Homo reciprocans : A Research Initiative on the Origins,

Dimensions, and Policy Implications of Recipro cal Fairness

Samuel Bowles

Rob ert Boyd

Ernst Fehr

Herb ert Gintis

June 7, 1997

Abstract

Exp erimental economists and other so cial scientists have discovered

an imp ortant form of human b ehavior that has b een inadequately an-

alyzed by b ehavioral scientists. In public go o ds, ultimatum, and other

games where players gain from co op erative b ehavior, agents have a

predisp osition to co op erate and to undertake costly punishmentofde-

fectors, even when this b ehavior cannot b e justi ed in terms of tradi-

tional game-theoretic equilibrium and learning concepts. We call this

`recipro cal fairness.'

Our research has four goals. First, can the exp eriments on recipro-

cal fairness b e replicated with diverse sub ject p o ols and various strate-

gic settings? Second, how might such b ehavior have evolved, given

that it is formally altruistic, and hence `un t' except under stringent

circumstances? Third, how do es the existence of recipro cal fairness in-

uence our analysis of so cial p olicy in such areas as taxation, charity,

redistributive exp enditure, and criminal sentencing? Fourth, how to

what extent do es cultural variation induce di erences in the strength

of recipro cal b ehavior and conditions under which agents exhibit re-

cipro cal fairness?

1 Explaining Co op erative Behavior

Despite its reputation for fostering comp etitive b ehavior, the contemp orary

market economy sustains imp ortant forms of co op eration. Employees co op-

erate with one another and with management in the enterprise, agents are

more or less trustworthy in exchange situations, family memb ers provide for

one another, p eople givetocharity,volunteer for public service, and supp ort

government redistributive exp enditures. 1

Research Initiative on Recipro cal Fairness June 7, 1997

As Bernard de Mandeville (\The Fable of the Bees") and Adam Smith

(\The Invisible Hand") long ago observed, the prop er institutional frame-

work can induce self-interested agents to serve the interest of others. The

most sophisticated mo dern statement of this principle is probably the Funda-

mental Theorem of Welfare Economics, based on the Walras-Arrow-Debreu

1

general equilibrium mo del.

This `neo classical' explanation of co op eration presumes that all economic

transactions are fully contractible, and all contracts are costlessly enforce-

able. However co op eration in mo dern market economies is not limited to

situations of complete and costlessly enforced contracts. When the assump-

tions of the general equilibrium mo del are appropriately weakened a di er-

ent set of analytical to ols are needed to explain why self-interested agents

co op erate.

One such to ol is the rep eated game, which implies the famous `Folk The-

orem,' implying that when discount rates are suciently low, Pareto-optimal

co op eration can be sustained if each agent resp onds to a non-co op erative

action by refusing to co op erate for the remainder of the game. Under suit-

able conditions such threats can b e shown to b e credible, in the sense that

it will indeed be in the self-interest of each agent to carry out the threat

of retaliatory defection should the o ccasion to do so arise, given that every

2

other individual do es so as well. While few instances of so cial co op era-

tion actually use universal defection to sustain co op eration, other plausible

3

sanctions can serve the job as well.

The principal-agent mo del and its manyvariations have also b een used

widely to explain co op eration in the rm, and have b een extended to provide

an analytical basis for a theory of economic institutions based on treating

4

individuals as rational and self-interested.

However imp ortant forms of co op erative b ehavior are commonly ob-

1

See, for instance, Debreu (1959), Arrow and Debreu (1954), Arrow and Hahn (1971),

or Mas-Colell (1985).

2

See Thompson and Faith (1981) and Fudenb erg and Maskin (1986). For a more

general treatment of the Folk Theorem and its variants, see Kreps (1990) or Fudenb erg

and Tirole (1991).

3

For instance, a group of p otential co op erators can o er incentives for individuals

to monitor and punish defection (Weissing and Ostrom 1991, Bendor and Mo okherjee

1987), or can ostracize defectors (Cremer 1986, Hirshleifer and Rasmusen 1989, Gintis

1989, Boyd and Richerson 1992). In addition, co op erators can di erentially asso ciate

with other co op erators (Bo orman and Levitt 1980, Grafen 1979, Hamilton 1963, Wilson

1980, Trivers 1971, Bergstrom and Stark 1993, Bergstrom 1995).

4

See Shapiro and Stiglitz (1984), Bowles (1985), Holmstrom (1979), Holmstrom (1982),

Bowles and Gintis (1993), Holmstrom and Milgrom (1994), Grossman and Hart (1983,

1986) and Hart and Mo ore (1990). 2

Research Initiative on Recipro cal Fairness June 7, 1997

served, and consistently repro duced in the lab oratory, that are dicult to

explain by mo deling economic agents as self-interested actors in the tra-

dition of the rational actor mo del. One is that p eople are `irrationally'

pro-so cial: in lab oratory settings sub jects consistently app ear to contribute

more than the rational actor mo del predicts in public go o ds games (Marwell

and Ames 1979, Schneider and Pommerehne 1981, Dawes, de Kragt and Or-

b ell 1988, Isaac and Walker 1988b, Isaac and Walker 1988a). For a review

of the extensive literature on this sub ject, see Ledyard (1995). We may

summarize this research as follows. Only a fraction of sub jects consistently

defect, contributing nothing to the public account. Rather, p eople b egin

by making contributions that average ab out midwaybetween the p erfectly

co op erative and the p erfectly nonco op erative levels, although co op eration

deteriorates if the game is rep eated numerous times.

There have b een some attempts to explain pro-so cial public go o d contri-

bution on the basis of the rational actor mo del, most notably Jo el Guttman

(1986, 1987). The mo dels we have seen, however, require implausible com-

mitment assumptions, and do not explain the lab oratory evidence on the

public go o ds game. Others have attempted to reconcile this b ehavior with

`rationality' by noting that in rep eated public go o ds games, co op eration de-

cays over time, eventually approximating the unique subgame p erfect equi-

librium. This suggests that participants do not understand the game at

rst, but progressively learn the sup eriority of the free-riding strategy.

There is p ersuasive evidence that interpretation is incorrect, however.

For instance, Andreoni (1988) and Fehr and Tyran (1996) nd that when

such games are rep eated with the same sub jects, the initial levels of co op era-

tion are restored, but once again co op eration decays as the game progresses.

These authors suggest that the decay of co op eration in rep eated public

goods games o ccurs b ecause public-spirited contributors retaliate against

free-riders in the only way available to them in the game: by defecting

themselves.

Indeed, retaliation is a second form of anomalous b ehavior consistently

found in lab oratory studies: that p eople app ear to be `irrationally' vin-

dictive. For instance, resp onders in ultimatum games reject p ositive o ers

apparently to imp ose costs on `unfair' prop osers (Forsythe, Horowitz, Savin

and Sefton 1994, Ho man, McCab e and Smith April, 1996, Cameron 1995,

Abbink, Bolton, Sadrieh and Tang 1996, Eckel and Grossman 1996a, Eckel

5

and Grossman 1996b, Eckel and Grossman 1997).

Some have explained this anomaly simply as error on the part of re-

5

For an overview, see Davis and Holt (1993) and Fehr and Tyran (1996). 3

Research Initiative on Recipro cal Fairness June 7, 1997

sp onders. The most sophisticated explanation of this typ e is p erhaps Gale,

Binmore and Samuelson (1995), who make the dynamic argument that the

error rates of resp onders are likely to b e high and negatively correlated with

the size of the o er in a rep eated ultimatum game. We nd this explanation

implausible, however, since human sub jects are normally adept at distin-

guishing receiving a p ositive amount from receiving nothing (Cosmides and

6

Tooby 1992). Also Bolton and Zwick (1995) and Abbink et al. (1996) show

that if the rules of the game are changed so that the prop oser keeps the

share he suggests whether or not the resp onder accepts the o er, the out-

come quickly approximates the subgame p erfect equilibrium predicted by

the rational actor mo del: the prop oser keeps as much as p ossible, and the

resp ondent accepts whatever he is o ered.

2 Homo recipro cans

A predisp osition to co op erate and to undertake costly punishment are proba-

bly related phenomena. Our prop osed researchinvestigates the implications

of combining the two forms of anomalous b ehavior sketched ab ove. We refer

to the combination as reciprocal fairness. Ostrom et al. (Gardner, Ostrom

and Walker 1990, Ostrom, Walker and Gardner 1992) and Fehr et al. (Fehr

and Gachter 1996, Fehr, Gachter and Kirchsteiger 1997, Fehr and Tyran

1996) have provided evidence for the existence of recipro cal fairness in a

variety of so cial situations: a ma jority of individuals approach strategic in-

teractions involving co ordination problems with a prop ensityto co op erate,

they resp ond to the co op eration of others by maintaining or increasing their

level of co op eration, and they resp ond to defection on the part of others by

retaliating against the o enders, even at a cost to themselves, and even when

7

they cannot reasonably exp ect future p ersonal gains from such retaliation.

In particular, when other forms of punishment are not available, individuals

6

One of us (Herb ert Gintis) has used arti cial life simulations of the ultimatum game

indicating that suciently high mutation rates and suciently low rates of migration

among groups (or a suciently small size of the whole p opulation) can repro duce the

empirical nding of the ultimatum game. This result, however, is more plausibly inter-

preted as genetically-evolved vindictiveness rather than `noise' or `error' on the part of

resp onders, since normally a considerable fraction of the p opulation exhibits retaliatory

b ehavior.

7

In the work of Ostrom et al. (1992) the same group of sub jects interacted for roughly

25 p erio ds, and sub jects could develop an individual reputation for punishing defectors.

Their exp erimental design therefore p ermits an interpretation of costly retaliation in terms

of strategically rational b ehavior: retaliation may increase co op eration in future p erio ds.

In Fehr and Gachter (1996), group comp osition is changed in every p erio d and individual

reputation formation is ruled out by the design. Therefore, costly retaliation do es not 4

Research Initiative on Recipro cal Fairness June 7, 1997

resp ond to defection with defection. We dub such agents Homo reciprocans,

to highlight the contrast of this b ehavior with that of the more traditional

Homo economicus. Homo reciprocans is thus neither the sel ess altruist of

utopian theory, nor the sel sh hedonist of neo classical economics. Rather,

he is a conditional co op erator whose p enchant for recipro city can b e elicited

8

under the prop er circumstances.

The novel element in this research is not the recognition that recipro-

cal b ehavior exists. The imp ortance of altruism within families has b een

stressed by William Hamilton in his seminal work on `inclusive tness'

(1963, 1964), and Rob ert Trivers (1971) has shown that no concept of ra-

tionality is need to predict that even unrelated individuals can gain from

recipro cal b ehavior in rep eated interactions. The robustness of recipro cal

b ehavior app ears in computer simulations as well, as in the work of Hamil-

ton and Rob ert Axelro d (1981, 1984) and others, reviewed in Axelro d and

Dion (1988). Arti cial life simulations of rep eated prisoner's dilemma games

using genetic algorithms also show the robustness of strategies that are `nice'

(never defect rst), `punishing' (always punish defection) and `forgiving' (re-

turn to co op eration after a short p erio d of punishing, if the other player is

9

co op erating) (Bowles and Gintis 1998a).

Rather, the novel element is the fact that retribution is `altruistic' in

the sense that retaliatory b ehavior b ene ts the group by fostering sustained

co op eration, but at a strictly p ositive cost to the individuals who b ear the

trait.

3 Topic I: Exp erimental Research on Sustaining Co op eration Via

Recipro cal Fairness

The Ostrom et al. and the Fehr and Gachter results show that free-riding

is signi cantly alleviated if there is an opp ortunity for costly retaliation.

The results, however, do not show that p ermitting costly retaliation leads

to welfare gains for group memb ers. In the presence of unco ordinated costly

retaliation opp ortunities the total costs of retaliation tend to outweigh the

gains that are achieved through higher co op eration rates. The Ostrom et

al. results show that if costly retaliation opp ortunities are combined with

communication opp ortunities almost no defection o ccurs and, therefore, no

confer any p ecuniary b ene t to those who punish. Nonetheless, punishment of free-riding

was prevalent and gave rise to a large and sustainable increase in co op eration levels.

8

Levine (1996) analyzes a utility function that combines co op eration and retribution.

9

Non-recipro cating strategies also emerge from arti cial life simulations. On the tness

of non-recipro cating strategies, see Nowak and Sigmund (1993). 5

Research Initiative on Recipro cal Fairness June 7, 1997

resources are wasted for retaliation. This result raises, however, the question

to what extent the uncontrolled e ects of face to face communication alone

can account for the increase in co op eration and welfare. One imp ortant task

of the planned exp eriments is, therefore, to determine which co ordination

devices facilitate the achievement of welfare gains through the threat of

costly retaliation.

Recipro cal fairness is not only characterized by conditional retaliation

but also by conditional kindness. The Ostrom et al. and Fehr-Gachter

exp eriments allow, however, only for retaliation. An interesting question

is whether the combination of the opp ortunity to exchange "gifts" (i. e.

the kindness feature of recipro cal fairness) with the opp ortunity to retaliate

leads to improved outcomes in terms of rates of co op eration and the welfare

of group memb ers. Previous research indicates that in bilateral relations,

p ositive recipro city is generally asso ciated with welfare gains. Whether this

also holds in the context of n-p erson so cial dilemmas remains an op en ques-

tion.

In the Ostrom et al and the Fehr-Gachter exp eriments groups were rela-

tively small and all group memb ers could monitor and punish the co op era-

tion b ehavior of all the other group memb ers. This design assumes implicitly

a rather dense so cial structure: every agent can monitor and punish every

other agent in the group. In fact, p eople often interact with a relatively

small number of neighb ors, so the structure of so cial interaction is not as

dense as assumed in the lab oratory exp eriments. We will investigate how

variations in the density of so cial interaction a ect co op eration rates. Such

exp eriments can help to detect those so cial structures that enhance co op er-

ation and those that inhibit co op eration.

Further questions concern the e ects of heterogeneity in endowments

and preferences on co op eration. Do es equality in endowments enhance co-

op eration? Do es heterogeneity of preferences inhibit co op eration? To what

extent do those with a strong preference for the public good force those

with a weak preference to contribute? How are co op eration rates and wel-

fare a ected if heterogeneity in preferences is combined with mobility across

groups? Virtually all of these questions are not yet rigorously examined al-

though they are of fundamental imp ortance if wewant to b etter understand

which so cial structures and institution will foster co op erative outcomes.

Another relevant issue is how so cial structure a ects co op eration. We

hyp othesize that the more dense the so cial interaction among agents, the

more e ective is costly punishment in maintaining co op eration. Consider,

for instance, a public goods game with 25 sub jects. The return of one

token on the public account is 0.08. So if each sub ject invests the whole 6

Research Initiative on Recipro cal Fairness June 7, 1997

endowment, sub jects can double their income relative to a situation where

each puts the whole endowment in the private account. Treatment A: Each

sub ject can punish all the other 24 players in the game. Treatment B: Each

sub ject can only monitor and punish a subset of the other players; i.e. there

exist "lo cal interactions." The numb er of agents who can b e monitored and

punished by each p erson in the group is thus a proxy for so cial density

or so cial capital. By varying the so cial density we can study its impact

on co op eration. This may be a particularly imp ortant contribution to the

current p olicy analysis of the role of `so cial capital' in inducing co op erative

b ehavior in communities. This same research design p ermits the study of

the \spatial" di usion of co op eration. Supp ose, for example, that sub jects

are spatially ordered on a rectangular grid. Then those in the middle have

the largest number of so cial contacts while those at the corners have alow

number of contacts. In the corners it may therefore be easier to free-ride

without b eing punished. Hence, in the corners free-riding may survive while

in the center co op eration is maintained.

Finally, we intend to supp ort the extension of exp eriments concerning

recipro cal fairness to so cial interactions relevant to real world so cial p olicy

issues, including charitable contributions, taxation, redistributive exp endi-

tures (the `welfare state'), the treatment of so cial inequality, and criminal

sentencing. Such exp eriments involve adding contextual and interpretive

elements to the bare structure of game payo s. While such additions can

lead to a situation where exp erimental outcomes are sub ject to multiple

interpretations, we b elieve carefully limiting and controlling the contextual

material can avoid this problem.

4 Topic II: Explaining Recipro cal Fairness

Recipro cal fairness as wehave de ned it is formally an example of the much

studied phenomenon of altruism: a b ehavior costly to the agent that con-

fers b ene ts on others. However there is a ma jor di erence: much of the

evidence for recipro city concerns p eople's willingness to in ict costly pun-

ishment up on others who have wronged them, their loved ones, or `so ciety.'

Revenge is an example of recipro cal fairness, as are the violent resp onses

to p ersonal insult that characterize what Richard Nisb et and Dov Cohen

call the culture of honor that is common in herding so cieties and among

whites in the United States South. The b ene ts conferred up on others are

thus indirect rather than direct: retaliatory b ehavior hurts the ob ject of

the agent's ire, but helps the group by inducing a reduction in the b ehavior

inviting retaliation. 7

Research Initiative on Recipro cal Fairness June 7, 1997

Evidence that recipro cal fairness is a ubiquitous b ehavioral pattern,

should the research of topic I supp ort this hyp othesis, then p oses a puz-

zle. How could costly punishment and other forms of recipro cal fairness

evolve? The problem is not new; Hume rhetorically asked:

Who sees not that vengeance, from the force alone of passion,

may b e so eagerly pursued as to make us knowingly neglect every

consideration of ease, interest, or safety?

Formally, the puzzle is this. Costly punishment, and the various other forms

of recipro cal fairness need not be, and generally are not in the interest of

the actor at the time the action is to be taken. If actors have outcome-

based preferences that are entirely self-regarding, the threat to retaliate is

not generally credible, and an equilibrium in which b ehaviors characterized

by recipro cal fairness are presentmay not b e subgame p erfect. An obvious

resolution of the puzzle is to p osit that p eople take pleasure in in icting

harm on those who have done harm to them or to others or are driven to do

so by a sense of obligation, honor, or dignity. But this simply displaces the

puzzle. How could preferences or compulsions of this typ e haveevolved?

We will attempt to provide an answer using mo dels of genetic evolution,

cultural evolution, and gene-culture co-evolution. Thus we will supp ort the

developmentofevolutionary mo dels of preference formation that determine

conditions under which recipro cal fairness might emerge. Such research in-

volves relatively uncharted territory, although there has b een some research

into the evolutionary emergence of the rate of time preference, degree of risk

aversion, and altruistic b ehavior, using group selection arguments (Hansson

and Stuart 1990, Rogers 1994, Mailath, Samuelson and Shaked 1995, Robson

1995, Robson, Bergstrom and Prichard 1996) and kin selection (Bergstrom

10

and Stark 1993, Bergstrom 1995).

An obvious candidate for a mechanism explaining the emergence of re-

cipro cal preferences is group selection op eration on either cultural or genetic

transmission mechanisms. Why might some genetic basis b e contemplated

for so complex a so cial b ehavior as recipro cal fairness? The answer is that

10

The most notable attempt to explain retaliation is doubtless Sethi and Somanathan

(1996), who use neither group selection, nor lo cal interactions, nor other forms of hetero-

geneity to prove that under the appropriate conditions costly retaliation against defectors

can sustain a co op erative equilibrium in a common p o ol resource game. However their

result dep ends on the absence of mutation or what we consider to b e implausible patterns

of mutation|in particular, that co op erators mutate into retaliators at a suciently high

rate to squelch the emergence of defectors. More imp ortant, their mo del implies a very

low level of defection and retaliation, whereas we b elieve human so cieties exhibit high

levels of defection and very high levels of recipro cal fairness. 8

Research Initiative on Recipro cal Fairness June 7, 1997

formal institutions involved in the transmission of culture in Western so ci-

eties do not `teach' recipro cal fairness. The norm of `returning kindness with

kindness' is widely shared and promulgated, but the norm of `returning evil

for evil' is held to b etraya low level of moral reasoning and b ehavior. Indeed,

few forms of retaliatory b ehavior are considered praiseworthy, although some

are widely understo o d and tolerated (for instance, we sympathize with the

e orts of the victim of a crime to increase the severity of punishment im-

p osed up on the p erp etrator of the crime). By contrast, of course, victims of

crimes are praised for their pro-so cial e orts to reduce the general level of

atyp e of criminal activity. This however is not a case of recipro cal fairness,

since it could easily be understo o d in terms of a reputation e ect|p eople

are rewarded for b eing `go o d citizens' in opp osing anti-so cial activity.

While biologists have expressed considerable skepticism concerning the

11

ability of group selection arguments to explain altruism in most sp ecies,

there maybeunusual characteristics of Homo sapiens and our close ances-

tors allowing biological group selection to work with greater force. Among

these distinct characteristics is the sup erior abilityof Homo sapiens to main-

tain group memb ership b oundaries and practice exclusion thus reducing the

level of inter group mobility and enhancing the force of group selection.

Similarly, while recent empirical work on cultural group selection (Soltis,

Boyd and Richerson 1995) suggests that the pro cess maywork very slowly,

we are not p ersuaded that this counts as an argument against the force of

cultural group selection for traits of the kind we are studying. Further, as

the prop osed research of Rob ert Boyd suggests, the assertion that cultural

group selection is slow-moving may b e a mo del-sp eci c result stemming from

particular assumptions concerning intergroup migration. To address these

p ossibilities, we will extend the group selection work of Boyd and his coau-

thors, combining it with other research (Bowles and Gintis 1997, Bowles

and Gintis 1998b) concerning endogenous group formation, b oundary main-

tenance, and the evolution of co op eration within groups.

We will also explore other mechanisms, including variants of nonran-

dom pairing of agents other than group selection (e.g., lo cal interaction|

see Mailath et al. (1995)) and Herb ert Simon's `pleiotropic' mo del, whereby

11

Mathematical biologists have shown that the conditions favoring group selection of

altruistic b ehavior are extremely restrictive, and the b ehavior of most life forms can b e

explained without recourse to dynamics based up on altruism or group selection (Williams

1966, Dawkins 1989, Maynard Smith 1976). Nevertheless euso cial nonhuman sp ecies have

emerged and do very well, and group selection is part of the account of their existence.

See Alco ck (1993), Ch. 16, for a recent review of the literature. For the case of Homo

sapiens see Cap orael (1987), Simon (1993) and the discussion in Wilson and Sob er (1994). 9

Research Initiative on Recipro cal Fairness June 7, 1997

costly but so cially valuable traits may evolve by dintof b eing\tied" either

genetically or culturally to other individually b ene cial traits.

5 Topic III: Cross-Cultural Research in Recipro cal Fairness

In an e ort to explore howhumans resp ond to bargaining situations, econ-

omists have administered a number of di erent exp eriments. Among the

simplest and most widely used of these exp eriments, the ultimatum game,

seems to provide a numb er of robust and imp ortant insights into human eco-

nomic reasoning that strongly contradict the predictions of standard game

theory. Because the ultimatum game yields similar results in many di erent

places (including Taiwan, Israel, Tokyo, Pittsburgh, Slovenia and even in

Java), many economists have come to think of this bargaining b ehavior as

a pro duct of some innate human-universal economic reasoning pro cess. For

example, Roth (1995) prop osed that humans p ossess an evolved cognitive

pro cess that balances a drive for immediate self-interest with a drive to di-

rectly punish asso ciates for inequitable transactions. Yet, recent data from

exp eriments p erformed among the Machiguenga, an indigenous group living

in a remote region of the Peruvian Amazon, substantially deviate from the

typical ultimatum game resp onses: mo dal o ers were much smaller, and

even very small o ers were typically accepted. We interpret these results

as indicating that game p erformance may not result simply from the basic

functioning of some innate optimizing psychological machinery, but that, in

addition, it may dep end on so cially transmitted b ehavioral rules that vary

from cultural group to cultural group.

However, in order to administer the game in a small Amazonian village,

the usual ultimatum game proto cols had to be mo di ed, and it is p ossi-

ble that the very di erent results were caused by these mo di cations. We

prop ose to test for this p ossibilityby running a controlled exp eriment with

UCLA graduate students which duplicates the pro cedures used in Peru. If,

as we exp ect, these graduate students b ehave much like other American

and Europ ean sub jects in the ultimatum game, and quite di erent from

the Machiguenga, then the hyp othesis that cultural di erences can a ect

ultimatum game p erformance will b e strengthened.

If these results hold up, we are left with an interesting and imp ortant

research question: sp eci cally how do culturally transmitted norms, rules

and b ehaviors interact with innate cognitive economic calculations to pro-

duce ultimatum game p erformance? To address this question, we prop ose

to assemble a group of between six and eight exp erienced, economically-

oriented, researchers that sp ecialize in very di erent cultural groups, train 10

Research Initiative on Recipro cal Fairness June 7, 1997

them in the theory and metho dology of the ultimatum game and other re-

lated exp erimental games, devise a set of exp erimental variations to test

sp eci c hyp otheses, and send them o to their eld sites across the glob e

with a common research design intended to acquire cross-cultural, compar-

ative data on ultimatum game p erformance. When all the researchers have

completed their investigation, we will reconvene, share our data, and discuss

our analyses. The results and conclusions of this conference, which will b e

published in an integrated form in an edited volume, should allowustobe-

gin di erentiating and delineating the asp ects or comp onents of ultimatum

game b ehavior that result from innate pan-human cognitive pro cessors from

those asp ects rely on culturally evolved b ehavioral norms or rules.

In the ultimatum game, two players are allotted a sum of money. The

rst player, often called the prop oser, o ers a p ortion of the total sum to

a second p erson, often called the `resp onder.' The resp onder, then, has the

opp ortunity to accept or reject the prop oser's o er. If the resp onder accepts,

she receives the amount of the o er and the prop oser receives the remainder.

If the resp onder rejects, then nob o dy gets anything; b oth the resp onder and

prop oser receive zero.

The ultimatum game rst sparked the interest of economists b ecause

its highly replicable results radically departed from the standard b ehavior

of self-interested income maximizers. Game theory unambiguously predicts

that prop osers will o er the smallest non-zero amount p ossible, and resp on-

ders will always accept. Instead, o ers made by prop osers typically average

between 30 and 40 p ercent of total, with the mo dal o er at 50 p ercent. Re-

sp onders usually accept the average o ers, and will often reject o ers lower

than 20 p ercent (Camerer and Thaler 1995).

Exp erimental economists have systematically studied the in uence of

various factors on the game's results, including stake size, degree of anon-

ymity, context and `culture.' Lisa Cameron's (1995) analysis of data from

Indonesia, where she was able to provide sums equivalent to approximately

three month salary for test sub jects, strongly rejects the hyp othesis that

higher stakes move individuals closer to game-theoretic b ehavior. In fact,

her data suggest that prop osers generally moveaway from game-theoretical

predictions and toward a 50-50 split; resp onders, consequently, accept these

prop ortionately higher o ers more frequently. Similarly, Ho man, McCab e

and Smith (1994) tested the e ect of raising the stakes from $10 to $100

dollars, and found they could not reject the hyp othesis that the o ers are

identical with $10 stakes and with $100 stakes.

Researchers have also suggested that the exp erimenter's knowledge of

the prop oser's b ehavior may contribute to non-equilibrium (non-rational- 11

Research Initiative on Recipro cal Fairness June 7, 1997

actor-mo del) results. In several tightly controlled exp eriments designed to

test this hyp othesis, Bolton and Zwick (1995) and Bolton, Katok and Zwick

(forthcoming) concluded that sub ject-exp erimenter anonymity makes lit-

tle di erence. Sub jects b ehaved similarly regardless of the exp erimenter's

knowledge of their b ehavior.

Exp erimental context, instructions and game terminology have some mi-

nor e ects on game p erformance. Forsythe et al. have shown that using

buyer/seller terminology drops the median o er slightly. Similarly, Ho man

et al. (1991) show that when participants b elieve that some individuals have

`earned the right' to b e prop osers, o ers tend to b e lower, and resp onders are

more likely to accept low o ers, than when roles are p erceived as randomly

assigned.

As wehave seen, Bolton and Zwick (1995) provide substantial evidence

for the imp ortance of punishment opp ortunities in creating substantial de-

viations from equilibrium b ehavior. Bolton and Zwickhyp othesized that an

imp ortant determinant of player 2's b ehavior is a desire to punish player

1 for an inequitable or unfair division. To test this, they compared their

ultimatum results to an identically scripted and structured game called the

`impunity game,' which has the same form as the ultimatum game, except

that player 2's rejection do es not a ect player 1's take; that is, player 1 gets

her p ortion no matter what player 2 do es, and player 2 receives either the

o ered amount (acceptance) or zero (rejection). The impunity game rapidly

achieves p erfect equilibrium (regardless of exp erimenter anonymity). They

conclude that the absence of punishment opp ortunities strongly a ects game

p erformance.

5.1 The E ect of Environmental Di erences on Behaviors

Economists have attempted to investigate the e ect of cultural di erences on

ultimatum game p erformance. Taken together (Cameron 1995, Kachelmaier

and Shehata 1992a, Kachelmaier and Shehata 1992b, Thaler 1988, Roth,

Prasnikar, Okuno-Fujiwara and Zamir 1991, Ho man et al. 1994), this col-

lection of cross-cultural studies shows that `culture' pro duces only minor

deviations in the game's results. In the largest of these exp eriments, Roth

et al. (1991) conducted a carefully controlled comparative ultimatum game

study in Jerusalem, Ljubljana, Pittsburgh and Tokyo. As exp ected, the

results from all four lo cations di ered greatly from game theoretical pre-

dictions, but comparatively, they di ered only slightly from one another.

However, some small, but interesting, di erences did app ear. For example,

Israeli prop osers tended to make somewhat lower o ers (with a mo de of 12

Research Initiative on Recipro cal Fairness June 7, 1997

40%) than prop osers in Pennsylvania (who provided a mo de of 50%). And,

Israeli resp onders were, on average, willing to accept somewhat lower o ers

than students at the University of Pittsburgh. Even Cameron's extensive

data from students and facultyworking at Gadjah Mada UniversityinYo-

gyakarta (Indonesia), p erhaps the b est cross-cultural test of the ultimatum

game, revealed no signi cant di erences in comparison to data from Roth

et al. (1991) or Ho man et al. (1994). The mean prop oser demands, for

example, from Indonesia and the U.S. were 0.5734 and 0.5625, resp ectively.

In total, many factors generate small deviations in ultimatum game p er-

formance, but no alterations in exp erimental variables have pro duced sub-

stantial deviations from the usual results (except for fundamental changes

like removing punishment p ossibilities from the game). After his review of

these studies in the Handb o ok of Exp erimental Economics (1995), Alvin

Roth concludes the following:

Thus we see here a series of exp eriments whose results seem

to b e that even initially very skeptical investigators are b ecom-

ing p ersuaded that the exp erimental results observed in ultima-

tum games are not easily displaced artifacts of the exp erimental

metho ds, but rather representavery robust phenomenon.

Interestingly, in his cross-cultural analysis of the small di erences be-

tween American and Israeli p erformance, Roth (1995) suggests that these

apparent di erences indicate, not a di erence in aggressiveness or tough-

ness, but rather a di erence in what is p erceived as fair, or what is exp ected

under the circumstances. Some economists might suggest that these minor

di erences in what is `exp ected' or `fair' b etween cultural groups result from

a sort of window-dressing e ect that cultural b eliefs can have on more funda-

mental, innate economic reasoning pro cesses. Some new research supp orts

Roth's conclusions, and indicates that culture may b e an imp ortantvariable

in understanding game p erformance.

Recently anthrop ologist Jo e Henrich, working with Rob ert Boyd, con-

ducted an exp eriment among the Machiguenga, an Arawakan-sp eaking in-

digenous group inhabiting the southeastern Peruvian Amazon, which sug-

gests that cultural di erences can have a substantial e ect on b ehavior in

the ultimatum game. Traditionally, the Machiguenga live in mobile, sin-

gle family units or small family hamlets and subsist on a combination of

swidden (sometimes called slash and burn ) agriculture, hunting, gathering

and shing. Within the last 30 years, missionaries, government-sp onsored

bilingual scho ols, and markets have sedentized and centralized the Mach-

iguenga in a gradual pro cess of increasing market integration. Currently, 13

Research Initiative on Recipro cal Fairness June 7, 1997

most Machiguenga live in small semi-p ermanent agricultural communities

(of between 250-350 p eople), grow some cash crops, and subsist primarily

on manio c, plantains and some sh (Henrich forthcoming).

In the summer of 1996, during Henrich's third visit to the Machiguenga

community of Camisea, he p erformed a mo di ed version of the ultimatum

game exp eriment. First, he gathered twelve men together b etween the ages

of 18 and 30 under the auspices of \playing a fun game for money." He

explained the game to the group in Spanish using a set script written with

simple terminology like ` rst p erson' to reference the prop oser and `second

p erson' for the resp onder. After this he had a bilingual scho ol teacher (an

educated Machiguenga) re-explain the game in the Machiguenga language

(translating from his script), and display the money that he would b e using

to makepayments. After this, each participantentered Henrich's house (the

guest hut) individually, he and the teacher explained the game a third time,

and Henrich asked a numb er of practice hyp othetical questions intended to

test the participants' comprehension of the game. They re-explained parts

of the game as necessary. After the individual con dently answered at least

two hyp othetical questions correctly, he would submit the actual question

with a pile of soles (Peruvian money) in view. The following day, after

having successfully gotten 12 resp onses and paid out some money, he b egan

seeking randomly selected individuals to play the game. Most p eople had

already heard of the game and were eager to play. He privately explained

the game to each individual (usually in their house) and ran through the

same testing pro cedure as the previous day.

After three days of doing this he accumulated 32 resp onses. During

this pro cess several p eople were rejected b ecause they, after 30+ minutes of

explanation, could not understand the game (at least they could not answer

the hyp othetical questions). While typical U.S. results pro duce a mean

o er of 40%, a mo de of 50% and few o ers b elow 20%, the Machiguen-

ga prop osed a mean o er of 27.5%, with a mo de of 25%, and many o ers

of 15%. Similarly, Machiguenga resp onders, with one exception, always

accepted; many o ers of 15% were accepted, whereas, Americans frequently

reject o ers b elow 20%. These results seem to be very di erent from what

has b een observed elsewhere.

We hyp othesize that the Machiguenga b ehave di erently from sub jects

in other exp eriments b ecause they are culturally di erent from those sub-

jects; that is, b ecause they have so cially learned di erent values, b eliefs

and b ehaviors from preceding generations. We b elieve that cultural e ects

were not detected in previous exp eriments b ecause the sub jects in prior

exp eriments were in fact culturally very similar; all were urban university 14

Research Initiative on Recipro cal Fairness June 7, 1997

students living in a sedentary, literate, market so ciety. Jerusalem, Ljubl-

jana, Pittsburgh and Tokyo represent only a tiny fraction of the range of

human cultural variation in any observable dimension. Fo cusing on kinship

systems, religious systems, marriage rules, or prop erty rights tells the same

story: industrial so cieties represent only a small subset of the global cultural

diversity.

Why should we exp ect that norms governing economic transactions to

be any di erent? If one accepts that many asp ects of culture are adaptive

resp onses to lo cal conditions, this makes sense. The urban, literate, market-

dominated world shared by previous sub jects represents only a small frac-

tion of the sp ectrum of human life ways. For example, until very recently,

the Machiguenga were nomadic subsistence horticulturalists without a cash

economy, written language, or established government. It is quite plausi-

ble that Machiguenga b ehave di erently in the ultimatum game b ecause

the culturally transmitted b eliefs and values that evolve in suchanenviron-

ment are very di erent from the b eliefs and values that characterize urban,

literate, industrialized so cieties.

5.2 Research Metho d in a Small Scale So ciety

A preliminary analysis of the ultimatum game data collected among the

Machiguenga Indians of the southeastern Peruvian Amazon suggests that

culture may have a much greater e ect on b ehavior than was previously

supp osed. This result suggest two further lines of research: a control ex-

p eriment to con rm that the Machiguenga b ehavior was not an artifact

of the nonstandard exp erimental pro cedures, and, a expanded program of

cross-cultural exp erimental economics research aimed at determining which

cultural factors are imp ortant in a ecting ultimatum game p erformance.

In order to administer the exp eriment in the small scale Machiguenga

so ciety, usual exp erimental proto col had to be mo di ed, and it could be

that these results are di erent for this reason. In order to control for the

e ects of such exp erimental factors which may be contributing or creating

these b ehavioral di erences, we prop ose to rep eat, as accurately as p ossi-

ble, the research p erformed among the Machiguenga with students at the

University of California, Los Angeles. Rep eating the same exp eriment, with

the same proto col, the same exp erimenter, similar stakes and identical pro-

cedures will allow us to eliminate p otentially confounding in uences, and,

dep ending on the results, demonstrate the imp ortance of cultural di erences

in understanding ultimatum game p erformance It is imp ortant to see that

redoing the exp eriment with the Machiguenga using more typical stakes 15

Research Initiative on Recipro cal Fairness June 7, 1997

would not serve the same purp ose as the prop osed control exp eriment. The

prop osed exp eriment is meanttocontrol for as much as p ossible, including

exp erimenter e ects and the sp eci cs of a cross-cultural proto col, not the

e ect of stakes. Moreover, given the cost of Amazonian research, redoing

the Machiguenga study would also b e much more exp ensive.

In comparison to most previous ultimatum game pro cedures, the Mach-

iguenga exp eriment used relatively high stakes. The base sum was 20 soles

($8.40), which represents ab out 2.3 days pay for a Machiguenga male do-

ing wage lab or. We prop ose o ering graduate students approximately $170,

or roughly 2.3 days pay (readers, for example, make ab out $9.50/hour).

This sets the stakes high (in comparison to the usual amount), and approx-

imately equal to the Machiguenga exp eriment. If the Machiguenga were

only resp onding to high stakes, then UCLA graduate students should p er-

form similarly.

The Machiguenga seemed con dent of anonymity among participants (in

fact, they did not seem to care ab out anonymity at all), but each participant

knew she or he was playing against someone else in a small community of

approximately 70 adults, so it was a guarantee they knew the other player,

they just did not know sp eci cally who it was. Again, by using only UCLA

anthrop ology graduate students, which number approximately 80, and by

making this known to all participants, we hop e to create a comparable so cial

situation. Participants will b e assured of anonymity, but they will know they

are playing against someone else they know.

The 32 student participants will be randomly selected from a strati-

ed list of all anthrop ology graduate students to match gender and age

di erences re ected in the Machiguenga sample. That is, the total list of

anthrop ology graduate students will b e sub divided by gender and age. The

appropriate number of participants will be randomly selected from each

age/gender sub division. This should mitigate any argument that di erences

in p erformance b etween Machiguenga and UCLA students arise from varia-

tions in the gender/age comp osition of the samples.

All other conditions of the Machiguenga exp eriment will be approxi-

mated as closely as p ossible. We will use the identical game description,

terminology and explanatory examples (except in English, rather than Span-

ish or Machiguenga). In designing the Machiguenga exp eriment Henrich

intentionally avoided any complex or suggestive terminology like `buyer'

and `seller' or `prop oser' and `resp onder,' and instead opted for lab els like

`1st p erson' and `2nd p erson.' Because he initially avoided words imbued

with implicit cultural assumptions, translations should pro ceed smo othly

and with little distortion. As he did with the Machiguenga, he plans to 16

Research Initiative on Recipro cal Fairness June 7, 1997

meet with each participant privately, explain the game individually, make

certain they understand the game with a few hyp othetical practice ques-

tions, and present them with the real situation while the sum of money is

in view. If graduate students, when faced with exp erimental conditions and

circumstances nearly identical to those encountered by the Machiguenga,

p erform similar to all other groups of American university students, and the

not like the Machiguenga, then researchers will have to entirely reconsider

the relative imp ortance of cultural di erences in making economic decisions.

Such a result would have imp ortant implications for economics. It would

suggest that cultural di erences, p erhaps related to exp ectations ab out

fairness and punishment, in uence b ehavior in the ultimatum game more

strongly than all other variables combined. Thus, to the extent that b ehav-

ior in exp eriments is relevant to other b ehavior, this result would suggest

that economic b ehavior is more than simply a pro duct of innate pro cesses.

Rather, economic b ehavior could only b e understo o d as in uenced by cultur-

ally transmitted b eliefs and preferences that set exp ectations, de ne fairness

and promote punishment. To account for the role of cultural di erences in

economic mo dels, economists would need to ask where these culturally trans-

mitted b eliefs and preferences come from, why some b eliefs and preferences

proliferate under certain conditions, and why some are maintained through

time.

5.3 Expanded Cross-Cultural Research

If the control exp eriment con rms our suspicions ab out the Machiguenga

data (that it is an e ect of culture), we prop ose to assemble a group of

between six and eight exp erienced, economically-oriented, researchers that

sp ecialize in very di erent cultural groups, train them in b oth ultimatum

game theory and metho dology, devise a set of exp erimental variations to

test sp eci c hyp otheses, and send them o their eld sites cross the glob e

with a common research design intended to acquire cross-cultural, compar-

ative data on ultimatum game p erformance. When all the researchers have

completed their investigation, we will reconvene, share our data, and discuss

our analyses. The results and conclusions of this conference, which will b e

published in an integrated form in an edited volume, should allowustobe-

gin di erentiating and delineating the asp ects or comp onents of ultimatum

game b ehavior result from innate pan-human cognitive pro cessors from the

asp ects rely on culturally evolved b ehavioral norms or rules.

The research group will design ultimatum exp eriments to distinguish b e-

tween alternative hyp otheses ab out how culture a ects game p erformance, 17

Research Initiative on Recipro cal Fairness June 7, 1997

and which recurrent asp ects of game p erformance result from innate reason-

ing. These exp eriments will b e designed to address questions such as: Do es

every culture punish `unfair' o ers in at least some contexts, or are there

some groups that never punish? How much cultural variation is there in

what constitutes `fair' and `unfair?' How do es what is fair vary with con-

text? Are there cross-cultural recurrent patterns of `fairness'; that is, do es

`fairness' followany predictable variation along some dimension as wemove

from one so ciety to another. Do some cultural groups maintain standards

are fairness without any enforcement by punishment. Or, in game terms,

do most prop osers provide amounts near 50/50 even though prop osers who

prop ose less are rarely (or never) rejected. The following discussion pro-

p oses several research p ossibilities that may be tested with an appropriate

exp erimental design.

If economics is like other comp onents of human b ehavior, then certain

context-sp eci c elements may strongly in uence b ehavioral resp onses. Ana-

lytically, context may b e sub divided into three comp onents: the medium of

exchange, the sphere of exchange, and the situational characteristics of the

exchangers. In addition, cultural evolution mayhave generated norms ab out

fairness and norms that evoke punishment for di erent contexts. What is

fair when trading jaguar skins for steel to ols may not b e what is fair when

exchanging meat for sorghum. New circumstances or non-traditional items

may not be governed by the same rules as traditional items or recurrent

situations.

Medium of exchange. Economic theory typically assumes that b ehav-

ioral resp onses should b e indep endent of the medium of exchange. It should

not matter very much whether players in an ultimatum game are dividing a

p ot of ten dollars or ten candy bars that can b e exchanged for a dollar each.

Daily exp erience, however, contrasts with this assumption. Supp ose you

ask a friend to driveyou to the airp ort, and he says that he cannot b ecause

he wants to watch his favorite TV game show, and instead, he o ers you

$30, the cost of a cab ride to the airp ort. Is this so cially acceptable? Do es

this friend su er any loss in your eyes? Will you o er this friend cab fare

when he has to go to the airp ort? To test the imp ortance of the medium of

exchange in in uencing ultimatum b ehavior, the game can be played with

di erent mediums, including cash, food, service time and symb olic items.

For example, among a group of Amazonian Indians called the Machiguenga,

Jo e Henrich could p erform the identical ultimatum exp eriments with cash

and meat. Cash is relatively new to the Machiguenga (app earing only within

the last thirtyyears), while it is very likely they have b een sharing meat for

many millennia. Thus even though the Machiguenga de nitely understand 18

Research Initiative on Recipro cal Fairness June 7, 1997

the value of money, in terms of what it can buy, the so cial rules for meat

distribution may b e quite di erent from the rules for cash distribution.

Sphere of exchange. The sphere of exchange may in uence game

p erformance. Although the game is usually played anonymously, p eople

mayhave implicit assumptions ab out the p o ol of p otential participants (the

sphere) with which they are re-playing. Most exp eriments are p erformed at

universities, so student participants may accurately assume they are paired

with another student, and p erhaps a class mate. In the Machiguenga ex-

p eriment, individuals were told that they played with someone else in their

community (of 300 p eople). Howwould it a ect the results if we controlled

for players assumptions ab out the sphere of exchange? Do cultural di er-

ences a ect how p eople react to di erent spheres? Many villages (in Ama-

zonian, Africa and New Guinea, for example) are sub divided into clans or

moieties. What if we changed the sphere from the village (say ab out 500

p eople) to the clan (150 p eople) or moiety (250 p eople)? Do es the sphere

a ect the tendency to make equal divisions or the desire to punish `unfair'

o ers? How do es ethnicity a ect the equation: What if we told Mongolian

pastoralists they were playing against neighb oring but ethnically distinct

Khazaks? Would they play di erently against other Mongols, then they

would against anonymous Khazaks?

Situational characteristics. Moreover, the situational characteristics

of exchangers may in uence ultimatum game b ehavior. Individuals may

use contextual clues ab out the status or character of the other anonymous

player in accessing their b ehavior choices, and the rules used in assessing

others may b e culturally transmitted. In Western industrial so ciety, for ex-

ample, Ho man et al. (1991) shows that when participants b elieve that

some individuals have `earned the right' to be prop osers, o ers tend to be

lower, and resp onders are more likely to accept low o ers, than when roles

are p erceived as randomly assigned. The p erceived status of the prop oser

may suggest to westerners that this individual deserves more than would

otherwise b e acceptable. Both the contextual situation (e.g. `having earned

the right') whichevokes the mo di cation in what is normatively acceptable,

and the strength of that mo di cation may b e culturally transmitted. Among

some cultures, it may be that apparently skilled or `deserving' individuals

are not p ermitted larger shares in exchange situations. In many foraging

so cieties for example, the hunter that made the kill (the more `deserving'

by our norms) is not p ermitted to partake of the meat, or he may be only

entitled to eat only a small or equal p ortion of the meat. Meanwhile, unsuc-

cessful hunters are often app ortioned generous shares. We can test this kind

of e ect by incorp orating the same kind of information (ab out the status of 19

Research Initiative on Recipro cal Fairness June 7, 1997

characteristics of other players, but keeping them anonymous) as Ho man

et al., but do it in culturally di erent situations. The details of such an

exp eriment would be worked out by the research group, thereby ensuring

the feasibility, comparability and cultural sensitivity of the test.

Economic and ecological correlates. In addition to exploring the

cultural variability of context-sp eci c factors, this research will explore how

di erent ecological factors direct the evolution of norms and b ehavior that

in uence ultimatum p erformance. For example, economic anthrop ologists

(Plattner 1989, Johnson 1989) have suggested that p eople's economic be-

havior is strongly a ected by their degree of economic indep endence or self-

suciency. Nomadic p eoples like the Machiguenga who rely almost entirely

on family-based pro duction and kin-based exchange, and thus are much less

tightly imb edded in anonymous exchange networks, will be less likely to

exp ect `fair' (according to our cultural norms) b ehavior in the ultimatum

game. Sedentary, more economic interdep endent, p eoples establish longer

term relationships with their neighb ors, and therefore are more likely to ex-

p ect fair b ehavior in the ultimatum game. Note, we are not prop osing that

participating in di erent economic systems evokes di erent individual-level

economic calculations or notions of fairness. We are saying that certain

economic systems provide conditions in which di erent norms ab out fair-

ness and exp ectations of fairness will evolve in time through the di erential

transmission of b ehaviors/ideas (see Boyd and Richerson 1985).

To explore these p ossibilities, we prop ose to cho ose eld sites so that

p eople share some ecological and economic features but not others. For

example, to test the our hyp othesis that a group's degree of economic in-

dep endence a ects norms ab out sharing, wewould gather ultimatum game

data from Peruvian p easant agriculturalists who share an identical environ-

ment (b oth economically and ecologically) with the Machiguenga, Tib etan

pastoralists who share little with the Machiguenga except a nomadic life

style, family-based mo de of pro duction and kin-based exchange networks,

Mapuche households who are highly economically indep endent but seden-

tary, and Cuban so cialists. If our understanding of the relationship b etween

culturally transmitted things, like exp ectations of fairness, and economic sys-

tems is correct, then the Machiguenga's p easant neighb ors should b ehave like

American undergraduates and Cuban so cialists, while Tib etan pastoralists

and Mapuche farmers should b ehave like Machiguenga. Each p opulation

was selected to inform a sp eci c asp ect of the overall pro ject, as well as

the practical diculties of p opulation access, contacts and familiarity; this

research will not be done through universities, with students or in urban

centers. Each exp eriment will use similar stakes, the identical proto col as 20

Research Initiative on Recipro cal Fairness June 7, 1997

was used with b oth UCLA graduate students and Machiguenga Indians.

Working together, the research group will design an exp erimental pro-

to col for the ultimatum game based on proto col used by Henrich among

the Machiguenga. This group of exp erienced eld workers will b e a able to

anticipate p otential diculties in administering the game in their particular

communities, and the group will b e able to discuss and agree on strategies

for adapting the game to particular ethnological circumstances.

Wehave designed this research around ongoing pro jects and exp erienced

researchers for a number of reasons. First, using existing pro jects greatly

facilitates access to p opulations. Research among real p opulations, inhabit-

ing inhospitable regions in p olitically delicate climates (where most p eople

live) can b e extremely dicult, time consuming and dangerous without an

exp erienced researcher who has friends and contacts in the area, sp eaks the

language, knows the lo cal customs and p olitical pitfalls. Second, ongoing

research supplies key ethnographic data that will b e essential to contextu-

alizing and interpreting our results. Third, gaining a sucient trust from a

group takes months, and sometimes years. But, by co op erating with anthro-

p ologists who have accumulated a group's trust through years of interaction,

we will b e able to use the Foundation's money and our time most eciently.

So far wehave found a number of interesting and well-quali ed researchers

who can give us access to nomadic pastoralists in Tib et, sedentary pastoral-

ists in Mongolia and Tanzania, Cuban collectivists, and horitculturalists

living ing Peru and on the Indonesian island of Sulawesi.

6 Topic IV: The Implications for So cial Policy

Egalitarian sentiment is often based on a commitment to `recipro cal fair-

ness.' So cial p olicies designed to tap this sentiment motives may succeed

where others, equally egalitarian in intent, are p olitically unp opular.

Both historical and contemp orary exp erimental evidence supp ort this

p osition. In his magisterial Injustice: the Social Bases of Obedience

and Revolt, Barrington Mo ore (1978) sought to discern if there might

be common motivational bases|\general conceptions of unfair and unjust

b ehavior" (21)|for the moral outrage fueling struggles for justice that have

recurred throughout human history. \There are grounds," he concludes from

his wide-ranging investigation,

for susp ecting that the welter of moral co des may conceal a cer-

tain unity of original form...a general ground plan, a conception

of what so cial relationships oughttobe. It is a conception that 21

Research Initiative on Recipro cal Fairness June 7, 1997

by no means excludes hierarchy and authority, where exceptional

qualities and defects can b e the source of enormous admiration

and awe. At the same time, it is one where services and favors,

trust and a ection, in the course of mutual exchanges, are ideally

exp ected to nd some rough balancing out. (4-5,509)

Mo ore termed the general ground plan he uncovered

... the concept of recipro city|or b etter, mutual obligation, a

term that do es not imply equality of burdens or obligations...

(506)

One standard explanation for the fact that individuals vote for redis-

tributive exp enditure and voluntarily contribute to private charities is that

the welfare of others is an argument in the utility function (Ho chman and

Nitzan 1985). However it is well known that predictions based on this con-

cept of altruism do not describ e charitable b ehavior well (Sugden 1982, Sug-

den 1985) and this form of altruism has p erverse eciency e ects (Buchanan

1975, Bernheim and Stark 1988, Lindb eck 1988, Stark 1990, Bruce and Wald-

man 1990, Hori and Kanaya 1989, Kranich 1988). Another standard expla-

nation is insurance: p eople vote for redistributive exp enditures that they

might not current receive, but could receive under some likely future states

of nature. However much of the supp ort for redistribute exp enditure for the

p o or is dicult to justify in this manner.

Can a theory of recipro city contribute to an explanation of charitable

giving and supp ort for redistributive exp enditure? Weintend to commission

two or three pap ers to address this issue. Potential researchers in this area

are Rob ert Sugden and Martin Gilens, who have written extensively on the

problem, and Christopher Jencks, who uses the concept in his analysis of

the `revolt against the welfare state,' but do es not employ formal mo dels of

12

recipro cal fairness.

We exp ect that recipro cal fairness may b e able to explain b oth the rise

of the welfare state after World War II, and the more recent tide of opp o-

sition to redistributive p olicies in recent years. Sp eci cally, in light of the

exp erimental regularities outlined ab ove, we susp ect the following to b e true

as well: redistributive p olicies that reward p eople indep endent of whether

and howmuch they contribute to so ciety are considered unfair and are not

supp orted, even if the intended recipients are otherwise worthy of supp ort,

12

Samuel Bowles and Herb ert Gintis have argued for a recipro city theory of giving

(Bowles and Gintis 1998c), but have not develop ed formal mo dels of the phenomenon. 22

Research Initiative on Recipro cal Fairness June 7, 1997

and even if the incidence of defection in the target p opulation is not partic-

ularly high. This would explain the opp osition to many welfare measures

for the p o or, particularly since such measures have b een to some extent op-

p ortunistically exploited, and are thought to have facilitated various so cial

pathologies. At the same time it explains the continuing supp ort for so cial

security and medicare in the United States, since the public p erception is

13

that the recipients are `deserving.'

Our arti cial life simulations suggest that the moral bases of so cial p olicy

may follow a dynamic cycle. In mo deling the rep eated Prisoner's Dilemma,

wehave found that in p erio ds in which levels of defection are high, recipro cal

strategies (e.g., tit-for-tat) sp ontaneously emerge as individually successful

strategy that leads to a very high level of co op eration. In this highly co op-

erative state, however, the attractive features of tit-for-tat disapp ear, and

there is a movementtowards unconditional co op eration that in turn invites

high levels of defection and non-co op erative b ehavior. This state of a airs

is then conducive to the return of recipro cating strategies, thus completing

the dynamic cycle.

The cross-cultural researchwe will undertake also has imp ortant p olicy

implications. Distinguishing the e ects of culture from pan-human cogni-

tive characteristics has imp ortant consequences for economic theory. The

rational actor mo del carries with it the implicit assumption that p eople

everywhere reason the same way, and the results of economic exp eriments

are sensibly interpreted as revealing facts ab out these reasoning pro cesses.

However, if human economic b ehavior is a ected by the cultural milieu, then

theories of human economic reasoning that neglect of the cultural environ-

ment are incomplete. Thus, such exp eriments suggest that economic theory

should b e extended to consider the recipro cal e ects of economic institutions

and culturally transmitted b eliefs.

Application-oriented scientists seeking to p ositively in uence economic

p olicy will have to mo del b oth innate human economic calculations and

p opulation-level pro cess of cultural evolution. In general it will not b e p os-

sible to predict patterns of b ehavior without understanding the cultural

transmission of the norms, values, and rules that in uence economic b ehav-

ior. For example, development economists need to understand that millions

of p eople in underdevelop ed and developing nations may not resp ond as

they anticipate b ecause these p eoples p ossess culturally evolved norms and

13

Evidence for this view is presented in Gilens (1996). Similarly, Citrin and Green

(1990) uses voting data and other statistical data to argue that only to a very small

degree do es self-interest explain to the p olitical preferences of Americans in many p olicy

areas, including cash grants based on means-tested criteria. 23

Research Initiative on Recipro cal Fairness June 7, 1997

rules that contrast greatly with the norms and rules p ossessed by western

industrial p eoples; the environment in which most of these theories were

generated. Further, culture is an evolutionary pro cess, and consequently

the norms and b ehavioral rules that govern ultimatum game p erformance in

western so ciety may rapidly change with the rise of novel so cial intuitions.

Economic theories founded on culturally-transmitted b ehavioral rules, but

lacking any mechanisms for the temp oral dynamics of those rules, will lose

their explanatory p ower as our culture evolves and our so cietychanges.

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