Economists study human behavior. “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog,” Adam Smith sniffed in The Wealth of Nations. The ability to “exchange one thing for another,” he declared, “is common to all men, and to be found in no other race of animals.” Later economists, inheriting Smith’s self-regard, rechristened man Homo economicus in the belief that rational self-interest defined the human species. Even John Maynard Keynes, the father of modern economics, attributed our irrational choices to “animal spirits.”
But an animal spirit can actually be entrepreneurial. Consider a January study about paper wasps from the journal Nature Communications. A female paper wasp will recruit “helper” wasps to her nest to raise her offspring, and these helpers can usually choose from several different nests in a given area. The wasps are essentially making a trade: The top female offers helpers membership in her nest in exchange for childcare, and she can kick out a helper who doesn’t pull its weight.
What’s remarkable is that the terms of the wasps’ trade are determined by supply and demand. When the paper’s authors increased the number of nests in the field, they found that females were willing to tolerate smaller contributions from their helpers. The paper wasps behaved like any rent-seeking landlord, just as an economist would predict. A greater overall supply of wasp nests lowers the price of entry into any single nest. “In order to predict the level of help provided by a subordinate, it is necessary to take into account the state of the surrounding market,” the authors wrote.
If Adam Smith had strapped on a bee suit—or a safari jacket, or a scuba mask—he could have discovered that the animal kingdom is, in fact, a chamber of commerce. “Biological markets are all over the place,” says Ronald Noë, a Dutch biologist at the University of Strasbourg who first proposed the concept of the biological market in 1994. Scientists have since described biological markets in the African savannah, Central American rainforests, and the Great Barrier Reef. Baboons and other social primates exchange grooming for sex. Some plants and insects reward ants for protection. Cleaner wrasses eat parasites off other fish and behave more gently when a “client” has the option of visiting a rival wrasse.
These discoveries have not just deflated economists’ anthropocentrism but have challenged biological dogmas as well. “We all learned not to treat animals in an anthropomorphic way, but a theory that was produced to explain human behavior nevertheless matters in biology,” says Peter Hammerstein, Noë’s co-author and a professor of theoretical biology at the Humboldt University in Berlin. “In fact, I believe some of it works better in biology than in humans.”
Noë began to think about economics in biology in 1981 as he worked on a post-doctorate degree in Kenya. “A big baboon gave me the idea,” he says. Baboons live in large hierarchal groups, and Noë was interested in when and how low-ranking males teamed up to challenge a more dominant male to mate with a female. Cooperation was common in nature—not just between animals of the same species but also between different species (for example, a plant and its pollinator). But the origins of cooperation were a mystery. How could two animals work together when Darwin’s theory of evolution taught about survival of the fittest? Shouldn’t natural selection always favor ruthless self-interest?
“It was one of the early questions in behavioral biology,” says Hammerstein. “Why do animals not always kill each other? Why is aggression limited?”
When Noë began his fieldwork, behavioral biologists proposed two theories for cooperation. The first, called “kin selection,” held that an organism could sometimes better propagate its genetic material by helping a close relative reproduce rather than trying to reproduce itself. An ant colony, for instance, has a huge number of sterile female workers who help raise the young of a kindred queen. But kin selection couldn’t explain why a fish such as the cleaner wrasse can pick parasites from the teeth of a barracuda with almost no risk of becoming a meal itself. They shared no genes, so a predator ought to reap a dual reward by eating the dentist after the cleaning.
“Reciprocal altruism” was the second main evolutionary theory for cooperation. Biologists argued that natural selection could favor cooperation between two organisms that interact repeatedly over their lifetimes. One individual conferred some benefit on the other, knowing that the benefit would be repaid down the line. The crux of reciprocal altruism was the idea of partner control. How could an altruist guarantee that his partner would return the favor?
To answer this question, biologists looked to game theory, which sought to model conflict and cooperation strategies between self-interested individuals. The most famous example was the two-player game called the prisoner’s dilemma, and biologists used it to write elaborate formulas for how reciprocal altruism might have evolved. “It was all theoretical papers stacked on top of each other, and at the bottom there was no empirical evidence,” Noë says. “I’m inclined to look at what real animals do.”
In Kenya, Noë noticed that the big baboon named Stu was stronger than the other low-ranking males and was not employing an elaborate strategy to control a single partner. If Stu was unhappy with a partner, he would simply switch to work with another baboon. By playing two different partners against each other, Stu was able to reap most of the reward of a successful challenge: Stu’s partner would typically accept less than half of the mating time with a female rather than lose him to the rival and get no mating time at all. Noë realized that his colleagues working with the prisoner’s dilemma had never asked themselves a simple question: “No one thought, how do they come together? How do they meet?” The crux of cooperation, Noë realized, was not partner control but rather partner choice.
Noë’s insight shifted the paradigm from the prisoner’s dilemma to the market. Animals weren’t stuck trying to extract the best possible deal from a single partner; they were actually free to “shop” for the best partner in their habitats. If a partner “cheated,” then he could be replaced by a more honest partner. “Partner choice is the main thing driving any market,” he says.
Noë returned to Europe and met Hammerstein, who had studied mathematics and specialized in evolutionary game theory. “It was very natural for me to think of biological problems in terms that borrowed from economics,” he says. Hammerstein believed that too much of behavioral ecology was “just watching things and counting.” He wanted to make the field more rigorous with mathematics, but the only mathematical model that interested most of his colleagues was the prisoner’s dilemma. Noë’s talk of partner choice opened up a whole new framework. “In normal life, we can choose with whom we interact,” Hammerstein says. “As soon as you introduce that, you’re in a completely different theoretical world.”
In 1994, Noë and Hammerstein laid out their new theory of biological markets in the journal Behavioral Ecology & Socialbiology. The paper fused the biologists’ different styles: Hammerstein developed the mathematical models, while Noë dug through the scientific literature for evidence from the field. Examples turned up across the animal kingdom. Male scorpion flies offer females a “nuptial gift” of prey before mating. In some species of bird, such as the purple martin, a male will allow another male to occupy part of his territory in exchange for help raising his young. Lycaenid butterfly caterpillars produce a sweet “nectar” whose only purpose is to attract ants, which eat the nectar and protect the caterpillars from predators.
In each example the “exchange rate” is not fixed but rather contingent on the supply of available partners. “It is essentially a supply-demand theory,” says Frans de Waal, the eminent primatologist from Emory University and a former mentor of Noë. The more male scorpion flies available on the market, the larger the nuptial gift the female will demand. The male purple martin chooses the most juvenile-looking and least threatening tenant. And the caterpillars adjust the amount of nectar they produce to the number of ants in the vicinity.
Noë and Hammerstein felt their paper laid out a radical new way to understand cooperation in nature, but there was not much immediate enthusiasm from their peers. “Because it was not in the big journals, it took off very slowly,” Noë says. The new theory inspired some of their students, though, who took it into the field. “I thought this is such a different way of looking cooperation and it made intuitive sense,” says Redouan Bshary, a professor of behavioral ecology at the University of Neuchâtel in Switzerland. Although he had trained with Noë in primatology, Bshary learned to scuba dive so he could study the animal that had long fascinated biologists who study cooperation: the cleaner wrasse.
Cleaner wrasses are small, ribbony fishes with black racing stripes from eye to tail. They aren’t the flashiest fish on the reef, but they are perhaps the cleverest. Each wrasse occupies a “station” on a piece of coral, which other fish visit when they are feeling crusty. The wrasses eat the dead skin and parasites off their clients, but not all clients receive equal treatment. Some clients have to wait longer than others, and a wrasse sometimes spices up its diet by sneaking a painful bite of healthy scales and mucus.
Bshary believed that market forces could explain the differences in service quality. He began his research in the Red Sea, where he divided the wrasses’ clients into two categories: the floaters with big ranges, who could travel between several cleaning stations; and the residents with small ranges, who couldn’t reach more than a single cleaning station. Floaters would be able to shop among stations, Bshary reasoned, while residents would not. Indeed, Bshary found that the floaters almost always received prompter and gentler treatment. The wrasses made residents wait longer for cleaning and were also much more likely to munch on residents’ healthy scales and mucus, demonstrating another well-known law of economics: Monopolists are jerks.
Bshary published his first cleaner-wrasse study in 2001 and has since discovered a variety of market effects. A cleaner wrasse, for instance, is less likely to take a painful bite from a client when another fish is watching. “They’re so flexible,” Bshary says. “Each fish has 2,000 interactions per day. Each interaction is unique, and the cleaner wrasses adjust the service quality to factors like, ‘Is it a resident or a predator? Am I observed or not? Am I with a partner?’ It’s just amazing how sophisticated their decision routes are.”
In one study, Bshary found that cleaner wrasses outperformed chimpanzees and orangutans on a cognitive test to maximize long-term food rewards. On the coral reef, it pays to be economical: In all his years of observation, Bshary has only once seen a cleaner wrasse eaten by another fish after it left its station and strayed into the open sea.
Around the same time that Bshary began his research on cleaner wrasses, two primatologists named Louise Barrett and Peter Henzi took a closer look at biological markets in baboons. They proposed that baboons groomed each other in exchange for a host of commodities, including reciprocal grooming, tolerance at feeding sites, mating opportunities, and infant handling. “It seems reasonable, at this stage, to pursue the idea that primate groups function as social market places,” they wrote in 2001.
Other primatologists took up Barrett and Henzi’s call and described biological markets in chimpanzees, lemurs, spider monkeys, and vervet monkeys. Biological markets have also been described or discussed in recent years in relation to animals like meerkats, dolphins, cichlids, yucca moths, crows, and squid. “We wrote that stuff in 1994,” says Hammerstein. “It’s now that it’s almost like a booming field.”
One of Noë’s favorite recent examples is underground fungi, which exchange phosphorous for carbon with the roots of plants and are able to adjust the amount of phosphorous they provide to the amount of carbon they receive. “Whatever we eat depends on these exchanges,” Noë says.
A plant has no brain, obviously, but the engine of most biological exchanges isn’t intelligence—it’s natural selection. “It’s like an enormous mathematical machinery,” says Hammerstein. Each new generation produces variants of behavior. Some variants prove beneficial and lead to higher reproductive output. “In the end,” Hammerstein says, “you get something that looks to an economist like a rational result.”
Biological market theory has become so popular in primatology that some scientists believe it is overused. “It’s a great theory,” says Federica Amici, a biologist at the Max Planck Institute for Evolutionary Anthropology. “The problem is the way it has been applied. Everyone’s using data in a different way.” Noë and Hammerstein admit that one of the hardest parts of their theory is to fix quantities and exchange rates; most of the time they can only say how a change in supply and demand will influence an exchange. And they are also careful to draw distinctions between human and biological markets. Animals obviously can’t use currency or sign contracts. And the animal kingdom has no third-party institutions to punish cheaters. Evolution may have produced fish dentists, but it has yet to produce fish lawyers.
Adam Smith might nevertheless be grateful to have biologists like Noë and Hammerstein chip away at his distinction between the human and natural worlds. While economists have realized that Smith’s most famous idea, the “invisible hand,” doesn’t really function in human markets—people behave way too irrationally—Noë and Hammerstein believe it could still serve as a metaphor for natural selection’s role in the evolution of cooperation. “In a biological market,” Hammerstein says, “everybody, by pursuing his own interests, does the right thing.”