When Do Populations Overcome Self-Interest and Cooperate for Collective Interests?
When governments increase the provision of public goods (public utilities), citizens are obligated to pay taxes. However, tax evasion diminishes the pool of funds available for these goods, thereby reducing benefits for all. Public goods benefit the entire community regardless of tax contributions, which incentivizes some individuals to avoid paying taxes while still enjoying these shared resources. Assuming the government operates without corruption, the availability of public goods hinges directly on the taxes collected.
The central challenge lies in achieving efficient public good provision — effectively motivating individuals to fulfill their tax obligations. This issue is extensively studied in academic circles under the concept of “public good provision.”
How to study public goods
In game theory, this situation is often modeled as a “public goods game.” In this game, each individual is initially given an equal endowment and has the option to contribute voluntarily to a public good. It’s up to each person to decide whether to contribute or not. After all individuals make their contributions, the total amount collected (money or resources) is enhanced, typically multiplied by a factor greater than one, and then divided equally among all individuals regardless of their contribution decisions.
In this context, individuals who choose to contribute are called cooperators because they incur costs to benefit the group, while those who do not contribute are called free riders because they avoid costs but still share in the benefits provided by others. In reality, we typically observe a mix of these types within populations. The enhanced amount that is collectively distributed is referred to as the public good.
The challenge of public good provision revolves around how to efficiently provide for these collective goods. It’s important to note that many assumptions are made in these models that don’t fully reflect reality; for instance, the assumption of equal endowments and equal sharing. Despite these simplifications, the core logic of this pressing problem remains crucial to understanding collective action and public policy.
What a rational actor do in public goods game
Let’s delve into the provision of public goods, considering it as a one-shot game where each player makes a contribution decision anonymously, without knowledge of others’ choices but aware of the game’s rules. In this scenario, without any communication or cooperation, individuals may rationalize their decisions based on the assumption that others are also rational actors. With no information on others’ actions, some may trust that others will contribute, while some may opt to free ride, as there are no consequences or guilt involved in anonymity.
If all players are rational and anticipate others to be rational too, a burden arises from these assumptions. Rational economic theory often suggests that if no one contributes, it’s beneficial not to contribute; if a few contribute, it’s better to free ride than to contribute. This perspective leads economic actors, or “homo economicus,” to predict that nobody will donate, making free riding a viable solution. In game theory terms, this scenario is known as a Nash equilibrium strategy, where no player can improve their outcome by unilaterally changing their strategy, assuming all others stick to theirs.
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For those interested in delving deeper into the subject:
- The article from PNAS (Proceedings of the National Academy of Sciences) you mentioned can be found here.
- For an accessible introduction to game theory, consider reading “The Art of Strategy” by Dixit and Nalebuff, available here.
- For a more comprehensive study, “Fun and Games” by Ken Binmore offers a thorough exploration of game theory concepts, available here.
- “Theory of Games and Economic Behavior” by John von Neumann and Oskar Morgenstern is a seminal work for those interested in the mathematical foundations of game theory, available here.
- If you prefer learning through videos, the YouTube link you provided offers visual explanations of game theory concepts.
These resources cater to various levels of interest and expertise, providing ample opportunities to develop a deeper understanding of game theory and its applications.
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What people do in experimental games
In the real world, even in a one-shot Public Goods Game (PGG), people often behave contrary to the rational self-interest assumed by standard economic models. They frequently contribute substantial amounts to the public good. When the game is repeated over multiple rounds, each individual starts afresh with a new endowment and knowledge of past contributions by others. Despite the anonymity and lack of direct communication, individuals are aware of the aggregate contributions made in previous rounds, influencing their decisions.
Empirical observations from repeated PGG experiments globally reveal distinct behavioral patterns. Initially, in the first round, contributions are typically high. This phenomenon reflects a trust that others will reciprocate their actions — a form of conditional cooperation. However, as subsequent rounds unfold, contributions tend to decline. This decline is often attributed to individuals observing free riders — those who do not contribute while benefiting from others’ contributions. In response, some contributors reduce their own efforts to avoid being exploited.
This dynamic mirrors real-world dilemmas such as tax evasion or environmental degradation. If individuals perceive that others are not fulfilling their obligations (like paying taxes or avoiding pollution), they may feel justified in doing the same. This behavior can lead to a downward spiral, akin to the tragedy of the commons, where collective resources are depleted due to self-interest overriding collective welfare.
From these observations, it’s evident that individuals in these experiments behave more like conditional cooperators than purely rational actors. They adjust their behavior based on the actions of others, demonstrating heterogeneous patterns of cooperation. Some require a critical mass of contributors to participate, while others contribute regardless. This diversity highlights the complexity of human cooperation and the challenges of sustaining collective action over time.
My PhD thesis focuses on exploring how conditional cooperators maintain cooperation in the absence of direct punishments (https://scholar.google.com/citations?hl=en&user=QR3WvyIAAAAJ&view_op=list_works&sortby=pubdate). I have demonstrated that noise in decision-making — where individuals make mistakes and learn from others after each round — can play a crucial role. This mechanism helps create a critical level of cooperation, sustaining levels exceeding 50%. Moreover, individuals can establish cooperative norms by imitating those perceived as prestigious, rather than simply following those with the highest payoffs.
What are solutions
In the literature, several intriguing mechanisms for fostering cooperation without relying on institutional punishments have been identified. For instance, it’s widely recognized that individuals are often willing to sanction those who harm the community, such as by polluting clean water, even without a direct personal benefit from doing so. Leaders in the field have demonstrated that in the context of Public Goods Games, allowing individuals to anonymously punish free riders can significantly enhance cooperation. This phenomenon, known as altruistic punishment, is prevalent across diverse societies despite their heterogeneity (see https://www.science.org/doi/10.1126/science.1127333).
Here’s how it typically works in games: After playing the game, each individual knows who contributed and who free rode or contributed the least. If someone decides to punish a free rider, the following rules usually apply: the punisher pays a cost of x units to the experimenter, who then deducts a penalty from the free rider that is typically 3 times the amount of the punishment received.
Here, punishment isn’t free; it’s costly but crucial for promoting social good. In academic literature, these types of punishments are termed altruistic punishments. If punishment were free, everyone would want to punish, which could undermine the effectiveness of maintaining cooperation. However, altruistic punishment involves a cost to the punisher, making it a meaningful signal of commitment to maintaining fairness and cooperation in a group.
In public goods games, free riders initially gain more payoff because they avoid the costs associated with contributing. When altruistic punishment is introduced, the payoff for free riders decreases as they face penalties. This change in incentives encourages free riders to modify their behavior and contribute to the public good, ultimately increasing overall cooperation.
Interestingly, individuals who contribute to the public good but refrain from participating in punishments may be perceived similarly to free riders by those who incur the costs of punishment. In the literature, these individuals are sometimes referred to as second-order free riders. If the number of second-order free riders increases within a group, altruistic punishers may lose motivation, and free riders could gain more influence. This dynamic highlights the critical role that punishment plays in sustaining cooperation.
Analogously, bystanders who witness wrongdoing but do not intervene can be seen as contributing to the normalization of misconduct. This analogy underscores the importance of collective action in deterring undesirable behaviors and maintaining social norms. When governments fail to address misconduct, it can inadvertently perpetuate a cycle of wrongdoing, enticing both offenders and bystanders to engage in harmful actions.
In essence, the willingness to punish wrongdoing, despite its personal costs, is pivotal in fostering cooperation and deterring behaviors detrimental to the common good https://www.nature.com/articles/nature02043.
Are the altruistic punishment effective
Societies cannot simply resolve the free rider problem through altruistic punishments alone; the reality is far more complex. Introducing altruistic punishments opens the door to counter-punishments, where free riders retaliate against those who punish them. This retaliatory cycle undermines the effectiveness of altruistic punishments, leading to a resurgence of free riding. This phenomenon is evident in public goods games where the option for counter punishment leads to a decline in cooperation and an increase in free riding.
These dynamics can be analyzed using both simple game theory and evolutionary game theory frameworks. In evolutionary game theory terms, free riders tend to proliferate within the population, causing cooperative and altruistic punishment strategies to diminish or disappear entirely.
Research indicates that the prevalence of counter punishments varies significantly depending on social norms and the level of inequality within societies. Countries with higher levels of norm violation often experience more frequent instances of counter punishment, which further complicates efforts to sustain cooperation and deter free riding (see: https://www.science.org/doi/10.1126/science.1153808).
The heterogeneity of social norms across different cultures and societies plays a crucial role in addressing the free rider problem. While some aspects of cooperation are well-understood, ongoing research is now focusing on understanding how norms function and evolve over time.
For those interested in delving deeper into the study of norms, “The Grammar of Society” offers an excellent introduction (https://www.cambridge.org/core/books/grammar-of-society/2B063E9C9621C2340DEFB2BE15B3AEA5). This resource provides valuable insights into the role of norms in shaping human behavior and societal interactions.
In summary, while altruistic punishments may initially seem effective, the existence of counter punishments highlights the intricate challenges societies face in sustaining cooperation and addressing the complexities of social norms.
Social norms crucial to functioning of well order society
Eliminating punishments and counter punishments to solve the free rider problem presents significant challenges. While institutions theoretically could address this issue if people acted purely as rational agents, institutions themselves operate within societies shaped by social norms. These norms play a crucial role in how institutions function effectively.
In societies where corruption is prevalent and beneficial social norms like honesty and positive reciprocity are undermined, trust erodes, making cooperation and achieving greater public goods difficult. Standard economics often overlooks the impact of social norms, thereby failing to provide adequate solutions to such problems.
To effectively address the free rider problem, it is essential to understand and foster cooperative social norms. These norms encourage behaviors that benefit the community as a whole and are essential for the successful functioning of institutions within a society.
For further insights into cooperative norms, you might find this discussion appealing: link to YouTube video. This resource explores strategies for establishing and promoting cooperative norms that can enhance societal cooperation and address challenges like the free rider problem.
Social norms are behavioral rules that dictate how individuals should behave in society. Whether someone follows these rules depends on conditional expectations — whether the behavior is prevalent in the population and if there are consequences for violating the norm.
A social norm, such as wearing masks during a pandemic, is characterized by its reliance on the conditional expectations of the population. If the majority of people follow the rule (wearing masks), and those who do not are socially disapproved or face social consequences (like being avoided in social interactions), then it qualifies as a social norm.
The defining feature of a social norm is that it hinges on these conditional expectations. There are two types of these expectations:
1. Empirical expectations: These reflect what individuals expect the majority of people in their reference network to do. For instance, someone might expect most people they encounter to wear masks in public places.
2. Normative expectations: These dictate what the majority expects individuals ought to do. Violations of normative expectations may lead to penalties or sanctions from others in the reference network. For example, if someone refuses to wear a mask in a community where it is expected, they may face social disapproval or avoidance.
The nature of the rule itself is less critical than the collective behavior around it. For instance, if free riding (such as not wearing a mask) becomes prevalent in a population and individuals see that others do not face consequences for it, free riding can become normalized — even though it may be detrimental to the group as a whole.
In society, there exist numerous harmful social norms despite their negative impacts. Examples include corruption, tobacco use, female genital cutting, child marriage, and honor killings. These norms persist because they are supported by empirical and normative expectations within certain social contexts, even though they may undermine societal well-being.
In summary, social norms are behavioral guidelines shaped by what is commonly practiced and expected within a community. They are maintained through both empirical observations of behavior and normative expectations of what individuals should do, reinforced by social approval or sanctions.
Social norms encompass a broad spectrum of behaviors across various disciplines like psychology and sociology. Traditionally, these norms have been defined using operational definitions that allow for measurement. However, recent developments emphasize that norms can be influenced and changed, although the methods for doing so vary significantly depending on the specific context and social systems involved.
Understanding norms continues to be an area of extensive study and research. Significant progress has been made through experimental studies (for example, see https://www.annualreviews.org/content/journals/10.1146/annurev-psych-033020-013319) and theoretical investigations (as discussed in https://royalsocietypublishing.org/doi/10.1098/rstb.2023.0023). Despite these advancements, theoretical models often struggle to distinguish between social norms and conventions.
In essence, while social norms are well-defined in terms of operational definitions and encompass a wide range of behaviors, the methods to change them are context-dependent and complex. Ongoing research seeks to deepen our understanding of these dynamics and their implications for societal behavior and change.
In my upcoming work, I argue that social norms are primarily enacted by a select few individuals in the population who act as cultural leaders. These leaders exhibit exemplary behavior, such as altruism in the context of Public Goods Games (PGG), or they possess high prestige. Importantly, they do not deviate from their behavior even if other strategies promise higher payoffs or fitness.
The presence of these leaders can influence the entire population towards more cooperative behavior through social learning mechanisms. Social learning encourages individuals to adopt behaviors that are perceived as beneficial or rewarded by the majority. In the case of cooperation in PGGs, individuals enhance their social payoff by conforming to the prosocial norms set by these leaders. This conformity leads to a situation where free riders, who may gain higher immediate payoffs from exploiting public goods, face negative social payoffs due to the disapproval and non-cooperation of the majority.
Consequently, the cumulative social payoff for free riders becomes relatively lower compared to cooperators. Over time, this disparity can lead to the extinction of free riders from the population, as their strategy becomes unsustainable in the face of overwhelming cooperation fostered by cultural leaders.
In summary, my research posits that the influence of cultural leaders and the mechanisms of social learning are pivotal in promoting cooperative behaviors and potentially eradicating free riding in social systems like public good provision.
