Tuesday, April 01, 2008

Cooperation and Economic Growth

(click on image to enlarge)

The graph shows the correlation between the level of cooperation (plotted on the y-axis and determined by a public goods game) and GDP per capita. It finds a positive correlation between cooperation and GDP per capita in a society, which is no surprise.

The authors of the paper write,
In some countries (US, Australia, UK, Switzerland, China), people were punished for defection, which is considered "normal." In others (Oman, Greece, Saudi Arabia, Russia and Belarus), people were ALSO punished for cooperation.
The authors hypothesize that people in some countries punish cooperation (rather than defection) because they have a culture of "revenge," i.e., if Mr. X punishes Mr. Y for defection, Mr. Y punishes Mr. X back.

Such a finding suggests that development in underdeveloped countries is stymied by a culture of revenge. It also suggests that punishment for defection encourages cooperation (a logical result of incentives) and thus stimulates economic growth. These findings introduce a dynamic to development study that is often overlooked, or perhaps considered unchangeable and thus discarded.

Gregory Clark in A Farewell to Alms, a economic history of the world which attempts to determine why some socities are rich and others are poor, disagrees with Jared Diamond's prognosis that a society's economic well-being is entirely determined by geography. Instead, he claims that the types of people that make up a society determine its economic success. To quote Wikipedia,
Prior to 1790, Clark asserts, man faced a Malthusian trap: new technology enabled greater productivity and more food, but was quickly gobbled up by higher populations. In Britain, however, as disease continually killed off poorer members of society, their positions in society were taken over by the sons of the wealthy, who were less violent, more literate, and more productive. This process of "downward social mobility" eventually enabled Britain to attain a rate of productivity that allowed it to break out of the Malthusian trap.
The positive correlation between cooperation and GDP per capita appears to support Clark's thesis. Such a conclusion can be inferred as a validation of cultural racism - that some cultures are superior to others. It is ridiculous to claim that one culture is "better" than another - one who makes this claim assumes they have the right to determine what is good and bad; obviously, such a claim would be ridiculous and false. Nevertheless, it does seem true that certain cultures are better at promoting economic growth than others.

Diamond may not yet be disproven - indeed, it is a fairly convincing argument, laid out in Guns Germs and Steel, that geography is the major determinant of a society's culture, and by extension propensity for economic success. Regardless, a cultural dispropensity for economic success is a problem. Although an affinity for one's culture is oftentimes very strong, I would argue that one's affinity for a decent life (in other words, a life not beset by hunger, disease, or want of shelter) is stronger. A destruction of a culture in exchange for a better life is, in my opinion, entirely justified. Being able to eliminate the "negative" aspects of a culture while preserving its general nature is, obviously, ideal and is a major challenge for development experts and economists.

[Unrelated adendum regarding revenge: A fascinating book I read a while ago called Three Cups of Tea explored in some depth the culture of tribal Pakistan and Afghanistan. In these tribal cultures, the concept of revenge is extremely important. These cultures are extremely impoverished. Since revenge is so central a tenet of their culture, individuals from these regions who feel victimized (of which there are many) by American invaders oftentimes turn to terrorism in order to exact revenge.]