Strong Reciprocity and Human Sociality

Human groups maintain a high level of sociality despite a low level of relatedness among group members. The behavioral basis of this sociality remains in doubt. This paper reviews the evidence for an empirically identifiable form of prosocial behavior in humans, which we call 'strong reciprocity,' that may in part explain human sociality. A strong reciprocator is predisposed to cooperate with others and punish non-cooperators, even when this behavior cannot be justified in terms of extended kinship or reciprocal altruism. We present a simple model, stylized but plausible, of the evolutionary emergence of strong reciprocity.

Power

We consider the exercise of power in competitive markets for goods, labour and credit. We offer a definition of power and show that if contracts are incomplete it may be exercised either in Pareto-improving ways or to the disadvantage of those without power. Contrasting conceptions of power including bargaining power, market power, and consumer sovereignty are considered. Because the exercise of power may alter prices and other aspects of exchanges, abstracting from power may miss essential aspects of an economy. The political aspect of private exchanges challenges conventional ideas about the appropriate roles of market and political competition in ensuring the efficiency and accountability of economic decisions

Optimal Parochialism: The Dynamics of Trust and Exclusion in Networks

Networks such as ethnic credit associations, close-knit residential neighborhoods, 'old boy' networks, and ethnically linked businesses play an important role in economic life but have been little studied by economists. These networks are often supported by cultural distinctions between insiders and outsiders and engage in exclusionary practices which we call parochialism. We provide an economic analysis of parochial networks in which the losses incurred by not trading with outsiders are offset by an enhanced ability to enforce informal contracts by fostering trust among insiders. We first model one-shot social interactions among self-regarding agents, demonstrating that trust (i.e., cooperating without using information about one's trading partner) is a best response in a mixed-strategy Nash equilibrium if the quality of information about one's partner is sufficiently high. We show that since larger networks have lower quality information about specific individuals and greater trading opportunities, there may be an optimal (payoff-maximizing) network size. We then model the growth and decline of networks, as well as their equilibrium size and number. We show that in the absence of parochialism, networks may not exist, and the appropriate level of parochialism may implement an optimal network size. Finally, we explore the welfare implications and reasons for the evolutionary success of exclusion on parochial and other grounds.

Walrasian Economics in Retrospect

Two basic tenets of theWalrasian model, behavior based on self-interested exogenous preferences and complete and costless contracting have recently come under critical scrutiny. First, social norms and psychological dispositions extending beyond the selfish motives of Homo economicus may have an important bearing on outcomes, even in competitive markets. Second, market outcomes depend on strategic interactions in which power in the political sense is exercised. It follows that economics must become more behavioral and more institutional. We can return to these themes of the classical tradition, now equipped with more the powerful mathematical tools developed over the past century.

Risk Aversion, Insurance, and the Efficiency-Equality Tradeoff

Under conditions of informational asymmetry, redistributing the property rights may improve work incentives but lead to an inefficient choice of entrepreneurial risk. We present a model in which reassignment of property rights does not affect factor prices and we show that there exist egalitarian asset redistributions that enhance allocative efficiency. The scope for such redistributions can be broadened by offering fair insurance protecting the independent entrepreneur against risk unassociated with the production process and against production uncertainties that are unrelated to the quality of their individual decisions. The market will generally supply insurance of this type suboptimally.

The Evolution of Strong Reciprocity

A number of outstanding puzzles in economics may be resolved by recognizing that where members of a group benefit from mutual adherence to a social norm, agents may obey the norm and punish its violators, even when this behavior cannot be motivated by self-regarding, outcome-oriented preferences. This behavior, which we call strong reciprocity, is a form of altruism in that it benefits others at the expense of the individual exhibiting it. While economists have doubted the evolutionary viability of altruistic preferences, we show that strong reciprocity can invade a population of non-reciprocators and can be sustained in a stable population equilibrium. Under assumptions that may reflect the relevant historical conditions, the model describes the genetic evolution of strong reciprocity as a component in the repertoire of human preferences.

Mutual Monitoring in Teams: Theory and Experimental Evidence on the Importance of Reciprocity

Monitoring by peers is often an effective means of attenuating incentive problems. Most explanations of the efficacy of mutual monitoring rely either on small group size or on a version of the Folk theorem with repeated interactions which requires reasonably accurate public information concerning the behavior of each player. We provide a model of team production in which the effectiveness of mutual monitoring depends not on these factors, but rather on strong reciprocity: the willingness of some team members to engage in the costly punishment of shirkers. This alternative does not require small group size or public signals. An experimental public goods game provides evidence for the behavioral relevance of strong reciprocity in teams.

Towards a Unity of the Human Behavioral Sciences

Despite their distinct objects of study, the human behavioral sciences all include models of individual human behavior. Unity in the behavioral sciences requires that there be a common underlying model of individual human behavior, specialized and enriched to meet the particular needs of each discipline. Such unity does not exist, and cannot be easily attained, since the various disciplines have incompatible models and disparate research methodologies. Yet recent theoretical and empirical developments have created the conditions for unity in the behavioral sciences, incorporating core principles from all fields, and based upon theoretical tools (game theory and the rational actor model) and data gathering techniques (experimental games in laboratory and field) that transcend disciplinary boundaries. This paper sketches a set of principles aimed at fostering such a unity. They include: (a) evolutionary and behavioral game theory provides a transdisciplinary lexicon for communication and modelbuilding; (b) the rational actor model, rooted in biology but developed in economic theory, applies to all the human behavioral disciplines. This model treats actions as instrumental towards satisfying preferences. However, the content of preferences must be empirically determined. Moreover, the rational actor model is based on a notion of preference consistency that is not universally satisfied, so its range of applicability must also be empirically determined; (c) controlled experiments have been underutilized in most behavioral disciplines. Game theory and the rational actor model can be used as the basis for formulating, deploying, and analyzing data generated from controlled experiments with human subjects.A pesar de que tienen objetos de estudio distintos, todas las ciencias del comportamiento humano cuentan con modelos de la conducta humana individual. La unidad de tales ciencias requiere un modelo común subyacente de comportamiento humano individual, especificado y enriquecido para satisfacer las necesidades particulares de cada disciplina. No existe tal unidad, y no puede ser fácilmente alcanzada, dado que que las diversas disciplinas tienen modelos incompatibles y metodologías de investigación dispares. Con todo, recientes desarrollos teóricos y empíricos han creado las condiciones para la unidad de las ciencias del comportamiento, incorporando principios centrales en todos los campos, y basándose en herramientas teóricas (como la teoría de juegos y el modelo de actor racional) y técnicas de recogida de datos (como los juegos experimentales de laboratorio y sobre el terreno) que transcienden las fronteras disciplinarias. Tales desarrollos incluyen: (a) la teoría de juegos evolucionaria y conductual, que proporciona un léxico transdisciplinar para la comunicación y la construcción de modelos; (b) el modelo de actor racional, anclado en la biología pero desarrollado por la teoría económica, que se aplica en todas las disciplinas del comportamiento humano. Este modelo trata las acciones como instrumentales, dirigidas a la satisfacción de las preferencias. Sin embargo, el contenido de las preferencias debe ser empíricamente determinado. Además, el modelo de actor racional está basado en una noción de la consistencia de las preferencias que no se satisface universalmente, de modo que su rango de aplicabillidad debe determinarse también empíricamente; (c) los experimentos controlados, que han sido infrautilizados en la mayoría de las ciencias del comportamiento. La teoría de juegos y el modelo de actor racional pueden ser usados como base para formular, desplegar y analizar datos generados a partir de experimentos controlados con sujetos humanos