The Biology of Exchange: It’s a Jungle Out There

In Coined: The Rich Life of Money and How Its History Has Shaped Us, author Kabir Sehgal casts aside our workaday assumptions about money and takes the reader on a global quest to uncover a deeper understanding of the relationship between money and humankind.

A quest to understand money

At the most basic levels, humans exchange with one another to acquire the items that we need to survive, like food and shelter. While money is a human invention, all organisms exchange in order to survive.

Commodities like salt, barley, and cacao were early forms of currency. As humans began to produce more than they could consume, a surpluse handful of barley became an item that might be traded to acquire something else. The surplus became a symbol of value. Its value was realized when it was exchanged for something else. It became currency.

It’s easy to understand the transfer of energy taking place in an exchange of one organic commodity for another, when they are then consumed naturally as food.

Evolutionary economist Haim Ofek asks in his masterful book Second Nature, ‘Was exchange an early agent of human evolution, or is it a mere de novo artifact of modern civilization?’

He raises the possibility that exchange is an evolutionary force: Organisms that exchange are more likely to survive and reproduce, and pass down and ‘exchange trait’ to future generations.

In the case of humans, we became aware that exchange increases our chances of survival. Perishable commodities gave way to nonperishable items like agricultural tools, weapons, and jewelery, which all functioned as early currencies. Humans could see the symbolic value of these tools–they could be exchanged for other valuable items. As the human brain became more sophisticated, and as civilization became more complex, there would be a need for a uniform and universal tool that would facilitate exchange more broadly. This tool was money.

Energy and money are both currencies that circulate and flow

The word currency comes from the Latin word currere, which means ‘to flow’ or ‘to run’. Both energy and money are valuable, and organisms compete to obtain them.

Money may be an evolutionary substitute for energy. As our ancestors evolved from hunting and gathering food to cultivating and preserving it, humans produced more than they could consume.

Prisoner’s Dilemma

In his landmark book, The Evolution of Cooperation, political science Robert Axelrod concludes that cooperation helps people survive and is therefore evolutionarily beneficial. His conclusion is supported by the results generated from a simulated tournament he ran.

He used the well-known Prisoner’s Dilemma game in his tournament. Prisoner’s Dilemma starts with you and your friend being arrested. The police question you separately. You face a year in prison, but if you snitch on your friend, your sentence will be reduced. Your friend is offered the same deal. If you both snitch, you will both receive longer sentences. But if you both remain silent, and cooperate with one another, you will both benefit. It’s a dilemma because you don’t know what your friend will choose.

In 1980, Axelrod planned a computer tournament to see which strategy is best, whether you should cooperate with your friend or not. He assigned points to each of the four outcomes:

1) If both you and your friend cooperate, you are both rewarded with three points;

2) If you snitch, and your friend cooperates, then you receive five points and your friend receives zero.

3) Conversely, if you cooperate, and your friend snitches, then your receive zero points, and your friend receives five points; and

4) If you both snitch, you both receive one point.

The incentive to snitch is significant: You will receive points regardless of whether your friend stniches or cooperates.

Scholars from several academic disciplines, such as evolutionary biology and economics, who were knowledgeable about Prisoner’s Dilemma submitted strategies. The winning strategy was known as ‘Tit for tat’. The strategy calls for cooperation on the first move and reciprocation on subsequent moves.Tit for tat shows that it pays to cooperate.

Another possibility for why humans cooperate is the ‘love hormone’ of oxytocin.

It’s created in the brain and disbursed into the bloodstream, though there are oxytocin receptors found in neurons in the nucleus accumbens, which is part of the reward center of the brain. Oxytocin levels in the bloodstream are typically minimal and require a stimulus to be increased. Mothers experience heightened levels of oxytocin while breast-feeding. When people hug a friend or check Facebook to catch up with friends, they also experience increased levels of oxytocin.

Researchers have even tested whether oxytocin alters the behavior of those in the Prisoner’s Dilemma game. Oxytocin increased cooperation in those players who had met their partners before the game. However, it exacerbated noncooperative behavior when players had not met previously. These results suggest that oxytocin can reinforce a preexisting social bond, but it can’t create one from scratch.

Complement Coined: The Rich Life of Money and How Its History Has Shaped Us with How to worry less about money