Economics of animals? ft. Adam Smith

Adam Smith (Wealth of Nations, book 1, chapter 2) wrote:

This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.

Whether this propensity be one of those original principles in human nature of which no further account can be given; or whether, as seems more probable, it be the necessary consequences of the faculties of reason and speech, it belongs not to our present subject to inquire. It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any other species of contracts. Two greyhounds, in running down the same hare, have sometimes the appearance of acting in some sort of concert. Each turns her towards his companion, or endeavours to intercept her when his companion turns her towards himself. This, however, is not the effect of any contract, but of the accidental concurrence of their passions in the same object at that particular time. Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that. When an animal wants to obtain something either of a man or of another animal, it has no other means of persuasion but to gain the favour of those whose service it requires. A puppy fawns upon its dam, and a spaniel endeavours by a thousand attractions to engage the attention of its master who is at dinner, when it wants to be fed by him. Man sometimes uses the same arts with his brethren, and when he has no other means of engaging them to act according to his inclinations, endeavours by every servile and fawning attention to obtain their good will. He has not time, however, to do this upon every occasion. In civilized society he stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely. The charity of well-disposed people, indeed, supplies him with the whole fund of his subsistence. But though this principle ultimately provides him with all the necessaries of life which he has occasion for, it neither does nor can provide him with them as he has occasion for them. The greater part of his occasional wants are supplied in the same manner as those of other people, by treaty, by barter, and by purchase. With the money which one man gives him he purchases food. The old clothes which another bestows upon him he exchanges for other old clothes which suit him better, or for lodging, or for food, or for money, with which he can buy either food, clothes, or lodging, as he has occasion.

These are broad sweeping statements about humans and animals which today would be criticized, but nevertheless, it does seem true that humans are the only objects of study by economics, decision theory, and studies of agency more broadly. Expound upon this topic.

Smith is doing two things at once in that passage:

1. giving an origin story for division of labour (“it’s a slow consequence of our propensity to exchange”), and
2. drawing a sharp species boundary (“contracts” and deliberate exchange are uniquely human).

A lot of the 18th-century biology in the contrast is dated, but the underlying question is still live: how far do “economic” and “agentic” explanations reach beyond humans, and where do they stop being the same kind of thing?

Economics as a subject vs economics as a toolkit

If “economics” means markets with prices, money, firms, contracts, property rights, and institutions, then yes—its natural home is humans (and human-like institutions).

But if “economics” means allocating scarce resources under constraints, then it’s hard to avoid animals. Modern behavioral ecology is basically “economics of survival and reproduction”: animals face tradeoffs (energy vs. risk, present vs. future, exploration vs. exploitation) and you can model them with optimization and choice under constraints.

A canonical example is optimal foraging theory and Charnov’s Marginal Value Theorem, which predicts when a forager should leave a food “patch” based on diminishing returns and travel time. (ScienceDirect) A standard synthesis frames foraging explicitly as “economic analyses of animal feeding behavior.” (De Gruyter Brill)

So: economics-the-discipline often studies humans, but economics-the-mathematics is used all over biology.

“Markets” without money: biological market theory

Smith’s “no contracts among animals” claim looks less solid once you broaden “exchange” beyond explicit bargaining. A big line of work treats many animal interactions as markets where partner choice and competition to be chosen create something like supply-and-demand “prices,” even when the “currency” is grooming, tolerance, access, or effort.

That’s basically what Biological Market Theory proposes. (EurekaMag) And it’s not just metaphor—there are empirical tests showing “market effects” (prices changing with supply).

Examples:

• Female baboons: grooming time functions like a “payment,” and the “price” of infant handling varies with the number of infants available (a supply effect). (ScienceDirect)
• Grooming reciprocity in baboons: framed explicitly as market forces shaping exchange patterns. (PMC)
• Bonobos: recent work analyzes sex and grooming as exchangeable commodities in a daily “market.” (Nature)

These systems don’t require language or legal contracts; they require (a) repeated interaction, (b) some ability to choose partners, and (c) enough cognition (or evolved heuristics) to respond to who offers what.

Cleaner fish: partner choice, “punishment,” and reputations

One of the cleanest (no pun intended) demonstrations of market-like dynamics is the cleaner wrasse–client fish mutualism.

• Experiments show cleaners prioritize “choosy clients” (those who can leave and go elsewhere) over “resident clients” (those stuck with one station), matching the idea that outside options change bargaining power. (Libra)
• Clients can curb cheating via partner switching or punishment, which stabilizes cooperation. (PubMed)
• There’s even evidence of something akin to reputation/image scoring affecting cooperation. (Nature)

What’s striking here is that you can analyze this with the same strategic logic economists use (outside options, incentives, enforcement), even though there’s no written contract.

And the bridge back to “decision theory” is explicit: researchers model what kinds of learning machinery are required to solve the cleaner-fish “market task” using reinforcement-learning theory. (PubMed)

Primates: barter-like behavior exists, but it’s limited

Smith says nobody ever saw an animal “make a fair and deliberate exchange.” Today we have seen exchange-like behavior—often in controlled settings—but it also highlights what may be missing relative to humans.

• Capuchins have been trained to trade tokens for food and show strong reactions to unequal outcomes (“unequal pay”), which researchers interpret (with debate) as a precursor to fairness/inequity sensitivity. (Nature)
• Chimpanzees will barter in some contexts (including giving up lower-value food to get higher-value food), but they don’t trade whenever it would benefit them; one proposed explanation is weak “ownership” norms and/or high perceived risk of defection. (PubMed)

So animals can “exchange,” but the scope and reliability often look different from human trade—especially when you need stable property, delayed reciprocity, or guarantees.

Why humans still look special (and why Smith’s core intuition survives)

Even if Smith overstated the uniqueness of exchange, a refined version of his point still has bite:

• Generalized, scalable exchange: Humans trade with strangers routinely, and not just via repeated dyadic relationships. This depends on norms, reputations, institutions, and often third-party enforcement.
• Abstract representations: money, accounting, standardized measures, transferable property claims.
• Commitment devices: contracts, courts, organizational forms, “credible commitments” that make specialization safe at scale.
• Cumulative cultural evolution: we inherit practices (weights, writing, double-entry bookkeeping, legal templates) that massively extend what any individual could negotiate ad hoc.

Animals can have reciprocity, partner choice, and even rudimentary “market effects,” but human economies are weirdly institution-heavy—and that’s what turns small-scale exchange into complex division of labor spanning millions of people.

Where this leaves “agency”

Modern work tends to treat agency as graded rather than all-or-nothing:

• Many organisms behave as if they’re optimizing (e.g., foraging models), whether by cognition, learning, or evolved heuristics. (ScienceDirect)
• Some species show strategic social behavior consistent with incentives, partner choice, punishment, and reputation-like dynamics. (Libra)
• Humans add a layer of explicit reasons, shared symbols, and institutional commitments that makes “economic agency” in the full modern sense far more portable and scalable.

So the cleanest way to reconcile Smith with current evidence is:

• Economics as “choice under scarcity” applies broadly across animals.
• Economics as “institutionalized exchange and production” is overwhelmingly human.
• The boundary isn’t “animals don’t exchange”; it’s that humans evolved (and culturally accumulated) the machinery that makes exchange general, explicit, and enforceable, which is what supercharges division of labor.

If you want, I can map this into a tighter taxonomy—e.g., reciprocity → partner choice → market effects → property norms → enforceable contracts—and show where different species plausibly sit on that ladder.