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'Geno-economics' Is a Thing, But Maybe It Shouldn't Be

Noah Smith

(Bloomberg Opinion) -- 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 development.

Too 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.

If these papers are to be believed, then a sizeable piece of human inequality -- both between countries and between individuals -- can be traced to deep-rooted factors in our genes. That may even turn out to be true. But these papers haven’t made an especially strong case.

The main problem with these studies is that they have trouble establishing causation. In order to show conclusively that genes influence economic outcomes, economists would need to show a causal link between the genes in question and some physical or mental traits, and then establish a link between those traits and economic performance. For now, both of these goals are out of reach.

For example, as epidemiologists Tim Morris, Neil Davies, Gibran Hemani and George Smith have explained, polygenic scores can be correlated with things like educational attainment for reasons that have nothing to do with genetics. If a bunch of people with similar genes marry each other, they may all teach their kids to study hard or help them with their schoolwork. Dynastic inheritance can also matter a lot -- as one Twitter user aptly noted, it would be easy to use genes to predict who controlled the Habsburg Empire, because it was always the Habsburgs. Similarly, the investing success that Barth et al. associate with a polygenic score could result from parents teaching their kids how to start businesses and take calculated risks.

The economic mechanisms proposed by Ashraf and Galor -- cooperation and innovation -- are even harder to link to genes. As some anthropologists pointed out in a response, that these behaviors are complex. Despite some research suggesting that diversity promotes innovation within corporations, it’s not possible to tell whether it’s genetic diversity or diversity of culture and background that produces the effect -- or whether  innovation is the result of some  other mechanism, like making employees feel more at ease. As for the proposed link between genetic diversity and cooperation, that’s on even shakier scientific ground -- biologists don’t understand how genetic similarity might induce large populations to cooperate with each other.

Instead of documenting statistical correlations between genetic measurements and social outcomes, economists pursuing these avenues of research should think more carefully about the mechanisms involved. Often, as in the case of genetic diversity and cooperation, that involves knowing a lot about actual biology as opposed to just statistics. Geno-economists should thus seek out and include biologists as co-authors when writing this sort of paper.

But more broadly, it’s also not clear how this research will help either policy makers or economists do their jobs better. Since things like investing performance can already be directly observed in the data, tying these things to genetics will be of limited use in predicting human behavior. And even if genetic influences on investing were confirmed and understood, they’d only explain a fraction of performance, leaving plenty of room for education in business and financial literacy. Meanwhile, research like Ashraf and Galor’s might imply that immigration is good for innovation or bad for cooperation, but those are hypotheses that economists can already test without any reference to genes.

So for right now, geno-economics is more of a curiosity than a promising research program -- a way for adventurous economists to appropriate some of the imprimatur of natural science, while striking out in new directions that get them noticed by journal editors and the media. But while doing so might generate buzz, headlines, and journal publications, its utility will be essentially nil until biologists understand a lot more about the links between genes and behavior than they now do. Until then, economists should probably leave genetics to the geneticists.

To contact the author of this story: Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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