Beyond foraging: behavioral science and the future of institutional economics

Institutions affect economic outcomes, but variation in them cannot be directly linked to environmental factors such as geography, climate, or technological availabilities. Game theoretic approaches, based as they typically are on foraging only assumptions, do not provide an adequate foundation for understanding the intervening role of politics and ideology; nor does the view that culture and institutions are entirely socially constructed. Understanding what institutions are and how they influence behavior requires an approach that is in part biological, focusing on cognitive and behavioral adaptations for social interaction favored in the past by group selection. These adaptations, along with their effects on canalizing social learning, help to explain uniformities in political and social order, and are the bedrock upon which we build cultural and institutional variability

How to play the games? Nash versus Berge behavior rules

Social interactions regularly lead to mutually beneficial transactions that are sometimes puzzling. The prisoner’s dilemma and the chicken and trust games prove to be less perplexing than Nash equilibrium predicts. Moral preferences seem to complement self-oriented motivations and their relative predominance in games is found to vary according to the individuals, their environment, and the game. This paper examines the appropriateness of Berge equilibrium to study several 2×2 game situations, notably cooperative games where mutual support yields socially better outcomes. We consider the Berge behavior rule complementarily to Nash: individuals play one behavior rule or another, depending on the game situation. We then define non-cooperative Berge equilibrium, discuss what it means to play in this fashion, and argue why individuals may choose to do so. Finally, we discuss the relationship between Nash and Berge notions and analyze the rationale of individuals playing in a situational perspective.