Human nature and institutional analysis

Human Nature and Institutional Analysis
Benito Arruñada1 Universitat Pompeu Fabra. Barcelona Published in E. Brousseau and J.-M. Glachant, eds., New Institutional Economics: A Guidebook, Cambridge University Press, Cambridge, 2008, pp. 81-99.

I. Abstract
This chapter reviews some findings in cognition sciences and examines their consequences for the analysis of institutions. It starts byexploring how humans’ specialization in producing knowledge ensures our success in dominating the environment but also changes fast our environment. So fast that it did not give time to natural selection to adapt our biology, causing it to be potentially maladapted in important dimensions. A main function of institutions is therefore to fill the gap between the demands of our relatively newenvironment and our biology, still adapted to our ancestral environment as hunter-gatherers. Moreover, institutions are built with the available elements, which include our instincts. A deeper understanding of both aspects, their adaptive function and this recruitment of ancestral instincts, will add greatly to our ability to manage institutions. JEL Classification: D01, D02 Keywords: evolution, biology,behavior, institutions.

Department of Economics and Business, Universitat Pompeu Fabra. Mail: Trias Fargas, 25. 08005-Barcelona, Spain. E-mail: benito.arrunada@upf.edu. The author thanks Jean E. Ensminger, Jean-Michel Glachant, Geoffrey M. Hodgson, Paul H. Rubin, Marta Serra, Robert L. Trivers, Xosé H. Vázquez, David Sloan Wilson and participants at the European School of New InstitutionalEconomics, The Ronald Coase Institute, Universidad Pablo de Olavide, Université de Paris I, Université de Paris X, Universidades de Castilla y León and the Gruter Institute for Law and Behavioral Research, for their comments; and, for financial support, the MCYT, an agency of the Spanish Government through grant SEJ2005-03871/ECON and the European Commission through the Integrated Project CIT3-513420.Usual disclaimers apply. 1

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II. Introduction
The human mind was mainly designed in a competitive process of natural genetic selection, which is characterized by random genetic mutation, producing new traits, and cumulative selection of those traits that allow individuals who carry them to survive and reproduce more. Natural selection thus acts as a chief design engineer, even if otherforces, such as sexual selection, path dependency and simple noise, are also present. We see well now only because a long series of mutations triggered redesigns which permitted our ancestors’ sight to improve. The same happens with our mental processes, even those considered more rational, involved in making decisions and interacting socially. Modern cognition sciences perform a sort of “reverseengineering” of these mental processes. Their findings may trigger a scientific revolution of Copernican proportions in the social sciences and in any case require a full reconsideration of standard assumptions about human behavior, related to both rationality and cooperation. This chapter reviews some of these findings and examines some of their consequences for the analysis of institutions andorganizations. We start by exploring the consequences of our specialization in producing knowledge, which are twofold: it has ensured our success in dominating the environment but has also changed the environment very fast and radically. This change occurred so fast that it did not allow time for natural selection to adapt our biology, causing us to be maladapted in important dimensions. To adapt, wetherefore need the artifacts we call institutions. A new view of institutions thus emerges, which sees their function as that of filling the gap between our biology, which is still adapted to our ancestral environment as huntergatherers, and the demands of our relatively new environment. The development of institutions therefore facilitates cooperative transactions which seem to rely less on our...