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The Banker’s Paradox

March 2009

An evolutionary tale for today

Imagine that you are a banker with a limited amount of money to lend. If you advance loans to people who are the poorest credit risks, you are taking a great gamble that they will default on their loans and you will go out of business. This sets up a paradox: the people who most need the money are also the worst credit risks and thus cannot get a loan, whereas the people who least need the money are also the best credit risks and thus it is that the rich get richer.

The evolutionary psychologists John Tooby and Leda Cosmides call this the Banker’s Paradox, and they apply it to a deeper evolutionary problem: to whom should we extend our friendship? The Banker’s Paradox, they suggest, “is analogous to a serious adaptive problem faced by our hominid ancestors: exactly when an ancestral hunter-gatherer is in most dire need of assistance, she becomes a bad ‘credit risk’ and, for this reason, is less attractive as a potential recipient of assistance.”

If we think of life as an economy, and if we count resources as anything we have that could help others — including and especially friendship — by the logic of the Banker’s Paradox we have to make difficult choices in assessing the credit risk of people we encounter. In evolutionary theory the larger problem to be solved here is altruism: why should I sacrifice my genes for someone else’s genes? Or, more technically, an altruistic act is one that lowers my reproductive success while simultaneously raising the reproductive success of someone else.

Standard theory suggests two evolutionary pathways to altruism: kin selection (“blood is thicker than water”) and reciprocal altruism (“I’ll scratch your back if you’ll scratch mine”). By helping my kin relations, and by extending a helping hand to those who will reciprocate my altruism, I am helping myself. Thus, there will be a selection for those who are inclined to be altruistic … to a point. With limited resources we can’t help everyone and so we must assess credit risks, and some people are better risks than others. Here again is the Banker’s Paradox: those most in need of assistance are the least likely to be given help, and so yet again the rich get richer.

But not always, because fair weather friends may be faking their signs of altruistic tendencies and later fail to come to our aid when the weather turns decidedly stormy. By contrast, true friends are those who are deeply committed to our welfare regardless of the potential for reciprocity. “It is this kind of friend that the fair weather friend is the counterfeit of,” Tooby and Cosmides continue. “If you are a hunter-gatherer with few or no individuals who are deeply engaged in your welfare, then you are extremely vulnerable to the volatility of events — a hostage to fortune.” The worse the environment the more important it is that we have true friends, and the environment of our evolutionary past was no picnic.

Evolution, it is suggested, would have selected for adaptations to work around the Banker’s Paradox dilemmas, including selecting us to:

  1. seek recognition from our fellow group members for our trustworthiness and reliability,
  2. cultivate those attributes most desired by others in our group,
  3. participate in social activities that recognize and reinforce such pro-social attributes,
  4. avoid social activities that lead to untrustworthy actions and therefore a negative reputation,
  5. notice similar attributes of trustworthiness in others, and
  6. develop the ability to discriminate between true and fair weather friends.

Thus, Tooby and Cosmides conclude, the Banker’s Paradox leads us to an evolved psychology where “if you are unusually or uniquely valuable to someone else — for whatever reason — then that person has an uncommonly strong interest in your survival during times of difficulty. The interest they have in your survival makes them, therefore, highly valuable to you. The fact that they have a stake in you means … that you have a stake in them. Moreover, to the extent they recognize this, the initial stake they have in you may be augmented.” Through such augmentation can the poor become rich through the evolved foundation of friendship.

If this sounds like I have reduced human relationships to nothing more than credit calculations and reciprocal relations, in my book The Science of Good and Evil, I demonstrate how kin selection and reciprocal altruism led to the evolution of deep and real moral emotions that include love, friendship, and trust, because it is not enough to fake being a good and faithful spouse, friend, or partner; you actually have to believe it yourself, and actions follow beliefs. Thus it is that morality is real and transcendent, and human relations genuine and deeply ingrained in our nature.

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