Saturday, April 08, 2006

'A lot of ruin' in Unpunished and Unrestrained Free-riding

The Liberal Order, in a Blog from Marc Stecbeck ('Why We Cooperate'), and Benedict Carey of the New York Times (‘Study Links Punishment to an Ability to Profit’) , have picked up on a research paper on co-operation with and without sanctions for free-riding, ‘The Competitive Advantage of Sanctioning Institutions’, by Özgür Gürerk, Bernd Irlenbusch, Bettina Rockenbach.

The research paper’s abstract says:

Understanding the fundamental patterns and determinants of human cooperation and the maintenance of social order in human societies is a challenge across disciplines. The existing empirical evidence for the higher levels of cooperation when altruistic punishment is present versus when it is absent systematically ignores the institutional competition inherent in human societies. Whether punishment would be deliberately adopted and would similarly enhance cooperation when directly competing with non-punishment institutions is highly controversial in light of recent findings on the detrimental effects of punishment. We show experimentally that a sanctioning institution is the undisputed winner in a competition with a sanction-free institution. Despite initial aversion, the entire population migrates successively to the sanctioning institution and strongly cooperates, whereas the sanction-free society becomes fully depopulated. The findings demonstrate the competitive advantage of sanctioning institutions and exemplify the emergence and manifestation of social order driven by institutional selection.”

Bernard Carey opens with: ‘Sociologists have long known that communes and other cooperative groups usually collapse into bickering and disband if they do not have clear methods of punishing members who become selfish or exploitative.

Now an experiment by a team of German economists has found one reason punishment is so important: Groups that allow it can be more profitable than those that do not

It is best to read the design details of the ‘games’ used by the researchers to derive their results (see below for links). Their conclusions are most interesting:

Other experts said the results were an important demonstration of how self-interest can trump people's aversion to punitive norms, at least in the laboratory. Out in the world, they said, it is not usually so clear who is free-riding, or even whether a given group is encouraging cooperative behavior in most people.

"The mystery, if there is one, is how these institutions evolve in the first place," Duncan J. Watts, a sociologist at Columbia, wrote in an e-mail message, "i.e., before it is apparent to anyone that they can resolve the problem of cooperation
Marc Steckbeck’s comments are also interesting:

Market capitalism requires social cooperation. When we specialize, take on risks, and enter into mutually advantageous voluntary agreements, trust is essential. But it's also then lucrative for free riders to profit off the backs of honest and trustworthy people by cheating. As the number of non cooperators increases, trust begins to break down on a larger scale. In the end, without trust market capitalism falls apart.’

Fortunately, human kind did not have to await the advent of market capitalism to evolve the appropriate mechanisms for enabling sanctions to police their trust systems. If they had it is doubtful if evolution would have progressed much beyond that of the brutish hominids of 1 to 6 millions years ago. It is also true that in resolving the social means, though not necessarily the universal application of them, human kind, the surviving last biological species of the hominid-home lineage, became possible, if precariously, from about 200,000 years ago.

The instruments that ensured biological survival can be seen in the practice of reciprocity in chimpanzee bands, which in grooming sessions, shows the power of punishment in acts of non-reciprocity (see Robin Dunbar on Grooming and Gossip). Chimps voluntarily groom those who groom them and avoid doing so to those who don’t (except in status cases towards Alpha males where they have no choice).

This carried over into the evolution of the hominids and later proto-humans (Homo erectus, etc.,) in reaction to the ever growing demands of their ever growing brains (from c.330cc to c.14,000cc in about 5 million years) which demanded higher productivity in food gathering and scavenging/hunting, 'feeding off' (to coin a phrase) their growing intelligence.

Crudely, those who tried free-riding on food – and sex – were excluded, or killed. Bands that failed to punish free-riders, and bands that ‘over-punished’, became extinct. The separation of the last hominids from the earliest homo species eventually left only one species, Homo-sapiens, albeit in extremely small numbers. Their descendents (us) inherited the entire planet.
Co-operation is not the absolute norm and probably never will be. We see today many examples of ‘cheating’ and endemic corruption that goes unpunished as elites that manage State punishment regimes are themselves the beneficiaries, and organisors, of ‘cheating’. As Adam Smith pointed out once to a younger man who believed that loss of a battle with the American colonists would ‘ruin’ Britain: ‘there is a lot of ruin in a nation’ he told him.

Nations, economies, forms of government (even 'Empires) accepting the non-practice of punishing free-riders can degenerate quite a way before the ‘edifice’ of justice ‘crumbles to atoms’, and, with it, society. Highly prominent trials, serious examples of the abuse of power and evidence of popular cheating do not presage the near-imminent end of market capitalism. The near total absence of punishment for endemic and systemic free-riding and cheating in some countries around the world does presage the likely failure of them to develop, hinder and delay, self-managed economic punishment norms (and ethical restraint) that would raise them to opulence in a few generations. But that is an altogether different scale of problem to those other countries that have occasional, if spectacular, lapses.

[Liberal Order is at: htpp://
The researchers are at: Bettina DOT rockenbach-At_unierfurt DOT de]. Their paper is in Science (subscription)


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