Mind, Reciprocity and Markets in the Laboratory
(English version of German translation)by Vernon Smith
August 10, 2001 The deep structure of human behavior falls into three interdependent categories: the internal order of mind; the external order of social exchange; and the extended order of markets. Each forms a complex self ordering system governed by endogenous rules reflecting individual and species experience, and biological/cultural evolution.
Most of our operating knowledge we do not remember learning because the learning was autonomic, imitative and formed by practice. By age four we were accomplished in a native language, capable of algorithmic inflection and syntactical construction. For English we added ed to convert verbs into their past tense form and s to obtain the plural of nouns, with some of the irregular exceptions yet to be memorized. Such learning required no instructions from mom or teachers; only listening, to initialize the circuitry with which we were born. Our vision circuitry had already learned to interpret flat retinal signals in perspective, so that we experienced the visual world as three dimensional, making us competent navigators, but necessarily vulnerable to optical illusions. Between age four and five (if unimpaired by autism) we learned to ‘mind read,’ to infer what someone must believe or think based on their actions or words, that a playmate will believe falsely that a toy is in the box if she did not see it being removed. Subsequently, on a flexible timetable, we learned ever more sophisticated social exchange behavior, enabling us to enjoy increasing gains from this trade, with the exception of the universal cross-cultural 3-4% of people who are socio-paths and who account for a large percentage of prison populations.
In 1952 Hayek, perhaps the 20th century’s most versatile and deep intellect, articulated a model of perception subsequently corroborated by neurobiology, that experience is not formed, as we might think, by our receipt of signals reflecting fixed attributes of external phenomena. Rather, perception involves an interaction between current stimuli, and our past experience of similar conditions. Mental categories are formed dynamically out of the relative frequency of concurrence between memory and current experience. All perception is memory: what is stored are external stimuli modified by processing systems conditioned by past experiences.
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