by Jim Rose in applied price theory, liberalism Tags: evolution of cooperation, experimental economics, game theory

Experiments in psychology and economics find that in market societies all over the world, a substantial fraction of individuals will be fair in anonymous interactions and will punish unfairness more.

In the dictator game , when played by participants in industrialized societies, the dictators gave away nearly half the prize — a division that probably sounds fair.

As for the noble savage, not corrupted by civilization and symbolising humanity’s innate goodness.what they do in the dictator game: hunter- gatherers, foragers, pastoralists and subsistence farmers were much less willing to share the prize, apparently because they didn’t feel an obligation to someone they didn’t know.

Success in the market correlates with the following characteristics:

Be nice: cooperate, never be the first to defect.

cooperate, never be the first to defect. Be provocable: return defection for defection, cooperation for cooperation.

return defection for defection, cooperation for cooperation. Don’t be envious: : be fair with your partner .

: be fair with your . Don’t be too clever: or, don’t try to be tricky.

Being nice and not too clever or too tricky becomes ingrained to success in market societies so that is why in market societies people are fair in the dictator game as a matter of course.

Why drop your standards because some silly experiment by psychologists? After all, you may have future dealings with members of the experiment, and even if you don’t, such as in anonymous computer-based experiments of interaction, you don’t want risk picking up bad habits just to please a psychologist.

Adam Smith, in his study of religion, noticed was that religious sects with stricter codes of honesty and intense mutual monitoring by co-congregants for the slightest moral lapses proliferated in cities. Many successful businessmen belonged to these strict religions. These highly religious businessmen were successful in their businesses because they were looked upon by the public as reliable trading partners in a time of weak law enforcement.

Smith viewed participation in religion as a rational device by which individuals enhanced the value of their human capital.These businessmen did not know that this was profit maximising but the businessmen with religious backgrounds slowly gained market share over rivals that had less efficient ways of communicating both their reliability and that their personal honesty was under daily scrutiny.

Ethnic minorities are advantaged in the same way in business. Because of their extensive social interactions with each other because of their language, religious practices and inter-marriage, the costs of bad business behaviours are much higher due to the risk of social ostracism by everyone you know. This greater trustworthiness gives them a cost advantage in the marketplace even though they may be unaware of its source.