Smithian Exchange Among Non-Human Animals

James E. Hanley for AdamSmithWorks

Smith wrote about the human propensity to "truck, barter, and exchange," but the modern science of animal behavior suggests that we are not exactly alone in this capability. 
What would you give for a chance to hold someone else’s baby? For baboon females, the price is grooming the mother. Baboons groom each other for health, picking parasites off each other in places they can’t reach by themselves, and for social bonding, but also as a price of exchange. And that price varies depending on the supply of babies. When there are fewer infants in the group, mothers demand more grooming before giving up their babies; when there are more infants, competition keeps the price down so the “purchasers” of baby-holding opportunities don’t have to groom them as long.[1]
The potential for economic behavior among animals is sometimes denied by reference to Adam Smith, who said that the “propensity to truck, barter, and exchange one thing for another” was a trait of human nature. Of other animals, he said, “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog,” and “Nobody ever saw one animal by its gestures and natural cries signify to another . . . I am willing to give this for that.”[2]
But what if Adam Smith was wrong about that because he was more right than even he knew about the power of specialization and exchange? It’s no harsh criticism of Smith to note that he wrote those words a century and a half before the modern study of animal behavior, called ethology, began to develop in the 1930s. Today we have almost a century of careful scientific observation of animal behavior to draw on. This is knowledge to which Smith had no access, and one of the most intriguing findings of ethologists is the many ways animals do signify that they will give this for that.
Some fish get in on the specialization and exchange game. A type of fish called the cleaner wrasse gets its nourishment by eating parasites and dead skin and scales off other fish, and occasionally sneaking a bite of healthy skin. But it doesn’t creep up to them to grab a bite. Instead, it sets up shop in one location and fish come to it to get cleaned, sometimes dozens of times per day. Even predators come, and although they could easily get a meal by eating the cleaner fish, they (usually) don’t, even as the fish swims around inside their mouth. The wrasse’s specialization provides them with a steady living and safety from predation.
The most intriguing part of the cleaner wrasse story, though, is that it demonstrates the effects of monopoly versus competition. Some of the fish who come to get cleaned are locals who never swim far enough away from their neighborhood to visit other cleaners, while some are travelers who wander across different cleaners’ territories. The cleaners know the difference between the locals, over whom they have a monopoly, and the travelers, for whose custom they must compete. And just as economic theory would predict, they give quicker and better service to the travelers, servicing them before the monopolized locals, so that they don’t get tired of waiting and swim off to another cleaner’s shop, and less often hurting them by taking a bite of healthy skin.[3] 
Laboratory experiments show that this behavior is not entirely instinctive. Wrasses can learn and they demonstrate foresight. Researchers offered cleaners two plates with identical amounts of food, but while one plate was permanent, the other disappeared if the fish ate from the permanent plate first, just as a traveler might if the cleaner served a local first. The cleaners quickly learned to identify the disappearing plate and eat from it first, and when the plates were switched they soon re-learned which one to choose first.[4]  
Animals in the wild are not known to use money, but a laboratory experiment showed that Capuchin monkeys not only can learn to use a rudimentary form of money, but that they can adjust their spending to maximize their purchasing power. After teaching the monkeys to exchange an aluminum coin for a piece of food, researchers offered them a choice between apple slices or grapes, both of which cost the monkey one coin. Capuchins like grapes slightly more than applies, so they bought grapes just over half the time. One day the Capuchins’ food budget was cut by giving them fewer coins, but at the same time the price of apple slices fell by half, so now a coin bought two apples slices but still just one grape. Like any rational shopper, the Capuchins increased their purchase of apple slices, stretching their food budgets further.[5] And in at least one case, a monkey exchanged a coin with another one for sex, with the other monkey then using the coin to purchase a grape.[6]
We have at least one example of animals exchanging intangible things: political support for social access. In the book Chimpanzee Politics, primate researcher Frans de Waal describes a three-way power struggle among adult male chimpanzees in a zoo. The oldest male, Yeroen, first lost a power struggle to a younger and stronger adult male, Luit. This was not a straightforward contest of strength, though. Luit’s first attempt at a coup failed because the adult females in the group supported Yeroen. But through a long process of intimidation of the females, Luit was able to isolate Yeroen and then defeat him. But Yeroen then allied with the other younger male, Nikki, and together they defeated Luit. Nikki became the top chimp, with Yeroen as his first officer. 
But what kept the alliance together? That’s where the exchange of intangibles comes in. Yeroen offered Nikki the support he needed to maintain his position against the stronger Luit, and in return Nikki offered Yeroen more access to the females in the group for grooming and mating than a top chimp would normally allow a subordinate. The exchange was finely tuned. Whenever Nikki seemed frustrated by the terms of the deal and restricted Yeroen’s social access Yeroen would withdraw a degree of support when Luit tested the political waters by acting aggressively. Each time Nikki agreed to reestablish the terms of the contract.[7]
One more example will be helpful before we get to our final discussion, and this time we turn to birds. Lazuli bunting males are territorial, and in nesting season protect their territory from intruders. But they offer territory to a select few other young males, yearlings, giving them room to nest and rear offspring. In exchange, they also get to mate with the other male’s mate. On average, this increases the number of offspring they have, but not the number they have to care for, because the other male can’t tell the difference between his own nestlings and the territorial owner’s chicks. The “guest” male still benefits, because without the territory they’d have no nest, no mate, and no chance of offspring of their own. 
The territorial owner makes a careful choice about which other male to do business with. Those with brighter plumage are more desirable mates, and so are more likely to cheat on the arrangement and mate with the territorial owner’s mate. So the young males that are offered territory are the ones with duller plumage, who only successfully mate because they are allowed nesting space, and are likely to be rejected by the territorial owner’s mate.[8]
Economists generally assume people behave rationally, that they consciously choose actions that improve their own well-being. But are animals consciously rational like humans? In the case of the chimpanzees, there is clear evidence of rational thinking, even plotting. There is little doubt that chimps can exercise foresight. In one experiment by de Wall, a chimp was let out of their night building into their enclosure before the others and given some food. The chimp quickly hid it, then carefully avoided going near it or even looking at it as the other chimps were let out, but later when the others were sleeping uncovered it and had an uninterrupted snack.[9] And the Capuchin monkey who offered sex for a coin clearly did not value the coin for itself, but for the grape she could buy with it, which demonstrates foresight.
But rational foresight is not necessary for exchange to occur. Exchange is so powerful a creator of value that natural selection has favored it even when the animals are unlikely to have enough intelligence to be cognitively rational. It is enough that they behave as if they were rational actors.[10] Cleaner wrasses can learn to go first for food that might disappear soon, but it seems doubtful that they are consciously reflecting upon their choices. Lazuli bunting males are probably not giving conscious thought to which males to allow onto their territory but are evolved to favor drab males over more vibrant ones. 
In another example of inter-species trade, certain butterfly species produce a nectar in their larval stage that serves no purpose except to attract ants. The ants feed on the nectar and in exchange protect the butterfly larva. In addition, the amount of nectar and protection provided vary based on the supply of larva. As doubtful as it is that ants exercise a great deal of rational foresight, surely larva could not possibly do so. Rather, larva that secrete nectar attract protective ants and are more likely to survive to reproduce, while same species larva that produce less or even no nectar attract less protection and are less likely to survive long enough to become butterflies and successfully reproduce. Natural selection is based on the benefits to the individual organism, not benefits granted to others. As Adam Smith would have said, neither the butterfly nor the ants are doing this out of benevolence, but out of their own self-interest.[11] 
Most amazingly, certain plants exchange nutrients with bacteria, creating trade between organisms so unrelated that they occupy different biological domains. The plants even selectively choose to which bacteria to provide nutrients based on how much they receive in return. There can be no possibility of rational thought here, as there are not even rudimentary minds in these organisms. And yet there is exchange, based on specialization of function, that has been favored by natural selection. 
And there is the marvel, the wonder of Adam Smith’s emphasis on exchange. Exchange creates so much value that the natural world gravitates toward it regardless of whether the life forms involved have any conception at all of what they are doing. Baboon babies become a resource to trade temporarily for grooming; nesting territory is traded for access to mating opportunities; fish behave like monopolists; and ants and butterfly larva exchange protection for food. Exchange, we can see now, is a more powerful force than even Smith himself ever imagined. 

[1] Henzi, S. P. and L. Barrett. 2002. “Infants as a Commodity in a Baboon Market.” Animal Behaviour 63:915-921.
[2] Smith, Adam. 1776. The Wealth of Nations, Book 1, chapter 2.
[3] Bshary, R. 2001. “The Cleaner Fish Market.” PP. 146-172 in R. Noë, J.A.R.A.M. van Hoof, P. Hammerstein, eds., Economics In Nature: Social Dilemmas, Mate Choice, and Biological Markets. Cambridge University Press.
[4] Salwiczek, Lucie H., Laurent Prétôt, Lanilla Demarta, Darby Proctor, Jennifer Essler, Ana I. Pinto, Sharon Wismer, Tara Stoinski, Sarah F. Brosnan, and Redouan Bshary. 2012. “Adult Cleaner Wrasse Outperforms Capuchin Monkeys, Chimpanzees and Oran-utans in a Complex Foraging Task Derived from Cleaner – Client Reef Fish Cooperation.” PLoS One 7(11): e49068.
[5] Chen, M. Keith., Venkat Lakshminaryanan, and Laurie R. Santos. 2006. “How Basic Are Behavioral Biases? Evidence from Capuchin Monkey Trading Behavior.” Journal of Political Economy 114(3):517-537.
[6] Puiu, Tibi. 2020. “How Scientists Taught Monkeys the Concept of Money. Not Long After, the First Monkey Prostitute Appeared.” ZME Science.
[7] de Waal, Frans. 2007. Chimpanzee Politics: Power and Sex among the Apes. 25th Anniversary Edition. Johns Hopkins University Press.
[8] Hammerstein, Peter, and Ronald Noë. 2016. Biological Trade and Markets. Philosophical Transactions of the Roayl Society B 371:20150101.
[9] de Waal. 2007.
[10] McFarland, David. 2014. A Dictionary of Animal Behavior. Oxford University Press.
[11] Leimar, Olof, and Annkristin H. Axén. 1993. “Strategic Behaviour in an Interspecific Mutualism: Interactions between Lycaenid Larvae and Ants.” Animal Behaviour 46:1177-1182.

Related Links:

An Animal That Trades Video Series
Mike Munger, The System of Exchange
Econlib Guide, Exchange and Trade
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