How to design institutions that foster cooperation

Abstract

Humans usually consider altruism a moral good, and they condition their social behavior on the moral reputations of others. Indirect reciprocity explains how social norms and moral reputations can collectively support large-scale cooperation: members of the society cooperate who others who are considered good. But the theory of indirect reciprocity does not explain how the requisite institutions that monitor and broadcast moral reputations themselves evolve. Here we study the emergence of public monitoring in societies where individuals are, at first, independently responsible for evaluating the moral reputations of their peers. We show that public institutions of moral assessment that promote cooperation can evolve under all simple social norms, depending upon the institution's tolerance to occasional antisocial behavior. Public monitoring serves to eliminate disagreements about reputations in the population, which in turn increases cooperation and individual payoffs -- and so the tendency to adhere to a public institution can evolve by social contagion. Moreover, the resulting public institution is then robust to invasion or collapse. We also show how institutions can be designed to dramatically increase cooperation rates, even for social norms that previous studies found to perform poorly. Our results help explain why societies tend to elect centralized institutions to provide top-down moral governance of their individual behavior.

Tolerant moral judgment drives evolution of collective action

“…Players occasionally copy the behavioral strategy of their piers, based on its mean payoff over multiple games. Following previous work on indirect reciprocity in two-player games [24,15,16], here I consider five second-order social norms that have been shown to sustain high levels of cooperation in donation games [9,13,25]. These moral norms determine how the reputation of an individual should be updated based on her action (cooperate or defect) and the reputation of the group (Table 1): Stern Judging (SJ), Simple Standing (SS), Staying (ST), Shunning (SH) and Scoring (SC).…”

“…But when members of the society make their own individualistic moral judgements, and reputations depend on the observer, cooperation tends to collapse and strict norms like Stern Judging become ineffective [15,8]. Societies can eliminate these disagreements and restore high levels of prosociality by either delegating moral judgments to an institutional observer [16,31], or by adopting empathetic strategies that perform moral evaluations from perspectives of other players [15].…”

“…Another important condition in these models is that objective reputations must either be provided by a public institutional observer, or individuals themselves have to be empathetic, allowing them to overcome disagreements over relative moral standings of other players [15]. Critically, theory predicts that individuals within societies will often benefit from electing a local institution of moral judgment [16].…”

Physics Breakthrough Disproves Fundamental Assumptions of the Chicago School

“…E-commerce companies "aggregate individual assessments of the reputations of buyers and sellers, providing a public broadcast to a large community of users." 266 While of course platforms like Amazon have faced problems with rankings being flooded with fake reviews, 267 companies like Google, Yelp, and ZocDoc have responded by verifying users to prevent this problem to increase trust in the marketplace, and claim to prevent companies from paying to have negative ratings removed. The Better Business Bureau acts as a non-profit watchdog agency for consumers and assigns scores to companies based on trustworthiness and will harm ratings based on meritorious disputes if businesses attempt to violate consumer protection laws.…”

“…269 Likewise, "credit bureaus synthesize and publicize the reputations of borrowers, so that lending agencies can choose to reward cooperative behavior with easy access to future capital. 270 Thus, reputation can be a powerful mechanism of earning trust, and trust can be rehabilitated even when it lapses through monitoring systems that teach users how to build their credit score effectively or allow both users and companies the opportunity to contest and correct bad reviews.…”