And so it is Christmas.  And, as every year, people will spend time with relatives they do not much like, give presents which the recipients value at less than they cost, and eat and drink more than they know is good for them.  As New Year approaches, they will make resolutions not to do these utility reducing things again, resolutions which they will not keep.  Confronted with this evident irrationality, economists conclude that if only more people had taken Economics 101 the world would be a better, or happier, or at least more prosperous place.

But we persist in these customs.  It is easy to understand why as the season of forced goodwill, approaches both Martin Wolf and I should have reflected last week on the inadequacies of economists’ models of rational behaviour.  But the many readers who applauded our criticisms of such are, perhaps, too quick to cheer.  Economic behaviour may often be irrational – in the decidedly specialist sense in which economists use the term – but it is usually adaptive, and that is often much the same thing.

Historical scholarship suggests that it is unlikely that Jesus was born on December 25, or at any time in the Palestine winter.   The festival which the secular world celebrates – even the markets close and the FT refrains from publication on that day – was, it seems, originally a pagan one appropriated by shrewd salesmen from Christianity who appreciated that a good knees-up would help attract adherents to their cause.  Their Christian celebration was more recently hijacked by commercial interests which rely on a December rush to empty their shelves.   

Such processes of adaptation are the means by which economies and institutions change over time.  They are rarely the outcome of careful calculation but they are far from irrational in their origins or their outcomes.  Evolution can bring about outcomes more complex and sophisticated than any designer could achieve.  That is what evolution one of the most powerful – and paradoxical – of human ideas.

But successful adaptation looks very like maximisation.  The cynical evangelists who adopted the festival of the winter solstice to their Christian purposes, and the mercenary merchants who used the nativity to attract us into their stores, may seem to fit the caricature of rational economic man.  Did not Richard Dawkins explain evolution through the metaphor of the selfish gene?   And if the selfish gene populates the earth, will not the selfish trader dominate the economy?

No.   The selfish gene is not selfish – and if it were selfish it would actually be less successful in propagating itself because it does not sufficiently know what its best interests are.  Lehman and Bear Stearns – the latter the business which ‘made nothing but money’ – were not successful over the long run because the ethos of ‘making nothing but money’ was not conducive to creating a sustainable organisation.   Only profitable firms can survive, but it does not follow – and is not in fact true – that the firms which survive are those most oriented to making profits.  Scrooge is not a happy individual because he does not understand wherein happiness lies – that it lies not in selfish behaviour but in interaction with others.  The happiest people are not necessarily those who are most determined in their pursuit of personal happiness.

Our cousins and parents in law may not be people with whom we would naturally have chosen to spend spare time with.  But the effectiveness of family bonds in supporting childhood, old age, and other dependency has ensured that the maintenance of these bonds on ritual occasions is part of every culture.  Gift exchange is a means of establishing and reaffirming social obligation and reciprocity, and similarly universally practised.  Our judgment of what the recipient will value is  a means of demonstrating intimacy (or failing to do so).  People who discern irrationality in these behaviours display only the limits of their own conception of rationality.

And why do we eat too much, and break our New Year resolutions?   Because we do not have the consistent preferences which a narrow conception of rationality requires.  We want to eat well, and also to be thin – and the preferences which were wired into our brains when food was scarce are not necessarily appropriate when food is only a call to the pizza delivery service away.   We want to be naughty, and for Santa to bring us lovely presents, and experience shows that usually he will.  Evolution is smarter than you, and a lot smarter than rational economic man.