's neither clarifying nor edifying, other than to note you haven't changed your mind. I don't expect or want to, I just want others to see your arguments are childish.

Eric Falkenstein said...

I too, am against slavery! Let's end on that agreement. :)

Mercury said...

Actually "capitalism" is the ultimate set-up straw created by Marx himself.

I would argue that an impulse toward free enterprise is as much a part of human nature as seeking shelter, food and sex is. What's more naturally human than to want to create value by your own labor to better the lives of yourself and your family?

To the extent that this overlaps at all with Marx's definition of capitalism - fine - but this isn't an "-ism" with a bunch of rules and ideals, it just "is". Even the most downtrodden, oppressed people in the world try to hustle a buck on the margins or turn shit into shine wherever they's just human nature.

I suppose you could say that free enterprise is more specifically a secondary impulse that is dependent on there being non-zero amounts of life, liberty and property which are primary impulses.

Caveat B said...

It seems many of your commenters have not had the opportunity to parent children of varied gender for a few years yet.

Anonymous said...

Capitalism comes natural to people, since we are indeed programmed to perceive "ownership". In this I agree with the study on 4-year-olds.

Socialism only comes natural in small tribes, when you know everybodies name. Once we live in big cities with anonymous people, its totally unnatural to live as a "collective" and will never work (unless we somehow splice our genes with ants and bees)

children are born amoral and savage, much like "primitive man". watch the movie "Lord of Flies" and you will see a realistic portrayal of child behavior if left without adult supervision. bullying, stereotyping, racism, xenophobia are natural. civilization created norms to overcome these innate biases, that were very useful when we were hunger-gatherers and every stranger was probably an enemy who was competing for land and food.

LetUsHavePeace said...

Professor Friedman's Recent Publications:

Friedman, O. (2010). Necessary for possession: How people reason about the acquisition of ownership. Personality and Social Psychology Bulletin, 36 1161-1169.

Friedman, O., Neary, K.R., Burnstein, C.L., & Leslie, A.M. (2010). Is young children's recognition of pretense metarepresentational or merely behavioral? Evidence from 2- and 3-year-olds' understanding of pretend sounds and speech. Cognition,115, 314-319.

Friedman, O. & Neary, K.R. (2009). First possession beyond the law: Adults' and young children's intuitions about ownership. Tulane Law Review, 83, 679-690.

Friedman, O. & Petrashek, A.R. (2009). Children do not follow the rule 'ignorance means getting it wrong'. Journal of Experimental Child Psychology, 102, 114-121.

Friedman, O. & Petrashek, A.R. (2009). Non-interpretative metacognition for true beliefs. (Commentary on Peter Carruthers' "How we know our own minds"). Behavioral and Brain Sciences, 32, 146-147.

Anonymous said...

Which one is the rentier?

Kev said...

Good article.

"It's kind of silly to attribute a feature to "human nature" (whatever that means) simply because it is displayed by 4-5 year olds. At that age, humans have had plenty of exposure to cultural/social norms and conventions, which would tend to influence their decision."

Since the kids in this experiment demonstrate an opinion that is opposite to the cultural norm (the opinions of the adults), this counterargument is demonstraby bogus.