The Institutional Foundations of Cooperation and Trading

Santa Fe Institute, Santa Fe NM

Investigators

Abstract

The Santa Fe Institute (SFI) work group The Institutional Foundations of Cooperation and Trading is a component of the European Science Foundation Eurocores project on Evolution of Cooperation and Trading (TECT) exploring the Social and Mental Dynamics of Cooperation (SOCCOP). The SFI group seeks to explain the role of group-level institutions in the evolution of cooperation and trading among early humans and explore the implications of recent advances in behavioral economics and cognitive psychology for improving the governance of cooperative and trading relationships in firms, neighborhoods, and nations. This project uses evolutionary game theory and agent-based simulations as well as empirical sources to model the co-evolution of those group-level institutions and individual preferences associated with cooperation and trading. Among the institutions to be studied are reproductive leveling and other within-group variance-reduction strategies, the emergence and subsequent dynamics of novel systems of property and socio-economic hierarchy, as well as insider outsider distinctions and frequent intergroup conflict. This project also develops a novel model of the interplay of economic and civic motivations to explore the implications of recent experimental evidence of the cooperative nature of our species for the design of more effective public policies and institutions. A final objective is to facilitate networking of both senior scholars in the SOCCOP project and other TECT projects, students, and others engaged in related research. This study investigates hypotheses that are situated at the intersection of some of the most vibrant fields in biology and the human social and behavioral sciences. According to the editors of Science the evolution of cooperation among humans is one of the top 25 questions facing the scientific community today. The importance of endogenous preferences, institutional innovation and persistence, and the relationship among the two is increasingly recognized in the social and behavioral sciences. Yet in part due to the formidable mathematical difficulties of combining institutional and individual evolution and the need to combine these with empirical knowledge of the relevant cases, the dynamics of these institutions has been overlooked in most evolutionary models. The SFI research team has already established a strong track record in this novel kind of modeling and related empirical work. The study will have broader impacts beyond the scientific community because an understanding of cooperative and civic motives is essential to the task of mobilizing diverse individuals towards common ends, whether in firms, neighborhoods, nations, or global communities. A key idea to be developed is that institutions that are designed to work well if citizens and economic actors are entirely self-interested will not generally be the best institutions for a heterogeneous population in which significant numbers are motivated by strong reciprocity motives, inequality aversion, insider bias, or other social preferences, as well as by self-interest. Applications to public policy range from optimal deterrence in criminal sentencing to policies to promote compliance with environmental protection measures.