September 24, 2020

The biology of economic policy

Luca Tobagi. Investment Strategist

The COVID-19 pandemic has been an unexpected event. From a “biological” perspective, it may have been the catalyst for an important step in the evolution of economic policy.

When I was in high school, I didn’t like biology much. As a good pupil studying classics, I loved the humanities, Greek especially, and I was also passionate about mathematics and physics, but biology never aroused great interest in me.

To my surprise, things changed during my university years, more precisely in the final year of my studies of economics. As I was preparing to write my dissertation, I read some articles by Robert Axelrod about the complexity of cooperative behavior and, over the years, I continued to be interested in the subject. In one of his works, the author makes a comparison with biology and explains how the sexual reproduction that takes place in many species, especially complex and large organisms, can appear extremely inefficient: two individuals of different sex are needed for reproduction, neither females nor males can do it alone. From an economic perspective, this is a curious problem. Nature is always pointed out as an example of efficiency. Therefore, there must be a valid reason to explain why large and more complex organisms reproduce in this way rather than through asexual reproduction, which generates identical replicas of a single organism.

The hypothesis that Axelrod has tested and verified with computer simulations, carried out along with the well-known evolutionary biologist William Hamilton, is that this process helps protect bigger and more complex organisms from the attacks of parasites. Parasites are much smaller and capable of reproducing very quickly. They can thus evolve faster than their hosts, defeating their immune system. Combining genes from two different parents introduces a greater variability in the offspring and in the population of a species, which can therefore better respond to and resist the attacks of parasites, defending the organism and allowing the species to survive over time.

Click here to read the full article.  

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • Where Luca Tobagi has expressed opinions, they are based on current market conditions, may differ from those of other investment professionals and are subject to change without notice.