Daily Archives: August 8, 2019

Geno-Economics

Biologists don’t understand the link between genes and behavior, so why should economists? Many outside critics of economics complain that it’s not a science. In response, most economists have steadily improved the quality of their empirical methods. But a few economists are taking a different tack by borrowing from natural science. Neuroeconomists, for example, have put experimental subjects in MRI machines to measure how their brains behave when they’re making economic decisions, in order to search for clues to the mechanisms behind everyday behavior. Recently, a few economists have sought to use genetics to augment their understanding of economic outcomes. This has become possible thanks to the advent of cheap genome sequencing and widely available databases of human genetic information. But there are a number of reasons this line of research is likely to do more harm than good, at least until biologists better understand the ways that genes affect human development.

One major foray into the field of geno-economics came from Quamrul Ashraf of Williams College and Oded Galor of Brown University. In a 2013 paper published in the American Economic Review — arguably the most prestigious journal in economics — Ashraf and Galor argue that genetic diversity exerts a big influence on economic developmentToo much diversity, they argue, and people don’t trust each other. Too little diversity, and original ideas are hard to come by. Thus, the optional amount of diversity is a happy medium — a population homogeneous enough to cooperate, but diverse enough to have originality. Looking at genetic data, they found that Europe and East Asia tend to have a medium range of genetic diversity, with Africa on the high end and the indigenous populations of the Americas and Oceania on the low end. Since Europe and East Asia contain the most industrialized nations, Ashraf and Galor concluded that the data supported their hypothesis. Another geno-economics paper was recently published in the Journal of Public Economics — also a top journal — by economists Daniel Barth, Nicholas Papageorge and Kevin Thom. Rather than tackling the broad sweep of international development as Ashraf and Galor did, Barth et al. tried to use genetics to explain differences in individual wealth, using the Health and Retirement Study, which measures wealth and various other financial information. For each individual, they obtained a polygenic score — a number that represents statistical differences in a large set of genes — that tends to be correlated with educational attainment. Restricting their analysis only to people of European descent, Barth et al. then showed that this genetic statistic is correlated with more success in investing, even after controlling for things like income and education. They concluded that genetic endowments help some people invest more successfully, leading them to build up wealth over time.

Source: https://www.bloomberg.com/