Freedom to choose your associates makes sustained cooperation between
individuals possible, according to new experimental research by Professors
Talbot Page, Louis Putterman and Bulent Unel, published in the October
2005 issue of the Economic Journal.
Cooperation is critical to the functioning of both economic and political
organisations, but standard economic theory has long predicted that rational
people will fail to cooperate when they interact in groups for any specific
number of periods. This article reports that when experiment subjects get to
choose who they associate with, cooperative individuals band together to
defend against opportunists, and the incentive to acquire a good reputation
leads even some opportunists to act more cooperatively.
The researchers placed subjects in small groups in which each make a series
of decisions about whether to retain an endowment of money for themselves
or contribute it toward a group project. Group members were better off when
all contributed than when none did. But individuals could be better off still by
letting others contribute while holding on to their own money.
Without freedom of association, experimenters have found that contributions
decline over time as more cooperative individuals tire of being taken
advantage of by more selfish ones. But with freedom to rank prospective
group members and periodic formation of new groups on the basis of the
rankings, the new experiment found that cooperation was both initially greater
and more sustained.
By itself, the authors explain, standard theory predicts that voluntarily based
regrouping should make no difference to cooperation levels if people are
strictly self-interested and believe this to be true of others.
The authors show why the presence of cooperation in their experiment
demonstrates that their subjects generally believed that some of them could
be genuinely inclined to cooperate, even at some sacrifice of their material
payoffs. They show how the number of subjects who cooperate in the final
period implies that at least 59% of their subject pool had a genuine willingness
to cooperate even at some cost to personal earnings, a substantially higher
estimate than found in previous experiments.
The experiment is related to experiments of researchers at the University of
Zurich, led by economist Ernst Fehr, and a group that includes Elinor Ostrom,
at the University of Indiana, who have provided evidence that many people
have a taste for punishing selfish behaviour. These researchers found that the
opportunity to impose costly punishments (sanctions) on others is a way to
sustain cooperation in the laboratory and, by extension, in some real group
situations.
The authors of the present article compare the effects of voluntary regrouping
with the effects of punishment. They find that both the opportunity to punish
and the opportunity to regroup were similarly effective in inducing cooperation,
but the group formation treatment generated more benefits because punishing
carries costs both to the punishers and to those punished. The combination of
punishment opportunities with control over group composition also gave less
benefit than the latter alone.
The new research qualitatively replicates many aspects of Fehr’s and
Ostrom’s work. All three sets of researchers see themselves as helping to
demonstrate the presence of cooperative propensities that can be harnessed
for social benefit by careful institutional design. All three research groups also
conclude that their findings call for a rethinking of some aspects of economic
theory.
ENDS
Notes for editors: ‘Voluntary Association in Public Goods Experiments:
Reciprocity, Mimicry and Efficiency’ by Talbot Page, Louis Putterman and
Bulent Unel is published in the October 2005 issue of the Economic Journal.
Talbot Page and Louis Putterman are in the Department of Economics at
Brown University. Bulent Unel is at the University of Texas at Austin.
For further information: contact Louis Putterman on +1-401-863-3837
(email: Louis_Putterman@brown.edu); or RES Media Consultant Romesh
Vaitilingam on 0117-983-9770 or 07768-661095 (email:
romesh@compuserve.com).