Stories | October 8, 2014

Can caveman economics have an effect on our financial choices today?

Does it make sense to buy an branded t-shirt to fit in with the crowd? How about a special anniversary gift several times more expensive than anything you would buy for yourself?

There is an argument that evolution plays a part in these types of spending decisions. It may be that our very distant ancestors continue to have a major influence on how we spend. This “caveman economics” might help explain why sometimes it might feel like financial decisions are dictated by instinct, people around us, and those we love.

Introducing the rational animal
In their 2013 book Rational Animal, academics Vlad Griskevicius and Doug Kenrick explain the idea that evolutionary history can provide insight into why we take certain decisions. The authors differentiate between what they call proximate (the here and now) and ultimate (deeper, older) drivers of behaviour. If a cake is put in front of someone, for example, their proximate motivation to indulge might be that “it smells good” while ultimate motivation might be the appeal of sugar and fat that provide stores of energy, more valuable in our evolutionary past when provisions were scarcer.

The pair argue that if we look only at the here and now proximate motivations, some things we do today can look “irrational” – despite a deeper and older ultimate motivation driving them. The book is not without controversy, however, with a one-star review on Amazon apparently penned by influential Antifragile and Black Swan author Nassim Nicholas Taleb.

The evolution of “caveman economics”
There are several supporters of the “caveman economics” idea that evolutionary history can provide insight into why we take certain decisions. The 2010 book Spent by evolutionary psychologist Geoffery Miller examines “unconscious instincts” behind consumer culture. In The Hour Between Dog and Wolf, neuroscientist and former Wall Street trader John Coates claimed biochemistry had a lasting and significant impact on the financial markets.

Similar themes are explored in The Mind of the Market by Michael Shermer.

How to make friends and influence people?
In Rational Animal, seven evolutionary goals are highlighted as drivers of the way people make decisions: self-protection, avoiding disease, making friends, improving status, acquiring a mate, partnering with that mate for the long term, and caring for children and relatives. As strange as it might sound, decisions about spending, saving and earning might be influenced by these deep-rooted goals.

For example, the drive to make friends might fuel peer pressure, widely documented to influence spending and saving choices. A 2011 study laid out how people are willing to pay a premium for university t-shirts and other items that demonstrate group affiliations or for products other people like – all in the hope of being socially included. But it may pay to remember that financial decisions are typically best driven by individual circumstances rather than the desire to “keep up with the Joneses”, and following the herd has been shown to have risks of its own. 

Is that anniversary gift too much?
The evolutionary goals about finding a life partner, keeping that partner, and caring for family may also influence decisions at different stages in life. Think of those who go to great lengths to stand out from the crowd at a night club, or who splash out on a special anniversary gift costing several times more than anything they would buy for themselves.

Caring for family doesn’t always relate to money, of course, with time and energy also invested in helping loved ones have the best chances at a fulfilling future. Similarly, conspicuous consumption of extravagant items is arguably linked to the evolutionary goal of gaining status.

What’s in your best interests?
This type of research from evolutionary psychology may help put decisions in perspective. Knowing where impulses might come from means we may be able to make an informed choice to alter what we do in the future. A difficulty is that the seven evolutionary goals might pull in different directions (or what University of Pennsylvania psychology professor Robert Kurzban describes as hypocrisy being the natural state of the human mind). So, choices can appear contradictory depending on which goal is in the driver’s seat.

The Rational Animal authors warn that savvy marketers might exploit this by appealing to one or even many of our evolutionary goals. One idea for the next time you go shopping is to think about what forces might be driving you and how marketers are appealing to these forces. Weigh up what’s in your best interests.


Nathalie Spencer
Nathalie Spencer

Behavioural scientist at ING

EconomicsPersonal financeIrrational