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How Institutions Transform Weak Reputation Incentives into Strong Cooperation Drivers
Institutions form the backbone of human societies. They foster cooperation by rewarding prosocial behaviour and punishing selfish actions. However, they face a fundamental paradox: while they are designed to incentivise cooperation, institutions themselves depend on the cooperation of their members to function. A new study, to be published in the prestigious journal *Proceedings of the National Academy of Sciences* (PNAS), demonstrates how institutions emerge and thrive.
Researchers from the Max Planck Institute for Evolutionary Biology, the Institute for Advanced Studies in Toulouse (IAST), and the Institut Jean Nicod at ENS-PSL present a mathematical model showing how institutions can be built through reputation. The study examines two interconnected cooperation problems. In the first dilemma, characterised by high costs or limited monitoring, reputation alone is insufficient to ensure cooperation. In the second dilemma, individuals can collectively act to change the parameters of the first problem.
The findings reveal that this nested structure creates a leverage effect: while reputation alone cannot directly solve the first problem, it motivates contributions to the collective action in the second problem. These contributions, in turn, create new incentives for cooperation in the more challenging first dilemma.
A historical example from Tokugawa-era Japan illustrates this concept. At the time, village communities faced the challenge of sustainably managing shared forest resources, such as firewood and building materials. This problem reflected the “tragedy of the commons”: individuals were incentivised to use as many resources as possible, risking overexploitation. Monitoring individual forest use was difficult, so villagers developed an institution: the role of the detective. These detectives monitored forest use and imposed penalties on rule-breakers, creating new incentives to follow the rules.
The institution itself required monitoring to prevent corruption or abuse of power. Thankfully however, this secondary challenge was easier to address, as the detectives could be monitored more effectively than individual forest usage. A poor reputation could cost detectives their jobs and social standing. By solving this second, simpler problem, the community successfully tackled the more complex issue of forest management.
The study concludes that institutions function as social technologies that harness universal human motives, such as the desire for a good reputation. Just as a pulley amplifies a small force to lift a heavy load, institutions transform weak reputation effects into strong incentives for cooperation. Over time, institutions may have been refined to maximise the social leverage effect, enabling societies to address increasingly complex cooperation challenges.
Dr. Julien Lie-Panis
Postdoc
Max Planck Research Group Dynamics of Social Behavior
Max Planck Institute for Evolutionary Biology
J. Lie-Panis, L. Fitouchi, N. Baumard, J. André (2024)
The social leverage effect: Institutions transform weak reputation effects into strong incentives for cooperation,
Proc. Natl. Acad. Sci. U.S.A. (PNAS) 121 (51) e2408802121,
https://doi.org/10.1073/pnas.2408802121 (2024).
Institutions allow reputation to solve hard cooperation problems indirectly.
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