Reciprocity, Altruism and the Civil Society: In praise of heterogeneity

Reciprocity, Altruism and the Civil Society

The main emphasis of this new book by Luigino Bruni is a praise of heterogeneity, arguing that society works when different people are able to cooperate in many different ways. The author engages in a novel approach to reciprocity looking at its different forms in society, from cautious or contractual interactions to the reciprocity of friendship, to unconditional behaviour. Bruni’s historical–methodological analysis of reciprocity is a way of examining the interface between political economy and the issue of sociality, generally characterized by ‘two hundred years of solitude’ of the homo oeconomicus. This historical analysis exposes an absence and this book looks at the reasons why among the many forms of reciprocity present in the civil life economics has chosen to deal just with the simplest ones (contracts and repeated self-interested interactions). The second part of the book is an analysis (with basically repeated and evolutionary games) of the interactions of the three forms of reciprocity faced with a fourth strategy; i.e. the nonreciprocity. This book will be of great interest to students and researchers engaged with the nature and history of reciprocity and of social interaction and the methodology of evolutionary game theory. Luigino Bruni is Associate Professor of Economics at the University of Milan-Bicocca. He is the author of Civil Happiness, also published by Routledge.

Routledge Advances in Game Theory Edited by Christian Schmidt

1. Game Theory and Economic Analysis A quiet revolution in economics Christian Schmidt 2. Negotiation Games Applying game theory by bargaining and arbitration Steven J. Brams 3. The Topology of the 2 × 2 Games A new periodic table David Robinson and David Goforth 4. Reciprocity, Altruism and the Civil Society In praise of heterogeneity Luigino Bruni

Reciprocity, Altruism and the Civil Society In praise of heterogeneity

Luigino Bruni

First published 2008 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Avenue, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2008. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.”

Copyright © 2008 Luigino Bruni All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Catalogue in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Bruni, Luigino, 1966– Reciprocity, altruism and the civil society : in praise of heterogeneity / Luigino Bruni. p. cm. – (Routledge studies in the history of economics ; 94) Includes bibliographical references and index. 1. Economics–Moral and ethical aspects. 2. Altruism–Economic aspects. I. Title. HB72.B78 2008 174–dc22 2007048232 ISBN 0-203-92666-8 Master e-book ISBN

ISBN 10: 0–415–42858–0 (hbk) ISBN 10: 0–203–92666–8 (ebk) ISBN 13: 978–0–415–42858–3 (hbk) ISBN 13: 978–0–203–92666–6 (ebk)

This book is dedicated to my family: my first school of reciprocity, in all its forms.

Contents

Acknowledgements Introduction

viii ix

1

The current debate on economics and reciprocity

1

2

Homo oeconomicus’ two hundred years of solitude

13

3

A first form of reciprocity: cooperation without benevolence

27

4

Reciprocity as philía

38

5

Unconditional reciprocity

46

6

Dynamics of reciprocity in a heterogeneous world

59

7

Three is better than two

68

8

In praise of heterogeneity

79

9

Reciprocity is one, but reciprocities are many

86

Appendices Notes Bibliography Index

98 124 149 155

Acknowledgements

This book not only speaks about reciprocity, but also has been an experience of reciprocity – as many books usually are. Reciprocity with many scholars, colleagues, friends and also with people met for a few moments in a train or in a congress, or maybe listened on the radio. Then it is impossible to thank everyone. Some of them, however, have had a direct role in the preparation of the work. First of all a special thank to Alessandra Smerilli, a young economist with a special gift for the mathematical and formal reasoning, who has been fundamental for the technical chapters and, especially, for the Appendix. She is an actual co-author of some key analytical passages of the book. I would thank Benedetto Gui, with whom I have discussed at length the entire book. The discussions with Bob Sudgen and Stefano Zamagni, especially for their criticisms (that only in part I have been able to endorse), have been precious moments of verification of the controversial methodological choices performed in this volume. Thanks also to Leo Andringa, Angelo Antoci, Nicolò Bellanca, Sergio Beraldo, Luca Crivelli, Pierpaolo Donati, Mario Gilli, Shaun HargreavesHeap, Lorna Gold, Alessandra Malini, Salvatore Natoli, Vittorio Pelligra, Pier Luigi Porta, Luca Stanca, Nicholas J. Theocarakis, Giuseppe Maria Zanghì and Luca Zarri. Finally, I would like to say thank you to the colleagues of the Dipartimento di Economia Politica of my University (Milano-Bicocca), the members of the ‘Scuola Abbà’ (Rome) and the actors of the Economy of Communion project of the Focolare Movement where I find most of the vital inspirations for my work. A first version of this book has been published in Italian, Reciprocità. Dinamiche di cooperazione, economia e società civile, 2006, by Bruno Mondadori, Milan. I thank the chief executive, Dr. Sandro D’Alessandro, for the permission of translation. The translation into English has been made by Valeria Jacovelli who did her work with an exceptional care and competence: my final warm thanks is for her.

Introduction

To feel much for others and little for ourselves . . . constitutes the perfection of human nature . . . As to love our neighbour as we love ourselves is the great law of Christianity, so it is the great precept of nature to love ourselves only as we love our neighbour. Adam Smith

Civil life is essentially a matter of reciprocity. Cooperation, friendship, contracts, pacts, family, love and even conflict, all are relationships very different from one another, but sharing basically one characteristic: all are forms of reciprocity. The multidimensional nature of reciprocity is the idea that has inspired this book: reciprocity is, at the same time, one and many; civil society flourishes if and when the different forms of reciprocity are seen as complementary instead of competitive or substitute one another. In the following pages I shall look at reciprocity with a broad glance: linking my reasoning to that of Aristotle and Genovesi (among the few companions I met along the way), with reciprocity I mean the ‘bond of society’. This bond is by nature plural, nevertheless its various expressions are joined with giving-and-receiving, taking-and-giving, going-and-returning, i.e. a mutual interpersonal structure. Aristotle, for example, uses the expression antipeponthos 1 (α´ντιπεπονθ ) in order to express both commercial and civil relationships, because in all relations of the polis (πολι) exists an idea of proportionality and mutuality.2 Similar is the Latin etymology of the word. Reciprocal comes from reciprocus or reciprocitate, which means ‘returning the same way, alternating’, reciprocus, where reci is from recus (from re- ‘back’ + -cus, adjective formation), and procus (from pro- ‘forward’ + -cus, adjective formation).3 An Etymological dictionary translates reciprocity as ‘retrogression, alternation, ebb’ or ‘move back and forth’.4 Starting from these ancient etymologies, I have tried to overcome the contraposition – that characterizes the modern debate in social sciences – among principles, i.e. reciprocity vs market relations, or gift vs contract, a contraposition strictly linked to others, and more fundamental, between market and civil society, community and society.

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Most of the modern social theories (from Tönnies to Boltanski), in fact, have been built upon the theory of the separation of principles, according to which the market logic ends when that of reciprocity begins (and vice versa), and when one principle (market) advances the other (gift) retreats. According to Serge-Christophe Kolm (2006, p. 25), an affluent author in the studies on reciprocity, for example, ‘[a] gift or favour motivated by another gift, [. . .], constitutes the very important social relation of reciprocity. This is very different from a self-interested exchange where each transfer (or favour) is provided under the condition that the other is provided, and hence is not a gift (in the proper sense of the term)’. This book is an analysis of the following three forms of reciprocity: (1) the reciprocity of the contract or ‘cautious’; (2) the reciprocity of friendship or philia and (3) the ‘unconditional’ reciprocity, the one more controversial, but that represents one of the theoretical foci of my discourse. But, unlikely the ‘separation of principles’ vision, my approach to the forms of reciprocity is basically different: the main message of the book will be a call for contamination and alliance amongst different forms of social interactions. The cultural perspective of the book is, in fact, that of the so-called Civil Economy,5 namely the conception, both theoretical and practical, which considers civil society as a multidimensional and polycentric dynamics, based on the dialogue and ‘reciprocity’ between different forms (or principles) of relationships: from contract to reciprocal gift, where principles of social life are not seen in opposition, but basically in a complementary relation. One of the goals of this book is to show that contract (self-interested exchange) and mutual gift are surely two different forms of reciprocity, but these are both forms of reciprocity that are essential in a good society. In what follows, I will try, instead, to show that contrapositions, which often are ideology-laden, can foster, in spite the good intentions of the authors, non-reciprocity or even conflicts. I will try to show that reciprocity is instead favoured by a pluralistic and non-ideological vision. By endorsing an unconventional approach to reciprocity (but normal in Aristotle and in the Civil Economy tradition), I have hence considered as a form of reciprocity also the cooperation of the contract and that of the ‘cautious’ repeated interactions. This is the kind of reciprocity less demanding from the motivational point of view because it does not require gratuity nor benevolence (or very little), nevertheless it is reciprocity, an encounter of interests (in the H. Arendt’s meaning of ‘inter-est’, i.e. being between),6 which plays an essential role in the building of a civil society – it suffices to see what happens to reciprocity and cooperation in regions and peoples where there is no culture of contract in order to immediately understand that the place of the contract is not filled by friendship or mutual love but, very often, by various forms of power and exploitations. On the other hand, I have extended the territory of reciprocity up to some forms of unconditional behaviour, which are normally considered by social sciences not as reciprocity but unilateral acts of altruism. So, I have gained

Introduction

xi

terrain for reciprocity both in the ‘left’ side (altruism or gift) and the ‘right’ one (contract or interests). It is straightforward to recognize that not all contracts or repeated selfinterested interactions are civil or civilizing: where freedom is missing, where monopolies and oligopolies are present, where the stronger exploits the weaker even on the basis of formal contracts – here the contract is just a juridical vest that covers unjust and asymmetrical relationships. At the same time, it is not less obvious that not all forms of friendships are civil and civilizing: various forms of mafia are important examples of ‘uncivil’ friendships, and the ‘friendships amongst firms’ are usually called cartels. Finally, unconditional behaviour can be uncivil: also the terrorist who kills can be moved by a form of unconditional reasoning, and the gift that, sooner or later, is not able to generate reciprocity can often create forms of pathologies in human relations. In other words, the border between civil and uncivil behaviour crosses all forms of interpersonal relations. In this book we shall consider the ‘civil’ reciprocity, that is ‘positive’ relationality that can be easily translated into ‘cooperation’ (I’ll use, especially in the first chapters, reciprocity and cooperation often as synonymous), but fully aware of the dark side that every form of reciprocity can hide (and often actually does). Furthermore, although I shall measure the degree of civilization of a given community or society on the basis of all forms of reciprocity, nevertheless a special weight is given to the ‘unconditional reciprocity’. This form of reciprocity has been basically disregarded by the founders of modern political economy: in this book, on the contrary, it occupies a central place. We shall see, in fact, that the unconditional reciprocity is the kind of behaviour able to break the closeness of any form of philia, and activates less courageous agents. Nonetheless, the entire analysis will also (and principally) show the delicate and critical role of the unconditional behaviour, which is always under the risk of favouring strategies of non-cooperation in the population. The main message of the book about unconditional behaviour can be summarized as follows: civil cooperation is impossible with only unconditional behaviour, but a fully civil life is impossible, at least in the long run, without people able in certain moments and contests to practice also forms of unconditional behaviour. Most of my theoretical efforts in the following chapters have been devoted to this tension between this ‘only’ and this ‘without’. The models and analyses of the book are attempts for corroborating this intuition, and exploring some of its counter-intuitive consequences for the life of society. The entire work can also be read as a criticism to the isomorphism (or monomorphism) that characterizes the contemporary studies on reciprocity. In fact, the mainstream economist or game theorist considers only one kind of reciprocity, which is of the contract or that emerging from repeated interactions on the basis of individual self-interest (basically that reciprocity that I shall call ‘the first form’). For most behavioural economists working

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today with reciprocity, reciprocity is also only one: the ‘strong reciprocity’, which in its basic structure is similar to the reciprocity of philia, the ‘second form’ in this book. Others such as K. Kolm or S. Latouche consider the exchange of free gift the only behaviour worthy of being called ‘reciprocity’, that is a pure unconditional relation, something like the ‘third form’ of reciprocity I will consider. Thus, the message of this book is to look at reciprocity as a complex and multidimensional entity. This unconventional and ecumenical choice presents costs and benefits. The costs are very clear: to have ‘forced’ a commonsense concept (i.e. reciprocity) and have used it for dealing with issues usually associated with different categories (i.e. contract or gift). The benefits, however, surmount the costs: to have a synthetic and unifying concept to start with and then to open and articulate the analysis as far as new elements are put forward is, for a social scientist, a temptation too difficult to win. The chosen three forms of reciprocity do not embrace all tonalities of human reciprocity – the conflict, for instance, is an important form of reciprocity, or the very relevant and largely studied ‘indirect’ or generalized reciprocity, are both very relevant forms of reciprocity totally absent in the following pages, together with the reciprocity (‘negative’ or ‘strong’) associated with some form of punishment. This book begins with a short review of the present debate on reciprocity and sociality in economics, which represents a sort of outline of my own discourse that, on the one hand, is in line with what economics is saying on reciprocity in the last decades, but, on the other, is also an attempt to say something new and different about reciprocity, a reality that, as all the words that constitute the grammar of society, is always greater than the abstract theories trying to describe it. Chapter 2 is an historical–methodological analysis, aiming at pointing out how political economy approaches, from its very beginning, the issue of sociality and, then, reciprocity. Actually, I shall spot basically an absence, because we’ll see that modern political economy is basically characterized by ‘two hundred years of solitude’ of the homo oeconomicus. In particular, I shall try to understand the reasons of ‘why’ among the many forms of reciprocity present in the civil life economics has chosen to deal just with the simplest ones. Chapters 3, 4 and 5 are devoted to the explanation of the three forms of reciprocity, their specific aspects, peculiar logics, potentialities, analogies and differences. In Chapters 6, 7 and 8, with the help of some simple model of the game theory (repeated Prisoner’s Dilemma and evolutionary games), the different forms of reciprocity, which in the meantime have become three strategies, will play together: at first two at once, then three and finally four strategies, three of reciprocity and one of non-reciprocity. In these chapters the language necessarily changes, but the most formal models have been relegated in

Introduction

xiii

Appendix, in order to make all the book readable also to those having a little knowledge of mathematics. The final Chapter 9 summarizes the main results of the book, includes some applications of the analyses of the preceding chapters to some concrete phenomena and embodies some suggestions, maybe in part counterintuitive. Finally, three methodological notes are as follows. First, this book is not written by a game theorist, but by an educated historian of thought, with frequentation in philosophy, economics and social theory. At the same time, I am more and more convinced that today it is very difficult, if not impossible, to pretend to say something on reciprocity and social relations without using the language of games, which is the language of dynamic interactions. Second, as quickly mentioned, this book does not pretend to cover the whole spectrum of sociality, not even of reciprocity: only some dimensions of reciprocal interactions are considered, with the hope that the chosen dimensions are relevant for understanding some tendencies of social behaviour. Finally, there is a more delicate and controversial disclaimer. My main purpose in conceiving and writing this book has not been to offer a grammar for describing the word as it is. There are some excellent books that have accomplished this fundamental task of science. One of these is The Economics of rights, cooperation and welfare by Robert Sugden (2004), which has been the main source of inspiration, among the contemporary authors, of my analysis. The aim of this book has been easier but, maybe, not less ambitious: to imagine possible scenarios and indicate some suggestions for those who are not satisfied with the world as it is and consequently try to do something for changing it. I like to be considered amongst these people who imagine communities and societies more civil, richer of positive reciprocity.

1

The current debate on economics and reciprocity

Capitalism rests – as Adam Smith points out – on a delicate balance of egoism and sympathy, and hence a society resting on the cash nexus alone [. . .] must be extremely unstable, and represent therefore a real threat for the progressing civilisation. Giacomo Becattini

Sociality in contemporary economic theory The way mainstream economic science deals with reciprocity is expressive of the more general attitude of economics towards sociality. Therefore, the first step in this analysis of reciprocity will be, in this chapter, an overview of the economic approach to interpersonal or social relationships. It is a matter of common knowledge that economists have examined, traditionally, only one form of sociality: the instrumental one.1 All the other forms of sociality have been regarded as a sort of ‘background’ onto which economic choices were represented as essentially instrumental and unaffected by the relational context where economic interaction takes place. Economics has adopted ‘self-interest’ as the general motivation of economic agency, and anonymity as the normal characteristic of market activity (e.g. as in the perfect competition model). The pursuit of social and civic dimensions inspired by different motivations (e.g. family bonds, friendship, volunteering, etc.) was then confined to non-economic domains, leaving to other disciplines (such as Psychology or Sociology) the investigation of those more complex relational dynamics that arise in those domains. Such reductionism and ‘division of labour’, as if each discipline could have its ‘slice’ of the human being – to use the terms that Vilfredo Pareto (1900) employed in his letter to the Italian philosopher Benedetto Croce – cannot be maintained any longer. Even amongst economists, there is increasing agreement that it is methodologically not sound, nor descriptively effective, to assume that economic relations take place on a constant social substrate. Indeed, the interpersonal dimension can be significantly affected and determined by economic factors (as, for example, when the development of markets

2

Reciprocity, Altruism and the Civil Society

tends to take over the role previously played by those ‘relational goods’ that arise as by-products of non-market interactions; see Gui and Sugden 2005). Conversely, the quality of relational life can bear some relevant economic effects: it is well established, on the basis of robust and widely-acknowledged empirical evidence, that better working performances are achieved in those environments where more value is given to the quality of relations (the opposite end of this spectrum is ideally occupied by the phenomenon of bulling and ‘mobbing’ in the workplace). Experimental Economics and Behavioural Economics have been showing for several years that, in order to gain a sound understanding of significant economic phenomena, the analysis needs to be broadened through the introduction of categories such as ‘sincerity’ and ‘genuineness’ (terms I employ here as synonyms of non-instrumental dealing), existence of which (either in the subject or in other agents) considerably affects motivation and interaction. The sphere of economic theory also witnesses a growing interest towards some exquisitively relational aspects, in an attempt to make sense of those genuinely pro-social behaviours that are embedded in ordinary market dynamics (e.g. the voluntary contribution to public goods), and not just focusing on non-market behaviours (e.g. family choices – phenomena with which economic theory was already traditionally concerned: see Becker).2 Experimental evidence suggests that, in many cases, motivations underlying behaviour and relational dynamics produce ‘anomalies’ in the conduct of those subjects who, under the influence of such dynamics, prefer strategies individualistically non-rational according to economic theory (because ‘dominated’ by more rational ones).3 The analysis of ‘genuineness’ becomes especially meaningful as it turns to assess if and to what extent the market might be able to produce relational goods (or bads). As this recent literature grows, the science of economics needs to confront the exceedingly urgent question whether its analytical framework might has become too narrow to represent such dynamics. In fact, until we look at non-instrumental relations holding to the conventional view of market and economic interaction, we are forced to interpret such behaviours as deviations and anomalies. As a result of this view – which, we will see, arises directly from the Smithian tradition – the idea of genuine sociality is necessarily associated with the sacrifice of individual well-being: interaction is represented as a game in which gains in genuine relational terms correspond to losses in strict economic terms (salaries or material pay-offs in general).4 The standard economics’ approach to sociality builds on the fundamental assumption that the genuineness of motivations is directly proportioned to the willingness to sacrifice self-interest: yet, one might wonder, is ‘willingness to sacrifice’ the appropriate test to measure genuinity in economic dealings? Economic theory has traditionally endorsed this opinion, drawing on the

The current debate on economics and reciprocity

3

peculiar understanding of the relation between sociality and market that we will discuss in the following pages.5 Interestingly, according to the feminist critique (Nelson 2005), the idea that any genuine form of reciprocity implies sacrifice has been used to disguise the exploit of women within the family, and today it helps sustaining the thesis of lower wages in jobs requiring intrinsic motivation. Finally, one is able to conclude that the neoclassical interpretation of sociality and reciprocity involves some difficulties and perhaps requires to be further elaborated and enriched. This is, therefore, the direction in which we are about to proceed, beginning by questioning two key assumptions of the conventional view on genuine sociality in economics: 1 2

We will maintain that even the ‘cautious reciprocity’ underlying contracts and repeated games is, in fact, a relevant form of reciprocity; Not only will we illustrate how this form of reciprocity is not necessarily in conflict with more ‘genuine’ forms, but also that these are, in many cases, complementary.

Sociality and well-being The results produced by current researches on subjective well-being in relation to economic variables are proving remarkably important in terms of the economic account of sociality. Contemporary social sciences today have largely acknowledged the critical role that reciprocity – here intended specifically as a form of social genuineness – plays in the pursuit of a ‘good life’. In the next chapter I will show that this has not always been the case along the history of economic thought (that has largely underestimated the role of intrinsic relationships); to this effect, the return to the analysis of sociality in economics constitutes a new event in economic theory. The broad research project set off by the so-called ‘happiness paradox’ offers sound and comprehensive evidence supporting the idea that relational life is the component most affecting self-assessment of subjective well-being (even relatively more than income).6 Psychological studies, in particular, provide empirical and experimental evidence on this topic. Daniel Kahneman, for example, has carried out several research projects indicating the critical importance of relationality for the happiness of human beings.7 Economists Meier and Stutzer (2004), working on German panel data from the period 1985–1999 (the German SocioEconomic Panel, GSOEP), have demonstrated, for example, the existence of a robust correlation between volunteer activity (chosen as an indicator of genuine relationality) and subjective well-being. And as psychologists examine those persons who report to be more satisfied (and who are regarded as such by others too), it turns out, without exceptions, that they experience positive and meaningful interpersonal relations (Diener and Seligman 2002).

4

Reciprocity, Altruism and the Civil Society

Psychological studies offer extensive evidence on the influence of relationality on people’s happiness and satisfaction. Some researchers have interpreted relatedness in terms of a primary necessity all essential to well-being (Deci and Ryan 1991). Especially those psychologists who find themselves in agreement with the eudaimonistic principles of Aristotelian inspiration claim that there is a universal connection between the quality of human relations and subjective well-being: Evidence supporting the link of relatedness to SWB is manifold. Studies suggest that, of all factors that influence happiness, relatedness is at or very near the top of the list. [. . .] Furthermore, loneliness is consistently negatively related to positive affect and life satisfaction.8 (Deci and Ryan 2001, p. 154) Other researches, concerned with the clinical aspects of well-being, have established the existence of links between interpersonal relations and health (Ryff and Singer 2000, p. 34). Finally, Bruni and Stanca (2008) have illustrated, on the ground of World Values Survey’s dataset (consisting of 264,000 observations from 80 countries, over the period 1980–2003), the strong correlation between the time a person dedicates to relational activities (time spent with friends, relatives or volunteering) and the self-evaluation of life-satisfaction (or happiness), a correlation which remains robust even when several other variables are controlled for (age, income, education, health, culture, etc.). Empirical studies, therefore, seem to suggest a general and fairly clear message: in the pursuit of happiness and human flourishing it is inevitable to continuously fall into the territory of relational genuineness, viz. of noninstrumental reciprocity.

We-rationality We are about to focus on the specific topic of reciprocity within today’s economic sciences. Before doing so, it is interesting to consider briefly one heterodox method, still little acknowledged among economists, of introducing reciprocity in the economic analysis: the theory of ‘team reasoning’, which is currently being investigated by both economists and philosophers.9 I am particularly concerned here with Martin Hollis’ and Robert Sugden’s theories of the so-called ‘we-rationality’ and ‘team-thinking’.10 The roots of this idea date back to the work of classical thinkers such as Smith, Rousseau and Genovesi. The main point is to develop a concept of rationality in such a way that the logic underlying a person’s decision about which action to undertake could be summarized as ‘this action represents my part in our action which yields good consequences for us’, rather than just ‘this action yields good consequences for me’.11 The cognitive aim of Hollis’ and Sugden’s operation is to carry out a

The current debate on economics and reciprocity

5

rethinking of the idea of economic rationality in an attempt to establish a ‘sense of reciprocity’, remaining within the realm of individual reason, but without taking in an olistic approach from the methodological point of view. In antithesis to their work are those authors (from Polanyi to Latouche) who, faced with the ‘social damage’ produced by individualistic and instrumental rationality, propose to save the social fabric composed of trust, morality, reciprocity, etc., by withdrawing from the domain of rationality and going back to ‘traditional’ or pre-modern values such as gift or reciprocity (intended as non-market relationships). The argument of these authors, who are sceptical about (economic) rationality, can be summarized by the claim that rationality erodes the conditions that make human society possible. Hollis’ proposal takes a completely different direction: his point is not whether or not to include rationality in the analysis, but rather it is the nature of rationality itself that needs to be questioned and reassessed in such a way that trust or reciprocity ‘makes sense, given a different idea of reason’ (1998, p. 161). Trust within reason, the title of his latest book, synthesizes effectively his research programme. According to Hollis, reciprocity has to be settled within the idea of rationality, as he claims that through such an approach it is in fact possible to successfully accommodate behaviours which are relational in nature, like trust and genuine reciprocity, but remain otherwise unsettled in the context of individualistic rationality: ‘we need a more social conception of what persons are and a role-related account of the obligations which make the social world go round and express our humanity’ (Hollis 1998, p. 104). The English philosopher sees reciprocity as something more complex than mere contract cooperation, something that arises from the mutual consideration of personal interests (as in Hume’s formulation, for example) and tends to overlap the relational logic that is typical in friendship. Therefore, Hollis’s intent is to design a theory of rationality which sees reciprocity as rational, even when such behaviour makes the single individual act, apparently, against her own interest in the short term. And yet, Hollis considers reciprocity rational only among people whose interpersonal relations are already build upon a disposition for reciprocity: the rationality of reciprocity is then rather different from an unconditional obligation towards anyone. The expectation that the practice of reciprocity will be extended to others and that it will bring advantages for all the members of the group is a precondition for the rationality of any act of reciprocity. The foundational question Hollis rhetorically poses is then: ‘Is it finally possible to be an individual who puts the team first? That sounds like a contradiction in terms’ (p. 110). As it stands, his proposal is an attempt to combine the value of individuality (freedom of action in particular) with the value of reciprocity (intended by Hollis as the social bond). Sugden (1993) identifies the essential trait of the ‘we-rationality’ (distinguishing it from ‘group egoism’) in the concepts of ‘team-thinking’ and

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Reciprocity, Altruism and the Civil Society

‘membership’, where the latter is better appreciated in the light of its original meaning which connected arms and legs as members of the same body: ‘Acting as a team member means acting as a component of the team. It is to act within a concerted plan, doing ones pre-arranged part without asking whether or not, given the actions of the others, your own action is contributing more or less to the goal of the team. [. . .] It is enough for the team members to know that the plan was designed to reach the objectives of the team and that these objectives will be reached if everyone does their part’ (p. 86). Through the concept of membership, a person who is motivated by we-rationality ‘values his actions as part of a whole made up of the actions of all the team members: for that person an action is rational in as much as it is part of the actions as a whole, which, taken together, have produced good results’ (ibid.). The motivation underlying action within a team relationship is not primarily instrumental: instead, it can be understood within a logic that accounts for ‘sense of belonging’, for the desire to comply with social rules, for devotion to duty, for trust or reciprocity. In 1970, R. Titmuss, a Sociologist at London School of Economics, published his classic research on blood donations, presenting some surprising conclusions and raising a lively debate also among economists. One of the most interesting findings of Titmuss’ field study concerns the donors’ answer to the question: ‘Why do you give blood?’. As a matter of fact they would usually reply: ‘Because one day myself or one of my family may need it too’. Indeed, such an answer makes no sense in the light of standard economic rationality. The blood I give out today will not be given back to me, nor will the fact that I am in fact a donor speed me up the waiting list if I needed it or my family did. Therefore, if all the subjects were to follow a logic inspired by ‘economic’ rationality, it would result in a typical ‘prisoner’s dilemma’ situation, in which in equilibrium no-one would contribute. On the contrary, if we adopted ‘we-rationality’ to make sense of this phenomenon, we should reply: ‘I give blood, because I take care of our blood’, whereas ‘our’ refers to my community or even my nation. At the basis of blood donation is a ‘sense of belonging’ to networks of relationships which are very deep-seated in our psyche. As Hollis says: ‘For people who flourish within networks of relationships, generalised reciprocity is a rational expression of who they are and to what they belong’ (Hollis 1998, p.147). Central to this theory is the idea of conditionality, which will often occur in the following chapters. What kind of conditionality occurs in the ‘werationality’? Indeed, a conditionality that is different from the one on which contracts are based; rather, it could be expressed by a statement like: ‘I interact with you because you are my friend, my “partner”, and since we are friends we can be considered as a plural agent. In order to be friends it is necessary that we share a certain kind of reciprocity: you have to be my friend as well, and you have to prove this to me with a certain kind of reciprocating behaviour because this is the only way we can be aware of belonging to the same group, of being a team’. This is still a kind of conditionality. Hollis

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remarks, on the topic of blood donations, that for an individual moved by we-rationality to make a donation, she must believe that ‘enough’ people are doing the same.12 She knows that not all the people are going to give their blood and hence accepts that there is going to be a certain amount of free riders (those who will benefit of the blood without contributing); if she believed to be the only one giving blood, she would stop doing it. To say ‘enough’ is not intended as a contract clause, although it is as much a form of conditionality, whereas the condition is to belong to a group that is large ‘enough’.13 To what extent such an approach contributes to the comprehension of social and economic dynamics? To a considerable extent, I would say. At this stage I shall just present an application, in which economic rationality and reciprocity are not necessarily in contrast with each other. Let’s then consider a contract, having a certain term, and let’s picture it as a team, whose individual actions are dominated by ‘we-rationality’. The team is formed by parties that are bound by contract, and the goal is to achieve a result that will benefit all contracting parties, on condition that each acts in accordance with an overall set of actions, even when individual action would produce greater advantages by not cooperating. Nevertheless, a team-reasoning relationship is different from a cooperative game because it lacks the enforcement, but it is also different from a repeated game with emerging reciprocity strategies because, as we will observe, they remain within individual rationality. In team-reasoning mutual defection is not prevented through punishment (a device that does not apply in ‘we-rationality’), but through the mutual expectation that the other players also feel, like she does, part of the team. ‘Sincerity’ and ‘genuineness’ or sacrifice consist in choosing, at a certain stage of the game, a defection-dominated strategy, trusting that others will do the same so that all together they will be able to enjoy a higher result. But how do we explain behaviours characterised by trust, reciprocity, altruism, openness towards those with whom we share no or very loose bonds, behaviours that do not satisfy that ‘enough’ condition, while still being, as we will see, decisive for the enhancement of reciprocity dynamics within civil society? Here, Hollis borrows an evocative expression used by Rousseau, who linked the passage from the private individual to the citizen to a ‘radical change in the agent’ (p. 83). But he does not explain what this ‘radical change’ is about, justifying this lack in a phrase which forms the conclusion of his book: ‘A fighting arrogance about questions must still go with a proper humility about answers’ (Hollis 1998, p.163). In the next chapters I will make an attempt, perhaps showing a little ‘arrogance’, to conceive a third form of reciprocity, following in Hollis’ footsteps.

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Reciprocity, Altruism and the Civil Society

Relational goods Closely connected to sociality and reciprocity, the idea of ‘relational goods’ is also increasingly attracting the interest of economists. The concept of ‘relational goods’ was introduced within the theoretical debate almost at the same time by four different authors: philosopher Martha Nussbaum (1986), sociologist Pierpaolo Donati (1986), economists Benedetto Gui (1987) and Carole Uhlaner (1989). Gui defined relational goods as ‘immaterial goods, and yet not services that can be consumed individually, but connected to interpersonal relationships [. . .] goods that we may call “relational” ’ (1987, p. 37). Similarly, Uhlaner defines them as ‘goods that can only be “possessed” by mutual agreement that they exist, after appropriate joint actions have been taken by a person and non-arbitrary others’ (1989, p. 254). The two economists call ‘relational goods’ those dimensions of human relationships that cannot be produced or consumed by an individual alone, because they depend on the modalities of interactions with others and can be appreciated only when shared in reciprocity. The economic approach to relational goods, however, leads to interpret them as distinct from the relationship. Gui explicitly expresses this methodological position, in order to preserve a continuity within economics, which sees goods as as a different instance from the act of consuming. For the same reason he tends to distinguish the relational good from the relationship. Therefore, in Gui’s theory, which has been much further analytically developed, the relational good is distinct from the subjective characteristics (i.e. affective states and agents’ motivations).14 In particular, Gui (2002, 2005) proposes to examine every form of interaction as a particular productive process, which he calls ‘encounter’. He suggests that ‘between vendor and potential buyer, between doctor and patient, between two colleagues, and even between two clients of the same store’ (2002, p. 27), in addition to traditional outputs (e.g. a transaction or a productive task carried out, a service provided) further intangible outputs are produced that have a relational nature: relational goods, in fact. To sum up, according to Gui and Uhlaner, relational goods are not coincident with the relation: friendship cannot be defined as a relational good, but instead as a repeated interaction, a series of encounters and affective states of which the relational good is just one component.15 Martha Nussbaum makes a different use of the expression ‘relational good’, compared to Gui, as she considers friendship, mutual love and civic commitment to be typical relational goods, in which the good actually is the relationship: they come into existence and expire with the relationship. According to an American philosopher, whose neo-aristotelian background was also influenced by the thought of Sen and Mill, relational goods identify a class of human experiences in which the relation itself constitutes the good. All the definitions of relational goods that have so far been given ascribe a

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foundational role to the reciprocity dimension. Finally, it is worth pointing out that in the case of relational goods the motivation determining the other player’s conduct is in fact an essential element (Aristotle already defended the idea that the highest friendship, which contributes to eudaimonia, can never be instrumental, because it is a virtue, as we will see).16 Robert Sugden, similarly to Gui, maintains: ‘The affective and communicative components of interpersonal relations are relational goods (or bads). I propose a theoretical strategy for analysing the affective component of interpersonal relations. The aim is to understand some of the mechanisms by which interpersonal relations generate affective states that are valued or disvalued by participants’ (Sugden 2005, p. 53).17 Nussbaum also makes an important contribution on the theme of the ‘fragility’ of relational goods: ‘These components of a good life are going to be minimally self-sufficient. And they will be vulnerable in an especially deep and dangerous way’ (2001, p. 344). Personally, I believe that in order to grasp the peculiarity of relational goods, the first thing we need to do is to get rid of the ‘public good–private good’ grip. As a matter of fact, as long as we try to accommodate the notion of relational goods amongst private goods (goods that are non-rival in consumption and excludable, like a pair of shoes or a sandwich) or alternatively amongst public goods (non-rival and mostly non-excludable),18 we still remain within a non-relational paradigm. Both the definitions of private and public good, in fact, do not imply any relation amongst the subjects involved: the only difference between the two types of goods consists in the existence of certain ‘interferences’ in consumption. For this reason, the consumption of public goods is basically nothing more than an act of consumption that single individuals make independently from one another (as in the case of an un-busy road or two people contemporarily admiring the same painting in a museum, one’s consumption not interfering with the other’s), this according to the non-rivalry assumption. As a consequence, I consider misleading the attempts to accommodate relational goods among public goods, preferring to interpret relational goods as a third class, in addition to traditional ‘public’ and ‘private’ economic goods. In the light of what has been discussed so far, and leaving unaltered the specificity of the different positions outlined, I would summarize the essential properties of relational goods as follows: a

b

Identity: the identity of the persons involved is a fundamental ingredient. This is what Uhlaner means as she argues that ‘goods which arise in exchanges where anyone could anonymously supply one or both sides of the bargain are not relational’ (1989, p. 255).19 Reciprocity: because they are made of relations, these goods can only be enjoyed within reciprocity; they are reciprocity goods: ‘Mutual activity, feeling, and awareness are such a deep part of what love and friendship are that Aristotle is unwilling to say that there is anything worthy of the

10

c

d

e

f

g

Reciprocity, Altruism and the Civil Society name of love or friendship left, when the shared activities and the forms of communication that express it are taken away’ (Nussbaum 2001, p. 344). Simultaneity: contrary to normal market goods, be they private or public, whose production is technically and logistically separated from consumption, relational goods (like many persons’ services) are produced and consumed simultaneously; goods are co-produced and co-consumed at the same time by the subjects involved. Even if contribution to the production of the encounter might be asymmetrical (like the organisation of a party among friends or the management of a social cooperative), pure free riding is not possible in the consumption of relational goods because, in order to be enjoyed, they require the agents to be involved in a relationship with the characteristics we have been describing.20 Motivations: in genuine reciprocity relations, the motivation underlying behaviour is a substantial element. The ‘encounter’ itself – a dinner, for example – can generate relational goods or only ‘standard’ goods depending on the motivation that inspires the subjects. If the relationship is not conceived purely as an end in itself but only as a means to something else (e.g. negotiating business deals), then there is no relational good.21 Emerging fact: relational goods ‘emerge’ within a relationship. Possibly, preferring the category of ‘emergence’ rather than the economic category of ‘production’ makes it easier to appreciate the very nature of relational goods. To say ‘emerging fact’ is to stress the otherness of the relational good, its being a third component beyond the contributions made by the agents, and in many cases even beyond their original intentions. This is why a relational good can ‘emerge’ even within a common market transaction, as, at some stage, and in the middle of an ordinary instrumental economic relationship, something happens that leads the agents to go beyond the initial motivation of their meeting and so the relational good emerges.22 Gratuitousness: we may well say that gratuitousness is a synthetic characteristic of relational goods, meaning that a relational good is such only as long as the relationship is not ‘used’ for other purposes, i.e. as long as the relationship is enjoyed as a good in itself and it arises from intrinsic motivations.23 This is why, as Nussbaum says, the relational good is a kind of good whereas the relation is the good, a relation that is not a combination of interests but rather an encounter marked by gratuitousness.24 Relational goods then demand intrinsic motivations towards that particular relation. Good: finally, another synthetic account of relational goods arises from the substantive: they are goods but not commodities (in Marx’s terms), that is to say, they have a value (because they respond to a need) but not a market price (because of the gratuitousness).25 Having listed these characteristics we can’t but acknowledge the

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difficulties experienced by economic theory in dealing with human relationships moved by complex motivations. As it is, economics looks at the world from the point of view of an agent choosing goods: it fails to grasp the relation (or regards it as a means or a constraint), just because the relational good is not a sum of goods or individual relations (that is a contradiction in terms!), and other agents are not goods nor constraints.26

An assessment of the current debate on reciprocity in economics We-rationality and relational goods are definitely important ‘news’ in the way sociality is considered in economics. Notwithstanding, our speculation has crossed the debate on reciprocity only incidentally so far, leaving aside definitions and explanations of this (complex) concept. As a matter of fact, today we observe among economists a special interest for the category of reciprocity. I refer to Appendix 1 for a short review on recent contributions to the study of reciprocity in economics (addressed in particular to those readers who are not familiar with the economic literature on reciprocity). Here I limit my remarks to one more aspect. While the economic theory of relational goods, the we-rationality and, initially, the empirical evidence most arising from psychology have directed attention at some rather sophisticated and inward aspects of sociality, the economic idea of reciprocity is still too little ‘complicated’. Although economists are undeniably bringing highly significant contribution to the subject of reciprocity, it is necessary to point out that even the most refined theorists – like those working around the research project of the so-called strong reciprocity – ultimately endorse two perspicuous foundational ideas, which will be critically assessed in this work: 1

2

Although the conditionality of reciprocity (as they define it) is different from the one operating in contracts, this reciprocity lies within the domain of conditionality. In this light an unconditional action is not interpreted as a matter of reciprocity but rather defined as ‘altruism’, or, in other cases, simply as a ‘sucker’s’ behaviour. Forms of relationality other than this kind of reciprocity are called ‘selfish’ and, however, not reciprocity (like altruism).

These two points arise clearly as we consider an extremely significant quotation, belonging to one fundamental contribution to the ‘strong reciprocity’ theory: It is important to distinguish strong reciprocity from terms like ‘reciprocal altruism’ and ‘altruism’. An altruistic actor is unconditionally kind, i.e. the kindness of her behavior does not depend on the other actors’ behavior. A reciprocally altruistic actor, in contrast, conditions her behavior on the previous behavior of the other actor. Yet, while a reciprocally altruistic actor is willing to help another actor although this

12

Reciprocity, Altruism and the Civil Society involves short run costs, she does this only because she expects long-term net benefits. [. . .]If [in a sequential game] player B is an altruist she never defects even if player A defected. Altruism, as we define it here, is thus tantamount to unconditional kindness. In contrast, if player B is a strong reciprocator she defects if A defected and cooperates if A cooperated because she is willing to sacrifice resources to reward a behavior that is perceived as kind. [. . .]The kindness of a strong reciprocator is thus conditional on the perceived kindness of the other player. [. . .]. Since a reciprocal altruist performs altruistic actions only if the total material returns exceed the total material costs we do not use this term in the rest of the paper. Instead, we use the term ‘selfish’ for this motivation. (Fehr, Fischbacher and Gächter 2002, p. 3)

In this book I will appraise reciprocity from a different perspective: as to the first point above, I will introduce a form of reciprocity that I will call ‘unconditional’, which, nevertheless, will be separated from altruism, and whose key element can be found in the concept of ‘intrinsic reward’;27 as to the second point, I will not call selfish the ‘reciprocity without sacrifice’ characterizing contracts and repeated games, but rather I will treat it as one important form of reciprocity, often completing the other two more ‘genuine’ or intrinsic forms that we will consider. For these same reasons, in the next chapters we will attempt to ‘complicate’ the economic idea of reciprocity, by accommodating it within a relational paradigm – a kind of relationality that will also be applied to the reciprocity theory, making different forms of reciprocity interact with each other – hoping in this way to overcome the ‘monophisism’ of current theory. The aim of the following chapters will be to present, also with the aid of the history of ideas, the manifold repertory of reciprocity, which will highlight the critical role played by the reciprocity of contracts and by that form of reciprocity that is not purely conditional. The analysis will than be further extended to actions inspired by intrinsic motivations and thus (and paradoxically) even to non-conditionality. It will be especially the introduction of non-conditionality to lead us beyond the current economic approach to reciprocity. We will then discover that reciprocities are many. Not all conditional. Yet, all reciprocities.

2

Homo oeconomicus’ two hundred years of solitude

It is interest alone which produces our friendship. François de la Rochefoucauld, Maxims

In this chapter my aim will be to outline a more complex analysis of reciprocity on the basis of a non-conventional history of economic thought. In a quest for new ideas, we shall search the works of some notable economists who have considerably affected the idea of sociality and, indirectly, the idea of reciprocity in modern and contemporary economic theory. Learning the reasons of the absence of reciprocity in contemporary mainstream economics will mark the first step to grasp the importance of its restoration into economic analysis, especially in a form that shall not be limited to the one featured in the current debate. Let us then begin with a question: What form of market relationship does the tradition of economic science specifically entail? This question held a central position in the thought of the eighteenth-century theorists concerned with the economy and society, but, being directly related to the role and nature of the market (an institution that is fundamental in modern democracies), it still represents an important challenge for those who study modern economies and societies today. In order to approach such an extensive subject, I have chosen a particular and yet rather prominent perspective in the history of economic thought. The analysis will move from the answers that were given to the above questionmentioned by two authors, the Neapolitan Antonio Genovesi (1713–1769) and the Scottish Adam Smith (1723–1790), who initiated the debate on the relation between reciprocity and economics. In their theories, Genovesi and Smith both ascribed special importance to the theme of sociality in civil life, in a time when the first signs were becoming apparent that something new and remarkable was taking place in the organization of economy and society. It was then the first dawn of market economy, a period of civic optimism that constitutes an invariably ideal reference for those wishing to seize the peculiarity of market humanism, its potentialities and limitations. I, therefore, believe the works of Smith and Genovesi to be particularly appropriate in

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order to grasp not only the historical and methodological reasons, the shadows, but also the lights, behind the origin of the typical form of relationality taken into account in the economic analysis of the market. In the course of the chapter, Genovesi depicts a rather distinctive theory of sociality in economics, which failed, nevertheless, to attract many followers along the tradition of the economic science; Smith, on the other hand, discloses some among the main reasons which led modern economics to neglect the role of genuine sociality in economic transactions, thus confining homo oeconomicus to ‘two hundred years of solitude’ he has only just started to overcome. The similarities between Smith and Genovesi are many – and one, in particular, is illustrated in the next paragraph. However, it is on one significant difference that I shall concentrate, a difference concerning the interpretation of market economy and directly related to the conception of reciprocity and of the kind of sociality that occurs within the economic sphere (to which I will synthetically refer as ‘market’ in a less restricted sense than ordinarily implied in economic theory).1 Not only shall this help to trace the historical account forming the object of the current chapter, but also to address the overall theoretical analysis in later chapters, where the topics that are about to be introduced might be occasionally recalled. Thanks to the advantage of time, we are now in a position to observe that it was Smith’s theory – and not Genovesi’s – to decisively influence the way in which the relation between market and sociality has been understood in the economic science. In any case, I try to show that although Genovesi’s view remained at the margins of modern economics and social theory, both answers were, in fact, coherently plausible and continue to offer fruitful insights for the current debate on reciprocity.

Market and civilization, civilization is market Genovesi and Smith are remarkably alike in many key aspects of their thought, but before turning to their theories let us consider some biographical circumstances. The two authors were contemporaries (though they never had any direct contact, nor is it likely that they were ever aware of each other’s existence),2 both were leaders of two among the most influential economic schools of the eighteenth century; they both became economists after studying and writing contributions in moral philosophy and, as economists, were concerned with the same emerging phenomenon: the rise of market economy and the consequent hope – expression of a genuinely illuministic and optimistic attitude – that feudal society could be shortly overcome, in most part as the result of the development of markets. Noticeably, several essential traits of Smith’s and Genovesi’s conception of sociality in economics spring from the analysis of trade and for this reason we shall look at it closely. Smith’s view on free trade, and on its crucial role in economic development and wealth creation, is far too famous to linger on it: Smith considers the development of trade and markets as the main indicator of the civic progress

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of a nation. Without free markets, without economic and social mobility, no civilization can exist. The Smithian defence of freedom of trade and exchange stands as a typical instance of ‘liberty humanism’. Where economic freedom occurs and markets establish their typical institutions, naturally trust, truthfulness and all civic virtues will ensue. Conversely, where civilization occurs, along come the markets. In this context, the following well-known passage from his Lectures on Jurisprudence is emblematic: Whenever commerce is introduced into any country probity and punctuality always accompany it. These virtues in a rude and barbarous society are almost unknown. Of the nations of Europe, the Dutch, the most commercial, are the most faithful to their word. The English are more so than the Scotch, but much inferior to the Dutch. (Smith (1978 [1763]), p. 538) Smith is thereby in a position to claim that the market directly generates civil society: while being essentially different from friendship, its existence produces a network of horizontal relationships upon which all other forms of reciprocity and freedom are founded. Genovesi and the Neapolitan tradition of civil economics seem to perfectly concur on this point with Smith and more generally with the Scottish Enlightenment. As a matter of fact the Neapolitan tradition too regards economic activity as accompanying civil life and hence understands trade as a highly civilizing factor. In line with fifteenth-century civic humanists (Leonardo Bruni, Poggio Bracciolini, Coluccio Salutati, Bernardino da Siena, etc.) and with Vico, Genovesi and the eighteenthcentury Neapolitans not only regard civil life as not contrasting with virtues, but also picture it as the place where civic virtues can be fully expressed. A careful consideration and praise of commerce remain central themes throughout the whole discourse of Genovesi, as clearly suggested by the title he chose for his work, Lezioni di commercio ossia di economia civile (Lectures on commerce, that is on civil economy), where ‘that is’ means that for Genovesi commerce is civil economy. Fundamentally, Smith and Genovesi look favourably on commerce because, by calling upon the most powerful forces of human agency (the desire to acquire wealth, to lead a good life, a means for distinction, etc.), it objectively contributes to a more egalitarian and free society, and normally with economic agents not endeavouring nor being able to intentionally anticipate it: ‘no one has greater or more capacious strength than commerce, for it raises to public value the natural cupidity of men, the most powerful and well-loaded spring, only generator of all our civil goods’ (Lezioni, I, Chap. 16, § I). Furthermore, where no commerce can be entertained, ‘no form of civic liberty’ (§ xv) exists. As illustrated below, this common praise of commerce and market, intended as the locus and means of civilization, conveys two different views of what constitutes the typical form of reciprocity, or sociality, of the market.

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Reciprocity, Altruism and the Civil Society

Sociality in the market: Political Economy versus Civil Economy Smith, cooperation without benevolence We shall now turn to one well-known, or even the best-known, among Smith’s quotes on the ‘benevolence’ of merchants: It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. (Smith, 1976 [1776], p. 26) A close examination of the structure of this passage suggests that Smith’s intention is not to emphasize the role of self-interest (the praise of interests is put forth mainly in the passages on the heterogenesis of ends), let alone to stigmatize the egoism of English merchants. His purpose here is rather to highlight independence from others and anonymity as the virtues associated to the development of markets. Market relations allow us to satisfy our economic needs without depending on others, and therefore entail a greater dignity in comparison with other forms of social organization, especially in comparison with the feudal society, where many come to depend on the beneficences of few patrons. Markets anonymity, instead, procures that ‘each tradesman or artificer derives his subsistence from the employment, not of one, but of a hundred or a thousand different customers. Though in some measure obliged to them all, therefore, he is not absolutely dependent upon any one of them’ (Smith 1976 1776], p. 420). Crucial to our considerations is therefore the link between those virtuous relations taking place in the market (and delivering from unchosen dependency) and the form of sociality that the market demands and permits. In particular, it is worth recalling that Smith conceives market relations as intrinsically different from friendship (a key word in this account of reciprocity): In civilized society he [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. (ibid.) In this light, friendship cannot be accounted as a feature of ordinary market relations. Benevolence and sympathy are constitutional traits of the human being and Smith extensively discusses them in his Theory of Moral Sentiments – a treatise concerning relational categories such as sympathy and fellowfeeling 3 – yet, they are not typical ‘sentiments’ of economic relations. Hence,

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despite being justifiably interpreted as a highly civilizing factor for the reasons we have just illustrated, the market is not in itself a locus of genuine relationality, nor does it need to be so in order to properly fulfill its function: quoting Granovetter (1973), it is sufficient, or perhaps necessary, the occurrence of a sort of ‘weak relationality’. The main ‘weak bond’ the market requires is the sense of justice, which is self-enforced on the ground of an illuminated self-interest that general principle which regulates the actions of every man, and which leads men to act in a certain manner from views of advantage’ (Lectures on Jurisprudence, pp. 538–539). In this perspective it is the development of commerce that generates reputation and trust, rather than vice versa as in Genovesi’s system (Bruni and Sugden 2000, 2008). The market, delivering human beings from dependency on others – and thus from asymmetrical relations – allows us to pursue authentic sociality and to give it full expression, but this can only take place before, after or parallel to the market. The transition from, in Henry Maine’s language, the status of feudalism to the contractus of market economy was interpreted by the first economists as a sign of growing civilization: the cash nexus, despite being a less rich model of relationship compared to mutual love, is nevertheless more civil than the slave–master relationship of feudal communities. This is the key insight to Smith’s a humanism and to the whole classical political economy. By the same token, economic relationality begins where friendship ends and vice versa. Market society is an extraordinary invention in that it gave different people the opportunity to experience, for the first time and to a considerable extent, a free and pacific kind cooperation, unconstrained by the sacrifice or risk conveyed by friendship, a good that is too rare and fragile, and hence inadequate, to found a large-scale society upon it: Society may subsist among different men, as among different merchants, from a sense of its utility, without any mutual love or affection. (Smith 1984 [1759], II, 3, 2) The market therefore yields beneficial and civilizing effects, because, through the introduction of egalitarian relations, it stands against the unchosen and illiberal hierarchic relations of feudalism.4 It should bear no surprise, then, that in the same chapter in which he discusses ‘the benevolence of the butcher’ Smith also claims that ‘nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens’ (Smith 1976 [1776], p. 27). The existence of the market thus allows the establishment of civil society that is able, on the one hand, to prevent war and abuse which would otherwise sneak through the creases of mutual love and, on the other hand, to cast aside the picture of a world in which few patrons assist multitudes of beggars (just the state Europe was slowly reclaiming from).

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Reciprocity, Altruism and the Civil Society

Finally, although individuals might pursue their personal interests and regard economic relations as merely instrumental, civil society is providentially 5 designed so as to turn the overall effect of individual actions to everyone’s advantage; but everyone’s advantage – the wealth of nations – doesn’t demand that agents count public good (or the good of the other party) among their goals, and it is more likely that common good can in fact be achieved when agents do not try to promote it directly, as their ‘benevolence’ might create distorsions in the price mechanism. The latter idea is clearly stated in the following quote, which, not surprisingly, follows the famous passage about the ‘invisible hand’: ‘I have never known much good done by those who affected to trade for the public good’ (ibid, p. 456). Antonio Genovesi, market as fraternity Bearing in mind Smith’s account of sociality in economics, we shall notice immediately that Genovesi’s position on the relation between market and sociality is far from Smith’s and from what would later become mainstream economics. Like Smith, Genovesi sees the person as a costitutively relational creature. In his (economic and philosophical) works, he frequently remarks that ‘no human condition shall be regarded as more miserable than that of being alone, excluded from any commerce of men’ (Lezioni, I, Chap. 10, § xi). We are ‘created in such a way as to be touched necessarily by a musical sympathy, pleasure and internal satisfaction, as soon as we meet another man’; and ‘like for the strings of an harpsichord, by striking one, the octave resounds in the consonance of tensity, whereas it would not if you tended it more or less than the unison demands; in that same way, if our natures are moulded, as it seems, by the same rod, and printed of the same print, there is no chance that the encounter with one does not move sympathetically the other’ (Diceosina, p. 42). Human sociality, however, belongs to a class of qualified sociality, i.e. reciprocity: Man is by nature a sociable animal: it is a common maxim. But not every man will believe that there is no animal on earth that is unsociable. [. . .] in what way shall we then say man to be more sociable than others? [. . .] [It is] in his reciprocal right to be assisted and consequently in his reciprocal obligation to assist us in our needs. (Lezioni, I, Chap. 1, §§ xvi, xvii) In this passage there is something we don’t find in Smith: according to Genovesi, reciprocity is the essence of human relationality. Smith, instead, maintains that the typical trait of human relationality is, even beyond sympathy,6 the ‘propensity in human nature [. . .] to truck, barter, and exchange on thing for another’ (Smith 1976 [1776], p. 25).

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Genovesi understands economic relations in the market as relations of mutual assistance, neither impersonal, nor anonymous. The market is itself conceived, in fact, as an expression of the general law of civil society, that is, reciprocity.7 The theorization of economic interactions as mutual assistance permeates his whole work, but emerges most effectively from the analysis of trust, hereafter illustrated. A key expression in Genovesi’s civil economy is ‘public confidence’, which he considers, together with the whole tradition of civil economics, as the principal precondition for economic development: ‘Reliance is the essence of commerce, [. . .] without it all the parts composing its building would collapse by themselves’ (Filangieri 2003 [1780], p. 93).8 Genovesi goes on to observe that public confidence is ultimately a matter of non-instrumental reciprocity, not just a matter of contracts. This further step is needed to show that, in his theory, the market too is a place of genuine sociality, or, in a word, of friendship (in the sense that will be explained later). According to the Neapolitan economist, public confidence is a capital that cannot be built outside the market and later spent in the market; as already mentioned, the market is part of civil society. For this reason the concept of public confidence in civil economics has an immediately economic nature. Where no confidence exists, for the sake of reciprocal reliance of the citizens on each other, and for the certainty of transactions, and the vigour of laws and science and the integrity of judges. [. . .] For where no trust exists, there can be no certainty of contracts, no vigour of laws, no reliance of man on any men. For contracts are bondages, and civil laws are public pacts and contracts themselves. (Filangieri 2003 [1780], § 1) So far the difference with Smith could remain ambiguous: to the Scottish economist, market exchange relies on social pacts and civic virtues (especially on justice). Where, then, shall the difference be retrieved? The answer becomes apparent once Genovesi’s entire system of thought is taken into account. It’s at the heart of his Lezioni, in the ‘Catechismo della legge di natura’ (Catechism of natural law), a sort of rational demonstration of the importance of virtues for the achievement of private and public happiness, that differences are fully revealed. Genovesi places friendship within the dynamics of civil society, comprising the market. On the contrary, it has been noticed earlier that Smith and the economic tradition inaugurated by him do not regard friendship as an economic category. From the Smithian perspective, friendship is a chosen private relation amongst specific individuals that are tied by affective bonds, while trust (in the form the market requires) is impersonal and grounded in interests rather than affections or sentiments. Such a distinction is rejected by Genovesi. His anthropological conception gives rise to a theory in which the person is conceived as a creature naturally tuned to interpersonal

20

Reciprocity, Altruism and the Civil Society

relationships and carrying an intrinsic desire that underlies any form of human cooperation. Ethical confidence, which Genovesi sees as the foundation of any civic and political cooperation (intending the latter as a government’s act), is rational to the same degree as friendship is: both are preconditions for the harmonic development of civil society. Therefore, the relationality of the market, as Genovesi describes it, is intrinsically different from the one Smith (but also Hume) – and subsequently the mainstream in social and economic theory – assumes. As his meditation on civil economy develops, Genovesi comes to the belief that the relationality of the market (or economic relationality) is not different in nature from the typical relationality of civil society: this also helps us to make sense of the expression ‘civil economy’ which occurs in the conclusive part of the analysis of social matters in the printed edition of his Lezioni in 1765.9 Let us consider a few examples showing the evolution of this economic theory into a theory of the civil dimension. In the early versions of his ‘Ragionamento sulla fede pubblica’ (Reasoning on public trust), written in the mid-fifties, Genovesi’s meditation on trust yielded a distinction between ‘private confidence’ and ‘public confidence’, recalling a dualistic scheme still based on the romanistic and juridical model. In the Lezioni, though, the reflection is organized on three levels: ethical confidence, economic confidence and political confidence, with the meaningful remark that: ‘this confidence, or tightening string of peoples, is threefold, and I shall call it ethical, economic and political’ (Lezioni, II, Chap. 10, § III). Ethical confidence is ‘the reciprocal reliance that every citizen holds on the probity and justice of another’ (ibid.), and in a footnote he highlights that confidence comes from the Latin word fides, recalling the ‘string’ that ties civil society together, a fides that is very similar to the concept that in this essay I have termed ‘reciprocity’ (not without the direct influence of Genovesi’s theory). This passage, in fact, is crucial for the development of our premises. Reciprocity (or ‘reciprocal confidence’) is one, though reciprocities are many; in other terms, reciprocity is what keeps civil society together (the ‘string’), but it is ‘threefold’. It is then on this very intuition that Genovesi founded the theoretical building we will explore in the following chapters. The reciprocity occurring in the market (economic reciprocity) is a species belonging to the same genus of reciprocity. Market trust (economic confidence) shares the same nature of other civil forms of trust, whereas for Smith the relationality operating in the market exhibits a different nature (friendship is not required among parties, let alone love) compared to the non-economic kind (or, as he says, ‘friendship’). Summarizing what we have outlined so far, both Smith and Genovesi are civil economists, because they conceive the market, and any economic matter, as a civil moment, a means and a locus of civilization. In Smith, as in Hume, there is a neat separation between private virtues

Homo oeconomicus’ two hundred years of solitude

21

(and, among these, friendship or love) and civic virtues (like justice). The common good – wealth and development – grows as long as we are able to keep these two domains well separated. On the contrary, we have seen that Genovesi explicitly rejects such a vision. In particular, it has been observed that in Genovesi there is a decisive stress on the intrinsic value (not just instrumental) of social interactions: they are not, as in Smith, essential means for the development of society, but rather they are civil society themselves. The meaning of the expression ‘civil society’ somehow gathers all this. In both theories, however, there is no contrast between market and civil society, but rather harmony: the market is a fundamental component of civil society and a civil society favours the development of markets, in a virtuous circle that greatly fascinated early theorists of modern market economies.10 Smith, once again, believed the typical form of market relationality to be different in nature from the relationality underlying civil society; contrary to small communities (like the family), a large society, the commercial society, owes its functioning to a new and distinct form of cooperation without friendship, the cooperation of the market, new bond of society. Genovesi instead, despite being a modern author in all respects (as his analysis of commerce demonstrates), would not accept the key idea of modern economic theory, that is to say, the separation between the logic of the market and the logic of the rest of society: according to him the market is civil society because it is based on the same logic, namely, reciprocity. The rest of the book shall proceed along the very same line: not opposing the reciprocity of the market to the more genuine reciprocity of friendship and gift; I will distinguish between them but, overall, we shall keep them together by picturing the market as an instance of civil society, where the various forms of reciprocity do not rule out each other but are enforced one by the other.

The solipsistic foundation of the neoclassical economic theory after Smith Smith’s vision has prevailed in modern and contemporary political economy. Here we shall not be concerned, anyway, with the evolution of the idea of sociality in economics.11 A key figure was Vilfredo Pareto, who impressed a decisive mark to the methodological path leading to the conception of relationality considered in the science of economics. It is widely acknowledged that the Italian economist limited the reach of economics to those choices supported by logical reasoning only, that is, choices grounded in an instrumental and anonymous kind of rationality: ‘Science proceeds by replacing the relationships between human concepts [. . .] by relationships between things. [. . .] Such a path is also the only one that can lead to the truth in political economy’ (Pareto 1900, p. 162).12 In fact, according to Pareto, the criterion to distinguish the economic from

22

Reciprocity, Altruism and the Civil Society

the social domain is the instrumentality of actions: economic actions are represented exclusively by (logic) repeated actions, which instrumentally and appropriately link the means to its end; all other actions are assigned to other social sciences, and particularly to sociology.13 Through the reading Hicks, Allen, Samuelson and the other mathematic economists of general equilibrium gave of Pareto’s works, this vision is still today very much endorsed in the discipline (Bruni 2002). Another economist who played a prominent role in the process of development of the Smithian approach to sociality is the English economist Philip Wicksteed, who, in The Common Sense of Political Economy (1933 [1910]), advocated the necessity of eliminating non-instrumental and non-anonymous interpersonal relations from economic science through the theory of non-tuism. Wicksteed’s economics allows for any kind of action (not just those ‘logic’ ones), and it is with no methodological concern that he takes altruism into account in his analyses, condemning the exclusion of ‘benevolent’ or ‘altruistic’ motivations from the study of political economy. Only one situation cannot be accommodated in his theory: once the other party is labelled ‘you’, we abandon the domain of economics and the appearance of the person actually participating in the economic relation is revealed. Sympathy is admitted towards anyone, except the ‘you’ I meet in an economic exchange. In this context, Wicksteed then introduces his famous neologism, the so-called ‘non-tuism’: It would be just as true, and just as false, to say that the business motive ignores egoistic as to say that it ignores altruistic impulses. The specific characteristic of an economic relation is not its ‘egoism’ but its ‘nontuism’.14 With Wicksteed, who indeed exerted a considerable influence on mainstream economics,15 the economic sphere comes to be identified with purely anonymous, non-personalized and hence instrumental relations. Indeed, in the world of the English economist and Unitarian Church pastor, some room for friendship is allowed but, as in Smith’s case, this can only happen in a second time: the business relation, as such, remains anonymous and instrumental. Therefore, the market, the ideal locus of economic exchange, can very well be inhabited by a multitude of anonymous ‘others’, but certainly not by any ‘you’ with whom I may be involved in a personal relation, not to mention, friendship.

Edgeworth’s ‘tuism’ In the nineteenth century, political economy has seen many approaches to relationality, but Smith’s methodological approach has never been seriously questioned by the principal exponents of classical and neoclassical economics

Homo oeconomicus’ two hundred years of solitude 23 (apart from the Marxist and socialist traditions). So far, two important exponents such as Pareto and Wicksteed have been recalled. Mill, Edgeworth or Pantaleoni, for example, despite remaining substantially aligned with Smith, did nevertheless attempt to conceive the economic science as more open to non-instrumental relationality. Let us focus briefly on F.Y. Edgeworth, a classic in modern economic theory, especially well known for his theses on utilitarianism and hedonism and for the analysis of exchange, but maybe less for his vision of sociality, partly deviating from mainstream, which instead is particularly interesting for our purposes. Edgeworth, in line with Smith, considers the market as a negotiating process, but with the significant difference that interpersonal dimension and sympathy are important for economic exchange as well. With Edgeworth, market exchange is not an encounter of things, nor is it one of the anonymous and impersonal individuals, but a place where personal qualities are in play as well. From the very first pages of his Mathematical Psychics (1881), he too, like marginalist economists, adopts the Robinson Crusoe metaphor but, contrary to neoclassical economists, Defoe’s shipwrecked appears from the very beginning in the company of Friday. If we take a look at the way in which Edgeworth describes the process of equilibrium formation taking place among the agents, we realise that the relational dimension does play a part – at least in imperfect competition, though it is not regarded as a regular situation. The description of the importance of the convergence process towards the equilibrium, that is, the process of negotiation, where he reintroduces the Smithian sympathy, remains nevertheless very interesting: We might suppose that the object which X (whose own utility is P) tends – in a calm, effective moment – to maximise, is not P but P + λΠ; where λ is a coefficient of effective sympathy. And similarly Y may propose to himself as an end Π+µP. What, then, will be the contract-curve of them modified contractors? The old contract curve between narrower limits. [. . .] As the coefficients of sympathy increase, utilitarianism becomes more pure, the contract-curve narrows down to the utilitarian point.16 According to the English economist, reciprocal sympathy is always a feature of domestic relations (family or friendship bonds) but, he remarks, this might occur ‘one day perhaps in political contracts’ (Edgeworth 1881, p. 53, note 1), in civil life, so that which we cannot exclude the action of a sympathy principle.17 Edgeworth thereby opened the second part of his Mathematical Psychics describing self-interest as the foremost principle of economics. This strong assumption, nevertheless, did not prevent him from finding room for other sentiments and for economic behaviours even within normal economic interactions. This component of non-instrumental sociality in Edgeworth’s thought has been left aside in the economic analysis of the twentieth century, a tradition

24

Reciprocity, Altruism and the Civil Society

which aligns Edgeworth (along with his famous ‘box’) with Pareto, Wicksteed and the other non-relational economists of the twentieth century.

The absence of the interpersonal dimension in contemporary economic theory Non-instrumental reciprocity, or that form of reciprocity differing from the one that arises in contracts, remained outside the domain of contemporary economics. As a matter of fact, even those traditions apparently more attentive to social dimensions have labelled genuine relationality an extra-economic matter. Let us just briefly turn to the work of Menger and Marshall. Carl Menger, founder of the Austrian school of economics, despite claiming in his Principles that ‘goods’ are in general ‘what is suited to the satisfaction of human needs’ (1871, Chap. 2, § 1), at the same time he denies that ‘family relationships, friendship, love’ are ‘goods’ and defines them as ‘free manifestations of will’ (ibid., footnote 2). Alfred Marshall came to the same methodological conclusion, though within a different epistemological framework. Thus, he wrote in his Principles, the book which mostly influenced English economics since the first part of the twentieth century: ‘The affection of friends, for instance, is an important element of wellbeing, but it is not reckoned as wealth, except by a poetic licence’ (1946 [1890], p. 54). Further on, defining individual wealth, he maintains that economic wealth ‘excludes his personal friendships, in so far as they have no direct business value’ (ibid., p. 57). Economic contemporary theory, with respect to the way sociality is approached, developed through the twentieth century, the methodological project of these early neoclassical economists and, ultimately, of Smith. In this paragraph I intend to mention to two lines of research, which have been central to today’s economic debate and, at the same time, constitute a full continuity with the historical and methodological analyses carried out so far: I refer to Gary Becker’s economic approach to human behaviour and, above all, to (traditional) game theory. These two approaches, considered together, represent a good deal of what we refer to as rational choice theory today, that is to say, economic theory applied to intentional choices. Those who are familiar with Becker’s school will probably find a remarkable consonance between Wicksteed’s non-tuism and Becker’s approach to human behaviour. Becker’s methodology, today widely applied in economics, is based on the epistemological assumption that it is possible to analyse human behaviour extending the applicability of human rationality so as to cover any intentional action, in any sphere, from politics to art, from religion to family. Becker too, like Wicksteed, has no problems in introducing altruism in his analyses (which do not imply egoism at all, as we can deduct from his studies on the family). Thus, he argues: ‘The analysis assumes that individuals maximize welfare as they conceive it’ (Becker 1996, p. 139). And, again similar to

Homo oeconomicus’ two hundred years of solitude

25

Wicksteed, he analyses interpersonal relations within a purely instrumental framework: none of the two theories allows for what we call today ‘relational goods’. Consider, just as an example, his famous Theory of Marriage, which in practice inaugurated economic analysis of non-economic behaviour. In that work, while remaining within the Pareto-Wicksteed tradition, what Becker does is extending the neoclassical theory of consumer to family dynamics. He does not move beyond the dichotomy market/friendship, nor beyond the Paretian instrumental/non-instrumental, and not even beyond Wicksteed’s tuism/non-tuism. In a much simpler way, he deals with the family as a kind of market where one can exchange commodities, a market that he names the marriage market (transcending from friendship and relationality), supported by an instrumental logic and characterized by non-tuism: ‘Household-produced commodities are numerous and include the quality and quantity of children, prestige, recreation, companionship, love [which, in his theory is intended as a kind of service/care], and health status. Consequently, they cannot be identified with consumption or output as usually measured: they cover a much broader range of human activities and aims. I assume, however, that all commodities can be combined into a single aggregate, denoted by Z’ (Becker 1973, p. 816). An analogous evaluation can be expressed about game theory, although attempts are increasing to innovate from the point of view of interpersonal relations (as we shall see also in this book); this shows how game theory is a language, potentially able to accommodate many dimensions even pertaining to the most genuine sociality.18 In the standard approach, nevertheless, playing (interacting) is not in itself a source of utility for the players, but only a means to maximize payoffs,19 which are defined before the beginning of the game (relation) and are not modified by the development the game, nor by sentiments, motivations or identities of the players. The other player is essentially a complex constraint, because in the typical strategic logic of game theory the player is a ‘live’ maximizer (and not just a ‘dead’ economic or technological constraint): ‘Game theory provides an elegant, universal logic of practical reason, offering much to anyone whose notion of rationality is instrumental and whose view of social world is individualistic’ (Hollis and Sugden 1993, p. 32). The founders of game theory had very clear the idea that their research programme was something else than the analysis of interpersonal relations or non-instrumental reciprocity. Von Neumann and Morgenstern, in the Introduction of Game Theory and Economic Behaviour, the book which disclosed the research programme of game theory to economists, commenting on the so-called Robinson Crusoe economics, wrote: The chief objection against using this very simplified model of an isolated individual for the theory of a social exchange economy is that it does not represent an individual exposed to the manifold social influences. Hence, it is said to analyse an individual who might behave quite

26

Reciprocity, Altruism and the Civil Society differently if his choice were made in a social world where he would be exposed to factors of imitation, advertising, custom and so on [. . .] Crusoe is given a number of data which are ‘dead’; they are the unalterable physical background of the situation. [. . .] Not a single datum with which he has to deal reflects another person’s will or intention. (Von Neumann and Morgenstern 1964 [1944], pp. 10, 12)

Such a statement could have led to the introduction of interpersonal relations within the economic analysis, adding ‘alive’ variables (emotions, identity, sentiments) to the standard (or ‘dead’) ones. But it is sufficient to read a few more lines of that Introduction to realise that what von Neumann and Morgenstern were trying to say was essentially different: The study of the Crusoe economy and the use of the methods applicable to it, is of much more limited value to economic theory than has been assumed heretofore even by the most radical critics. The grounds for this limitation lie not in the field of those social relationships which we have mentioned before – although we do not question their significance – but rather they arise from the conceptual differences between the original (Crusoe’s) maximum problem and the more complex problem. (Ibid., p. 12, my version italics) Therefore, the challenge they defended was to deal with a greater complexity in the calculation of the optimum choice (the maximum), given the presence of ‘alive’ variables,20 without entering the territory of non-instrumental human relationality often prevailing in civil interactions.21 Two concluding comments ought to be made following this digression in the history of economic thought. Through different paths and for different reasons,22 genuine relationality, the one characterizing non-instrumental reciprocity, mutual love and friendship, was considered by the founders of the economic science as a subject not pertaining to their analyses. On the other hand, the current revival of attention towards the theme of reciprocity we summarized in the previous chapter does not exhaust the rich diversity of the classical tradition of economics, particularly of civil economy. The intrinsic value of sociality, the conception of market interaction as friendship and as a relation non-opposed to the approved civic one, are concepts basically missing in economics today, apart from the cases of the few economists we mentioned. For this reason too, in the following chapters we shall try to image a different path – also different from contemporary theories on reciprocity – to access the territory of human sociality and reciprocity. We will articulate it around six chapters: three methodological and foundational chapters where three forms of reciprocity shall be introduced, and three analytical chapters in which I shall make those three forms of reciprocity interact.

3

A first form of reciprocity Cooperation without benevolence

Reciprocal equality is the salvation of states. Aristotle, Politics

The rationale of non-cooperation The analysis in the preceding chapter has supplied us with some elements to appreciate the principal reasons leading economics to concentrate on individualistic relationships, instrumental and non-tuistic. In the opening chapter, we acknowledged the recent revival of a form of reciprocity (i.e. ‘strong reciprocity’) which, as I said, I regard favourably but do not fully endorse. Having sketched the historical account – that ideally conveys the theoretical study – we are now ready to set off the analysis of the three forms of reciprocity. The first form we will consider is the typical form of the official tradition of economics, whose roots have been earlier retraced. We shall investigate it within the framework of contracts with enforcement (and no need to assume any kind of benevolence in agents) and, later, in repeated games.1 The logic of this first form of reciprocity, which in practice is equivalent to cooperation, requires agents to put at risk very little – if anything at all – of their own interest: reciprocity then emerges as the result of a rational calculus, to be complemented, in the case of contracts, with appropriate institutional requirements. This only form of reciprocity had been traditionally taken into account in economics until the most recent appearance of other forms (briefly reviewed in Chapter 1). Any economy and society, as was briefly suggested, will prosper and foster human development if they manage to activate some forms of cooperation. We begin, nevertheless, with the analysis of non-cooperation, in an attempt to figure out why and upon what conditions economics may provide a theoretical understanding of non-cooperation. To this end, we shall closely consider the standard idea of economic rationality, developed in economics as a by-product of its approach to sociality.

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The characteristics underlying the standard idea of economic rationality can be summarized by spelling out the assumptions, frequently implicit, of the most famous game2 in economics: the ‘Prisoner’s Dilemma’, a trivial game but, for many scholars, embodying the essence of the problem of human cooperation.3 The game shows how, even in those contexts in which cooperation would be advantageous to all agents, rational interaction leads to non-cooperation. The same logic operating in this game has been employed, as well known, to make sense of several dilemmas that arise in the absence of markets: from pollution to traffic congestion and, in general, to the difficulties of non-contractual cooperation (that one may also term ‘spontaneous’). The game illustrates a ‘Prisoner’s (or Prisoners’s) Dilemma’ one-shot interaction (i.e. non-repeated) between two (or more) individuals, A (Anna) and B (Bob) sharing identical features (they possess the same information and the same structure of preferences, the two elements that otherwise normally serve to discriminate economic agents). A and B find themselves separately choosing their optimal move (or strategy, if the game is repeated) in a situation of interdependence, in which they are aware of facing an agent identical to themselves and they both understand the structure of the game (i.e. the structure of payoffs associated with each outcome) and are aware that their results will depend as well on which strategy the other player adopts. Table 3.1 describes, in the normal form, the structure of a Prisoner’s Dilemma-like game.4 We could also express payoffs in a more general way by calling b the benefit and c the cost (Table 3.2). When A cooperates and B does not (or defects), A is only assigned a cost, but no benefit: her payoff is therefore − c. When both cooperate, A and B realize a payoff that is worth the difference between benefit and cost: b − c. When B cooperates and A does not, A obtains only benefits: b. Finally, when neither of them cooperate, nothing happens: 0.5 Arguably, as long as A and B are rational (at least in the sense implied in economic theory), they will both choose not to cooperate.6 A game equilibrium thus characterized represents a dilemma, in that Table 3.1 The Prisoner’s Dilemma numerical matrix A/B

Cooperation

Non-cooperation

Cooperation Non-cooperation

3.3 4.1

1.4 2.2

Table 3.2 The Prisoner’s Dilemma A/B

Cooperation

Non-cooperation

Cooperation Non-cooperation

b − c, b − c b, − c

− c,b 0,0

A first form of reciprocity

29

non-cooperation prevails even when each player, individually, prefers mutual cooperation (b − c > 0). We may well conclude that the solution of the game and its dilemmatic results rest essentially upon two basic assumptions: concerning rationality and one concerning interaction. With regard to rationality, the first assumption is individualism or, we might say, decision-making in terms of ‘what the optimal choice is for me’ rather than, for example, ‘what the optimal choice is for us’. If, in other terms, we assumed that choices were made by a ‘collective agent’, the rational choice of the Prisoner’s Dilemma would be cooperation. The second assumption concerns instrumentality, that is to say, the action is implemented with the aim of maximizing a result (the payoff) that is distinct from the action itself; behaviour as such, then, is not a source of utility, it doesn’t possess any intrinsic value (and this will become clearer later on). As to individualism, it shall be noted that when the game is proposed to philosophers or social scientists never before concerned with economic theory, opinions about what a rational player ought to do are sharply divided (Gold and Sugden 2007). While, according to someone, the rational choice is obviously ‘non-cooperation’, others, on the other hand, are equally persuaded that rationality demands cooperation. In particular, it is interesting that the non-cooperative result of the game, as Bacharach (2006) very well points out, comes to depend substantially on the representation of the game: ‘In a Prisoner’s Dilemma, players might see only, or most powerfully, the feature of common interest and reciprocal dependence which lie in the payoffs on the main diagonal. But they might see the problem in other ways. For example, someone might be struck by the thought that her co-player is in a position to double-cross her by playing D in the expectation that she will play C. This perceived feature might inhibit group identification’ (p. 86). In this perspective, then, each player’s move and the game final outcome ultimately depend upon the subjective frame that the players adopt in representing the game to themselves. Moreover, interaction is anonymous: even if the game was repeated with different subjects (as normally happens in social interactions), each player would still gain experience uniquely in relation to the general rules of the game, unable to acquire any specific knowledge about the behaviour of any particular partner – the player knows she won’t meet the same co-player anymore or, even if she did, she wouldn’t be able to recognize her.7 Given these hypotheses, non-cooperation is a game equilibrium (a Nashequilibrium) from which none of the players has incentive to depart unilaterally. What, then, does the Prisoner’s Dilemma tell us about ‘reciprocity’? It tells us basically one thing that is just as simple as it is fundamental: for reciprocity to be activated, providing benefits to both participants and society, some well-defined conditions are required that the Prisoner’s Dilemma (thus described) does not answer.

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Admittedly, if the agents in the previous game had managed to cooperate, both of them would have been better off:8 therefore, the Prisoner’s Dilemma can be rightly interpreted as a failure of economic cooperation.

Contractual cooperation We have learned so far that a non-cooperation or defection strategy (that we shall call ‘N’) results as a failure of cooperation and civilization caused by the lack of the necessary requirements to seal a contract with enforcement. Hence, we shall not regard those choosing not to cooperate in the Prisoners’s Dilemma as necessarily selfish or antisocial, as is commonly assumed in the literature.9 The information we possess in such a game is too narrow to attempt any hypotheses about the motivational structure of those people adopting such a non-cooperating strategy. The same agent who chooses not to cooperate in a certain context or game, for example, might choose to cooperate if the game was repeated, or an enforcement was applied, or if she found herself in a relational context (and also in the light of Bacharach’s aforementioned passage, the same subject might as well cooperate or not cooperate, regardless of her preferences, solely in virtue of the game frame). In fact, by assuming the existence of a binding enforceable agreement between the parties, the non-cooperative game turns into a ‘cooperative’ one.10 If the contract involves sufficiently high sanctions (with probability = 1 of the certainty of enforceability) in case of defection (e.g. 4), the (numerical) matrix of the game (that is no more a Prisoner’s Dilemma) takes the form of Table 3.3. The payoffs associated with the cooperation strategy remain the same, while the ones associated with ‘non-cooperation’ become 0 (4 − 4) in case of unilateral defection and −2 (2 − 4) in case of mutual non-cooperation.11 Assuming this different payoffs structure, cooperation becomes the game equilibrium. Therefore, a non-cooperation strategy N may arise merely as a consequence of the absence of the necessary conditions to enable cooperation among cautious persons. At this point a first conclusion can be drawn. The elements presented so far suggest that the logic of the Prisoner’s Dilemma does not offer arguments for the ‘failure of cooperation in contracts’ or a thesis against Adam Smith’s ‘invisible hand’ of markets: rather the opposite. This game implies that interaction ends in non-reciprocity or noncooperation precisely because the players are unable to seal a contract, which is Table 3.3 Game with enforcement A/B

Cooperation

Non-cooperation

Cooperation Non-cooperation

3.3 0.1

1.0 −2.−2

A first form of reciprocity

31

a form of reciprocity. The Prisoner’s Dilemma can then be seen as a praise rather than a critique to typical contractual cooperation, in a logic very similar to Hobbes’ or Rawls’ contractualism: the non-cooperation is the ‘state of nature’ before the social contract (Binmore 2005). Pointedly, for reciprocity or contractual cooperation to operate, some institutional conditions are necessary to grant a binding agreement. Sanctions established in the contract (in case of unilateral defection) need to be effective in exerting their deterring power.12 The promise to cooperate that each player makes to the other cannot be enough, because there is an incentive to break promises.13 Nonetheless, when a binding agreement is either not feasible or too costly, non-cooperation becomes the only possible strategy (so far as we remain within this first logic of cooperation/reciprocity). When we succeed in cooperating in the reality of social life, this can be frequently ascribed either to the fact that we do participate in some kind of formal or silent agreements featuring a variety of sanctions and incentives or entailing a different logic of cooperation, or else, as in the case we are about to describe, or to the fact that the game is repeated.14 Civil society prospers and human development progresses when many such situations occur, triggering cooperation: for this reason my view of this first form of reciprocity is not negative in a civil sense,15 contrary to what can be found in the literature (especially sociological), where contractual reciprocity is often characterized as ‘negative reciprocity’: ‘Negative reciprocity ultimately relies upon personal guile, suspicion, self-interest and a material gain’ (Thompson 2003, p. 88).16 The Prisoner’s Dilemma is actually a sort of trap that in practice forces us not to cooperate. When in later chapters other forms of reciprocity – different and to some extent specular to this traditionally economic form – will be introduced, the idea won’t be to just oppose the ‘good’ or ‘civil’ ones to this ‘bad’ or ‘uncivil’ typically economic form,17 but rather to opportunely combine and blend the various forms, including the one arising in contracts. We shall then try to spell out the main characteristics of this form of reciprocity that we are about to extend to repeated games. Many of these characteristics will be further investigated where this form of reciprocity will be compared with the other two. However, it is wise to introduce three of them straightaway, since they will weave the thread of our discourse. a

b

Conditionality: A’s action is conditional upon B’s action. No gratuitousness applies here. A’s action stands as the reason and the condition for B’s action, and vice versa: ‘I’ll scratch your back if you’ll scratch mine’, thus Binmore (1994, pp. 114–115), likening us to primates, defines this first form of reciprocity, with a sentence that well summarizes the conditionality demanded in contracts.18 Enforceability: For this kind of cooperation to work, contracts must be enforceable (feasible and executable) and hence there must be a third

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c

party, independent and sufficiently authoritative, to impose sanctions as envisaged by the contract. This precondition makes agents’ value noncooperative outcomes ex ante, thus including sanctions among the payoffs of their optimal choice.19 Exchange of equivalents: Actions must bear an objective equivalent value, normally measurable in monetary terms.20 From an ethical point of view, this characteristic goes back to the classic idea of commutative justice: a contract is perceived as just (even by an external and impartial judge) if the values being exchanged are equivalent.21

The kind of cooperation entailed in contracts requires nothing more than adequate institutions, efficient laws, effective sanctions and an uncorrupted judiciary to enforce them. This form of reciprocity therefore necessitates, in a word, civilization. Far from being a natural product of human aggregation, it is instead the result of a millenarian process of foundation of institutions and cooperation culture. For these reasons and in line with ‘civil economy’ tradition, I understand the reciprocity of contracts as a civil achievement, which, once more, not only is in contrast with other more ‘genuine’ forms of reciprocity, but even allows people who are not tied by blood, etnic or clan bonds to entertain, if they wish – and hence freely – a relationship that frequently yields mutual benefits and conveys civil bonds as well as economic and social development.

Repeated cautious interactions In this paragraph, we will see that the logic of this first form of reciprocity continues to apply even when enforcement is missing – most cases in civil life – and the game remains non-cooperative. In fact, we will question how the same rationality works in repeated interactions (the most ordinary situation in social life), where cooperation can emerge even without binding contracts. What reciprocity with enforcement has in common with the one we are about to define is the lack (or the insufficiency) of intrinsic value associated to reciprocity as such, leading agents to adopt ‘cautious’ strategies: they won’t accept to take risks in non-enforceable cooperation unless sufficient guarantees are provided, but, we’ll see, in certain situations they might cooperate. Hereafter, on talking about this first form of reciprocity when we shall deal with repeated or evolutionary games, we shall refer to this ‘spontaneous’ form without enforcement in games.22 Admittedly reciprocity is a matter of freedom and interactions over time: for this reason, despite advocating the critical role of contract as a form of cooperation indispensable to civil life, in the following pages we analyse reciprocity only in repeated interactions without enforcement. Economic theory tells us that cooperation can emerge within a Prisoner’s Dilemma-type of interaction if the game is repeated and the probability that the game will continue is not too low.23 Also, as seen in Chapter 1, this is the

A first form of reciprocity

33

form that some authors engaged with ‘strong reciprocity’ call ‘mutualistic cooperation’ or ‘reciprocal altruism’, defining it in a simple (and semplicistic) way as selfish (or kinship) behaviour. To get to the logic of reciprocity in repeated games, let us imagine a simple everyday situation.24 Frank is a traveller asking for a smoking room in a guesthouse. In the hotel there are only ‘non-smoking’ rooms available. The fine in case of smoking is de facto not enforceable. If Frank spends only one night in that room, standard game theory (or, better, rational choice) would forecast that Frank will smoke (maybe opening the window of the room in the morning) and the guesthouse owner, Felicia, anticipating Franks’ best choice (when he asked in the phone for smoking rooms), will offer lower quality cereals in the morning. No cooperation. Once more, the two parties would be better off if they cooperated even in the one-shot game, but, due to the kind of interaction and rationality triggering their decisions in such a context, they won’t be able to do that. The rationale of this non-cooperation was outlined clearly by the philosopher David Hume, in 1740: Your corn is ripe to-day; mine will be so tomorrow. ‘Tis profitable for us both, that I shou’d labour with you to-day, and that you shou’d aid me to-morrow. I have no kindness for you, and know you have as little for me. I will not, therefore, take any pains upon your account; and shou’d I labour with you upon my own account, in expectation of a return, I know I shou’d be disappointed, and that I shou’d in vain depend upon your gratitude. Here then I leave you to labour alone: You treat me in the same manner. The seasons change; and both of us lose our harvests for want of mutual confidence and security’. (Hume 1978 [1740], book III, section ii, 5, p. 520) Consider now what changes in these non-cooperative situations if the game is repeated. Suppose that Frank will spend two nights in the hotel: in the first night he will prevent smoking, but in the second day he does not – and Felicia will follow a similar strategy. The interaction, however, changes significantly if some probability π that the two players might meet again is taken into account. If, in fact, in such a situation there is a probability (>0) that Frank will come back to the guesthouse in the future, it is possible that he will prevent smoking even in the second day (and a similar cooperative behaviour is also possible on the Felicia side). It is straightforward that in such a new situation the nature of interaction (the game, in our language) between the two parties is radically transformed. In general, it can be noticed that for cooperation to emerge there is no need to assume that the game shall go on infinitely; more simply, it will suffice to assume indefinitely, that is, in no stage of the game the agents believe to be playing the last round.25 In this kind of interactions, the structure of the game is different from the

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one portrayed in contract interactions: there is no guarantee of sanctions (enforceability). In this context, interactions can be personalized, learning is specific, but an enforceable contract cannot be sealed. At the same time, the first form of reciprocity ‘without sacrifice or benevolence’ still holds when cooperation continues to be endorsed as just a result of a mere rational consideration of the respective self-interests, and without any request for benevolence or intrinsic motivation for reciprocity.26 To say that the game can go on after the first round means to pose π >0. In particular, in repeated games27 (Prisoner’s Dilemma-type, with the payoffs in Table 3.2), in order to make cooperation possible, it is important to require that π >(c/b).28 Thanks to an adequately long expectation about the duration of the game, and to the ignorance that the last round is about to be played, the possibility of cooperation becomes viable. No-one, nevertheless, can ensure – and that is the point – that cooperation will actually emerge from interaction. Why? First of all because the probability π can be a subjective estimation, and therefore the values of π can turn out to be asymmetrical in practice (e.g. for player A π >(c/b), while for B is π <(c/b).) What strategies of cooperation are then possible in repeated games representing the logic of what we are calling the first form of reciprocity? The approach I choose to describe this first form of ‘reciprocity without benevolence’, which can emerge in the absence of enforceable contracts, is what I have referred to, in line with Sugden (2004, Chap. 6), as cautious reciprocity, or C strategy. C belongs to the broader family of Tit for Tat strategies,29 but it specifically implies never to cooperate in the first round of the game: the player following a C strategy does not take the first cooperative move, but, if she encounters a subject that cooperates in the first round, she will reciprocate in the second, and that moment onwords she will follow a Tit for Tat logic of action. C, then, gives a reciprocating response, but does not cooperate first: ‘An individual following a strategy of cautious reciprocity waits for his opponent to make the first cooperative move; then, but only then, he cooperates too’ (Sugden 2004, p. 122).30 It is rational, for a self-interested agent, to follow a C strategy? Yes, if the agents live, or imagine to live, in a generally non-cooperative environment characterized by distrust or conflict. If, in fact, people consider and forecast that the prevailing behaviour in a given population is non-cooperation, then C can be a rational strategy, because is not exploited by non-cooperative agents (0 > − c). In general, a strategy of cautious reciprocity can be plausibly followed by those not holding sufficient intrinsic motivation to take chances in a given relationship: if an agent does not know which is the cooperative culture (or strategy) of his or her opponent, can have no reason to risk a negative payoff (− c) and so being exploited even only in the first round. The rational people of the Hobbesian state of nature, characterized by the ‘war of all against all’, can be properly depicted as a population composed by

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C agents: they rationally choose to constitute a social contract (with enforcement), but outside the cooperation guaranteed by the enforceability of the contract, to be cautious is a rational behaviour. Furthermore, a C strategy can be played by those who estimate in a repeated game a too low level of π: in such a contest, if the conditions for enforcement are satisfied, the agents will seal a contract, otherwise they will choose to play cautiously. For these reasons I consider also this first kind of reciprocity to be consistent with the standard economic view on reciprocity: it is a kind of cooperation which excludes benevolence or risk that the other/s will exploit the first cooperative move. A kind of reciprocity, however – this is the point I will argue for – doesn’t stand necessarily in opposition to other more unconditional or generous forms of reciprocity, but may even serve their occurrence, as we shall see later on in the next chapters. Now consider a first key point: can reciprocity, or cooperation, emerge between two (or more) subjects if they all follow strategy C? The straightforward answer is no.31 In fact, in a world populated exclusively by C (cautious) and N (never cooperate or always defect) agents, spontaneous reciprocity/cooperation won’t appear (as long as we hypothesize interactions of the Prisoner’s Dilemma-type). This means C agents, in such an environment, never get to experience reciprocity and in practice will behave exactly like N agents: they are, in fact, potential but sleeper reciprocators. In such a population N-C there are agents open to a form of reciprocity or cooperation (the Cs), but an external observer cannot distinguish them from the unconditional cooperators N: their behaviour is exactly the same, although different in culture. Yet – and this will be one of the main theoretical knots explored in the coming chapters – if C agents manage to interact by putting forward ‘braver’ strategies, they can express their reciprocity too, so becoming ally of unconditional forms of reciprocity. I regard this as a first important result.32 In a world only populated by reciprocators of the first type (C) and of non-cooperators (N), only two forms of relationship can be found: a relation regulated by contracts with enforcement or non-cooperation in interactions where no enforcement can be applied. This model closely resembles those societies or organizations in which people, because of the prevailing culture, strictly comply with formal rules and extremely detailed regulations that attempt to accommodate the greatest number of possible circumstances (in the ineffective effort to make contracts complete). But outside contracts (and we know contracts only describe rather simple relations) are spontaneous and unregulated relations of mutual distrust and non-cooperation, although some of these agents would be willing to play C, but ‘cautiously’. Other real examples are those communities where people, although individually, would be open to experience reciprocity and/or cooperation, actually cooperation never starts: most of the lack of social capital, and

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the related underdevelopment, can be interpreted as culture not necessarily composed by non-cooperative people (the Ns): it is enough a cautious interpersonal attitude. In other words, a society unable to cooperate is not necessarily composed entirely of N individuals; even assuming, like we are, that individuals are C type – and hence potentially open to one (cautious) form of reciprocity – non-cooperation (N,N) may turn out to prevail as the social norm. In fact, the same ‘cautious’ individuals would cooperate if they encountered subjects who cooperate taking the first move (as we will see) but in that particular social or organizational context remain trapped in non-cooperation. There is no need to add more to realize that such a scenario is all but civil or beneficial to a good life. In other cases instead, this first kind of reciprocity doesn’t emerge because the probability that the relationship will last in time, in certain critical moments of community life, might not be high enough: ‘Indeed, individual discount factors are likely to have been high throughout most of human history, both because of the riskiness of life and the fragility of group ties. For instance, hunter-gather groups typically experience periodic threats to their existence, in the form of pestilence, famine and war, at which time the discount factor is quite low, since the probability of group dissolution is high. Self-interested cooperation models predict the dissolution of such groups’ (Gintis 2004, p. 712).33 On the contrary, groups can be often successful in surviving even in those situations, also because human reciprocity is more complex than apes’. All these situations are serious and significant traps of social poverty, which resemble many actual circumstances in which we can ordinarily find ourselves. In other terms, in a world where only cautious cooperation existed, there could only be room for cooperation put forth by contracts, hence, for a cooperation that could arise solely in those situations in which the stipulation of a binding agreement was possible – in practice, not many. Reciprocity outside or without contracts might never emerge and, as seen, it couldn’t emerge at all if this relational form uniquely existed. In a ‘cautious’ culture, unlikely in the ‘pure’ non-cooperative one (N), contracts and non-cooperation in non-enforceable relations can easily go hand in hand. This leads to the conclusion that ‘cautious’ reciprocators, in order to cooperate, need ‘activators’ inspired by different logics of reciprocity.34 As a final note, I wish to underline once again that cautious cooperation, as in contracts (i.e. our first form of reciprocity), is nevertheless a form of reciprocity – although insufficient to build a good society. Large societies manage to live decently, or better, anyway, if interactions increase from the inside allowing to establish contracts (in the sense just specified) or interactions in which relationships tend to last for a long time (even though the stability of relationships has other side effects, not always positive: group closure, freedom limitations, etc.). In such cases, especially relevant in the civil life of today societies, cooperation among people can emerge even without sanctions

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and courts of justice – on condition, though, that other forms of reciprocity also exist in the society so that they will trigger cautious reciprocities too, as we will illustrate and discuss. However, there is one more important aspect to highlight in order for this first form of reciprocity (but for others as well) to spring: cooperation in contracts and repeated games needs, to be effective, not only that the game be objectively able to generate cooperation, but also that agents subjectively represent the game they are playing in such a way that cooperation stands out as a superior outcome compared to non-cooperation.35 In other terms, for any given situation, cooperation only arises if subjects are able to picture interactions as mutually beneficial. It is likely, and historically has been widely documented, that cultures in which people look at others as potential co-operators grow and develop much more thrivingly and rapidly than those social realities in which each person looks at the other with diffidence and as a potential rival in a ‘zero-sum game’. This all goes to show that cooperation – and its nature – is also and above all a cultural matter.

4

Reciprocity as philía

Without friends no one would choose to live. Aristotle

So similar and yet so different Human communities and organizations, including those organizations, such as firms, whose role within the modern economy is especially critical, rest largely on contracts and ‘repeated games’, and hence on the logic of ‘cautious’ form of reciprocity we have just introduced. But there are other forms of reciprocity that, I claim, are also and above all necessary forms that seem not to be adequately explained in terms of the incentives or the controls of reciprocity in contractual relations, nor in terms of a high enough probability of repeating the game with the same partners. Quoting Bowles and Gintis: ‘Among humans however, we do not doubt the importance of repeated interactions and other structures that reward cooperators with higher fitness or other payoffs, rendering seemingly selfish acts a form of mutualism. While an important part of the explanation of human cooperation, there are several reasons for doubting the adequacy of this explanation’ (2004, p. 18). In the preceding chapter, we observed that in a world entirely composed of subjects endorsing the logic of cautious reciprocity (and of N), cooperation would not emerge apart from contractual interactions with enforcement. Yet, the point was made that in the event that these same subjects happened to come across braver agents, they might actually be induced to cooperate. The ability to trigger dynamics of reciprocity even where the conditions to activate first-kind reciprocity might be missing deserves to be further explored; we need to give an account of what such ‘generous reciprocators’ may be like. With this purpose in mind, I devote Chapters 4 and 5 to the introduction of the second and the third forms of reciprocity, respectively. I will refer, in this chapter, to the Aristotelian friendship (philía) as the paradigm for the second form, which is also the paradigm commonly presupposed when dealing with reciprocity in social sciences (especially Sociology). In particular, this second kind of reciprocity resembles the social norm

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purported by some contemporary authors, notably economists, and mentioned in the first chapter. Remarkably, this form, which we will call brave reciprocity, shares many similarities – not in the methodology of the games but in the logics of behaviour – with the notion of reciprocity prevailing in economics today (namely, strong reciprocity); at any rate, in my analysis this is not regarded as the only important form in this context, but simply as one (indeed important) form.1 Having said that, the account offered hereafter will mostly follow a path of its own, with the aim of describing the essential traits which mark the distinction of philía-reciprocity from cautious reciprocity, on one side, and from unconditional reciprocity, on the other, leaving definitively aside the comparison with the ‘strong reciprocity’ and other concepts of reciprocity (indirect, negative, . . .) present today in the debate in social sciences. Philía-reciprocity exhibits characteristics in some respect similar to contracts (according to someone even too similar, as we shall see in the next chapter), and nonetheless retains some distinctive features. We now consider some of the common traits of the first and second forms of reciprocity, taking as inspiration the idea of philia of Aristotle, whose Nicomachean Ethics (Chap. 8 in particular) established the theoretical paradigm of friendship (intended as a form of reciprocity) in Western culture: a

b

Equality: friends, to be such, must stand on a plane of equality. Equality applies both to the adequacy of the response (although is not necessarily a monetary or contractual response). For friendship to last, each person must feel she is not being systematically taken advantage of by the other person. This is why Aristotle associates friendship with justice, which ought to accompany any form of friendship, thus becoming a constitutive characteristic of the latter. Philia requires not only a long-run equivalence in the content of the series of exchanges in the relationship of friendship, but more fundamentally the equality between the subjects of the philìarelationship. On this ground, Aristotle denies the possibility of real friendship between a freeman and a slave, a citizen and a king, an adult and a child, a man and a woman, or between a human being and God: ‘when one party is removed to a great distance, as God is, the possibility of friendship ceases’ (NE, VIII, 7).2 For instance, a kind of reciprocity which entails no sacrifice, as in contracts, seems not to require equality, in principle, but only equivalence (think of a contract between a monopolistic supplier and a consumer, or contracts under information asymmetry).3 Freedom: The liberty principle (referring to both the ‘liberty or freedom of’, or ‘positive’, and the ‘liberty from’, or ‘negative’) lies at the foundation of any form of market-based humanism. As we recalled in the outline of Smith’s and Genovesi’s views, in the absence of markets (as in any feudal society or community) no true friendship could arise because, according to Smith, we would ultimately depend on our ‘friends’ – who could not therefore be real friends.4 The idea that only a free (male and

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c

d

Reciprocity, Altruism and the Civil Society adult) human being may have friends underlines the whole Aristotle’s discourse on phìlia. Friendship is formed freely, and freely it is dissolved. Electiveness: A friend chooses her friend and, in turn, is chosen by her/ him. Friendship is not characterized by transitivity: if X is friend with Y and Y is friend with Z, these relations do not necessarily entail that X be friend with Z. ‘Contract reciprocity’ does not satisfy transitivity either (unless X, Y and Z were partners in the same contract). Friendship is thus elective, not universalistic. Similarly, according to Aristotle, for the higher form of philia (virtue-friendship): ‘One cannot be a friend to many people in the sense of having friendship of the perfect type with them, just as one cannot be in love with many people at once’ (NE, Chap. 8, 6).5 Conditionality: Finally, this characteristic represents a point in common between the first and the second kind of reciprocity, but at the same time it brings out the main point of difference between the two. As a matter of fact, the logic of philía-reciprocity is neither purely conditional (as in the contract), nor purely unconditional (as in the third kind of reciprocity that will be described in Chapter 5). Surely, in the nature of philía there is an attitude of opneness towards the other friend that involves the risk of missing reciprocity, given, however, the pre-condition that the other is a friend, is ‘good’ in Aristotle’s language: ‘nor can they admit each other to friendship or be friends till each has been found lovable and been trusted by each’ (NE, Chaps. 8, 3). One way of expressing this characteristic is to say that the first move of cooperation towards the other is essentially unconditional, but the relationship will be ended if after that the other does not promptly reciprocate. This logic by the French sociologist Alain Caillé (2000) is called ‘conditional-unconditionality’, with an expression that sounds deliberately paradoxical and evocative. We can genuinely say, therefore, that this form of reciprocity behaves differently from the entirely conditional reciprocity of contracts, and nonetheless it demands the other’s response. It’s a reciprocity that takes the first step (by performing an act of trust ex ante) and that is capable of forgiveness. But the other’s response is necessary if the relationship founded upon reciprocity is to last.

Next, we focus on some main differences between the two forms of reciprocity so far illustrated: 1

Repetition: A contract might be exhausted even after a single interaction; we could have in that case a non-repeated game. On the contrary, to deal with philía is to consider a chain of repeated interactions. A one-shot game, therefore, cannot be used to effectively describe this kind of reciprocity (while it can describe the first and, as we’ll see, the third form of reciprocity).6 My decision to adopt a repeated-game framework to represent the social dynamic in the analytical part of this work mainly reflects

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2

3

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a methodological concern: with repeated games we can make subjects interact with the same partners in time so that interaction does not remain anonymous. Relations characterized by philía-reciprocity just call for repeated games.7 Disposition: Another way of rendering the ‘conditional-unconditionality’ is to define friendship as conditional upon disposition, but not upon a single act. Typicall, a friend has a disposition to forgive another friend’s acts of defection (one or more), on condition that the other still maintains her disposition to engage in the friendship. In concrete terms, in a relationship founded on philía (from friendship strictly speaking to the dynamics of a work-team), costs and benefits are not evaluated over single actions, since one may well be disposed to overlook occasional nasty behaviours and to forgive. Friendship will end, though, if we see that the disposition to friendship (or ‘good standing’, in Sugdens (2004, chap. 6) words), and to continue our relationship as friends, has disappeared in the counterpart (this aspect was briefly mentioned when we referred to team-rationality, in Chap. 1). Cooperative behaviour and willingness to forgive cease to apply when we feel we have good reasons to believe the other part no longer is in a disposition of friendship towards us, a disposition that otherwise would need to be convincing and manifested by means of a reciprocating behaviour. Intentions: There is another element, related once again to the role of dispositions, that marks the difference between the first form, where there are no sacrifices involved, and philía-reciprocity: this element lies in the essential role of intentions or motivations underlying action. In firstkind reciprocity, why the other agent chooses to cooperate with me is unimportant: as formerly noted by Wicksteed, in market interaction (the way he considered it) ‘we are only concerned with the “what” and the “how”, and not at all with the “why” ’ (1933 [1910], p. 165). In friendship, on the contrary, the ‘why’ tells a large part of the story. This is especially true of the highest kind of friendship in Aristotle’s theory, i.e. friendship of virtue. Aristotle defines philía as a complex and considerably broad category (encompassing all the relational forms that rise in civil life). In particular, he makes a threefold distinction between friendships of pleasure, utility and virtue.8 The key distinction, however, concerns the pair friendship of pleasure and friendship of utility on one side, and friendship of virtue on the other side. Common to the pair is their being instrumental, self-centred and unconcerned with the motivations underlying the actions: friendship is not an end in itself, but essentially a means the individual has to achieve pleasure or utility; and for this reason friendships of utility or pleasure are regarded by Aristotle as always transitory and unstable. In terms of our categorization, the logic of philía with regard to these two forms falls into the first form of reciprocity (which doesn’t demand sacrifice): ‘Friendship based on utility is for the commercially minded’ (NE, Chaps. 8, 6). Friendship of virtue is portrayed

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Reciprocity, Altruism and the Civil Society instead as the perfect form of friendship in the Nicomachean Ethics: ‘Perfect friendship is the friendship of men who are good, and alike in virtue; for these wish well alike to each other qua good, and they are good themselves. Now those who wish well to their friends for their sake are most truly friends’ (ibid., 3). Being a matter of virtue, this kind of reciprocity demands that the agents put aside the calculation of their own advantage and the opportunistic pursue of pleasure and utility, and that friendship be ascribed an intrinsic value (further observations about intrinsic value or reward will be presented in the next chapter). Friendship of virtue, however, is always a matter of disposition, therefore concerning the intentions which motivate the action.9 A friend is perceived as a value, an end in itself, not a means for the sake of something else; but this can be so only on condition that the person is truly a friend, who intends to remain such in the future. Hence, friendship of virtue is the most elective form of philía, so much so that according to Aristotle one can have very few friends of this third kind (possibly no more than one), while friends of pleasure or utility can be many. An alternative way of illustrating this characteristic of philía is to say that relations founded on reciprocity are personalized and not anonymous (as the contractual relation might be instead): identity is essential to friendship.

The rationale of philía-reciprocity is consistent with Genovesi’s idea of reciprocity in his civil economy; and yet, by posing a particular form of friendship, i.e. ‘mutual assistance’, as the foundation of civil life in his reflection, Genovesi causes friendship to lose its sense of electiveness and intimacy typical of the classical tradition, while opening to the illuministic and Christian concept of ‘universal fraternity’.10 If we looked at the account of ‘mutual assistance’ given in his Lezioni, we would find that according to the Neapolitan economist the logic of friendship-reciprocity is a matter of disposition, rather than single actions. In effect, Genovesi recommends that we cultivate genuine friendship, which involves the willingness to be ‘useful’ to one another.11 But, we may ask, how should we interpret such disposition to friendship? One possibility is to say that a person having such disposition will choose to act in a cooperative manner, holding the expectation that the others, in turn, will be reciprocating towards her. Surely such reciprocity differs from the one experienced in contractual relations (which nonetheless need not be ruled out) because, as already noted, the conditional dimension (that still applies) is only evaluated against the overall disposition and not against each single action.

‘Brave’ reciprocity Our next step will be to ‘translate’ the essential principles underlying philíareciprocity into a repeated-game strategy (of the Prisoner’s Dilemma-type), just like we did in Chapter 3 for the first form of reciprocity. I will be

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adopting a different logic than the one we considered in the preceding chapter (strategy C). In this respect, the difference between the second and the first forms of reciprocity, which was analysed earlier, consists in the presence of an explicit form of benevolence, expressed in particular through the acceptance of the ‘risk’ that the other agent (one’s friend) might in some circumstances ‘take advantage’ of one’s initial willingness to cooperate. Accordingly, we will model our strategy for this second form of reciprocity as an adjustment of Axelrod’s noted ‘Tit fot Tat’ (T) strategy (Axelrod 1981, 1984).12 In a repeated game, the behavioural pattern embedded in strategy T supposes an unconditional act of cooperation in the first round. Second round onwards, T will play cooperation if the other agent responded by cooperating in the first round, or non-cooperation if the other agent did not cooperate. It seems worth emphasizing that strategy T always begins with cooperation. For this reason Sugden (2004) ascribes T to the class of ‘brave reciprocity’ (B) strategies. In turning to the logic of B, we then abandon ‘cautious reciprocity’. By introducing the risk of a loss (compared to riskless strategy C and to all reciprocities that fall into our first category), we move from the first cautious reciprocity and enter a different logic of reciprocity, namely, philía. In fact, unconditional cooperation in the first round does entail the risk of obtaining the lowest payoff (if faced with non-cooperation N or cautious strategy C), a risk whose acceptance may be interpreted as a form of benevolence or intrinsic value for reciprocity.13 In strategies T we can then detect a certain degree of non-conditionality which was missing in the first form we described: here the first move of cooperation is unconditional. It is surely an investment, but the chance of being exploited by a non-cooperating subject (N) is actually taken into account (if only in the first round). Strategy T can interestingly be turned into strategy T1, by means of a variation that better describes the dynamics of friendship-reciprocity. In order to appreciate the meaning of the variation, we need to assume that the players are allowed to make mistakes. An agent X playing strategy T may for instance make a mistake (intentionally or not) at a certain round (i) of the game, thus replying with defection to an act of cooperation. Faced with X’s (accidental) non-cooperation, if Y is a T player as well, she will respond with an act of non-cooperation in round i + 1; in i + 2, Y will not cooperate either and, thus, the relation becomes adjusted to non-cooperation. Strategy T1 instead admits the possibility of forgiveness: in order to interrupt the chain of non-cooperation responses triggered by X’s mistake, Y can decide – for purely self-interested reasons, we can say – to continue cooperating in round i + 2. A T1 player, therefore, may perform an act of trust towards her co-player, if she recognized the disposition to cooperation regardless of occasional mistakes in single acts. In that case, T1 is prone to forgive in the belief that the other agent will be disposed to start cooperating again after the mistake made. T1 can therefore be interpreted as a strategy T adjusted for the possibility of

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forgiving.14 Thus, the rationale of this forgiving does not require sacrifice or gratuitousness. Because of the crucial role of dispositions in dynamics of philía, strategy T1 needs one more ingredient in order to turn into a convention (that is, an equilibrium strategy): the restoration of the damage that the act of noncooperation has produced upon the other player (Sugden 2004 pp. 115ff.). In the round immediately following X’s mistake, Y demands a compensation for the loss she suffered (also as a demonstration that the disposition to cooperation is still binding, in spite of the mistake), consisting of one round (or more) in which X will cooperate and Y will not.15 The importance of ‘reparation’ for the purpose of demonstrating disposition and good standing is well illustrated by Sugden: ‘After having made a mistake a player is under no compulsion to accept punishment since he may possibly resign himself to the loss of his good standing and continue to defect. It is clear that the less forgiving the opponents’ strategy, the more attractive this second option becomes. Moreover, it will also be all the more attractive as the value of π is lower: “the sooner the game is likely to end, the less there is to gain from being in good standing” ’ (ibid., p. 119). On that account, the act of consenting to repair the damage produced upon the other player ought to be understood as a sign of disposition with respect to that particular friendship, rather than as a contractual sanction (there is no third-party enforcement in friendship).16 This logic of reciprocity (without guarantees or sanctions) then bears the risk that the others might not reciprocate the cooperative first move at the outset of the game, thus yielding a lower payoff compared to the case of a non-cooperative first move. In a context in which contracts cannot be sealed and the game is unrepeated (or π is not high enough), cooperation of the first kind cannot emerge. In addition, we learn once again from game theory that when the end of the game is anticipated by the agents (as in many fixed-term contractual relations), cooperation fails to rise from the first move. In these cases (that are fairly frequent, especially within organizations), we ought to rely on different arguments to make sense of cooperation: strategies B only provide explanations to some of these situations (but not to all of them, as we are about to see).

An interlocutory conclusion The occurrence of reciprocity in many economic and social experiences can be successfully explained in terms of this second form of reciprocity. The cases more traditionally debated include various forms of behaviour affected by civil virtues; here, philía-reciprocity seems able of explaining several actions which would otherwise be regarded as anomalies if the first form of reciprocity was solely taken into account.17 Consider, for instance, the logic of reciprocity inspiring the activity of many volunteers in the social economy: these individuals donate their time

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subject to no prior condition of being reciprocated (e.g. through esteem and attention, but also by means of a serious commitment of the organization towards the beneficiaries of the volunteering activity); but if no such feedback is ever provided, the volunteer could face a crisis that might definitively compromise her involvement in that activity. Finally, I wish to offer key to the following chapters: while philía is a generally desirable mode of civil cohabitation, it does not ultimately provide an adequate basis to found upon it a good society. The essentially elective character of friendship makes it incapable of prompting processes of reciprocity among subjects who are not already engaged in the dynamics of reciprocity (who are not ‘friends’ yet) and are not already sharing a friendship but would reveal a disposition to cooperate if they were ‘activated’ (our C agents). It can be easily anticipated that – as we are about to see – a population inhabited exclusively by B and C strategies would fail to enhance reciprocity in their interactions. This consideration seems to further suggest the need to surmise other strategies of reciprocity capable of addressing this failure, and this is precisely what we intend to do hereafter by introducing in the next chapter the third form of reciprocity.

5

Unconditional reciprocity

All the forms of realization have a paradoxical aspect: it seems as though the ego is forgotten, yet it comes out enriched. When I work for the pleasure of doing a certain job, I’m not thinking of myself; when I admire or communicate I merge into the background. And still my existence is reinforced every time. T. Todorov

With or without others? So far, we have discussed two accounts of reciprocity with arguments aimed at illustrating the dynamics of its emergence in the cases that have relevance to civil life. The emergence of reciprocity has thus been represented by employing two logics which, while different, have in common the agent’s expectation or request that the other player (or players) participating in the interaction will also choose a strategy of reciprocity. We labelled this sort of expectation ‘conditionality’ and showed that while it fully applies to the first kind of reciprocity, it becomes more faded, and even willing to take the first step and forgive with ‘philía-reciprocity’; even in this second case, however, the decision of an agent X to follow the strategy of reciprocity is conditioned to the suitably reliable expectation that Y will do the same: ‘Even purely selfish employers have an incentive to make a generous job offer, if they expect sufficiently many workers to behave in a reciprocal manner’ (Fehr and Gätcher 2000, p. 12).1 As mentioned in Chapter 1, the various theories of strong reciprocity suggest that the subjects are generally willing to punish those who do not reciprocate, even when there is a cost to pay, but we remain, as seen, within the domain of conditionality. In a world in which individuals are moved by these two logics of reciprocity (C and B agents), cooperation will be achieved only if we are able to bind ourselves to some non-opportunistic rules, for the sake of a greater individual welfare. This summarizes the rationale of the sort of cooperation that may be established among rational subjects in the two ways we have introduced, and that inspires the contemporary literature about reciprocity we referred to in Chapter 1.

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In this chapter we then ask a new question: is it possible for a subject to start (and continue) following a norm of reciprocity even without holding any reliable expectations that the others will follow the same norm? And if so, what kind of logic would better describe such a behaviour? In other words: is it possible for a subject to follow a logic of reciprocity in a world populated by non-reciprocating agents? Theory suggests that a subject who chooses a strategy of reciprocity (type B) in a population of non-cooperators (N) is bound to extinction (we briefly mentioned this aspect and we will further develop it later in the work): Sugden calls this strategy of reciprocity S for ‘sucker’ (2004, p. 113): ‘It is immediately clear that S cannot be an equilibrium strategy. If you know that your opponent is going to cooperate whatever you do, there is never any point in your cooperating’. This book may also be read as an attempt to show that, in some circumstances of civil life, not only shouldn’t unconditional behaviour be regarded as ‘sucker’, but it even plays a critical role in the dynamics of reciprocity and there might actually be good reasons behind it.

Unconditionality and reciprocity? Several acts of cooperation we witness everyday can be adequately explained in the light of the logics of the first two forms of reciprocity so far analysed. We have repeatedly pointed out that a community unable to take these opportunities of cooperation is indeed ‘poorer’ in terms of social and civil capital and typically unable to create virtuous cycles of development. Further, we observed how the existence of the instrumental and purely conditional cooperation of contractual relations as well as the cautious cooperation characterizing repeated interactions require, but also express and hasten, civility: effective laws, conventions and uncorrupted judges are all indicators of civil life. At the same time, I believe that a civilization can flourish when is able to activate many forms of reciprocity. In this perspective, a second form (friendship or philia-reciprocity) has already been presented, helping us to sense its importance for organizations as well as in civil life. In this chapter – which unfolds the theoretical and cultural heart of the work – we introduce a third form of reciprocity that we will term unconditional or, as we shall see, gratuitous. The logic of this kind of reciprocity departs, therefore, from the first two kinds formerly analysed, where conditionality was the common denominator. It is worth anticipating, however, that the key to the third form is the existence of an intrinsic reward that the agent gains from the action itself, before and independently of the result of the act of reciprocity (which, on the contrary, is affected as well by the behaviour of others with whom the subject interacts). The existence of an intrinsic reward, nevertheless, is a necessary but not sufficient condition to include any given instance of behaviour under the label of this form of reciprocity. A sufficient condition could be formulated as

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follows: the reciprocating behaviour of others does not affect the ‘choice’ to follow this logic of action, but it does affect the ‘outcome’ of the choice. In other words, we might think that even vegetarians or the believers of any given religion perform non-conditional actions because gaining an intrinsic reward from the action itself (e.g. vegetarians maintain their behaviour even in the company of non-vegetarians, whose presence is unlikely to change the choice to follow the vegetarian diet); nonetheless, we cannot take these behaviours into account in our analysis of the third form of reciprocity if the others’ presence and response (or lack of response) does not have any impact on the outcome (utility or happiness) of the unconditional behaviour: otherwise we wouldn’t be dealing with the phenomena of reciprocity. In the following, we shall then consider two broad categories of behaviour that I take as relevant when dealing with this third kind of reciprocity: 1

2

Choices concerning environmental or civil matters, as a direct expression of civic virtues (from separate collection or consumer boycott, to compliance with the law, and so on); Choices inspired by one particular spiritual logic, i.e. the Christian agápe.

Clearly, these two categories do not cover all the motivations that can be behind this third form of reciprocity. Art is, for instance, one more setting in which a logic of unconditional reciprocity might emerge: the ‘vocation’ of an artist guides her activity for the sake of an intrinsic motivation, regardless of the consensus and response of others; but no-one needs reciprocity like an artist does (from the audience, the critics, her fellow-artists, etc.) in order to be fully satisfied with her work.2 Similarly, a person who is culturally committed to fight pollution no matter if she’s the only one in town, just like a person who forgives ‘up to 70 × 7’ because she lives her life the Christian logic of agápe, or even the artist; they all share the two fundamental traits of this third form of reciprocity: 1 2

They do not condition their ‘vocational’ behaviour to the response of others, because their behaviour is a matter of intrinsic motivation; But the results conveyed by their actions depend nonetheless on the responses of the agents with whom they interact.3

This logic of reciprocity can be summarized by the expression ‘gratuitousness’: the action inspired by gratuitousness is relational (not individualistic), but is not conditional upon the other’s response. In this sense, we can regard civil virtues, agápe and art as matters of gratuitousness (although in different ways). The third form has only one trait in common with the other forms, i.e. freedom. Freedom as entailed by this third form is stronger, for indeed an act that is not conditioned by the action of others is free a fortiori. Freedom that arises from the compliance to an inner vocation and is expression of an

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intrinsic motivation is possibly the highest freedom we can imagine. For this reason gratuitousness is free and, perhaps, only gratuitousness is really free. Moreover, if the act of gratuitousness did not originate from an act of inner freedom, gratuitousness would be transformed exactly into its opposite. We now turn to the differences with the second form of reciprocity, starting with equality and equivalence. Gratuitousness means renouncing to equivalence, intended as the equivalence of both contracts and friendship, the subjective as well as the objective one. It is, in other words, a renounce to the very idea of calculating equivalence. As to equality, when an unconditional or gratuitous reciprocity comes across another gratuitous reciprocity, we have an encounter of gratuitousness: equality between the parts is unimportant. An act of gratuitousness is potentially addressed to anyone: because it does not seek for revenues, it does not take into account the reciprocating response of others. This is also why, with respect to the third characteristic of philiareciprocity, electiveness, gratuitousness is exactly anti-elective and universalistic, while in the logic of philía it is preferable to ‘feel friendly to those who have treated us well . . . and also to our friends’ friends, and to those who like, or are liked by, those whom we like ourselves. And also to those who are enemies to those whose enemies we are, and dislike, or are disliked by, those whom we dislike’ (Aristotle, Rhetoric, Book 2, part 4.). Gratuitousness, instead, makes no distinction between different people. Gratuitousness, moreover, doesn’t necessarily demand repeatedness in the game: it can operate even in a one-shot game, or in a situation in which the probability that the game will continue in the future is not high enough, or is zero or even negative.4 Considering conditionality, it shall be mentioned that gratuitousness is not conditional with respect to single acts (as the first form is), nor with respect to disposition (as the second form is), at the level of the choice, as mentioned. Finally, in an act of gratuitousness, other agents’ intentions do not matter, nor do the motivations underlying their action. Not only does the act of gratuitousness start out as an act of reciprocity (or of openness to reciprocity),5 like the strategies we’ve called B (brave reciprocity), but it goes on reciprocating even when confronted with non-reciprocating behaviours. Not only does it concede to the other agent the possibility to start again (like the T1 strategy), but it goes on forgiving at its own expenses (because it continues to behave cooperatively thus compromising the material payoff ) even when others do not respond or repair in subsequent interactions. These conclusions, however, are question-begging: in what sense, and why, we can still claim to be dealing with a form of reciprocity and not just a form of altruism? If, as a matter of fact, we lose all the characteristics (apart from freedom) that characterized the two precedent forms, how can we still regard the act of gratuitousness as a form of reciprocity, and hence as a kind of interaction, rather than as a unilateral act? The traditional way of looking at non-conditional acts and to the gift, in fact, often identifies gratuitousness as altruism: but in effect altruism is a kind of behaviour that can renounce to both

50 Reciprocity, Altruism and the Civil Society conditionality and reciprocity, while, in the reading I offer here, gratuitousness can only renounce to conditionality. The identification of gratuitousness with non-reciprocity has been claimed explicitly by many authors that make use of the notion of agápe to provide a philosophical foundation for the categories of ‘gift’ or ‘pro-social action’ in civil life. The French sociologist Luc Boltanski thus remarks on this topic: ‘Agápe, unlike philia, does not rely on a relational structure’ (Boltanski 2005, p. 77).6 According to such a theoretical approach, agápe represents the purely unconditional gift that one gives without claiming anything in return. Boltanski has well summarized this approach: ‘Agápe, defined by the gift, does not expect any return, neither in terms of objects nor in the immaterial form of love. The gift of the agápe pays no attention to the counter-gift’ (sec.ivi, pp. 76–77). By renouncing to equivalence, equality, electiveness and conditionality, gratuitousness or agape then seems to inevitably renounce to the very idea of reciprocity. Conditionality and reciprocity appear then as indissolubly bound; therefore, abandoning conditionality, as in agápe, suggests a necessary renounce to reciprocity itself. This vision of agápe-not-reciprocity finds in Søren Kierkegaard (1946 [1847]) a renewed precedent; the works of the protestant theologician Nygren, earlier, and the sociologist Luc Boltanski (2005, pp. 83 ss.), today, are both explicitly connected to the protestant great philosopher’s thought. According to Kierkegaard (p. 42), agápe begins where the reciprocity of philía (and of eros) ends, suggesting with these words that, in friendship, love is reduced to a mere exchange that is far too similar to a contract ‘love [eros] and friendship are matter of exchange’.7 Contrary to the view, I have been trying to outline in the following pages: I will regard gratuitousness-reciprocity as the renounce to conditionality but not to reciprocity.8 We shall now turn to a more detailed discussion of the elements of such reciprocal gratuitousness and gratuitous reciprocity.

The logic of unconditional reciprocity Let us define an unconditional (or gratuitous) act as an act (or strategy, in a repeated game) that is not conditioned to the reciprocating response of others at the level of the choice, but conditioned to the response of others at the level of the outcomes. In other words, the agent moved by a logic of this third form of reciprocity is a subject who acts independently of the choice of others (not strategically) but whose welfare (or utility) also depends on the presence or absence of a reciprocating response (or non-response9). A subject endorsing such logic is not a monad, unperturbed and indifferent to the others’ response: her nature remains profoundly relational, although some of her actions are not conditioned to the response of others because she ascribes an intrinsic value to those behaviours. For this reason I call such a behaviour

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a form of reciprocity, although the more distant from the traditional way of understanding reciprocity in economics today. In the language of game-theory, we say that those who adopt a strategy of unconditional reciprocity (which we shall call ‘G’ – from Gratuitousness) will always cooperate, but their payoffs will depend on the strategies adopted by the other players with whom they are interacting.10 Hence, how do we explain the choice to adopt strategy G? Accounts can vary, and many are reported in the literature.11 In the following I have chosen to interpret the adoption of strategy G, together with this third form of reciprocity, in terms of an intrinsic reward associated with the act. This interpretation is, in my opinion, the one that most makes relevant and empirically grounded the choice of an unconditional behaviour in some people.12 In fact, the idea that the agents are rewarded by their own behaviour, and not just by the results it ingenerates, is alien to the tradition of economics and closer to sciences like sociology or psychology, which regard behaviour as determined by ethical and environmental dimensions and typically inspired by a wide range of motivations. This kind of person or economic agent pursues strategy G, by avoid polluting or by paying taxes, because she gets a reward from behaving that way, and not just from the material or ‘objective’ outcome of cooperation; the intrinsic reward is high enough to compensate the costs in terms of material payoffs.13 At the same time, when the subject follows this logic, she is aware that her action will be fully effective only if others behave similarly (i.e. if they reciprocate); but, thanks to the existence of the intrinsic reward, she does not condition the choice of behaviour to the choices of others. Gratuitousness, therefore, lies in the risk of a lower payoff if the others don’t reciprocate and in continuing to do one’s fair share even when the others do not (and perhaps even exploit her). To keep things simpler, we might begin by ascribing the value ε to the intrinsic reward in a one-shot interaction.14 In order to describe this new context, we can consider the payoffs structure as featured in the Prisoner’s Dilemma, with the addition of the intrinsic component ε. Such ‘unconditional-reciprocity game’ shows that if ε is great enough (in this case >c) for the agent ‘cooperate’ becomes the dominant choice (see Table 5.1).15 Actually, the matrix does not represent the standard payoffs in a game, but rather the motivational structure of a G agent (later in the chapter I will discuss further this point). Again, I use the expression ‘cooperation’ to indicate a strategy of reciprocity, although reciprocity here refers to the gratuitousness in the encounter with the other, which is something more and something different than cooperation. An agent following this strategy won’t ask herself such questions as: ‘What is the point of separate collection if I am the only one making the effort?’, or:

52

Reciprocity, Altruism and the Civil Society Table 5.1 The unconditional-reciprocity game16 A/B

Cooperation

Non-cooperation

Cooperation Non-cooperation

(b − c) + ε b

−c+ε 0

‘What is the point of behaving honestly when nobody else here does?’. She acts according to a different logic. This might explain, among other things, the behaviour of citizens that comply with the rules even when, individually speaking, it would be rational not to do so (according to the first or the second logic of reciprocity), as well as the fact that some people continue to endorse a certain behaviour even when they have no positive response from others.16 At the same time, those who follow such logic will achieve the best result (b − c + ε) only if they meet another agent playing G: if such gratuitous encounter never takes place, the agents choosing this strategy unilaterally will obtain the worst result (− c + ε). In this light we can regard also G as a form of reciprocity.17 How should we interpret the role of intrinsic motivation in the choice of adopting strategy G, or any other strategy? I prefer not to model the intrinsic component as having a binary structure (yes or no, or 0/1), but as a continuous variable. In particular, in a Prisoner’s Dilemma repeated game, an agent will choose to adopt strategy G if, using the ordinal pay-offs of Table 3.2, the intrinsic reward (ε) is greater than the threshold value c/(1 − π);18 if ε is not great enough, the chosen strategies will be others (in my world, B, C and N19). From this point of view, we may surmise a relation between the adoption of a G strategy of reciprocity20 and the significance of the intrinsic motivation, or, in other words, the value of ε. We therefore ought to recognize the profound engagement existing also between this third form of reciprocity and the civil setting. In this light it is plausible to assume that the value of ε might increase and decrease in time according to experiences and contexts: as ε varies, the player might change strategy. Secondly, the choice of a strategy will also depend on the constraint posed by the ‘cost of unconditionality’ or ‘cost of gratuitousness’ (c), and on the length of the interaction (π). In this way, we suppose that strategy G as well is determined within a relational perspective, which reflects the civil setting in which the agents are operating. At the same time, there are actions – and we take this as a fact that can be observed in any society – whose intrinsic value has considerable weight on individual choices. Indeed, the relational perspective, while extending beyond the limits of the individualistic horizon, does not deny the person and her motivational dimension (and her liberty) lie at the heart of civil dynamics. The behavioural pattern exhibited by those who endorse first-kind

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reciprocity (C) corresponds to agents who may even gain a certain little intrinsic reward from reciprocity-oriented action, but for whom that reward is insufficient to cooperate in the first round (in our case the significance of the intrinsic reward is lower than c). Choosing strategy B, when strategy N or C is also available, means that the corresponding action yields a value associated with the intrinsic reward that is above the threshold value, but not high enough to adopt strategy G. In strategy C, then, there is no need to suppose the intrinsic reward of reciprocity equal to 0: its value may simply be low.21 In particular, C will respond with cooperation to those who cooperated in the previous turn, rather than playing defection as N would do. Why? Again, explanations can vary (and maybe explanations are not even necessary in pure evolutionary game theory): some seem to be consistent with the total absence of intrinsic motivations for reciprocity-cooperation, but perfectly justified in terms of a sacrifice-less cooperation. But we can also imagine that C could respond by cooperating because he ascribes a certain value to cooperation, and for this reason he is willing to accept a certain risk, that is, the risk of meeting an alternate strategy A, leaving him with a low payoff in the second round. In this case, the choice to cooperate in the second round (compared to non-cooperation) is justified by an intrinsic reward greater than cπ.22 Before we delve into the analysis, there is one last methodological note worth considering on the meaning of the strategies interacting in the models hereafter introduced. One interpretation associates one kind of agent, and only one, with each strategy: we would have, in this case, one agent playing N, one agent playing C, someone playing B and one following G. The hermeneutics of this interpretation can be effective in dealing with long term cultural dynamics (e.g. the first generation cannot change strategy, but later generations can), and even more with identitary dynamics.23 In our discussion, we’ll take on a different perspective, nonetheless, for we will use the notion of ‘strategy’ in a ‘weaker’ sense: we’ll suppose the coexistence of multiple strategies within the same agent, who will choose one of the strategies available in a given repeated game24 on the basis of the payoffs, the relative proportion of the different strategies, the constraints and ε. According to this second interpretation, with the expression ‘G-type agents’ – as we will do especially in the final applications of the work – we will refer to agents whose repertoire,25 together with N, C and B, also contains strategy G, which is undertaken in some contexts.26 I offer, thus, a dynamic vision of the strategies: on the basis of a number of factors. The relation is illustrated in Figure 5.1. Let’s then assume that the strategies form a continuum with respect to the intrinsic reward. The choice of a G strategy will depend on the cost of unconditionality (c) in a given context, the length of the interaction (π) and ε. The graphic in Figure 5.1 shows that for given values of c and π, only if a person has enough high value of the intrinsic reward ε the agent will choose strategy G, located beyond the critical point (to the right of c/(1 − π)).27

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Figure 5.1 The relation between G strategy and intrinsic motivation.

From this perspective, the same person might ascribe (as one typically does) different intrinsic values to different strategies of reciprocity that she implements in civil life. Not evading taxes, for example, might yield for a given person a high intrinsic reward that leads her to adopt strategy G and to pay taxes even in a world in which nobody does (and hence even to sustain the burden of a high taxation). The very same person, perhaps, in pondering actions that might have an impact on the environment, may ascribe a lower intrinsic value to the cooperative action (possibly due to cultural or contextdependent reasons: she knows, for instance, that no separate collection system is available in her area) and hence decide to behave according to another strategy. In other contexts, in the (ecological) choice between taking the car or tram to go to work, she might subscribe to a logic of first-kind reciprocity (which needs no intrinsic reward). And finally, the administrator of a company, faced with a customer who offers inadequate collaterals, might, consistently with a civil culture, choose strategy N.28 Our interpretation of the notion of strategy remains unchanged whether we consider a person X, who, due to her personal and cultural history, ascribes a substantial intrinsic value to the environment and follows an unconditional logic of reciprocity; or another person Y with a less evolved ecological culture, who, despite ascribing some intrinsic value to the cooperative action affecting the environmental, finds that intrinsic value is not high enough for her to cooperate (i.e. to lead her in the area of actions G), and therefore subscribes to the logic of the second or first form of reciprocity. And so on. According to the intrinsic motivation criterion29 there would be no difference in nature among the various strategies of reciprocity, but only a difference in degree, because the criterion is the ‘significance’ or value of the intrinsic reward ascribed to a given action.30 The graphic in Figure 5.2, for instance, shows what happens if the ‘cost of unconditionality’ (c) increases: we observe a reduction in the area of strategy G, to the benefit of the other forms of reciprocity; a decrease in π, instead, only ingenerates a shift towards the origin of the threshold value (c/(1 − π)) that delimitates the G region (if the interaction does not last long, the additional cost faced by G agents in comparison to other more conditional agents – B for example – is reduced,31 and vice versa).

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Figure 5.2 The effect of an increase of the pay-off c on the choice of the strategy.

To regard the weight of the intrinsic motivation as a variable, whose existence and significance for the agents have effect on the adoption of a strategy of reciprocity rather than another, strikes me as particularly effective way of looking at the social dynamic, although clearly is not the only way.32

A note on preferences, motivation, utility and evolution A key issue still remaining open: what is the nature of ε, which plays a central place in understanding G strategy? The immediate way of understanding it in contemporary game theory is to call ε a ‘psychological payoff’, then an argument of the utility function that is not ‘material’ or monetary but intrinsic or immaterial – and some hints in the previous pages could even be interpreted in such direction. Then, for example, when I don’t pollute due to an ecological culture, besides the material payoff of living in a cleaner environment, I get also from my behaviour something else of intrinsic or psychological nature that, as seen, can push me to choose always a cooperative action. Then, in the utility function of such a person, there are two kinds of payoffs: the standard or material ones (in our case b and c) and the psychological ones (ε). This is a possible and widespread way of treating ε, but not the most satisfactory.33 In fact, if one thinks that this intrinsic reward is simply ‘preferences’ or ‘utility’, it is straightforward to insert it into the payoffs of the game; so, in this way, in a repeated game if an agent is sufficiently intrinsically motivated she will surely ‘will the tournament’, because it is just a matter of being ‘enough’ motivated, i.e. to rise the value of ε. I don’t think this approach is the best in order to understand the social dynamics and human actions. In particular, I don’t think that motivation can be easily translated into preferences and hence utility (payoff). Following Sen (1977), I also believe that ‘choice may reflect a compromise among a variety of considerations of which personal welfare may be just one’ (p. 324).34 Motivation, in particular, intrinsic motivation, is something different from ‘utility’ or ‘welfare’ (in Sen’s words). A person can choose an unconditional pattern of

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behaviour in a repeated game, or in the game of life, because she has ethical or intrinsic reasons for doing so; I don’t see, however, why the intrinsic reward that every ethical choice brings with it has to be translated into utility or payoff in the game of life: the reasons for choices and the consequences of choices belong to two different logical plans, certainly interrelated, but different and clearly distinct, although in the long run the consequences feedback to choices. This is particular evident in case of market competition: an ‘ethical oriented’ entrepreneur can find many reasons for being unconditional loyal in terms of taxation or bribes in his region, but her payoff will depend on the consequences of her actions in the game of life, where the payoffs are the same for all. For these reasons, while it has been shown that the intrinsic reward is the crucial ingredient in explaining the emergence of unconditional strategies (especially G), in the following analyses, both in repeated and in evolutionary games, I will not count in the payoffs the component (ε) associated with the intrinsic motivation. Although, as seen in this chapter, the intrinsic reward is essential in order to understand the choice of a strategy G (ε can be seen as an argument of the utility function of these agents, or of their preferences), nonetheless the payoffs for G (and for all other strategies) that we will use as the basis to calculating expected utility are only the ‘objective’ ones, the payoff of the game of life that is the same for all (not necessarily confined to the ‘material’ ones, but, in any case, always objective or ‘external’ to the agent). No one is entitled, in particular in the long run, to greater payoff just because (s)he is intrinsically motivated when (s)he interacts with others. In other words, I think it is important to distinguish the domain of preferences from the domain of long-term success in life, the latter depending mainly on the interactions with others (this is the sense of using a game as the structure of interaction). I think that a good way of imagining possible scenarios is to consider that in the public sphere the payoffs counting in terms of long run success are the same for all players (those measured, in our models, in terms of c and b).35 In the dynamic analysis, then, we’ll calculate the expected utilities by considering only the standard payoffs (i.e. without including the intrinsic component ε), although without renouncing later a some methodological consideration. Such a choice is more prudent from a theoretical point of view (also thinking of the applications to civil life). As a consequence, in the entire analysis that follows, I will not consider ε in the calculation of the expected utility and then the success of the strategies in the games. In this sense, too, we can say that ‘reciprocity is one’.36 There is more to say on this controversial topic.37 In Appendix 4 I develop one interesting result: if we added ε (=1) to G’s payoff and then to its expected utility,38 the dynamic of reciprocity would be far from granted. In fact, we shall see that in the repeated game, the performance of G tends to improve in time compared to other strategies, but in the evolutionary dynamic the presence of ε makes G’s performance better only in the short

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run, and soon not only will strategies G tend to extinction (something that does not happen if we omit ε), but the intrinsic element will lead in the end to the prevalence of N (and not B, as in the case without ε). How should we interpret these results? First of all, the improved performance relative to the repeated-game dynamics is no trivial result: the intrinsic reward is real and plays a role in improving or worsening people’s quality of life. At the same time, important insights also emerge from the trends of evolutionary simulations in the long run. In a heterogeneous world, inhabited as well by strategies of non-reciprocity (Ns), the ethics of virtue (intrinsic motivation) needs to go hand in hand with an ethics of responsibility and prudence oriented to the individual and social results of one’s action, for the sake of a truly civil and lasting cohabitation. Inner satisfaction, while important in the short run, is not sufficient to preserve reciprocity in time; therefore, ascribing to it excessive weight in concrete choices may have possibly detrimental side effects for civil cohabitation. Having said that, if in order to avoid the risks involved by unconditionality the third form of reciprocity became finally extinct – in people or communities – life would be so much poorer and, I am guessing, unliveable. The rest of the discussion is articulated around these two poles: the third form of reciprocity is the one that can produce the worst civil damage, but is also and above all the one that gives significance and quality to civil cohabitation, that awakes sleeper and unused reciprocities, that makes things re-start in a deadlock situation, that welcomes the marginalized into civil mechanisms and turn them into individuals capable of establishing dynamics of reciprocity. In conclusion, we should ask what civil and cultural meaning can ultimately be assigned to the third form of reciprocity: what is the value of actions, or agents, who endorse a non-conditional approach to civil life? The rest of this chapter may even be read as the attempt to reveal the significance of this third form of reciprocity (the most neglected by social researchers and, in particular, by economists), and also (and the reader will probably say at end mainly) to demonstrate the importance of using special care to the scarce resource of unconditionality in civil life. I end this chapter with some preliminary remarks on this aspect. We have seen that where conditions necessary to the first form of reciprocity do not apply (contracts with enforcement), and where, in repeated games, only ‘cautious’ cooperators are available, reciprocity can never be developed. Furthermore, in our definition of the strategies, Bs are not sufficient to induce strategies Cs to cooperate. Persons who are capable of unconditional strategies G act as the starters in those social contexts in which reciprocity has not yet been developed, or where it is too frail for those with poor intrinsic motivation (like C and B players) to engender reciprocity. If, looking back at the diagram above, in a given area or community, the cost of inconditionality (c) became at a certain point particularly high (due to political or cultural reasons, or due to a natural disaster, etc.), strategies B might interrupt the practice of reciprocity (and choose N), while strategies G (at least some of

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them)39 will keep reciprocity in play and avoid in some cases the downfall of civil life. Secondly, the presence of persons moved by the logics of unconditional reciprocity has the effect of disrupting the particularism and closure of the various forms of philía, and allows to go beyond a simple ‘group egoism’, an always plausible possibility in all experiences of philía (B agents in our world do not cooperate with C agents). Moreover, this unconditional logic often lies at the heart of critical cultural changes, in which the existence of an even small group of people with high intrinsic motivation unleash revolutions and cultural changes spreading to the entire population (Bruni and Smerilli 2007). The founders of cultural, civil or religious movements are normally subjects with high intrinsic motivation (they follow strategies G), capable of activating unprecedented behaviours when, by definition, nobody is yet practicing them; if the founders followed conditional logics with their actions they could hardly be able to give rise to truly original realities and to introduce momentous turns. A relevant example is the story of the death penalty. ‘Don’t kill’ is a typical behaviour that can be represented by a G strategy, which has been explicitly influenced by the Christian concept of agape. Don’t kill is an unconditional line of action that is an evolution – or a ‘mutation’ – of the ‘Tit for Tat’40 culture of both Judaic and Roman–Greek cultures. If nowadays in many countries the capital death has been abolished, this is due to the action of few people following a G strategy that has become little by little the dominant culture.41 Thus, the unconditional action has always high potential. When behaviour itself produces satisfaction, consequences might not be adequately weighted, for oneself as well as others: indeed, as we have seen, when strategy G meets strategy N, the former will be systematically exploited by the latter, because she will receive the worst payoff from the interaction. A strong intrinsic motivation does not preserve from failure the civil action. Nonetheless, intrinsic motivation is the salt of life, is the prophecy that pushes the boundaries of humanity forward.

6

Dynamics of reciprocity in a heterogeneous world

I love fools’ experiments. I am always making them. Charles Darwin

Playing together It is time for us to take one further step and ask ourselves what will happen if the various forms of reciprocity (the three + N) have the chance to interact with each other. Civil life, including the economic sphere, is characterized by the cohabitation of different identities and cultures; thus, the same persons, for the reasons outlined in the previous chapter, typically carry out actions moved by various logics of reciprocity or non-reciprocity – we hinted occasionally some of these possible situations. The insight to gain from this and the following two chapters consists mainly in picturing complex dynamics of reciprocity (although with very simplified models, as usual in science), where the emergence of a type of reciprocity over other types, or over non-reciprocity, depends ultimately on the combination of different strategies, on their frequencies (or relative abundance or probabilities) in population and on the length of interactions (of the game). The principal message the analysis shall convey is twofold: we will see, on one side, that less conditional forms of reciprocity necessitate a multidimensional world in order to set in, because heterogeneity can benefit the richness of reciprocity; on the other, the critical and delicate role of arbiter played by unconditional action will become apparent when confronting reciprocity with non-reciprocity. Before we approach the technical analysis, I also want to emphasize once more how the kind of reciprocity we examine in this chapter is not limited to the reciprocity that arises among selfish agents or ‘selfish genes’ (as in Axelrod’s seminal analysis).1 There is no question that civil life is made out of actions that are much more complicated than ‘simple’ selfish acts. We will take as given the existence of different strategies of action in the society: in our hypothetical and simplified civil society, citizenship will not be granted exclusively to the self-interested, but she won’t be banned either. Our task

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will be to analyse the evolution of reciprocity in heterogeneous cultural contexts. However, since we cannot, nor wish to, display all conceivable strategies of reciprocity,2 in this and the following chapters we will focus on four strategies: 1 2 3 4

Strategy N, who never cooperates (or ‘always defects’). Strategy C, who starts out by not cooperating and, after that, will only cooperate with those who cooperate. Strategy B, who cooperates only with those who cooperate but, unlike C, starts out with an act of cooperation. Strategy G, who cooperates in all cases (‘always cooperates’).3

Strategies C, B and G, respectively, represent (although in a rather simplified way, how we’ll see) the first, second and third forms of reciprocity introduced in previous chapters. N is a strategy of non-reciprocity, but it does not necessarily grow out of incivility or selfishness, due to the reasons we have often recalled. The role of N will be critical to our overall analysis, because studying the dynamics of reciprocity is meaningful insofar as non-reciprocity constitutes a plausible, or even likely, threat. Notwithstanding, we will generally interpret N as the strategy typically endorsed by those who do not ascribe any intrinsic value to the reciprocal action and therefore take on a standard Prisoner’s Dilemma logic, failing to see any rationality in cooperation outside the enforceable contracts. If N faced exclusively other N agents, non-reciprocity would become the prevalent line of action; the same result would occur, as mentioned earlier, if N only came across C agents. But if N met an agent following strategy B or, a fortiori, strategy G, then the outcome would amount to something more than mere non-cooperation among non-cooperators: the non-cooperation of N turns, ipso facto, into an act of free-riding or shirking, at the expense of G and B (something that could not happen to the cautious C). Thanks to their non-cooperative behaviour, agents N obtain a ‘rent’. And this is a key problem, because the rent they gain works in the long run as a ‘fitness’ signal that pushes them to persevere in their behaviour: this way the frequency of N agents will increase in time, as others will begin to imitate them and they will eventually ‘contaminate’ the other strategies. As a matter of fact, if N agents are able to earn payoff at the expense of B and G, civil life will inexorably tend to deteriorate in time, eventhough such deterioration being even perceived by N, at least in the short run.4 We shall then proceed by gradual steps. In this chapter we picture populations where only two strategies interact and, while here the analytical results will not be hard to derive, their interpretation should not be trivial. In the following chapters, we will extend the analysis to respectively a three-dimension and a four-dimension world, combining multiple techniques of analysis, from repeated games to the numerical and the evolutionary analyses.

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Finally, I have a little piece of advice. This chapter and the next two show a rather dramatic shift in the language, which might result unpalatable to the reader unaccustomed with game theory: the prose leaves its place to a more formal analysis which, while not a very complex one, requires nonetheless a little attention. Some will indeed be tempted to skip it and go straight to the last chapter where we restore a less technical language (note that the choice to confine the more formal passages to the mathematical Appendices is intended as an aid to resist such temptation). In sum, I reckon that the conclusions and final applications of the work may appear non-trivial only to the extent that one will have made the effort to go through the little demanding analysis sketched hereafter.

A two-dimension world, to begin with Let us consider the easiest case first.5 Our whole population is inhabited by four strategies – N, C, B, G – all with the characteristics previously illustrated, but we assume that interaction takes place in particular contexts (clusters) where only two strategies are in play. Here, we carry out the analysis by means of a repeated-game methodology, namely, the indefinitely repeated Prisoner’s Dilemma game.6 It can be worthwhile to remind that the players do not know ex ante with whom they might be playing and whether they might be facing an individual of the same or different type as their own; they are paired by random matching. The agents only possess the information they gather from their partner’s behaviour in the preceding round.7 Since contracts with enforcement are not possible, all words ‘not backed by actions are so cheap as to be meaningless. The players can communicate with each other only through the sequence of their own behavior’ (Axelrod 1984, p. 308).8 Consider another question: how can we predict which strategy will be more successful? To provide an answer we will take on a criterion largely employed in these games, i.e. the criterion of expected utility. If the expected utility of a given strategy S*, assessed on the basis of the average value of the expected payoffs9 associated with that strategy in the interaction with others, is higher than the expected utility of the counterpart’s strategy, we will say that strategy S* has the best performance in the repeated game.10 Expected utility will then be an indicator of the relative success of a strategy compared to the others.

When unconditional non-cooperation meets friendship: N vs B Let us first consider the encounter between strategy N and strategy B. Comparing the two expected utilities – their derivation, together with the demonstration of all other propositions in this chapter, can be found in Appendix 2 – we will say that, on the basis of the repeated Prisoner’s Dilemma payoff structure, strategy B will prevail over N if and only if Ub ≥ Un, which entails

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Proposition 1 Ub ≥ Un ⇔ pb ≥

c(1 − π) 11 . π(b − c)

This proposition shows that, if those conditions are satisfied (i.e. if pb, that is, the probability of meeting a B, is greater than the threshold value), B will win the repeated game (over N). In Appendix 2 we will also consider the evolutionary approach and we will see that, having won the contest, strategy B will be imitated (by N) by means of a classic replication dynamics and, in time, the population will generally adopt strategy B. The ratio[c(1 − π)]/[π(b − c)] can be in fact interpreted as a threshold value for pb (indicated by pb*), a value above which reciprocity (B) prevails over non-cooperation (N). The smaller the threshold value, the lower the probability of meeting a type B needs to be for philìa-reciprocity to spread in the population. The probability pb (as all the other probabilities we refer to) is also normally understood as a measure of the ‘frequency’, the proportion or the relative abundance of B agents over the total population:12 a relatively small value for pb* means that we are in a situation in which reciprocity may overcome non-reciprocity even with a relatively small initial frequency of B agents. Thus, if at the beginning of the game, the frequency of B is higher than pb*, types B will tend to settle in the population. If, on the other hand, the game begins with pb ≤ pb* we will have the opposite scenario: non-cooperation will prevail. For the purpose of interpreting this proposition, it is therefore important to analyse the composition of the parameters that affect the threshold value, namely, π, the probability that the game will continue; c, the cost of unconditionality; and b − c, the payoff associated with reciprocity. The threshold value p* is inversely correlatated to π. In fact, it is plain to see that if π = 0, pb* will tend to infinity:13 in a world in which the game is not repeated, strategy B cannot evolve for any possible value of the payoffs. What does this mean? The interpretation comes straightforwardly: reciprocity is more rewarding than non-cooperation in those social contexts where interactions have a high probability of continuing. The shorter the temporal horizon, the weaker the shadow of the future over the present in and the more difficult the life becomes for agents endorsing a strategy of non-cautions reciprocity. Indeed, if π tends to 1, that is, if the game will last for a very high number of rounds, we can easily observe that strategy B prevails even if at the beginning there is only a very low frequency of strategies B in the population (because, in this case, we have pb* ≥ 0). This explains, for instance, why in contexts where relationships will supposedly last for a long time (as in a family or a university department), reciprocity B tends to emerge relatively more easily. Moreover, the higher the value of c – interpreted here as the ‘cost of non-

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cautious reciprocity’, for B and G, compared to non-reciprocity, while − c is B’s first-round payoff when she meets N or C – the higher is the threshold value of pb. On the other hand, the higher the payoff from cooperation (b − c), the lower is the threshold value pb* necessary for B to prevail. One critical aspect for our entire analysis can be noticed immediately. In the real civil dynamic, the values of b and c are ultimately a cultural and political matter: they represent the costs and rewards that derive from reciprocity and cooperation or non-cooperation. A society that hinders reciprocal behaviour (by making it costly or rewarding it poorly) will necessitate a higher number of types B in the population for reciprocity to eventually emerge, and thus reciprocity often actually does not arise. We will return on this last remark later in the work.

The courage of friendship does not suffice to drag the ‘cautious’: B vs C We should now imagine a population where ‘cautious’ strategies C perform acts of what we called ‘first-kind reciprocity’ and interact with braver strategies B only. Which form of reciprocity will eventually overcome the other, and in which conditions? By deriving the expected utilities, we obtain Proposition 2 Ub ≥ Uc ⇔ pb ≥

c (1 − π) b (1 − π) 14 − . (b − c)π2 (b − c)π

We observe that the first component of the threshold value of pb is very similar to that of Proposition 1; but here a second positive component is subtracted from it and, hence, the final threshold value will be lower than the previous one.15 With C, B does not have the hard time it had with N. Why is that so? A lower threshold value for B (compared to the case of B meeting N) depends on the fact that C, the way we defined this strategy, has the same advantage (b) that N had in the first round; but in the second round, contrary to N, C will have a cost (− cπ) thus ensuring a reward (bπ) to B. Apart from these aspects that are more strictly related to the way the interaction of B and C has been defined (see Appendix 2), the important thing is that agents C behave among themselves as if they were N and, even more interestingly, agents B are unable to activate the ‘sleeper cooperators’ C in the population. Indeed, although C and B would each be ‘predisposed’ towards one kind of reciprocity, at the end they fail to meet and cooperate. Cooperation could only occur if B followed a different strategy (for instance, by cooperating twice after an act of cooperation by C),16 but then B would not be the strategy we have been describing.

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Would it then be possible for B to follow a strategy T1 that involves forgiving?17 Well, first of all, the forgiveness of T1 requires, in line with the philosophy of philia, that the other be an agent sharing the same disposition, or, in other words, that the other be T1 as well, which cannot be the case when the counterpart is C (a fact that becomes apparent to B as C replies to her first act of cooperation). B agents, therefore, are simply unable to activate reciprocity with C agents, and this should be no surprise considering the nature of philíareciprocity: in friendship one ‘loves’ her friend, not her non-friends (this is a consequence of the propriety we called ‘electiveness’). C belongs to a different type and follows a different logic of behaviour compared to B, and thus C is not triggered by those following the logic of philía, as we shall repeat it later. This result is already significant for real dynamics of reciprocity in civil life. Here, we have two kinds of agents, each individually committed to a different strategy of reciprocity (they are not N), but, in spite of this, they are unable to activate each other in a virtuous way. In particular, agents B cooperate among themselves, but they seem unable to cooperate or to connect with agents C, who are also unable to cooperate among themselves. What conditions are then necessary in order to interrupt this vicious cycle of non-cooperation among strategies which would themselves be inclined towards some form of cooperation? One possibility the literature has considered is that cooperation might start out by mistake of B (or C), who at a certain point in the game makes a mistake and cooperates, instead of following the original programme. Let us suppose, for example, that a relationship between a supplier and a customer, describable as a repeated Prisoner’s Dilemma, remains stuck on mutual distrust until, at a certain point, the customer makes a mistake (he credits, e.g., to the supplier an invoice for double the amount owed). If the supplier reports the mistake, showing with this action to have a genuine disposition to cooperation, the customer as well, that moment onwards, might start to respond, thus establishing a dynamic of reciprocity. Hence, a mistake might trigger a virtuous chain of cooperation.

The importance of gratuitous reciprocity: C vs G Finally, let us see what happens when agents C come across unconditional cooperators G. From their expected utilities, we derive Proposition 3 Uc ≥ Ug ⇔ p g ≥

−c + bπ 18 . (b − c)π

This result leads us to one key aspect of this book. We learn from Proposition 3 that when types G are above a certain threshold value, the first form of

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reciprocity (C) prevails over (G). Such threshold value is directly proportional to (− c) and b, and inversely proportional to (b − c). While the ‘civil’ interpretation of these payoffs and of π has already been discussed, we now need to take note of the critical role of agents G: if they become too many, they paradoxically end up favouring reciprocity C. On the contrary, if the agents G are below the threshold value, the unconditional form of reciprocity can emerge – this aspect will be crucial for the rest of our discussion. Meanwhile, it is important to highlight that it is only when agents C interact with agents G that they can manage to experience some form of reciprocity: gratuitous inconditionality is the only strategy that leads C to cooperate.19 This, too, will be a central concept in later chapters. Here is a first example. Imagine a block of flats inhabited by a group of people who follow a line of behaviour that we may describe by strategy C: ‘cautious’ people who might be willing to cooperate, but are nonetheless unprepared to take the first step, perhaps for lack of intrinsic motivations. Suppose that communication is poor or unreliable (think of the anonymous blocks of our larger cities) and that behaviour is the only language available, made of reciprocal moves and countermoves (such as management of common parking space, use of common areas, knocking at the neighbour’s door to ask them for an onion, etc.): if the block is only inhabited by agents C and B (or N), reciprocity can never spring (unless mistakes are made, due, e.g., to a crisis or an emergency that brings out the preferences yet unrevealed by their ordinary behaviours). If, on the other hand, at least one agent (or strategy) G is present – or arrived at some point – in that community, her presence might give a critical contribution to that relational environment. However, if after a while unconditional actions (G) became too many in that building (never standing up against uncivil behaviour, systematically overlooking common rules, etc.), we know that the situation would soon turn back into non-cooperation (N). It will be these very dynamics that engage us the most in the following pages, as we increase the dimensions and the strategies in the game. Before proceeding to the next two chapters with the dynamic analysis, in the next session the use of the evolutionary logic in social sciences is critically discussed.

Evolution and reciprocity among humans: some critical remarks Evolutionary game theory is a relatively new branch of social theory that has been originated by an encounter between economics and biology.20 The evolutionary methodology in game theory is a combination of Darwin’s theory of evolution and Mandel’s genetics. Payoff is interpret as fitness, and agents as phenotypes. The ‘success in game is translated into reproductive success. Strategies that do well reproduce faster. Strategies that do poorly are outcompeted. This is straightforward natural selection’ (Nowak, 2006, p. 46). The gene transmitted in biology from parents to children becomes the ‘meme’

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defined as that cultural element which passes from a person to another, and the ‘replicator’ does not replicate genes or DNA but strategies. While in biology the basic mechanism is the reproduction or the surviving of the fittest, in social sciences the main dynamic mechanism is imitation: a strategy with an expected utility lower than the average will be not imitated in a given population and so tends to extinction over time, and vice versa. According to Sethi and Somanathan: ‘The hallmark of the evolutionary approach is the hypothesis that in a heterogeneous population, more successful traits will survive and spread at the expense of less successful ones. When the traits in question are transmitted genetically, the success of a trait refers simply to the reproductive fitness of its carrier. However, much of the literature on the evolution of reciprocity treats the biology model just as a metaphor, interpreting the dynamics in terms of cultural transmission. Under this interpretation, traits are transmitted through processes of imitation and learning, and traits that bring their bearer higher material or monetary payoffs are replicated faster’ (2003, p. 2). Then, the evolutionary analogy allows evolutionary game theory to avoid the hypothesis of ‘rationality’ and maximizing behaviour, that is, instead of central in the traditional game theory research project. In fact, in evolutionary game theory, a strategy can be any norm of conduct (any mutation of a given species), and only the selection via imitation will determine which strategy is the fittest in a given context: ‘Evolutionary game theory does not rely on rationality’ (Nowak, 2006, p. 46). I am convinced that the extension of the evolutionary methodology based on the concept of fitness from biology to social sciences, namely, to pass from natural to cultural selection, requires many methodological precautions. First of all, the concept of ‘meme’ is very controversial and overall weak, a concept made popular by R. Dawkins’ ‘The egoist gene’ (1976). The meme, according to Ken Binmore (today a ‘repented memetist’21), is ‘a norm, an idea, a rule of thump, a code of conduct – something that can be replicated from one head to another by imitation or education, and that determines some aspects of the behaviour of the person in whose head it is lodged’ (1994, p. 27). And John Maynard Smith is also very sceptical: ‘My uneasiness with the notion of memes arises because we do not know the rules whereby they are transmitted. A science of population genetics is possible because the laws of transmission – Mendel’s laws – are known. . . . No comparable science is as yet possible’ (1995, p. 47). A similar, and even more radical critique, is that of Robert Sugden (2001), one of the first economists who made use of the evolutionary approach in social sciences (Sugden, 2004), according to whom the research project of the evolutionary game theory represents basically a ‘bluff’: ‘the evolutionary processes represented in economics applications of evolutionary game theory are not (or are not primarily) biological. They are processes of human learning and imitation. Thus, economists cannot piggyback on biologists’ understanding of genetics. We need theories which tell us, for the relevant processes of

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learning and imitation, what gets replicated and how it gets replicated. It only when we know this that we can legitimately make use of the tautologies of natural selection. Merely to assume the existence of utility functions, and to assume replicator dynamics (or similar dynamic process), is to try to create an evolutionary theory that is analogous with a biology that understands natural selection but knows noting about genetics’ (p. 123). If, for example, the use of the evolutionary analogy would be bounded only to dynamics of the surviving of the firms in competitive markets, maybe the analogy is not completely misleading for imagining possible scenarios: a lower fitness could be interpreted as lower monetary payoffs and profits that, in the long run, could explain the success of a given business culture in the market. But if we want to use the evolutionary methodology for understanding the cultural evolution and social complex phenomena (as reciprocity), the help of the standard evolutionary methodology can be very small. In particular, I see two basic problematic issues: 1

2

First of all, the fitness has to be interpreted in broader terms than just monetary or material payoff. The success of a social norm depends on much more than money or material incentives. In this sense, our interpretation of the payoffs ‘c’ and ‘b’ has to be as larger as possible; Second, it is a mistake to take for granted that anyone following a given strategy of reciprocity is prone to change for imitating another one only because her fitness is relatively lower. In particular, referring to our discourse, although the imitative dynamics can say something about the tendency of the first two forms of reciprocity (C and B), when however we consider strategy G the story becomes much more complex. History tells us that cultures, although discriminated and with relatively lower payoffs, do not necessary disappear. Let us think, for example, of strongly motivated minorities oppressed and exploited by a majority. In some cases, the lower payoff could even bring these people to reinforce their intrinsic motivation and push them ahead in spite of their material disadvantage. History is full of such experiences. If, for just a self-evident example, the first Christians during the Roman persecutions had looked at their material payoffs in making their choices about the cooperation with the empire, then maybe they would have imitated more prudent strategies such B or C, and Christianity would have become just one of the sects of the Mediterranean Sea, and soon disappeared. Similar situations occur when a new cultural movement takes place, from Saint Francis to Gandhi, from Nelson Mandela to Martin Luther King.

All this just to say that if we like to make use of the (very powerful) instrument of the evolutionary game theory, as we too do, it is very important to know the limits of the tool, and maybe try to complicate the analysis from time to time – as I try to do in the following chapters.

7

Three is better than two

When Rabbi Meir saw a man setting out on a journey alone, he would say, ‘Go in peace, you man of death’. When he saw two men, he would say, ‘May you have peace, you men who are sure to quarrel’. When he saw three, he would say, ‘May you have peace, you men of peace’. Rabbi Meir was sure that in the event of a fight between two friends, the third would be the peacemaker between the two that quarrel. The Book of Legends

Refining and enriching the game In this chapter the analysis will be refined and enriched, shifting from two to three dimensions. In the transition, the dynamic analysis used in the simple two-dimension world will need to go through some revision: with two strategies, the comparison between the expected utilities was enough to give a fairly precise idea of which form of reciprocity (or non-reciprocity) would emerge in the long run within a given population.1 Going from two to three dimensions, it is worthwhile to use both repeated games and the evolutionary dynamics, because they give two different kinds of information in our discourse on reciprocity. In the first part of the chapter, we make use of the same methodology famously employed by Axelrod (1981), i.e. the repeated Prisoner’s Dilemma in a ‘Round Robin tournament’, where the strategies face repeatedly each other, two at the time in a random order; there is no direct elimination of the ‘weaker’ strategies (as in an evolutionary game), but each participant meets all the others (for a number of times that is defined by the value of π),2 until the end of the tournament, which is won by the player with the highest final score.3 In more technical words, in ‘the repeated Prisoner’s Dilemma a player is matched against an opponent, plays the game a number of times and then, when these rounds come to an end, she is re-matched with another opponent against whom she plays another repeated Prisoner’s Dilemma’ (Varoufakis and Hargreaves 2004, p. 225). We shall suppose that three strategies have been adopted within our population: N, B and G. Expected utility – measured, for the reasons discussed in

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Chapter 5, only by the material payoffs – is the indicator of a strategy’s success: the ‘tournament’ is won by the strategy that will have gained the highest score by the end of the competition. We also assume, in line with repeated games standard methodology, that during the tournament the frequency or share of the different strategies remains the same in the population (the players cannot modify along the game their choice of which strategy to adopt). Only in a second time we will illustrate the evolution of the strategies over time, by considering evolutionary games. In other words, in the first part of the analysis we only ask what strategy will win the tournament and under what conditions, supposing that the frequency of each strategy will stay the same. In the evolutionary analysis,4 on the other hand, we ask which dynamics will take place over time and hence in what way the strategies in the population will evolve. For the time being, we compare only two strategies at the time (despite our population being inhabited by three types and each strategy – unlike the analysis of the previous chapter where we have supposed the presence of clusters – meets all three strategies) and ask under what conditions one gains a higher expected utility than the other. Let us begin by comparing B and G, and we obtain: Proposition 4 Ub is always higher than Ug. As a matter of fact, B has all the advantages of G (she cooperates with herself and with G), but without the costs G has when facing N. Also interesting is the comparison between N and G, which suggests Proposition 5 Un ≥ Ug ⇔ pb ≤

c . bπ

In a two-dimensional world (like that of the mentioned in preceding chapter), G had no chance of obtaining a higher expected utility than N. As we open to the three-dimension world, we learn instead that it is possible for G to obtain better results than N (if π > c/b).5 But what are the conditions that need to apply? N has a higher expected utility compared to G if agents B are too few: the latter play the arbiter in the confrontation between the two polar types. And the threshold value depends on the payoffs: it is proportional to c and inversely proportional to b and π.6 In the preceding paragraph, we hinted at the fact that the interpretation of the parameter c is straightforward: an increase in it always goes to the disadvantage of G and B (only B and G can obtain −c; C and N cannot7) and

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does not benefit N either: therefore, we can regard c as an indicator of the cost of reciprocity, or, better, of reciprocities based on philía and especially on unconditionality in a given population.8 This tells us once more that the more costly a community makes cooperation, the more the threshold value will increase, all other things being equal (ceteris paribus).9 Moreover, the longer the game, the easier the life G will have. Even more insights can be gained from the confrontation between B and N: Proposition 6 c c(1 − π) + . (b − c) (b − c)π

Ub ≥ Un ⇔ pb ≥ pg

How should we interpret this result? The second component of the Proposition 6 contains the threshold value for pb from Proposition 1: we may recall that in the confrontation N-B, when pb was higher than the threshold value p*, that is, [c(1 − π)]/[(b − c)π], Ub was higher than Un. Now we are playing with three agents: together with N and B we can also observe G, making the analysis more complex but also more interesting. The threshold value for pb is higher than it was in Proposition 1. It is worth noticing, moreover, that if the game came to an end after the very first round (i.e. π = 0), pb* should have an infinite value: this means that in a one-shot interaction, strategy B could never prevail over strategy N: philíareciprocity cannot emerge if the game is not long enough, at least according to our analysis thus far. In order to comprehend the key role played by G agents, it is useful to look at Proposition 6 from their point of view ( pg) and to rewrite the inequality as follows: b−c 1−π − . c π

Ub ≥ Un ⇔ pg ≤ pb

This formulation shows in a sharper way that, other things being equal, there are some aspects that ought to be taken into account in order to establish philía-reciprocity in a world populated by N, B and G agents: 1

The frequency, or proportion, of G must not become too high, specifically, not higher than the threshold value; otherwise N will eventually prevail, consistently with Proposition 3. As a matter of fact, in a world where non-cooperation is an actual option and, as we are saying, other conditions are not satisfied, too many unconditional acts may lead not only to the extinction of G, but also to unintentionally spreading of the generalized non-cooperation of N over B.

Three is better than two 2

3

71

The action of G produces opposite effects on the expected utility of N and B. In particular, meeting G procures an advantage to B (expressed by the payoffs [b − c]), compared to meeting N (from which B would obtain 0, and − c in the first round); but meeting G, instead of B, is also profitable for N, who thus gains the maximum score (b) instead of 0 (as in the case of meeting B, except for the first round). Moreover, the fact that b > (b − c) explains the higher threshold value for pb.10 The interpretation of c and (b − c). As already mentioned, the parameter c is an indicator of the costs associated with taking the risk of practicing reciprocity (philía and especially unconditional reciprocity) in a given population, and (b − c) shows the extent of the reward that can be derived from practicing reciprocity (in these two forms). Let me repeat once more that if a given community gives little reward to reciprocal behaviour (in terms, to say, of fiscal advantages for social firms or families, etc.) and instead makes it very costly to prefer such behaviours (e.g., by granting various kinds of condonations to agents N), a relatively higher frequency of B agents will be necessary for reciprocity to be established.

Which strategy of reciprocity will then obtain the highest expected utility in a three-dimension world, inhabited by N, B and G? The analysis so far carried out seems to suggest that unconditional reciprocity could hardly be expected to prevail: we know from Proposition 4 that Ug is always lower than Ub. Therefore, we are led towards the conclusion that in the described scenario the kind of reciprocity which could in fact emerge is philía (assuming that agents G are not too many). To put it differently, in a world where there is no option C, but where N is instead available, it looks like the only possible form of reciprocity which could prevail would be philía. We will see shortly to what extent these results still obtain (although with some specifications) when assessed in terms of the evolutionary analysis. But before, let’s first take one further step.

A numerical analysis On the grounds of the analyses undertaken so far, we cannot yet say which strategy, amongst N, B and G, will win our tournament (the repeated game). In order to find a global solution (rather than just measuring the threshold value of all possible two-player ‘encounters’), one possibility is to assign some numerical (cardinal) values to the payoffs, to the frequencies and to π, and see which strategy will have the highest score at the end of the tournament.11 In this paragraph we carry out some numerical examples in the attempt to learn a little bit more about each strategy. In the first example we may consider the three strategies to be equiprobable (1/3) and assign a numerical value to the payoffs accordingly.12 Like Sugden (2004), let us pose b = 2 and c = 1. Using these values, we can calculate which

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strategy will be more successful for varying values of π. The following graphic shows how the winner may change as π (and then the length of the rounds) increases, or how it does not change, as in the cases we initially examine. From Figure 7.1 we can see that, given the values we have assigned to the parameters, strategy N wins for any possible value of π (between 0 and 1). Clearly, this result depends not only on the particular values we have assigned to the payoffs, but also on the strong hypothesis that the three strategies are equiprobable (in fact, the propositions we found yet suggested that for a strategy other than N to prevail we needed to impose some restrictions on the frequencies of the different strategies). Instead, when we suppose the frequency of G to be equal to 10% (and the others both 45%), the story changes, and we obtain the following graph (Figure 7.2). In this case, B becomes the winning strategy when the value of π approaches 0.8.13

Figure 7.1

Figure 7.2

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In order to push further this analysis, let us go back to the assumption that the strategies have an equal distribution (p = 1/3). We can ask what would change now if b was twice the initial value and c remained unchanged (equal to 1). We are then supposing b = 4 and c = 1. The expected utilities are represented in the following graphic, keeping again π as an independent variable (Figure 7.3). We can see here that with an initially equal frequency and with the new values of the payoffs, B becomes the winning strategy when π tends to 0.6. How do we explain that? As the ‘cost of unconditionality’ (c) remains the same as it was in the previous example and the ‘reciprocity reward’ (b − c) becomes higher, B, who cooperates with both herself and G, will manage to prevail even when the length of the game is shorter.14 This numerical analysis then confirms what we had previously established about the key role of G agents: if their frequency is adequately low (e.g. 10%), B will prevail over N, provided that π is sufficiently high.

The evolution of reciprocity Proceeding with our analysis, we shall now shift to the evolutionary logic. Thanks to the numerical analysis in the preceding paragraph, we have already gathered some insights about the general tendency of the tournament (for varying values of the parameters). Formerly in the analysis, however, we had assumed, consistent with a repeated-game approach, that during the interactions the frequencies/probabilities of strategies composing the population would not change. We fixed the initial frequency of each strategy, we made them play and eventually we observed which strategy and under what conditions would win each round (playing two at the time). With the numerical analysis we have expressed an evaluation on the entire tournament, but only for particular cases, and, above all, always in the

Figure 7.3

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hypothesis that the frequencies of every strategy would remain the same during the tournament – as it happens in non-evolutionary games. What is then the meaning of the results we have so far achieved? A possible interpretation that I like (although is quite unusual in the literature) is to imagine that until now we have found the interactions between strategies B, G and N within a given organization or a certain community in the short run, with the agents taking the organizational structure and the cultures of the various actors as given. We have taken into account, in other words, those situations in which the subjects play without being ‘eliminated’ or without ‘imitating’ the strategies that achieve greater success. Imagining to be in the short term, to look at which strategy attains the greatest expected utility in certain contexts also means to provide some guidelines about the strategies of behaviour that are more likely to gain the best or the worst results in those situations, the strategies that will probably be better or worse off. I want to argue that in the civil as well as in the personal life such situations are extremely significant. In offices, schools, university departments, firms, families and organizations in general, we constantly carry on interactions that can be well represented by repeated games (we do not look at our colleagues as ‘being eliminated’ or as ‘imitating’ us), and the results we have offered therefore provide indications of a certain relevance, also because they allow us to highlight how relevant payoffs are to civil life as well as to the organizational dynamics. People, usually, who are endowed with a given culture or ethics, try to follow for a certain amount of time their values and believes, although they suffer or feel less satisfied than their colleagues. In civil life, human beings – I believe – are disposed to renounce to short term welfare or happiness in order to be consistent with their convictions and culture. At the same time, if we look at civil society in a long-term perspective, phenomena of imitation (occurring within the same person, with the change of the strategy – a thesis that can be seen in line with the theory of multiple selves (Davis 2001) – or amongst different people) become relevant, and they can point at trends that are also extremely meaningful. Coming to the simple qualitative model I have introduced at the end of Chapter 5, based on the concept of intrinsic reward (ε), the intrinsic value of reciprocity actions normally varies according to the feedback we get from the context we leave. Furthermore, the costs (c) and the duration of the game (π) can change, and these combined elements (ε, π and c) can bring the person to change strategy. In the short term (that in our model is represented by the duration of the repeated game), it is legitimate to assume that these values can remain constant, and so the chosen strategy. But in the middle and in particular in the long run, every thing changes. As a matter of fact, we need to think it likely that the frequency or share of subjects adopting the strategy that ‘won’ the tournament (by obtaining the highest expected utility, given the parameters) will be higher in future tournaments (that is, it will be imitated 15), while a strategy that has been ‘dominated’ will lose ground until it will disappear completely. At the end of

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the first tournament, the payoffs or ‘points’ earned by the various strategies will become public knowledge, and the various players will be able to modify their strategy so as to imitate the winning strategy. It is not unlikely, therefore, to suppose that the strategies achieving the best results will be emulated and grow. Evolutionary games and other analytical tools that go with them are – in spite of the methodological precautions of the previous pages – particularly suited to carry out this kind of analysis, which is derived in the rest of the paragraph as an illustration of a broader research project. An easy-reading instrument useful to describe the evolution of strategies in a three-dimension world is the simplex (based on the replication dynamic introduced in Appendix 2). Considering the expected utilities (calculated as seen so far), in a few passages (the analysis in the Appendix 3) we can build the simplex in Figure 7.4, which represents the evolutionary dynamic of each strategy. The simplex16 is itself a graphic representation of the evolutionary dynamics and it shall hopefully be understood also by those who are scarcely familiar with the language of mathematical dynamics.17 How should we read the simplex NBG? We may notice from the figure that depending on the starting point (given by the initial combination of the three frequencies in t0) and on the position of the fixed point f on the side NB (which in turn depends on the value of the payoffs and π), we will have a different long-term dynamics, which might lead either to a combination of G and B, or to a population of N-agents only. A first result that the analysis based on only repeated games did not bring to light is the coexistence of strategies B and G: if the dynamics starts from a point to the right of f, it will converge to a combination of the two strategies on the BG side, which is made only of fixed points (with relatively more B than G). Moreover, the presence of fixed points only on the BG side suggests

Figure 7.4

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that if we take a population initially inhabited by agents B and G exclusively, these two strategies can find an (evolutionary stable) equilibrium and can both coexist (we have seen that in a world inhabited by B and G agents the two strategies obtain the same expected utility). Different results obtain when at t0 (when the process starts) all three types are present in the population (the starting point is internal to the simplex). In this case, there is the possibility that non-reciprocity might emerge, hence leading to an equilibrium composed by agents N only. The dynamics will depend on the position of the starting point: moving from a point to the left of the trajectory, that is, from the side BG to the point f (i.e. the arrow in the simplex), we will go towards an N-only equilibrium; vice versa, moving from a point to the right of the trajectory, we will arrive to the coexistence of B and G. It is worth observing, moreover, that all the points to the left are characterized by a higher proportion of B compared to G. From this perspective, too, it is important that agents B are relatively more numerous than agents G, in order to avoid the emergence of an N-equilibrium. In practice, also the evolutionary analysis seems to hint at the critical role of strategies G: if there are too many of them in the population, they favour the emergence of N over B. At the same time, the coordinates of f also depend on b and c.18 The value of c, as we have seen, is the one that more clearly describes the social structure of premiums and rewards: a high value of c is expressive of a culture that penalizes reciprocity, whereas a high value of (b − c) is expressive of a culture that rewards it. As it is, if the first coordinate is high, the point f will tend to N (and the same happens if the second coordinate is low, thus making cooperation scarcely likely); in the opposite case, f will tend to B. And this is due to the fact that the coordinate of N (the first) is directly proportional to (b − c), and while both coordinates depend on (b − c), the sign of c is negative in the coordinate of N and positive in the coordinate of B. This suggests that, ceteris paribus (in particular, the value of b), the more a society makes the second and third reciprocity expensive to practice (they are the only to face the cost c), the more likely the affirmation of generalized non-cooperation becomes. Uncounted historical examples support this claim. These results, then, are consistent with – and also confirm – the interpretations we had achieved by means of the repeated games framework. The evolutionary analysis stops here for the time being and, as we open our hypothetical world to all four strategies in the next chapter, we shall go back to the sole repeated games’ technique. We finally use the simplex to reinterpret the numerical analysis carried out in the preceding paragraph. The combination of the frequencies (45%, 45%, 10%) corresponds to the point K in the simplex above: starting from that point and from any point to its left (combinations with a lower concentration of G), we tend to achieve the emergence of strategy B, as seen. But from the evolutionary analysis we now know something more: the final results will contain a combination of G and B, which was not shown by the use of repeated games only.

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Figure 7.5

Both the evolutionary and the (partial) numerical analysis entail the same thing: for high values of π we arrive at a combination of B and G; for low values of π, instead, there are more probabilities that only agents N will prevail (since the point f moves according to the value of π).

Two further examples The discussion just carried out becomes particularly profitable and evocative as we imagine to apply it to the sphere of the family and of human communities characterized by a large presence of the gratuitous form of reciprocity. The family is an organization19 in which gratuitousness and friendship (our strategies G and B) may coexist, with no need of conditional reciprocity C (or even without non-cooperation N). How do we explain this in the light of our discussion? The simplex NBG is a useful tool for the analysis of family reciprocities too.20 A family might be represented as a simplex NBG, with the point f very close to the vertex N; here, the equilibrium of coexisting behaviours G and B is a highly likely solution. We know that f lies close to N when π is very high and when cooperation is rewarded (b − c is high) and opportunism discouraged (− c). The family dynamics is indeed the one in which the probability that the game will continue is much higher than in other formal organizations (such as associations or firms); in the family it is typically not known when the last round is being played – an essential condition for the emergence of B-kind cooperation – and where cooperation is highly rewarded and noncooperation and free-riding promptly punished. Moreover, family life is characterized by frequent actions inspired by intrinsic motivations (the parent–son relationship is typically quoted as the paradigm of unconditional

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love), which can thus explain the emergence of G-type behaviours. But to what extent are unconditional behaviours sustainable in order to preserve reciprocity in the family? We have just seen that if the number of G agents is relatively too high, the evolutionary trajectory may lead to non-reciprocity, corresponding in fact to the break-up of the family. In order to avert this kind of scenario, it is important instead that there are a relatively high amount of actions B; otherwise, generalized non-reciprocity could be unintentionally encouraged. What does this mean in practice? Let us picture, for instance, the mother of a family, who behaves in an excessively generous way with her husband and children; she sets no limit to her love and support towards her relatives. Supposing the other parent behaves with her according to our strategy N (not necessarily in each act, but just from time to time), the other members of the family might perceive the relationship between the parents as an exploitation of the mother on behalf of the father, and it is likely that the cooperative behaviour of the mother will not be imitated in time and will gradually fade away. If G is the only strategy of reciprocity available to the group, the relational type to be imitated will be non-cooperation N, which will progressively spread within the family.21 If, on the other hand, that mother had alternated G-type behaviours to more conditional B types,22 not only wouldn’t unconditional reciprocity have become extinct, but it would have been the ideal way to preserve it. This dynamic can be extended to any community – civil or religious – committed to preserve and perhaps to spread a culture of gratuitous reciprocity or friendship. As a last example, consider the situation which might be unintentionally experienced by the mayor of a town, meaning to be open and generous towards the least-advantaged in the population. If the new mayor acted in opposition to the excessively rigid and intolerant attitude of her predecessor (type N) by behaving in an exclusively unconditional way (type G), a situation of generalized non-reciprocity might paradoxically arise in that town; such situation could have been avoided if the new mayor had also introduced behaviours characterized by conditional reciprocity (B).23 Non-conditionality can become an enemy of gratuitousness. And even those who dream and fight for a society without markets, despite being moved by the noblest intentions, might end up trapped by the ties of a thousand contracts.

8

In praise of heterogeneity

Glory be to God for dappled things. Gerard M. Hopkins

Dynamics of reciprocity in a four-dimension world Introducing the first form of reciprocity (C) In this last chapter before drawing the final remarks, we are going to complicate our discussion further on by incorporating into the analysis a fourth strategy: namely, ‘cautious reciprocity’ C, which we have taken to represent our first form of reciprocity. The interaction between the strategies will continue to be assessed on the basis of two-agent repeated interactions, while bearing in mind the presence of others in the not too distant ‘background’. We then start by examining the encounter between agents N and B. In a world populated by four strategies, Proposition 7 applies: Proposition 7 Ub ≥ Un ⇔ pb ≥

c (1 − π) c b (1 − π) + pg − pc . (b − c) π b−c b−c

As we may recall, this result contains the threshold value we had obtained in Proposition 6, minus a positive quantity; this seems to indicate that, in a world also inhabited by C-type agents, a slightly lower threshold value of pb is necessary in order for B to prevail over N. Because the cautious agents C are unable to cooperate with both N and B, they seem to make no significant difference in this four-dimension-world interaction: agents N cannot discriminate between agents C and other agents N (and, compared to meeting B, it is slightly less profitable for them to meet another N or a C, because they lose their first-round advantage); agents B, on the other hand, because of the way we have described the interaction with C, cannot distinguish the latter

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from N in the first round, thus leading to non-cooperation from that moment on. C will nonetheless pay a ‘rent’ to B in the second round in the useless attempt to reciprocate – hence the change in the threshold value, which we can be basically overlook. We may therefore conclude that in this circumstance C’s potential for reciprocity remains unexploited. So far, cautious reciprocity (which requires no sacrifice on the part of the agent) seems inessential for both non-cooperation (N) and conditional cooperation (B). We need to investigate other interactions in order to unfold the precious role of first-kind reciprocity. Looking at the encounter between agents N and C, we have Proposition 8 Un ≥ Uc, in all cases if π ≥ 0 (and Un = Uc, if π tends to 0). It is worth spending a few words to comment on this result. After the first round, if the game is likely to last for at least one more round (i.e. π > 0), the presence of G always makes non-cooperation prevail as a result of the encounter between N and C. How should we interpret this conclusion? Despite the presence (and, in this case, the sacrifice) of G, which allows agents C to experience reciprocity (through cooperation with G), the second round onwards cooperation will be corresponded to a lower remuneration compared to non-cooperation ([b − c] < b). The presence of G, therefore, operates as a kind of civilizing factor (because it increases the ‘average rate’ of reciprocity in the population), but this is especially meaningful when not only the first form C, but also the second form of reciprocity B takes part in the game. In other words, G-type actions – when agents N are also participating – lead to affirm reciprocity amongst the population if all three forms of reciprocity are in play: particularly in a complex world, cooperation cannot occur in the absence of philía-reciprocity, which, I might say, throws a bridge between the first and the third form of reciprocity. Turning now to the encounter between agents N and G, as a result of the due passages we obtain: Proposition 9 Ug ≥ Un ⇔ pb ≥

c − pc. bπ

In analysing the three-dimension world, we had similarly derived Proposition 5: Ug ≥ Un ⇔ pb ≥

c . bπ

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We notice that in Proposition 9 the quantity pc is subtracted from the threshold value, otherwise equal to the threshold value derived for the threedimension case (in which C was missing). This result bears the following two main implications: 1

2

The presence of C determines a lower threshold value of pb, which might, to some extent, increase G’s chances of prevailing over N: the more numerous agents C are, the less numerous agents B need to be in order for G to obtain a higher expected utility compared to N. In a community where all three forms of reciprocity are active, the possibility that unconditional reciprocity establishes itself in the population needs to satisfy less-demanding conditions, and hence becomes more likely. We will come back to this point later in the chapter.

As to the comparison between G and B, we can easily derive Proposition 10 Ug ≥ Ub ⇔ pc ≥ pn

c . bπ − c

In the three-dimension world, G was never able to achieve a higher payoff than B. Here, on the contrary, the sheer presence of agents C opens the way to this eventuality (within the repeated game).1 And in that case, paradoxically, the participation of ‘reciprocity without gratuitousness’ in the repeated game could make unconditional reciprocity spread across the population and prevail over conditional reciprocity B. This result is also peculiar, for it overturns the conclusion reached for the three-dimension case (N, B, G) that unconditional reciprocity could not become the attitude generally endorsed in the community (as we have seen, subject to the satisfaction of a few – rather demanding – conditions, G might have established itself over N, but never over B).2 Furthermore, the same patterns characterizing other encounters previously analysed can be retraced here: the threshold value of pc rises when the cost of reciprocity (c) and the frequency of N rise; it decreases when the payoff associated with cooperation (b − c) or the probability π rises. At last, let us take a look at the encounter between C and B, which entails Proposition 11 Uc ≥ Ub ⇔ pb ≤

c(1 − π) b(1 − π) − pc . (b − c)π b − cπ

Here, too, C prevails over B as long as agents B are few, the cost of reciprocity

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c (that is only faced by G) is relatively high and the reward associated with reciprocity (b − c) is relatively low. Step by step, the argument becomes stronger and the idea it wishes to convey ultimately takes shape.

A numerical analysis with four dimensions Similar to the preceding chapter, I shall now present a few numerical examples, which become even more precious in the four-dimension case, where we cannot present our results in terms of the evolutionary dynamics, but we only use some other simulations that I confine to the Appendix 4 (it would be much more complicated to use the evolutionary dynamics here compared to the threedimension case, because they cannot be illustrated by means of a simplex). If we impose the values b = 2, c = 1 for the payoff and assume an equal distribution of the strategies in the population, we obtain the following graphs for varying values of π. It is straightforward to see that in the four-dimension world the result does not change: the expected utility of N (the continue line) is always higher than the others for any value of π.

Figure 8.1

As in the preceding chapter, we will now assume a lower frequency for G (0.1) compared to the other three strategies (each equal to 0.3). From these values, we can derive the graph below (again for varying values of π):

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Figure 8.2

When π is above 0.7, we have again that: Ub (the dotted line) > Un (the continue line). Let us see what changes in the four-dimension case for different values of the payoffs. To this end, we assume b = 4 and c = 1 (while restoring an equal distribution of the four strategies in the population) and obtain the graph below (Figure 8.3).

Figure 8.3

The picture shows that, for values of π larger than 0.5, it is Ug > Un.3 Thanks to the participation of C in the repeated game, G (the medium dotted line) has the chance to attain the best performance. As a final step, we may try to push the numerical analysis a little further, in the attempt to learn something more about possible dynamics. We can then adopt pg as the independent variable (on the axis x) and see what happens by varying the frequency of agents G (pg), while maintaining the others equal. Consider three cases.

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In Case 1, we pose π = 0.2: notice that, given these values, we observe again that Un is always higher than the expected utilities of others. On the contrary, by posing π = 0.8, the situation changes, as illustrated by Case 2; in particular, if pg < 0.147727, it follows that Ub > Un. Case 1: π = 0.2

Figure 8.4

Case 2: π = 0.8

Figure 8.5

This synthetic result brings together the outcomes we had observed, one at the time, in the previous graphs: if π is high enough (greater than 0.8) and pg is low enough (smaller than 0.147727), then types B prevail over types N.4 Case 3, the last one, shows that, for π = 0.9, the frequency pg could further decrease and it would still result: Ub > Un.5

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Case 3: π = 0.9

Figure 8.6

In a heterogeneous world, the length of the game, the value of the payoffs and especially the frequency of unconditional strategies G then determine the possibility for reciprocity to establish itself over non-reciprocity. This message, in its manifold guises, is what the analysis of these latest chapters has been trying to communicate. In the very last chapter we will try to pick up the threads and draw some conclusions and, finally, we will suggest some possible applications springing from the insights presented in this work.

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Reciprocity is one, but reciprocities are many

For persons who flourish in networks, generalised reciprocity is a rational expression of who they are and where they belong. Martin Hollis

Picking up the threads As our journey through the various forms and dimensions of reciprocity approaches its conclusion, we are left with the task of summarizing the results emerged from previous chapters, including the ones that were just hinted to and the ones concealed by the formulas; finally, we shall illustrate a few concluding applications offering cues for further reflection. However, it should be remembered, especially in undertaking this final task, that any application originating from necessarily abstract models should be read just as an indication and without losing sight of the strong assumptions underpinning the models.1 This precaution notwithstanding, the notion of reciprocity we have come to by highlighting its pluralistic character and extending its reach beyond the monism of theories which would consign it to one unique relational paradigm, I maintain, and has allowed us to gain a deeper understanding of the social as well as economic life. Pure non-conditionality and cautiousness do not pay in a two-dimension world While not new to the literature, our first accomplishment consisted in the illustration and argumentation of the idea that in a two-dimension world (or a world perceived as two-dimensional by agents) the only strategy able to establish itself in spite of non-cooperators N is philía-reciprocity (B): neither the cautious, nor the unconditional cooperators could ever manage to overthrow non-cooperators (see Proposition 1 and 4). On the contrary, we have seen that even a relatively small group of reciprocators B would suffice to activate reciprocity – provided the game was long enough – because mutual

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reciprocity is more rewarding than indifference and exploitation. This significantly suggests that in a community largely inhabited by non-cooperators, if part of the population wanted to activate processes of cooperation, the strategy to follow should not be cautious reciprocity (C), or pure unconditionality (G), but it would have to be philía with its brave but conditional logic of action. To illustrate, if an individual or group pursued the aim of turning a situation of non-reciprocity into one of reciprocity and they conceived the world – we have seen agents’ self-representation of the game to be relevant – as offering only two strategies, i.e. non-cooperation (N) and unconditional reciprocity (G), it is unlikely that the creation of new conventions of reciprocity would be successful, especially if the ‘starters’ were too few. The face-to-face between pure gratuitousness (G) and non-cooperation (N) seems to lead inevitably to the success of the latter. It is, therefore, fundamental to try to conceive the world as featuring more than two ‘polar’ alternatives (unconditional cooperation and non-cooperation), and instead learn how to use imagination and creativity to implement a social action capable of conceiving and thereby activating more relational dimensions. We shall come back to this point in the space of a few pages. Politics and institutions We have often observed that reciprocity has typically better chances to emerge in a given population the longer games, the lower its costs and the higher its rewards. Inspired by these findings, we made some occasional digressions into the political–institutional realm: in real life, payoffs are often called laws, institutional design, public administration policies, or in short: civil culture. The frailest, yet vital, forms of reciprocity may become extinct in a society as a consequence of political acts failing to see their worth, or even hindering them; they may flourish, instead, in a community or society able to foster gratuitousness and acknowledge its value. The delicate role of unconditionality The dynamics of reciprocity become even more interesting when dealing with a population hosting more than two types of strategies. In a three-dimension world, the role of unconditional reciprocity (G) is crucial because it decides whether reciprocity will be able to evolve and, in that case, which form will prevail. In particular we have seen, in both repeated and evolutionary games (cf. Proposition 6 and the simplex), that if the frequency of unconditional actions is high, or at any rate higher than the frequency of conditional actions, not just unconditional reciprocity but also philía-reciprocity would become extinct. In other terms, in a population exposed to the possibility of non-cooperation, if too many acts of unconditionality were performed, not only would gratuitousness itself become extinct, but it would also drag

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philía-reciprocity with it, thus leading to a picture of contractual relations exclusively (in the best case scenario and provided the necessary conditions were verified), or of generalized non-cooperation. On the other hand, in cases in which friendship is directly dismissed for the sake of an allegedly more deserving ‘unconditionality of giving’, it can be easy to unintentionally plunge into generalized non-cooperation. An example is given by those utopian communities that, failing to acknowledge the existence of non-cooperation N (which instead is never missing in actual communities), attach an excessive weight to unconditional behaviours (communal property, lack of rules and contracts, . . .); together with the refusal or disregard of any kind of formal rules, this ends up producing a result opposite to the one originally sought, i.e. the prevalence of noncooperation and possibly the termination of those same communities. As another example, we can think of other religious community experiences where, in the time of the foundation, considerable weight is ascribed to unconditionality and none to the conditionality of philía, let alone contracts or rules: once the foundational stage is over and non-cooperative behaviours or individuals set in, the logic prevailing amongst the second and any subsequent generations will be non-cooperation (or, alternatively, the obsessive compliance to juridical norms, and hence to the ‘contract’).2 There is no civil life without unconditionality The key strategy in a three-dimension world is indeed the reciprocity of friendship. However, we saw that, moving from three to four dimensions, philía loses its centrality to cautious reciprocity C and to the unconditional G. When strategies C enter the game (cf. Propositions 3, 7, 8, 9, 10) the role of unconditional cooperators G gains a whole new meaning, thanks to their unique ability to trigger the potential of reciprocity lying latent in the cautious C (an ability which the conditional cooperators B do not possess). This fact is suggestive of actual (or at least plausible) civil-life dynamics: 1

2

Cautious cooperators C, although they never cooperate in the first round, are able to respond positively to unconditional strategies of reciprocity from the second round onwards; at the same time, C-strategies do not let the others exploit them when they run into agents who are unwilling (or unable) to cooperate. Furthermore, C rewards more G than B, and this fact indirectly favours the presence of gratuitousness in society. Sugden (2004) effectively compares cautious strategies to those plants that somehow manage to grow even under extremely adverse conditions and, once they have established themselves, they allow other more delicate plants (just like the ‘plants of unconditionality’) to develop; crucially, the latter would be unable to set in without plants C, more resistant to the adversity of cultural ‘climate’. A community wishing to initiate a culture of friendship-reciprocity in a

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3

89

non-cooperative context is more likely to succeed if the cautious agents C are also present. So the most conditional form of reciprocity becomes an ally of the least conditional one, and they join forces to overthrow non-reciprocity. Amongst the results of this work, this is one of which I am particularly fond, because it suggests that, in order to achieve prosperity, civil society needs to address towards the common good different types of actions, informed by wide-ranging motivations and cultures. First-kind reciprocity, however, successfully contributes to the spread of reciprocity only if amongst the population there are also the unconditional cooperators G, who are capable of ‘activating’ the cautious C. At the same time, C cannot co-exist together with G: or imitate other strategies of reciprocity (B and G), or are able to co-exist only with N. The latter can benefit civil life only if they live symbiotically with unconditionality. The logic of reciprocity underlying friendship, instead, is not fitted for this purpose, because by nature it does not involve non-friends in its dynamics of reciprocity. Unconditional cooperators then behave as catalysts towards the more cautious, conditional, non-gratuitous forms, who, in turn, serve philía-reciprocity indirectly.3

Conditionality, in a multidimensional and heterogeneous world, far from being an enemy of gratuitousness, might serve as its footstool. Here is another example. Art has an extreme need of gratuitous reciprocity: art is essentially a matter of gratuitousness: ‘a work of art can survive without the market, but where there is no gift there is no art’ (Hyde 1983, p. xi). There are artists who refuse to ‘compromise’ with the market because they do not want their works of art, which they regard as expressions of gratuitousness, to be contaminated and treated as a mere medium of exchange. The artist who behaves this way conceives the world as two-dimensional only, with gratuitousness on one side and the market, reign of pure interest from which gratuitousness is banned, on the other. The outcome of this dynamics can be represented as the encounter between non-cooperation (N) and unconditional reciprocity (G): gratuitousness tends to shrink. On the contrary, if the artist were able to picture the world as three- or four-dimensional, imagining more opportunities of market relations (a second job, for instance) and learning to acknowledge the possibility of entertaining intermediate forms of relations with the civil society (in our terminology, strategies B and C), then he or she may truly cultivate the gratuitousness of art, because in fact conditional reciprocity can deliver an artist from having to depend on ‘benefactors’ or on a ‘patron’ who might take advantage of talent for the sake of mere profit: it is through such deliverance that reciprocity makes authentic gratuitousness possible. This conclusion is in line with the theory of Lewis Hyde, anthropologist of art: ‘Gift-increase (un-reckoned, positive reciprocity) may be converted into market-increase (reckoned, negative reciprocity). And vice versa [. . .]. Put generally, within certain limits what has been given us as gift may be sold in

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the marketplace and what has been earned in the marketplace may be given as a gift. Within certain limits, gift wealth may be rationalized and market wealth may be eroticized’ (Hyde 1983, p. 274). In this work we have tried to explore those ‘certain limits’ within which the alchemy of gratuitousness might take place. Cui prodest G strategies? From firms to households and to a different extent in each case, many experiences of reciprocity draw their success on an even limited presence of agents behaving according to non-conditional strategies (Bruni and Smerilli 2008); they are able to activate reciprocity in other types of agents, who would remain dormant if they only came across conditional cooperators. For this reason, while in the preceding chapters I have repeatedly praised the value of conditionality, I also pointed out that, contrary to what economic theory traditionally prescribes, non-conditionality also plays a unique and precious role in contexts where conditionality and contracts are unable to foster virtuous civil cycles. Actually, although it would be clear to the reader that the author of this book is a ‘supporter’ of unconditional behaviour or gratuitousness, the main message coming from all the previous analyses about gratuity or unconditional behaviour of G is: ‘be careful’, ‘not too much’. In the world we have depicted there is a only ‘positive’ role of G: the activation of Cs, which is also one important message of the whole reasoning embodied in this book. In fact, this book has emphasised the importance of other strategies (of C in particular) for the surviving of G, but all our games have showed the risks and the dangers associated with G behaviour. Why? In a world designed as a Prisoner’s Dilemma, a rational (in the terms of rational choice) agent shouldn’t choose an unconditional strategy G, because a B strategy rewards cooperation and doesn’t reward exploitation (as G, instead, does). But, the approach I have followed has been different. The question was not: ‘which is the best strategy for a rational player in a four dimensions world’?; but rather: ‘given the fact that unconditional people do exist in real word, which are the benefits and the costs of their presence?’. Or, in other words: ‘given the fact that without some forms of unconditional behaviour social life becomes very poor in the long run, which are the ‘precautions’ that those who love gratuitousness have to keep in mind in order to avoid the extinction of both unconditional reciprocity (G) and friendship (B) for the sake of non-cooperation and conflict’? In the next paragraph, we shall look at three possible fields of application, where all the insights and precautions we have explored along the way will hopefully convey a few non-trivial thoughts.

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Three concluding applications The Corporate Social Responsibility movement and the need for pluralism Today there is much talk about Corporate Social Responsibility (CSR), a phenomenon of considerable relevance to the civil quality of economic development. The insights offered so far might help to grasp some frequently neglected aspects of a debate that is very lively and complex.4 On a biographical note, it was a while ago when, during a conference in Brazil, I gave a speech about the risks typically associated with CSR: the possibility that purely instrumental or marketing motivations might in some cases lie behind its implementation; the risk that some forms of pseudo-CSR might jeopardize the reputation of those firms who choose CSR inspired by intrinsic motivations, and so on. At some point, a lady from Recife, who was involved in NGOs activities, turned to me and said: ‘In contexts like ours, where the rights of workers are frequently violated and the environment polluted, where firms frequently act as predators of the civil society, I welcome firms who behave responsibly, even if they only do so for the sake of their own economic return’. This simple objection forced me to undertake a more thorough and less-ideological reflection on CSR, and in general about the multidimensional nature of reciprocity and civil life. In undertaking an analysis of CSR, one should first of all realize that it comprises a whole family of concepts and experiences. It might be useful to group these into three types, corresponding each to one of our strategies of reciprocity C, B and G.5 In the first group, which we may associate with reciprocity C, we place the firms that put CSR into practice for the only reason that they are forced to do so by civil or political pressure, or by the mere calculation of economic profits. These firms conceive CSR essentially as a ‘cost’ they have to pay in exchange for the opportunity to operate; should the context change (for instance, due to relocation), the responsible practices would no longer be observed. Like all ‘cautious’ agents, these firms are never the ones to inaugurate a culture of social responsibility, but are willing to imitate others and to respond with cooperative acts when they meet cooperating subjects. There are then other kinds of firms (that can be represented by our type-B agents or strategies) who use CSR essentially as a marketing and communication tool. These entrepreneurs know – by instinct, or from market analyses, or perhaps from operating in a sector strongly influenced by ethical or environmental concerns, etc. – that to associate a firm’s name to social and/or ethical messages will increase the profits and, therefore, they choose freely (contrary to the first type) to start adopting CSR; nonetheless, the policy of these firms cannot be said to be inspired by intrinsic motivation (or these might be concurrent with other motivations, but to a very limited extent), and if one day the practices of CSR should no longer be profitable (as an effect of

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a change of country or sector or of law), these firms too would immediately stop acting according to CSR. We associate this behavioural pattern to our type B because this kind of organization might decide in certain contexts to take the initiative and take the gamble of starting a new responsible practice even without guarantees of economic return; as soon as they should see no response from others, they would immediately interrupt the socially responsible practices. Finally, there is a third kind of CSR that is undertaken by virtue of essentially intrinsic motivation or ‘vocation’, meaning that the entrepreneurs and those who control the firm have interiorized the ethical values that lead to entertain a responsible relation with the environment and the various stakeholders. The choice of CSR does not arise here primarily as a matter of convenience, but as the inner and symbolic compliance with some kind of identitary codes. Given the tight relation between corporate identity and the actual way in which CSR is realized, we could say that, in this third group, the experience of each firm establishes a way to CSR in its own right. Many amongst the organizations labelled ‘social firms’ can be described in terms of our G types.6 Until the aforementioned experience in Brazil and before writing this book, I thought that only G-type firms deserved the label of ‘socially responsible’ and I was a major skeptic about types C and B, because I used to see them as in conflict with the genuine culture practiced by G. Today I can say I have changed my mind; I have come to believe that market economy is civil when it hosts many forms of corporate responsibility. Indeed, the irresponsible and uncivil firm causes damage to both the social and natural environment; but all three forms of reciprocity and cooperation I have sketched are coessential in order to realistically visualize an economy or society we can truly call civil.7 This analysis makes way for further remarks. Type-G firms, for instance, despite remaining a minority (sometimes by necessity), play the essential role of ‘starters’ in environments characterized by a low degree of civil culture and lacking the conditions necessary to activate reciprocity B – let alone reciprocity C or contractual relations. The existence of G is a major ingredient in deciding the quality of social and economic progress. But – here is the catch – in a market conceived as two-dimensional (where non-cooperation is one of two dimensions) the life and development of firms committed to CSR would prove unsustainable. As a matter of fact, if they followed a cautious strategy we already know that the outcome would be generalized non-cooperation. If, on the other hand, they applied an unconditional strategy of reciprocity led ‘by vocation’, they would become extinct – unless they chose to seek shelter in ‘niches’ (supposedly) unknown to non-cooperation, but even then the chances of success would be probably quite low. Following a type-B line of action, the situation would show no significant improvement unless, as we have seen, the initial settings presented very high levels of cooperation already widespread in the market (or in some niches).

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The generalized establishment of CSR in the market should be accomplished by combining several forms of responsibility and ascribing the proper value to all cultures of CSR, instead of seeing each in opposition with the others. As a first rule, those agents in the market who do not assume cooperative behaviours should not be regarded presumptively as types N (noncooperators), but it might be beneficial to see them as cautious C to be activated by practices of gratuitousness (G). By self-representing the market as a multidimensional reality and hence embracing the risks that reciprocity necessarily entails, it may be possible to make way for generalized reciprocity and hence for a truly civil development.

The civil conditionality of microfinance Amongst the most successful and imitated experiences of civil development are indeed micro-credit and micro-finance, whose growth has shown a remarkable upturn in the last decades. Historically, the origin of micro-finance and micro-credit has been associated with the Grameen Bank of M. Yunus, ‘the banker to the poor’. In fact, if we chose to retrace the origin of these modern experiences in accordance with the essence of their philosophical rationale, it would have to be found in the so-called Monti di Pietà (transl. mounts of piety), invented by the Franciscans during the Italian civil Humanism (see Todeschini 2002).8 Monti di Pietà were originally institutions dedicated to the ‘care of poverty’, that is to say, to fully reintegrating those who had become indigent as a result of the contingent economic scenario back into the reciprocity dynamics of civil life. Indeed, Monti di Pietà are surrounded by a certain amount of folklore (many lights and some shadows, like the controversy entertained with the Jews all along the evolution of the Monti), and certainly this does not make easier to see them for what they really represented in the modern market economy. In fact, Monti di Pietà were the first major evolution in Western banking.9 But where does the real innovation of Monti di Pietà lie?10 The great innovation consisted in regarding the poor as a person: not to let the poor beg, but to give them a loan, even on some interest. While gaining some resources through the famous pegni (i.e. pawns: weapons only could not be pawned), the poor would contribute to increase the Monte, bringing funds that would thereby be invested: the assets of each Monte were composed for the most part of the poor’s goods. This is an important innovation, not just from the economic point of view, but in a profoundly civil sense. Not only do indigents not create wealth, but they destroy it, whereas once back into the economic cycle the poor are able to convey resources and activate development. Even in today’s world, this is the secret of the surprising success of micro-finance: the specific innovation of the modern movement initiated by Yunus’s in Bangladesh consisted in turning to a special class of poor, i.e. Muslim women, and in transforming them from social problem into social

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and economic resource by investing on their strengths, i.e. the ability to cultivate relationships and build communities on the basis of mutual trust. And it worked, and still works. In a situation of generalized non-cooperation, perhaps due to a social and/ or economic crisis, there is an extreme need to recreate a fabric of reciprocity, but the process cannot be activated unless someone starts taking risks even in the absence of adequate collateral. Because of this, entire countries fall into the trap of poverty. Back to our terminology, we may say that in order to start (or restart) economic development, there must be, at first, some strategy of action capable of unlocking the dilemmatic non-cooperative scenario by performing acts that must not be purely conditional. The two alternatives available are, therefore, unconditionality (G) or the ‘partial’ conditionality of philía (B). Micro-credit then works if it is able to adequately combine these two strategies: the unconditionality of gratuitous reciprocity activates our ‘sleeper’ cooperators C, but, as we have seen, it is ‘exploited’ by the systematic noncooperation of N; for this very reason, where cooperation is impractical, nonconditionality must be well balanced by B’s conditional cooperation. In fact, micro-credit would not be able to endure if it gave up either one of these two dimensions: without a certain number of unconditional actions it would not be able to break the trap of non-cooperation; but it is only with nonconditionality that the institutions of micro-credit have a chance to last in time. Indeed, actual experiences of micro-credit, from the ancient Monti di Pietà to today’s Grameen Bank, are a most fortunate mix of conditionality and unconditionality: they make use of contracts, they provide loans rather than gifts or charity, but the contractual tool is activated within a relation of trust that makes room for gratuitousness. Micro-credit demonstrates that, with regard to all types of reciprocity, a (conditional) loan is more effective than an unconditional gift (which is how both private and public aids to development had originally been conceived). The crucial message for those who wish to break out of poverty and underdevelopment is that to disregard conditionality and contracts, in the name of greater human dignity and of the rich anthropological nature of unconditional gifts, might often turn them into the unintended enemy of real human development, which shall be measured by the yardstick of reciprocity and fraternity.

Value-based management and fair trade Finally, we shall apply our theoretical framework to the domain of valuebased organizations, that is, organizations primarily created with a different purpose than making profits, but committed to some idealistic aim by ‘mission’ or ‘vocation’ (Bruni and Smerilli 2008). For example, many NGOs and humanitarian associations, or many experiences of social and civil economy, while still being subject to budget and efficiency constraints, are all inspired

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nonetheless by a wider range of motivations and goals, open to gratuitousness and with a vital need of our third form of reciprocity (G) – for it attracts customers and financial backers. In the light of our discussion, it seems likely that value-based companies incur the risk of two fatal mistakes. The first consists in thinking of the economic world as having only two-dimensions or types of firms and, on the part of the organization specifically, in identifying itself straightaway with the purely unconditional kind (G) while seeing the remaining actors as noncooperators (N). Taking the world to be sharply divided into ‘goods’ and ‘bads’ is sure to produce plans of action leading to the extinction of valuebased companies: it is necessary, therefore, to overcome this Manichaean division that sometimes deceives even some operators and intellectuals of the social economy. The managers of fair trade companies are amongst the ones who might fall prey to this mistake, for instance, by categorically refusing to get involved with the large distribution for fear of compromising their idealistic motivation and social identity. Our analysis, though, conveys the conclusion that those who feel and act this way may generate the unintentional effect of jeopardizing the very survival of the organization in the medium run. The second mistake is perhaps more difficult to identify for the fair trade operators. It consists in subscribing entirely to the line of action of semiconditional types B or totally conditional C: faced with the unavoidable disappointments induced by the ‘encounters’ with opportunistic subjects N, the value-based firm could choose the conditional strategy, that is well described by such ordinary sentences as: ‘I want to be good but not to be fooled’. In these organizations, such mistake is typical of ‘second-generation’ managers: as a reaction to the excessive emphasis on the founders’ vocation and gratuitousness (which might have given rise to organizational and/or economic problems), they simply respond by lowering the degree of freedom in the system; but this ‘solution’ necessarily yields an impoverishment of the civil dynamics. Not only does this ‘solution’ lead to the extinction of gratuitousness, but it also undermines the very roots of the idealistic motivation that had given rise to the organization and to its identity in the first place, and had attracted the consents of all the various stakeholders. And when these organizations lose unconditional reciprocity, something crucial to the quality of human relations is also lost. What course of action should they adopt? As to fair trade, the advice that emerges clearly from our analyses is to collaborate with types B or even with C. But who are these agents, beyond the metaphorical rhetoric? Types B could be those actors of the market (and large distribution) that, despite having weak intrinsic motivations today, have not completely abandoned them (and in some cases those motivations might still be there and need only to be revived). I am thinking of many large consumer cooperatives founded in the past out of vocation, that by coming into contact with new,

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young and idealistic cooperators of fair trade might achieve a double positive effect. First, the ‘sleeper cooperators’ could re-awake that social vocation that lies latent in them: they would then act like agents C coming across the unconditional G, and thus experience a new form of reciprocity. On their side, fair trade cooperators, avoiding the face-to-face with the noncooperation of the large distribution (a confrontation they had no chance of winning) to enter a three- or four-dimensional arena, could very well succeed in establishing reciprocity in the ‘capitalistic’ market, and in retaining their identity without compromising gratuitousness.11 One day they might see the equality and solidarity that have inspired their action all along become the ordinary culture of the market. Given its prominence in today’s debates, the theme of social economy networks deserves a very last note. If a network aimed at connecting only unconditional types (G), it would be deemed to collapse as soon as it came to face non-cooperators (N). From our discussion, we may infer that social economy networks wishing to grow and evolve need to be heterogeneous and to involve many kinds of firms, with different vocations and different degrees of intrinsic motivation. Otherwise, the desire to preserve themselves from the logic of contracts and conditionality could ultimately condemn them to extinction. It is the evangelical parable of the salt of the earth: ‘You are the salt of the earth, but if salt has lost its taste, how shall its saltiness be restored? It is no longer good for anything except to be thrown out and trampled under people’s feet’ (Gospel of Matthew).

Civil happiness Reciprocity is one then, but reciprocities are many. We stated this in many different ways, making it the leitmotif of this book. What is typical in each form of reciprocity is the encounter of giving and receiving. It is in this sense that reciprocity is one. At the same time, reciprocity comes in many guises and is inspired by many different motivations; therefore, reciprocities are many. This insight seems to fit perfectly in the Italian tradition of civil economy which, while recommending people to cultivate civic virtues, is never forgetful of ‘man as he is’, or of the fact that actors are quite different from one another (even more so in the mixed society of our times) and that their actions are informed by the most heterogeneous logics and motivations. A society and its economy are said to be civil, in this perspective, when they manage to turn the variety of human actions into ‘industrious reunion of forces aiming at’ and thus achieving ‘the well-being of each one – hence the public happiness. [. . .] This must be the aim of every human law’ (Verri 1964 [1763], p. 100). Another founder of the civil Italian tradition, the Neapolitan philosopher Giambattista Vico, used to regard the civil dynamics as a providential mechanism ‘Legislation considers man as he is in order to turn him to good uses in

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human society. Out of ferocity, avarice and ambition, the three vices which run throughout the human race, it creates the military, merchant, and governing classes, and thus the strength, riches and wisdom of commonwealths. Out of these three great vices, which could certainly destroy all mankind on the face of the earth, it makes civil happiness’ (1744 [1725], § vii, p. 81). On Vico’s view, this ‘alchemy’ is the sign of a providential order that is immanent in the dynamics of history. Vico, alongside Genovesi and the entire tradition of civil economy, acknowledged the fact that when life is truly civil even selfinterested motivations can play an important role in the edification of civil happiness; this confidence, however, is accompanied by the awareness that private interests do not always, or naturally, turn into public virtues, but this can only happen within the dynamics of civil life: private interests, often unintentionally, serve the common good only within institutions and civil laws that regulate their dynamics. Our analyses suggest that in some institutional contexts (here represented by means of our parameters and payoffs) civic virtues, i.e. genuinely gratuitous actions, cannot manage to unlock situations of non-cooperation if the premiums of reciprocity are poor. At the same time, we have learnt that more numerous and articulated forms of reciprocity increase the heterogeneity of civil life and hence foster the alchemy of interests which can now become the unintended allies of gratuitousness. This book has then tried to give an account of the various forms of reciprocity that compound civil cohabitation, but above all it has intended to highlight the importance of activating plentiful forms of reciprocity if we do not want civil life to remain stalled on non-reciprocity, and if we want at least to try to imagine and dream of ‘civil happiness’ and of that universal and generalized reciprocity each culture and person secretly longs for.

Appendices

Appendix 1 to Chapter 1 The current debate on reciprocity in contemporary economic theory The use of reciprocity as a category for economic reasoning has become widespread along with the rise and development, in the last thirty years, of experimental economics and behavioural economics; the latter has emphasized the importance of those behaviours tending to deviate from conventional economic theory.1 To acknowledge the novelty of this use of reciprocity does not mean there were no previous theories of non-self-interest or altruistic behaviours within the science of economics: a few marginalist economists had in fact hypothesized, without departing from the homo oeconomicus paradigm, that agents might undertake actions not motivated by self-interest even in an economic context.2 Such behaviours, though, were not considered as especially significant in accounting for economic interaction, which, in turn, was conveniently restrained to the simple but realistic assumption that agents, when operating in the market, do not take into account other agents’ well-being or humanity, but only their own (and their family’s). This new series of studies has been brought up by empirical and experimental analyses, providing sound and robust evidence about behaviours not motivated by self-interest. Among the earliest anomalies to be investigated are cooperative choices, registered through prisoner’s dilemma experiments (even in one-shot interactions): ‘Laboratory experiments routinely find that some agents defect but others cooperate’ (Samuelson 2005, p. 490). Explanations of such ‘anomaly’ draw attention on specific assumptions. One of the earliest theoretical models applied to voluntary contribution to public goods is Sugden (1984), explaining contribution on the basis of the hypothesis that every agent has her own idea of what amount of contribution (ε) she would like others to give. If the effective contribution is equal or greater than ε, then the agent perceives a moral obligation to contribute by at least ε: ‘I shall call this the principle of reciprocity’ (p. 775). Sugden’s model employs the category of ‘moral rule’ to make sense of the rise of reciprocity:

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the emergence of cooperation is explained without referring to economic rationality as the ethic rule is seen as an alternative to (economic) ‘rationality’. In other words, a social norm is rational in a different sense compared to the neoclassical account of rationality (as individualistic and instrumental maximization):3 in this case the agent does not systematically come to choices through calculation, but follows – on a rational basis – an ethic rule, which applies to a wide range of actions (Gauthier 1986). However, these explanations remain within the domain of conditionality: the social norm of reciprocity is not unconditional to other players’ response. Many among the early studies on reciprocity were built on the assumption of altruism, but it soon became clear that mere altruism could not provide an adequate explanation for anomalies, to fit laboratory evidence; they needed assumptions to be more sophisticated from the relational and motivational point of view. It is in this light that through the 1990s were created the theories of iniquity aversion (Fehr and Schimdt), warm glow (Andreoni), team-thinking (Sugden and Bacharach) and others.4 One of the first authors to deal directly with the concept of reciprocity was Rabin, in 1993, although the focal category in his work is actually fairness. Let us consider the very first lines from his classic work, an article appeared on the American Economic Review: ‘People may care not only about their own well-being, but also about the well-being of others. Yet psychological evidence indicates that most altruistic behavior is more complex: people do not seek uniformly to help other people; rather, they do so according to how generous these other people are being’ (p. 1281). According to this theory agents are not generous, or non-generous, indistinctively towards anyone, but show a certain degree of conditionality and selectivity in their reciprocating action: ‘Indeed, the same people who are altruistic to other altruistic people are also motivated to hurt those who hurt them’ (Rabin 1993, p. 1281). More specifically Rabin builds his theory on three assumptions: 1 2 3

people are willing to sacrifice their material well-being to help those who have been kind to them; they are willing to sacrifice their material well-being to ‘punish’ those who have been unkind to them; the formers will produce the greater effect on behaviours the lower is the extent (cost) of sacrifice.

Particularly important in Rabin’s work is the analysis of intentions. In his model, he proposes a simple set of equations representing the mechanism adopted by the agent as she tries to figure out the other agent’s intentions and to assess her degree of kindness; that is to say, the agent examines the way in which the other has in fact acted, but also what she could have done and did not (the other feasible options). Rabin’s theory, both in the original and in the versions that were later

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extended to dynamic contexts, has undergone extensive developments and experimental applications. The methodological turning point for the economic studies on reciprocity has been, in recent years, the abundant empirical results attained thorough laboratory experiments which, as mentioned above, have led to question the paradigm of rational egoism. A rather less aprioristic and more pragmatic approach has consequently emerged for the purpose of studying the real behaviour of people. This experimental literature has produced new models and theories, providing the essential tools for game theory and decision theory, and in general for the analysis of behaviour. In such theories, reciprocity is seen as a phenomenon to assess empirically and, at the same time, as a theoretical assumption aimed at explaining anomalies in theories built on self-interested behaviour. The gift-exchange game, the public-good games, the ultimatum game or the dictator game have shown behaviours in which players tend to respond more generously than rational choice theory would predict, and reciprocity plays a central part in all of them. In particular, many experiments indicate that economic agents (at least in laboratory interaction) are willing to accept lower monetary returns in order to reward or punish other players on the ground of a norm of reciprocity. One basic game in these experiments is the ‘Trust Game’. One agent, A, receives a certain sum of money (e.g. 10 dollars) from the experimenter, and she can donate it to the other player, B, or keep it by herself. If A trusts and donates, then the sum is multiplied (in our example, 30 dollars) and B will decide if and what amount donate back to A. According to ‘standard’ economic theory, the game has only one Nash-equilibrium: A keeps the whole sum of money and the game ends after the first move (10,0). Experimental evidence, instead, shows that over a half of type A agents trust and donate money to B agents, who, in most cases, donate back a certain quote (x) of the sum they received from A agents. B responds by ‘rewarding’ A’s kindness at her own expenses. Another significant game is the ‘Ultimatum Game’. A receives a certain sum of money (e.g. 10 dollars), but the game establishes that she’ll be able to effectively receive the sum only if she will make B accept the sum she offers (and, if B does not accept, none of them receives any money). According to rational choice assumptions, A ought to donate the smallest possible amount (e.g. 1 dollar), supposing that for B 1 > 0. In reality experiments show that B often refuses to accept A’s offer if she doesn’t consider it ‘fair’ and so punishes A (but at her own expense). The ultimatum game is the most common game within ‘strong reciprocity’ models: agents punish an offerer who has been unjust in the offer by rejecting that offer and thus sacrificing their own monetary returns. The explanatory variable of the whole theory is then fairness: the other player is rewarded (or punished) according to the persuasion that she behaved fairly (or unfairly) in the first place. Therefore, in this approach, intentions matter.

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The results of the game will vary depending on the strategies of the players (A and B) and on their first-order beliefs (A’s belief on B’s strategy) and second-order beliefs (A’s belief on B’s belief on A’s strategy, and viceversa).5 This first and influential work by Rabin was later extended into the Theory of Reciprocity (2000) by Armin Falk and Urs Fischbacher of the University of Zurich, who are among the greatest contributors to the strong reciprocity theory.6 Their model, just like the one they adopt from Rabin, ascribes a key role to intentions. Yet, as they point out, ‘intentions alone cannot be the whole story’ (Falk and Fischbacher 2000, p. 6). They assume that players’ utilities depend on the payoffs achieved and on the kindness and reciprocity they perceived during the game.7 Falk and Fischbacher, like many other economists who have worked on this subject, use the terms ‘positive reciprocity’ and ‘negative reciprocity’ referring, respectively, to a kind response for a kind action and to a hostile answer for a hostile action from the agent’s point of view. They also observe that those responses, be they kind or unkind, in the case of reciprocity cannot be explained on the account of self-interest and preferences merely directed at material gains.8 The ‘Zurich School’s’ results suggest that reciprocity is in fact a kind of ‘rule, able to promote cooperative relationships resulting in an increase of collective well-being, especially in those contexts in which it is not conceivable or possible to work out a contractual constraint’ (Crivelli 2002, p. 24). Finally, a few words should be dedicated to those models that incorporate the principle of reciprocity in the contribution to public goods.9 Many of the authors mentioned above, as it is, also consider the ‘public good game’ in the application of their models or simply to assess experimental results on reciprocity. In this game, each person is endowed with a certain stock of money and she has to decide what amount of her stock she wants to contribute to the public pot (the public good); every player, at the end of the game, will be rewarded with her own contribution and with part of the total contribution to the public pot, on condition that a minimum amount has been achieved for the realisation of the public good. This game can also be interpreted as a prisoner’s dilemma game with n players, where each player has non-cooperation as her dominant strategy, necessarily resulting in a non-cooperative Nash equilibrium. Experimental results have shown instead that very few players behave according to standard economic theory, whilst many decide to contribute from the first round of the game. If the game is one-shot, then the players tend to contribute on average with half of their initial endowment. In repeated games, though, a declining proportion of public contribution is observed after half of the rounds have been played, until the last round in which the amount contributed drops to zero. Some authors explain this behaviour with ‘learning’, assuming that players do not initially realize that non-cooperation would be more profitable but round after round they

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eventually understand that non-contribution is the rational (or dominant) strategy. Such an explanation, nevertheless, does not account for the fact that when the game is run again with the same subjects (so-called ‘re-start effect’), the level of contribution still tends to reach about half of one’s endowment (Gintis 2000b, p. 317). Andreoni interprets this anomaly in the light of the category of reciprocity: the subjects planning to behave according to this rule start by contributing but, if free riders persist with their strategy, the others can only punish them in one way, i.e. by not cooperating (not contributing). When the game is restarted, they hope that reciprocity will prevail and therefore they choose to contribute again: if, however, free riding occurs again, a punishment is delivered: ‘Social norms tend to be self-enforcing, punishing those who do not comply with them’ (Andreoni 1988, p. 301). Andreoni’s theory seems to be confirmed by the circumstance that in the public good game, when retaliation, that is, the opportunity to punish by other means than defection, is allowed, players choose other available punishments rather than interrupting their contribution (Gintis 2000b). Moreover, in the experiments carried out by Fehr and Gächter (2000) in which participants are guaranteed that punishment towards defecting players will not bring them any future benefit (because games are not repeated and there is no random matching), retaliation behaviours are nonetheless observed; this might serve to answer the potential objection of those who claim that the punishment of defecting subjects might be strategic and instrumental to one’s own advantage, and hence that it could be explained in terms of pure self-interest, with no need to call upon reciprocity.10 In conclusion it must be acknowledged that many of the contributions on reciprocity theory that we have presented in this Appendix make use of sequential games in order to observe and theorize the rationale of reciprocity behaviours: B observes and interprets A’s behaviour and, on this ground, decides if and how to reciprocate. In the next chapter we will follow a somewhat different approach: we will take the (repeated) prisoner’s dilemma, as our basic game and, being a simultaneous game, the response to the other players’s behaviour will be acted in the successive round based on the behaviour observed in the round before. At first, the psychological refinement will seem to vanish in games where behaviour (past interaction) is the only communication language: in fact we will see that, behind the simple ‘technology’ of the model, the psychological and methodological dimensions will emerge as we proceed with the analysis.

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Appendix 2 1 to Chapter 6 Proof of Proposition 1 Let us start with the equation of Proposition 1: Ub ≥ Un ⇔ pb ≥

c(1 − π) . π(b − c)

For an agent N, meeting another N yields the payoff 0, while meeting B yields b in the first round (and always 0 thereafter). If pb designates the probability of meeting B (which is set equal to the frequency of B-type agents in the population), the expected utility of N will be given by Un = pbb. The expected utility of an agent B will be given by Ub = −c(1 − pb) + [(b − c)/(1 − π)] pb.2 By comparing Un and Ub we have − c + cpb + cpb +

b−c pb ≥ bpb 1 −π

b−c pb − bpb ≥ c 1 −π

c − cπ + b − c − b + bπ ≥c 1−π

pb

冢

pb

冢

冣

− cπ + bπ ≥c 1−π

pb ≥

冣

c(1 − π) . (b − c)π

We shall now consider an evolutionary extension of our analysis, obtained by running simulations and implementing a replication dynamics. The aim is to gain some insights into the evolution of the frequencies of N and G over time (after the first repeated game). By writing the system of differential equations for the case of a standard replication dynamics (i.e. the difference between the strategy fitness and the average fitness), we have the following equations:

冤

冢

冢

p′n (t) = pn (t) b( pb (t)) − (bpb (t) pn (t) + −cpn (t) + p′b (t) = pb (t)

冤冢−cp

n

(t) +

b−c pb (t) pb (t) , 1−π

冣

冣冥

b−c pb (t) − bpb (t) pn (t) + −cpn (t) 1−π b−c + pb (t) pb (t) . 1−π

冣 冢

冢

冣

冣冥

For the simulation we need a parameterization. If π = 4/5, c = 1, b = 2, Proposition 1 entails

104

Appendices 1 Ub ≥ Un ⇔ pb ≥ . 4

Given the initial conditions pn = 0.5, pb = 0.5, the following simulation obtains (the continuous line refers to N, dotted refers to B), which shows the extinction of N right after the second period. In this case, Proposition 1 gives also an indication of the evolutionary dynamics.

Figure App. 2.1

We shall now ask how things change if pb ≤ 1/4 (that is, if Proposition 1 does not hold). By posing pn = 0.8 and pb = 0.2, we observe the following.

Figure App. 2.2

As a third case consider the values pn = 0.7 and pb = 0.3 (the condition stated in Proposition 1 is barely verified): agents N still become extinct, but at a later stage, and their initial fitness is higher.

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Figure App. 2.3

Finally, if pb is exactly equal to the threshold value (1/4), then the two strategies will coexist.

Figure App. 2.4

By changing the values of the parameters to π = 3/5, c = 1 and b = 2, Proposition 1 will now entail pb ≥ 2/3. Thus, given the initial conditions pb = 0.5, pn = 0.5, agent N will now prevail in the population.

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Appendices

Figure App. 2.5

However, if we retain these values while changing the initial conditions to pb = 0.7 and pn = 0.3 (consistently with Proposition 1), strategy B will evolve.

Figure App. 2.6

Proof of Proposition 2 The expected utilities of strategies B and C are the following: b−c Ub = pc (bπ − c) + pb 1−π Uc = pc (0) + pb (b − cπ) Developing their comparison (1 − pb)(bπ − c)(1 − π) + pb (b − c) − pb (b − cπ)(1 − π) ≥ 0,

Appendices

107

and in a few steps we achieve Proposition 2: Ub ≥ Uc ⇔ pb ≥

c (1 − π) b (1 − π) 3 − . (b − c) π2 (b − c) π

It is straightforward that for π ≥ 1/2, Ub is always higher than Uc. As it is, if π was equal to zero, i.e. if the game only lasted one round, agents C would gain a higher utility than agents B (C would gain b, while B would get −c and, by stipulation, in a Prisoner’s Dilemma game it is b > c). In the second turn, however, the situation is reversed. Let us consider two simulations of the replication dynamics. The differential equations appear as follows: b−c

冤冢1 − π p

b−c

冣 冢冢1 − π p (t) + (−c + bπ) p (t)冣 p (t) + ((b − cπ) p (t)) p (t)冣冥 , b−c p′ (t) = p (t) 冤(b − cπ)p (t) − 冢冢 p (t) + (−c + bπ) p (t)冣 p (t) 1−π + ((b − cπ) p (t)) p (t)冣冥. p′b (t) = pb (t)

b

(t) + (−c + bπ) pc (t) −

c

c

b

c

b

b

b

b

b

c

c

b

c

Considering π = 2 /5 (< 1/2, that is) and taking c = 1 and b = 2, it follows from Proposition 2 that for values of pb > 3/4 the repeated game is led by C. The evolutionary simulation has – once more – confirmed the previous results. And indeed, by posing pb = 1/2 (< 3/4), we have that agents C set in (medium dotted line).

Figure App. 2.7

On the contrary, by posing pb = 0.85 (and pc = 0.15), we have – consistently with Proposition 2 – that agents B will set in.

108

Appendices

Figure App. 2.8

Proof of Proposition 3 The expected utilities of strategies C and G are the following:

冤

Uc = pg b +

b−c − (b − c) + pc (0)4 1−π

冤

冥

Ug = pc −c +

(b − c) (b − c) − (b − c) + pg . (1 − π) (1 − π)

冥

It is possible to derive the demonstration of Proposition 3, which describes the encounter between C and G: Proposition 3 Uc ≥ Ug ⇔ pg ≥

−c + πb (b − c)π

Uc ≥ Ug implies

冢

pgc − (1 − pg) −b +

b−c ≥0 1−π

冣

pg (b − c) π ≥ bπ − c pg ≥

bπ − c . (b − c)π

Once again, we run some dynamic simulations for this case. The differential equations are the following:

Appendices p′g (t) = pg (t) +

冢

g

(t) +

− c + bπ pc (t) − 1−π

冢

冣

− c + bπ pc (t) pg (t) + 1−π

冣

p′c (t) = pc (t) +

b−c

冤冢 1 − π p

冣

b − cπ

冤冢 1 − π 冣 p

g

(t) −

b−c

冣 冢冢 1 − π p

g

109

(t)

b − cπ

冢冢 1 − π 冣 p (t)冣 p (t)冣冥 , g

b−c

冢冢 1 − π 冣 p

g

(t) +

c

冢

− c + bπ pc (t) pg (t) 1−π

冣

冣

b − cπ

冢冢 1 − π 冣 p (t)冣p (t)冣冥. g

c

Proposition 3 entails that if π = 4/5, c = 1 and b = 2, in order to have Uc ≥ Ug it must be pg > 3/4. And hence, for pg > 3/4 we observe the cohabitation of G (thin dotted) and C (medium dotted).

Figure App. 2.9

And in case pg = 1/2 (<3/4), the higher utility of G compared to C does not lead to the extinction of any of the two, but rather to their cohabitation with a higher proportion of G.

110

Appendices

Figure App. 2.10

As to other cases of two-agent game, notice that G vs B is not particularly significant, for the two strategies exhibit the same expected utility. Notice as well that in a population exclusively composed of G and N, the expected utility of G is always lower than N: Un is always higher than Ug and consequently the inequality pg

b

冢1 − π冣 ≥ p

g

b−c c − (1 − pg) 1−π 1−π

is necessarily verified.

Appendices

111

Appendix 3 to Chapter 7 In a three-dimension world (N-B-G), we may derive the following expected utilities: Un = pn (0) +

pgb + pbb 1−π

Ub = pn (− c) + pg Ug = pn

(b − c) 1−π

+ pb

(b − c) 1−π

−c (b − c) (b − c) + pg + pb 1−π 1−π 1−π

Proof of Propositions 4 and 5 Proposition 4: Ub is always higher than Ug. Indeed, the inequality pn (−c) ≥ pn

−c 1−π

is always verified. Consider now c Proposition 5: Un ≥ Ug ⇔ pb ≤ . We have: bπ Un ≥ Ug implies pg · b + pbb ≥ pn

−c b−c b−c + pg + pb 1−π 1−π 1−π

− pb · bπ + (pn + pg + pb) c ≥ 0 pb ≤

c bπ

Proof of Proposition 6 Proposition 6 Ub ≥ Un if : pb ≥ pg

c c(1 − π) + . (b − c) (b − c)π

Ub ≥ Un implies pn (−c) + pg

b−c b−c b + pb − pg − pbb ≥ 0 1−π 1−π 1−π

pb (c) + pg (c) +

−c bπ − c + pb ≥c 1−π 1−π

112

Appendices pb

π(b − c) cπ ≥ c + pg 1−π 1−π

pb ≥

c(1 − π) c + pg . π(b − c) b−c

Graphic and numerical analysis In building the first graph on p. 72, it has been assumed that the three strategies are equally distributed among the population. We can put: 1 pn = pb = pg = , 3 and we therefore obtain the following values for the expected utilities: Un =

1 b b+ 3 1−π

Ub =

1 b−c 2 −c 3 1−π

Ug =

1 2(b − c) − c . 3 1−π

冢

冣

冢

冣

冢

冣

By posing c = 1 and b = 3, we can express the expected utilities as functions of π. 9 1 In graph 2.5 on p. 106, we assumed: pn = pb = , pg = , with b = 2, c = 1. 20 10 Deriving the expected utilities for these parameters’ values, we obtain the following: Un =

9 1 b b+ 20 10 1 − π

Ub =

9 b−c 1 b−c −c + 20 1 − π 10 1 − π

Ug =

9 (b − c) − c 1 b−c + . 20 1−π 10 1 − π

冢

冢 冢

冣

冣

冢

冣

冣

冢

冣

which generate our graph with π as the independent variable (still considering b = 2 and c = 1).

Appendices

113

Constructing the simplex From the expected utilities, we can derive the payoff matrix: 0

b

A= −c −c 1−π

b−c 1−π b−c 1−π

b 1−π b−c 1−π b−c 1−π

The replication dynamics can be described using the following system of differential equations: p·n = pn [(Ap)1 − tp · Ap] p·b = pb [(Ap)2 − tp · Ap] p·g = pg [(Ap)3 − tp · Ap]. whereas A is the payoff matrix, tp ≡ (pn, pb, pg) and (Ap)r is the r-component of the Ap vector, corresponding to the expected payoff of the examined strategy, tpAp is the average payoff. The unfolding of the dynamics is illustrated by the simplex: ∆ = {p ∈ ᏾3 : p ≥ 0 e pn + pb + pg = 1} In constructing the simplex, we shall refer to the analysis presented in Bomze (1983) and therefore we first build the matrix A′, obtained by subtracting from A its first row: 0 A′ =

−c −c 1−π

0 0 bπ − c − c 1−π 1−π bπ − c − c 1−π 1−π

Recalling Proposition 2 in Bomze (1983),1 we have that the following points:

• • •

The eigenvalue of the vertex N along the N-B direction is proportional to (− c) and is therefore negative. −c The eigenvalue of N along the N-G direction is proportional to 1−π and is therefore negative. bπ − c The eigenvalue of B along the B-N direction is proportional to − 1−π and is negative.

冢

冢

冣 冣

114

• • •

Appendices The eigenvalue of B along the B-G direction is zero. The eigenvalue of G along the G-B direction is zero. The eigenvalue of G along the G-N direction is proportional to (c/1 − π) and is therefore positive.

We know from Bonze’s Proposition 2 2 that a fixed point f lies along the N-B side (since ab < 0), and the eigenvalues associated to it are proportional both to (−γ), and hence positive, and to bd b− ae, that is to say: bπ − c

−c

bπ − c

冢 1 − π 冣 冢1 − π冣 − (− c) 冢 1 − π 冣

.

bπ − c 1−π

−cπ , which is clearly a negative quantity. 1−π The coordinates of the fixed point are [p, 0], where, in Bomze’s terms, (1 − π) p = − ab (which in our case corresponds to: cbπ − c ); the transformation of the coordinates for a three-dimension world is given by (Bomze 1983, p. 204): which can be turned into:

pn =

1 = 1+p+0

1 1+

c bπ − c 1−π

pb =

p c(1 − π) = 1 + p + 0 (b − c)π

pg =

0 = 0. 1+p+0

=

bπ − c (b − c)π

In virtue of Bomze’s Proposition 5, we may conclude that the B-G side is composed of fixed points (with e = b, c = f).

Appendices

115

Appendix 4 to Chapter 8 Proof of Proposition 7 Proposition 7 pb ≥

c(1 − π) c b(1 − π) + pg − pc . (b − c)π b−c b−c

Once again, we start by calculating the expected utilities:1 Un = pn (0) + pbb + pg Ub = pn (− c) + pb Ug = pn

b + pc (0) 1−π

(b − c) (b − c) + pg + pc (− c + bπ) 1−π 1−π

−c (b − c) (b − c) b−c + pb + pg + pc −b 1−π 1−π 1−π 1−π

冢

Uc = pn (0) + pb (b − cπ) + pg

冣

b−c

冢1 − π + c冣 + p (0); c

and then we compare the utilities of the strategies being examined, thus obtaining: pn (− c) + pg

b−c b−c b + pb − pcc − pg − pbb ≥ 0, 1−π 1−π 1−π

− pnc + pncπ + pgb − pgc + pbb − pbc − pcc + pccπ − pgb − pbb + pbbπ ≥ 0, pncπ + + pccπ + + pbbπ ≥ c c Ub ≥ Un ⇔ (1 − pb − pc − pg)c + pcc + pbb ≥ , π c − pbc − pgc + pbb ≥ , π 1 pb (b − c) ≥ c ( − 1 + pg). π The latter entails the threshold value in Proposition 7:

pb ≥

c(1 − π) c b(1 − π) + pg − pc . (b − c)π b−c b−c

116

Appendices

Proof of Proposition 8 Proposition 8 Un ≥ Uc in all cases if π ≥ 0 (and Un = Uc, if π tends to 0). As a matter of fact, if it were, Un < Uc, it would also be: b−c

冢1 − π + c冣 < p b + p

pb(b − cπ) + pg

b

g

b . 1−π

But in fact this inequality is never verified because (b − cπ) is always smaller b − cπ b than b, and therefore is always smaller than . 1−π 1−π Proof of Proposition 9 Proposition 9 pb ≥ pn

c − pc. bπ

−c b c b−c (b − c)π + pg − pg + pb − pcc + pc 1−π 1−π 1−π 1−π 1−π b − pg − pbb ≥ 0 , 1−π

Ug > Un ⇔ − pnc − pgc + pbb − pbc − pcc + pccπ + pcbπ − pccπ − pbb + pbbπ ≥ 0 . − c + pcbπ + pbbπ ≥ 0. And hence, pb ≥

c − pc. bπ

Proof of Proposition 10 Proposition 10 pc ≥ pn

c . bπ − c

Appendices

117

Ug ≥ Ub ⇔ pn

−c (b − c) (b − c) (b − c)π (b − c) + pg + pb + pc − c + ≥ pn(− c) + pg 1−π 1−π 1−π 1−π 1−π

冤

冥

+ pn

pn

(b − c) + pc(−c + bπ) , 1−π

−c (b − c)π + pc + pnc ≥ 0 , 1−π 1−π

− pnc + pc(b − c)π + pnc − pncπ ≥ 0. And hence,

pc ≥ pn

c . bπ − c

Proof of Proposition 11 Proposition 11 pb ≤

c(1 − π) b(1 − π) − pc . (b − c)π b − cπ

Uc ≥ Ub ⇔

b π) ≥ 0 ,

b−c

冢1 − π + c冣 − p

pb (b − c π) + pg

n

(− c) − pb

c − pbc + pbb − pbc π − pcb π − pb

which entails

pb ≤

c(1 − π) b(1 − π) − pc . (b − c)π b − cπ

(b − c) (b − c) − pg − pc (− c + 1−π 1−π

(b − c) ≥ 0, 1−π

118

Appendices

Graphic and numerical analysis Recalling the expected utilities calculated for the four-dimension world: Un = pn (0) + pbb + pg Ub = pn(− c) + pb

b + pc(0) , 1−π

(b − c) (b − c) + pg + pc(− c + bπ) , 1−π 1−π

−c (b − c) (b − c) b−c + pb + pg + pc −b , 1−π 1−π 1−π 1−π

冢

Ug = pn

冣

b−c

冢1 − π + c冣 + p (0).

Uc = pn (0) + pb (b − cπ) + pg

c

1 If the strategies are equiprobable, we have pn = pb = pg = pc = , and thus 4 obtain the following expected utilities: Un =

1 b b+ , 4 1−π

Ub =

1 b−c 2 + bπ − 2c , 4 1−π

Ug =

1 2(b − c) + bπ − 2c , 4 1−π

Uc =

1 b − cπ b − cπ + . 4 1−π

冢

冣

冢

冣

冢

冣

冢

冣

By posing c = 1 and b = 2 we obtain the first graph of the numerical analysis 3 1 section. To build the second graph, we need to pose: pn = pb = pc = , pg = , 10 10 which altogether imply: Un =

3 1 b b+ , 10 10 1 − π

Ub =

3 b−c 1 b−c − 2c + + bπ + , 10 1−π 10 1 − π

Ug =

3 (b − c) + bπ − 2c 1 b−c + , 10 1−π 10 1 − π

冢 冢

冣

冣

冢

冢

冣

冣

Appendices Uc =

119

3 1 b − cπ (b − cπ) + . 10 10 1 − π

冢

冣

The graph is built by assuming c = 1 and b = 2. In the other graphs of that section, we have taken on the following set of assumptions: pn = pb = pc = pk , pn + pb + pc = 3pk , 1 − 3pk = pg , pk =

1 − pg . 3

Moreover, pg varies between 0 and 1. The expected utilities (in these graphs represented by straight lines) are compared for varying values of π, while the values for the payoffs remain b = 2, c = 1.

Simulations of evolutionary dynamics We shall now turn to see what happens to our strategies in an evolutionary perspective. In dealing with four dimensions, we have had to give up the geometric aid that was the simplex (for the reason that it would become a three-dimension pyramid); however, thanks to simulation softwares (Mathematica, in our case), we can still produce and study some simulations, whose value will be purely illustrative (because the results are affected by the arbitrary choice of values assigned to the parameters and to the initial conditions) and do not allow us to carry out a global analysis, like we did with the simplex. The dynamics of the system can be written as follows: p·n = pn [(Ap)1 − tp · Ap] , p·b = pb [(Ap)2 − tp · Ap] , p·g = pg [(Ap)3 − tp · Ap] , p·c = pc [(Ap)4 − tp · Ap] , where A represents the payoff matrix, tp ⬅ (pn, pb, pg, pc) and (Ap), is the rcomponent of vector Ap, therefore corresponding to the expected payoffs of a given strategy, while tpAp is the average payoff.

120

Appendices

By imposing the values b = 2, c = 1 and π = 4/5 and requesting equal initial frequencies for all strategies, we obtain the simulation below (time periods are represented on the axis x and the frequencies of the various strategies are on the ordinate axis).

Figure App. 4.1

As we can see, given these conditions (with an initial low value of G and a high value of π), B prevails; but G is the only strategy which never becomes fully extinct, leading to the cohabitation of these two strategies (B and G). We can also observe, again consistently with the conclusions derived from the theoretical models, that an increase in the frequency of C (to 0.4) and a reduction in the frequency of G (to 0.1) tend, in time, to produce an improvement on G’s situation (G’s surviving level now corresponds to a higher frequency than the previous case and is approximately equal to the initial frequency):

Figure App. 4.2

Appendices

121

For an even lower initial frequency of G (0.05), they will tend to increase over time, as shown in the graph below:

Figure App. 4.3

In line with our conclusions so far, we can finally observe that if the initial frequency of G is (too) high they will not survive, leading to the prevalence of N (with the cautious C as the only other survivors):

Figure App. 4.4

There is also another possible way of looking at this result of the simulation: G free-rides over B. In fact, one can say that G can survive in such a cooperative population because somebody else (Bs) is saving the cooperation from Ns. Gs can follow their unconditional strategy and survive in cohabitation with Bs because the latter protect them thanks to their Tit for Tat behaviour. Take, for example, the case of the protection of the property: if in

122

Appendices

a given city there is a large number of people who are prudent in keeping their proprieties, then people less prudent can survive safely because the presence of the prudent people (the Bs) does not allow the thieves to spread in the population. However, if at a certain point a mutation of a B or G into an N agent occurs, the first to be invaded will be the G – G, in fact, not an ESS, because it can be successfully invaded by an N strategy, unlike B.2 Another suggestion coming from a different domain, is living in chosen poverty – like the early Franciscans or some Buddhist monks who live of ‘providence’ – is possible and sustainable if in society there are people who produce added value that can be donated to those who choose poverty. Chosen and free poverty, in other words, requires ‘wealth’ in others.

Evolutionary analysis and intrinsic motivation Bearing in mind the remarks at the end of Chapter 5, we shall now ask which turn evolution may take as a consequence of introducing the psychological payoff (ε) into G’s fitness function (limited to encounters among agents G). Consider the case: ε = 1. We can appreciate the significance of the psychological payoffs only within the scope of the repeated game. For instance, if we take the first graph of the numerical analysis section, where Un gains the best result for any value of π, by introducing ε = 1 we obtain the graph below, in which G (medium dotted line) gains the highest fitness when π > 0.75 (approximately).

Figure App. 4.5

However, the simulation hereafter shows that things change as we turn to the dynamics.

Appendices

123

Figure App. 4.6

In the long-term dynamics we observe that, after a remarkable initial growth, G becomes extinct (due precisely to that early expansion) and no strategy other than N will survive – the interpretation of this result can be also found at the end of Chapter 5.

Notes

Introduction 1 On the meaning and the history of the concept of reciprocity from Aristotle onwards, see the excellent paper of Theocarakis (2007), which shows how in Aristotle’ Ethics there is no contraposition between the reciprocity of market and that of philia. 2 On this see also Vivenza (2007). Aristotle also uses another word for expressing the meaning of reciprocity: ‘antiphìlesis’ or ‘antiphilìa’, which indicates the reciprocity of affection, of sentiments, an answer with the same love, in nature and degree. The prefix ‘anti-’ indicates always an answer. ‘Antiphìlesis’ is present in both Nicomachean Ethics (1155 b 28) and Eudemian Ethics (1236 b 2). I thank the historian Maria Intieri, from the University of Calabria, for this note. 3 The verb reciprocate means ‘to return, requite’ – a verb recorded in English from the first quarter of the sixteenth century. 4 See www.etymonline.com 5 On the Italian and Latin tradition of ‘Civil Economy’, see Bruni and Zamagni (2007). 6 See Vita Activa (1958). 1 The current debate on economics and reciprocity 1 In this book I will refer to non-instrumental sociality by the term ‘relationality’, intended as those ‘forms of human interaction in which the identity of the participants as particular human beings has affective or cognitive significance’ (Gui and Sugden 2005, p. 2). 2 This perspective was preferred by certain neoclassical economists (in 1970s and 1980s), who have tried to ‘export’ the research method of economics (methodological individualism) to non-market spheres. For a discussion on this point, see Frey (1992). 3 For a review, see Falk et al. (2003). 4 To conceive genuine sociality as incompatible with ordinary economic reasoning bears some significant implications, in policy terms as well. The economic analysis of labour market in sectors characterised by ‘vocation’, as for sanitary workers (doctors, nurses, etc.), is an example which I find particularly appropriate. The common point of this literature can be summarized by the slogan ‘getting more by paying less’ (Handy and Katz 1998; Heyes 2005). The underlying assumption concerns the existence of workers who are moved by ‘vocation’ (that is equivalent to intrinsic motivation) and are predictably going to achieve better working performances. Since the ‘vocational disposition’ cannot be observed directly (due to asymmetric information), the willingness to substitute a material reward

Notes

5 6 7

8 9 10

11

12

13 14

15

125

for an intrinsic reward sends a ‘signal’ to the organization, allowing to single out the ‘good’ candidates, that is to say, those inspired by ‘vocation’ (ensuring a better performance). Thus, a lower wage (compared to the market one) combined with specific benefits (in a form that can be relatively more appreciated by those who are moved by ‘vocation’), allows to discriminate (through self-selection) the motivated candidates. Brennan (1996) has applied this theory to the labour market of academics. How can universities or academic institutions be prevented from picking the ones who are only interested in material benefits and possess no academic vocation? Simply: by offering a low salary, combined with substantial research funding: those with scientific vocation will self-select themselves, while those who are only interested in material benefits will not be tempted by fringe benefits directed at research. Similarly, Handy and Katz (1998) apply this theory to managers in the non-profit sector, and Heyes (2005) to nurses. These issues are discussed in Bruni and Sugden (2008). Clearly the point of the selection of worthy university professors (those with ‘vocation’) remains undecided, especially with regard to incentives mechanisms. On this point, see Bruni and Porta (2005) and Bruni (2006a). An experiment carried out on a group of 900 women in Texas (Kahneman et al. 2005) has revealed that in fourteen out of the fifteen activities performed during the day (i.e. in all activities except praying) women reported a higher evaluation of their well-being when activities were undertaken along with other people. This experiment, performed with the Day Reconstruction Method, is especially significant since it allows to overcome the critical problem of causality in regressions. Similar theses are endorsed by Argyle (1987) and Myers (1999). The idea of ‘we-rationality’ was also proposed by Gilbert (1989), Bacharach (1999), Tuomela (1995), Hollis (1998) and Sugden (1993, 2000). In particular, philosopher Martin Hollis has elaborated ‘we-rationality’, whilst economist Robert Sugden mainly contributed to ‘team-thinking’: despite being far from identical (considering the authors’ different disciplinary environments), the two theories in fact bear noticeable similarities, also for the reason that the authors worked together for about a decade. As Robert Sugden writes: ‘In relation to a specific decision problem, an individual may conceive of herself as a member of a group or team, and conceive of the decision problem, not as a problem for her but as a problem for the team. In other words, the individual frames the problem, not as “What should I do?”, but as “What should we do?” ’ (2000, pp. 182–183). As Hollis writes: ‘Why do people who contribute to public goods fret about freeriders in some cases but not others? There is a logic of “enough”, I submit, which can overcome the dominance of defection, provided that a sense of membership is in play. Donors cooperate if confident that enough blood is being provided by enough members. [. . .] Enough is then enough’ (1998, p. 147). All models concerning critical mass, made popular in economics by the Nobel prized work of Schelling (1978), share exactly the same insights. In fact, in Gui’s most recent works, the analysis has been further complicated by presenting preferences on affective states as a subjective aspect for the evaluation of relational goods, and affective states as an objective element of interaction. See Gui (2005). Sociologist Pierpaolo Donati (2005) discusses this kind of goods within a relational approach to social dynamics, intending to take the distance from the reductionisms of olism and individualism. In this context, relational goods are defined as the ‘emerging effects’ of action, and not of the agent’s choices nor as effects of the environment. Instead they are seen as the products or consequences of existing relationships, which could even have influential impact on the agent’s

126

16

17

18

19 20

21 22

23

24

Notes

will. It is just because of this feedback dynamic that relational goods cannot be seen as merely coinciding with the agent’s will. For this reason it seems little effective to ascribe relational goods to the class of ‘externalities’. Gui – and I agree – would not do so both to preserve their nature of goods and because the lack of intentionality is usually considered an essential property of externalities, whereas it generally does not apply in the case of relational goods (often the particular atmosphere or a smile during an encounter are expressly chased, even at some costs). Sugden (2005) proposes an analysis of the ‘technology’ of relational goods in terms of emotions and affective states (that is more than just the inputs and outputs of the encounter), extending beyond the reach of the classic theory of rational chioice, which focused plainly on preferences and beliefs. Sugden shapes his theory by rethinking Smith’s Theory of Moral Sentiments and fellow-feeling. According to Smith (and Sugden), the latter can be seen as a general anthropological tendency in human beings, something distinct from altruism (Sugden 2005): in fact, the fellow-feeling analysis developed by Smith is extremely different from modern theories on altruism. Fellow-feeling is ‘reciprocal sympathy’: Smith maintained that the human being derives pleasure from all forms of fellow-feeling. Back to relational goods, Sugden claims that they arise, in this Smithian framework, from the perception of corresponding feelings, and that they can be enjoyed in any joint activity despite having an economic nature. Non-rivalry is in fact the assumption that changes a good into a public good, whereas non-excludibility relates essentially to technology and costs: in principle, it could be possible to prevent those individuals who did not contribute from consuming any (produced) public good. Here, Carole Uhlaner’s use of the term ‘relational’ is attributive, not predicative. Let us consider for example three friends taking a short trip. The friends may put asymmetrical effort into the production of the encounter (i.e. the organization of the trip) and yet, if during the trip any of the friends makes no attempt to establish a genuine reciprocity relationship with the others, she will consume just a standard market good (the trip), but she won’t be able to enjoy any relational goods. This is not equivalent to rule out the possibility of relational goods in business relations, but for this to happen something new needs to emerge, something that does not entirely or primarily pertain to instrumentality (see also footnote 24). For example when a business meeting is being held and there is a phone call for one of the participants, the meeting is interrupted and the person concerned engages a conversation about the kids or other private aspects, deviating from the meeting agenda. During those few minutes the participants can create and consume relational goods. Analogously we can imagine the occurrence of ‘relational bads’. It should be clear by now that in this essay I endorse the view of a profound connection between gratuitousness and intrinsic motivations. In it I see a much closer relation than the one between gratuitousness and altruism: in fact a gratuitous (intrinsically motivated) but non-altruistic act (like the acts of an athlete or a scientist) could be able to produce even more positive externalities than an altruistic act. Human beings possess a psychological mechanism that produces a feeling of pleasure every time we see someone (or even ourselves) accomplishing something led by intrinsic (and not instrumental) motivations, regardless of any direct benefit that might derive from it. This is the same psychological mechanism that makes us praise the missionary helping the lepers more than the company implementing cause-related marketing strategies, or makes us blame the athlete overly fond of monetary incentives. So defined, the relational good yields some characteristics that make it similar to a local public good (it is consumed together) or to an externality (it ‘emerges’ and it

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can be unintentional), but it cannot be identified with any of those. For example, not only is the relational good different from a non-rival good, but it can even be defined anti-rival (borrowing this expression from Luca Zarri): the consumption of the other not only does not reduce my utility but, in the case of relational goods, increases it. 25 Relational goods are produced in order to be consumed only by those who produce them. 26 A we-rationality approach could grasp more on the nature of relational goods, as indicated by Smerilli (2007). 27 As we will see, my idea of intrinsic reward will be technically represented by a psychological payoff: we will find, however, that for our purposes intrinsic rewards will be employed in a rather peculiar way. 2 Homo oeconomicus’ two hundred years of solitude 1 In particular, I do not contemplate the distinction, here, between market and firm. 2 It cannot be a priori excluded that Genovesi might have been aware of the Theory of Moral Sentiments (1759), considering his extensive knowledge of the Scottish Enlightment. Much more likely, virtually certain, is Smith’s ignorance of Genovesi’s works. However, the only datum (as to my recollection so far) concerns the absence of any references to each other’s work. 3 On Smith’s theory of relationality (‘fellow-feeling’), see Sugden (2005). 4 An author who has very well captured this tension is Dumond (1980), through his classic comparison between homo equalis and homo hierarchicus. 5 In Smith, Providence does not represent a reflection of the presence of God the Father in history (as in Genovesi), but rather the ‘unmoved mover’ (though benevolent) of illuministic deism. 6 Smith does not consider sympathy as an exclusively anthropic characteristic; exchange, on the other hand, typically pertains to humankind for the Scottish philosopher: ‘Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog’ (1976 [1776], pp. 16, 17). 7 We shall see in the following chapters that the reciprocity Genovesi has in mind goes beyond Aristotelian philía, and is closer to the (Christian and illuministic) idea of universal brotherhood (‘fraternité’). 8 For this reason, as the Genovesian Ludovico Bianchini will point out almost one century ahead, public confidence is not just a means, but is also ‘part of the wealth’ of a nation (1855, p. 21). 9 In his Elementi di commercio (Elements of commerce), the transcript of his lectures (1757–1758) that will later become the work known as Lezioni, we still find the expression ‘public economy’. 10 This belief can be supported, today, on the ground of what Henrich, Boyd, Bowles, Camerer, Fehr and Gintis (2004) have reported: their studies indicate a positive correlation between the development of market (GDP) and the average amount offered by individuals belonging to a certain ethnic group within experiments modeled on the ultimatum game. When markets develop, and so does the cooperation required by the specialization of labour, civil cooperation also flourishes (in fact, there is some distance from the standard homo oeconomicus behaviour, which would otherwise result in the offer of the minimum possible amount above zero to induce another homo oeconomicus to accept cooperation, as we have seen). In the absence of market interactions there seem to be, in fifteen native communities where these experiments were carried out, less instances of reciprocities compared to places where the market is more largely developed. 11 Studies that I have especially dedicated to this matter are Bruni (2005, 2006a), Bruni and Sugden (2000, 2008).

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12 It is particularly expressive, on this topic, what Edgeworth wrote for the New Palgrave Dictionary at the ‘Pareto’ necrology entry: ‘The Manuale is distinguished by the original idea of treating the laws of demand and supply, or rather the ‘indifference curves’, from which those may be deduced, as objective and capable of being ascertained by external observation without the psychological knowledge obtained through sympathy. In short, the economist may be a solipsist’ (Edgeworth 1926, p. 711, my version italic). 13 In the system of Paretian general economic equilibrium, then, ‘the subject is conceived as a monad “without doors or windows”: exclusively interested in his personal advantage, utterly disinterested of others, does not communicate with them nor does he cooperate nor does he collude with them’ (Ingrao and Ranchetti 1996, pp. 384–385). 14 Wicksteed (1933 [1910]), p. 180. 15 Very few ideas such as non-tuism have managed to remain so deep-rooted in the science of economics. An important role of mediation was played by L. Robbins (1932), whose Essay on the the Nature and the Significance of Economic Science (a work which like very few others has affected economic methodology in the last seventy years) explicitly recalls Wicksteed’s epistemological structure, including his theory of ‘economic relation’ (as Robbins himself admits in his Introduction to the reprinted edition of Common Sense). It is no wonder then that new welfare economics, also founded by Robbins, relies on the same theoretical structure. 16 Here utilitarianism seems much closer to Mill’s and, even more, to Sigdwick’s, rather than to Bentham’s more indivualistic version. 17 Even if he is tempted to remark that such an action is ‘not economic’ (ibid.), despite being performed at the very heart of his economic theory. Magliulo (2007) shows the development in the Austrian tradition (Menger and Böem Baweck in particular) of the idea of relationships within the economic analysis. 18 As a matter of fact, in the latest works, various attempts can be found to introduce non-instrumental and relational elements within game-theory models: I refer to games allowing for sympathy (Sally 2000), emotions (O’Neil 2000) or fellowfeelings (Sugden 2005), and to other models mentioned in the first chapter. 19 Through this whole analysis we will not consider monetary payoffs but rather payoffs evaluated in broader terms, as in the case of rewards assigned to a certain strategy or action in a given civil context. We shall then distinguish material payoffs, or rather ‘objective’ (because they are not always material matters but also include social approval, reputation, esteem, etc.), from psychological and entirely subjective ones; since we are dealing with the analysis of reciprocity, the reward structure shall not be limited to monetary or material aspects only. 20 O. Morgenstern, remembering the early times of game theory, so writes: ‘In my book I showed among other things that one is confronted with two kinds of variables, which I called “dead” and “live”, the former being those that do not reflect decisions by other economic subjects, the second, those who do. I also showed that the mere increase in the size of an isolated “simple economy” [à la Robinson Crusoe] [. . .] was a less complicating factor than complications encountered by a simple economy, no matter what size, when involved with others. [. . .] this states exactly one of the basic tenets of game theory where one can maximize only in the first case when the variables of nature are “dead”, but one is confronted with a conceptually different matter in the second case, since the “live” variables represent other “wills”, other “economic acts”, which may interfere with, or enhance, one’s own plans, as I expressed the matter then’ (1976, p. 806). 21 On this cf. also Mirowski (1999). 22 Little has been said here with regard to the reasons: for an analysis, see Bruni (2004, 2005).

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3 A first form of reciprocity 1 Drawing on Trivers (1971), Gintis (2004) defines this kind of relationships as ‘mutualistic cooperation’ (p. 695). 2 Game theory is prominent in economic theory. Above all, it provides a language, rich in syntax and allowing to effectively represent strategic interactions (called ‘games’), situations in which a player’s gains, not necessarily monetary (so-called ‘payoffs’, i.e. rewards representing the utility associated with each particular outcome of the game), come to depend on other players’ choices as well, and not just on her own. Game theory is widely employed nowadays, for example, in the analysis of inter-firm collusion, electoral choices or patient–psychologist relation. In this chapter, we are basically taking everything from scratch in an attempt to make reading easier for those who might still be unfamiliar with the language and logic of game theory. 3 Ken Binmore, on the contrary, thinks that ‘it represents a situation in which the dice are as loaded against the emergence of cooperation as they could possible be’ (Binmore 2005, p. 63). Actually, I think that both interpretations are possible – this is a sign of the richness of this trivial game! 4 The depicted game is symmetrical, i.e. the two players ascribe the same payoffs to the various outcomes of the game (cooperation yields equal utility to both A and B, and so does non-cooperation). The non-cooperative result can be maintained even when we consider an asymmetrical structure of the game (so long as noncooperation continues to be the dominant strategy for both players). Furthermore, the extended form may seem to suggest a sequential game (where each player chooses how to play after observing the other’s move) rather than the simultaneous game it actually is. In fact, the Prisoner’s Dilemma can be presented both in the normal form, as a simultaneous game, and in the extended form, where the other’s move cannot be observed (in general, a sequential game can be also represented as a simultaneous game). 5 A game belongs to the class of Prisoner’s Dilemma games if, given y > x > w > z, it results 2x > y + z. With the payoffs in Table 3.2, we have b > (b − c) > 0 > − c, determining 2(b − c) > b − c. The same condition is satisfied by the numerical payoffs in Table 3.1 (being 4 > 3 > 2> 1 and 2(3) > 4 + 1). On this see Sugden (2004) that inspires most of the analytical choices in the present and in the next chapter. 6 In order to comprehend the non-cooperative result, let us consider Table 3.1. From B’s point of view it is not known whether A will cooperate or not (choices are always carried out without being able either to communicate or to seal any binding agreement). Let us assume that A will cooperate: if A decided to cooperate then B would still have two alternative strategies: ‘cooperation’ or ‘non-cooperation’. In the example, if he chose cooperation he would gain three points; if he chose noncooperation on the other hand he would get four. According to the fundamental assumption of economic theory that ‘more is preferred to less’ (in the hypothesis of dealing with ‘goods’ and not with ‘bads’), he will pick non-cooperation, fetching four points (rather than three). On the contrary, if B assumed that A won’t cooperate, he would be again confronted with two options: cooperation, worth one point, or non-cooperation, worth two points: in this case again he will choose not to cooperate. It can be shown therefore that for whatever choice A shall make (cooperation/non-cooperation), non-cooperation is always rational for B, and vice versa. 7 The anonymity assumption allows us to extend the non-cooperative solution from one-shot to evolutionary games: anonymous iteration strengthens the rationality of non-cooperation. Things change, as we will see, with repeated games. 8 Arguably, cooperation yields a Pareto superior game outcome compared to non-cooperation.

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9 See, among others, Gintis (2004), Bowles and Gintis (2004), Axerlod (1981) and Sugden (2004). 10 Cooperation can emerge also in public goods contribution (‘public good game’) if a contract with enforcement can be established. 11 Where the probability of being sanctioned is less then 1 (certainty), the analysis becomes complicated, but it is possible to obtain the cooperative outcome anyway. 12 In this case a binding legal system and judiciary are needed to execute sanctions and guarantee the enforcement. 13 In game theory, the ex ante verbal promise in cases like these where individual incentives exist to non-cooperation is considered ‘cheap talk’. 14 For example, consider those towns or neighbourhoods where a system of separate collection of waste has been successfully introduced. What does success depend on in such experiments? Even without necessarily surmising a high number of citizens endowed with civic virtues and intrinsic motivations (cases that will be introduced at a later stage), cooperation can be promoted through administrative fines (that can be interpreted as sanctions in a community contract among individuals who reason according to the logic of this first form of reciprocity), enforced through devices (often in the form of incentives) that reduce monitoring costs (in several Italian towns this is being increasingly realized through the use of transparent bags that in some cases are provided by public administration). Fines can then be seen as the sanction in a binding pact among citizens in a community; consensus to the contract is given in a democratic game also by voting or not voting for the administrator who proposes a certain specific contract. 15 It is easy to show that the logic of the contractual reciprocity is very similar to that of eros; both are forms of relationality without gratuitousness, as underlined (using a language very similar to that of repeated games) also by Marion 2007: on this cf. Bruni 2007. But, as in the case of eros, civil life is not possible without this first form of reciprocity; at the same time, civil life does last long only with eros and/or contracts, because other forms of reciprocity are co-essential, such as philia and agape (in the language of classical Christian philosophy, which also inspires the next chapters of the book). 16 Similarly, Kolm (2006) tends to regard reciprocity purely as an ‘exchange of gifts’ and to categorize as non-reciprocity those interactions in which the gift dimension is absent. 17 This is, for example, the approach followed by Fehr and Gätcher (2000). 18 Martin Hollis has called this form of reciprocity bilateral back-scratching (1998, p. 144). 19 The general economic equilibrium model, from its early versions in the nineteenth century – both in the Walrasian-Paretian and in the Edgeworth’s version (and in fact the contract curve representing equilibrium in an Edgeworth box is called ‘Pareto curve’) – consists of an elegant theoretical construction that envisages a complex system in which the enforceability of contracts is invoked as a founding basic feature (or rather, taken for granted). Admittedly, as Gintis among others has pointed out, the theoretical model needs to face the practical issue that seeking the intervention of an external judge is costly: ‘The model assumes that contracts agreed upon by private agents can be enforced by third parties (e.g. the judiciary) costlessly to the contracting parties themselves’ (2004, p. 696). 20 In fact, not every contract involves a counter-action of equivalent value. Consider, for example, a contract involving donation or commodatum in Latin private law: these are gratuitous contracts in which the counterpart needs only to accept the contract. These contracts, though, lie on the edge of the logic of contracts and, apart from the consent of the part to be benefited, all other elements suggest their classification among unilateral acts, lacking that essential feature of contracts that

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is the synallagmatic aspect (as jurists say), i.e. the equivalence relation between reciprocal actions. In fact, the idea of equivalence also appears in reciprocity-philia. On this topic, see also Binmore (2005). ‘Reputation’ is another important explanation of cooperation in repeated games, as a huge game theory literature and experimental evidences are more and more showing. Robert Sugden (2004, pp. 109–110) uses another nice hypothetical situation. Bob is a member of faculty at an American university, Anna is an English colleague. Both being on sabbatical leave, they are visiting each other’s university. Without knowing each other, they decide to exchange houses. At the end of the visiting year, Bob would like to invite friends for a party and Anna would like to do the same with her new American friends. They both realize that the party could produce damages to the hosting house, but also that those damages (unless they were excessive) couldn’t possibly be imputed to them, since the two won’t meet in the future and it is likely that the respective departments won’t entertain any further contact. What we have just depicted is then a one-shot game of the same kind of Prisoner’s Dilemma that Sugden calls Exchange-Visit Game. The solution of the game is again non-cooperation (N,N): the colleagues will throw their parties, inflicting reciprocal damages. Non-cooperation (‘having the party’) is the best reply to any possible strategy (mixed or pure). As a matter of fact, nothing Bob may do could affect Anna’s choice of not having the party (and vice versa), since one’s action may not be acknowledged by the other before their return home. The same non-cooperative solution would be obtained if the game featured the whole academic community with each player playing the game repeatedly but anonymously (i.e. as a game with n players but non-repeated). In other words, in every round there is a probability π that the game might go on for one more round. In the analysis I will always assume that the value of π remains constant for the whole game and that players ignore the approaching of the last move, so that their actions won’t be triggered by the logic of the so-called backward induction, which would otherwise hinder cooperation. Admittedly, common awareness that in the last round each player has an incentive not to cooperate determines non-cooperation as a Nash equilibrium (in a structure of the Prisoner’s Dilemma–type) from the very first move. A significant analysis of this kind of situations can be found in Hollis (1998). Actually, in repeated games a certain (very small) amount of risk (or intrinsic motivation) may be contemplated in the case of ‘cautious’ reciprocity as well. A repeated game therefore illustrates situations where subjects play with each other more than once the same game: the same players encounter each other repeatedly. In fact, if the two players managed to cooperate, their expected utility would be for both: (b − c)(1 + π + π2 + π3 + . . .), that is, when the exponent of π tends to infinity, tends to (b − c)/(1 − π). The parameter π represents, as mentioned, the probability that the game will go on for one more round. If a player chooses to defect instead of cooperating (while the other cooperates), the defectionist obtains b (and 0 second round onwards, because cooperation will stop: we then hypothesize that the players are conditional cooperators, as discussed in the next chapter). It will be worth to comply with the agreement as long as the expected utility is (b − c)/(1 − π) > b, i.e. the advantage of cooperation is greater than its opportunity cost. Simplifying the equation, we have π*> c/b as the threshold value associated with cooperation in this repeated game. This value of π makes possible cooperation among ‘standard’ and rational players, without the need of any ‘altruist’ or pro-social behaviour in the agents. This reasoning is in line with the so-called ‘folk

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theorem’: ‘the folk theorem tells us that we don’t need to rely on anything but the enlightened self-interest of sufficiently forward-looking players to maintain the full panoply of cooperative possibilities’ (Binmore 1998, p. 293). Noticeably, for cooperation to emerge (i.e. to be an equilibrium), the game need not be too long. If, for example, b = 4 and c = 1, cooperation will emerge if π> ¼ (and its average duration, in general equal to 1/(1 − π), is 1,33 = 1/[1 − 1/4]). The next chapter will add more on the Tit for Tat strategy. The philosopher Marion says something very similar referred to the logic of eros: ‘I never love if not reciprocated, only after you, I will love only if loved first. To play love, yes, but risking the least as possible and under the condition that the other will make the first move’ (2007, pp. 89–90). I referred to the analogy between eros and contract in footnote 15. Predictably, in the second round each player observes the other’s non-cooperation in the previous round; at that point (N,N) will prevail as stable equilibrium from that round onwards. Binmore says something similar about the Prisoners’ Dilemma: ‘If the great game of life played by the human species were the Prisoners’ Dilemma, we wouldn’t have evolved as social animals’ (2005, p. 63). A proof that the two logics are similar. One of the first analyses (probably the first) of this result is present in Sugden (2004) [1986]. Many people’s behaviours, during community crises (I think, e.g., the extraordinary case of hurricane Katrina in New Orleans), can be described as a cooperation that implodes because π suddenly drops to zero. In these initial analytical pages, I use the terms ‘types’, ‘persons’ or ‘strategies’ indistinctively: as the analysis develops this usage shall be more precisely characterized. This problem is central to all game theory employing the notion of convention (or saliency) that we briefly mentioned when recalling Bacharach’s theory.

4 Reciprocity as philía 1 In technical terms, there are significant differences: strong reciprocity, for example, is not normally set in a repeated-game framework, but is applied as a principle explaining the emergence of reciprocity in one-shot and sequential games (such as the ultimatum game). 2 In the same session (7) of Nicomachean Ethics, Aristotle examines also the possibility of friendship among unequals as well, but always in the attempt to establish equality. 3 But, in fact, the market ultimately aims at equality between agents: perfect competition represents the ideal market, that is, a market in which all agents are equal. Moreover, should there be any actual asymmetry between the parties of the contract, the ‘rules of the game’ (laws, controls, etc.) would tend to re-establish the equality that was missing in the ‘initial positions’ in market competition, to use an expression borrowed from the Italian economist Maffeo Pantaleoni (1925). 4 Both these economists (and their colleagues of their time) regard the existence of the market as a necessary condition for unselfish and unconstrained relations and for genuine friendship to arise (Silver 1990). Thanks to the existence of markets people are delivered from unchosen and status-based relations (which typically occur in the feudal world) and can thus achieve a condition of equality, whose absence would altogether compromise the possibility of having friendship, for this is by nature a relation among free and equal individuals. This explanation counts as one of the historical reasons underlying the choice of French and European illuminists to associate the ideal of brotherhood with liberty and equality, as seen in Chapter 2.

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5 Other social bonds, on the contrary, tend to admit transitivity: among these, for example, are relations of esteem and trust. Philía’s characteristic of being elective and not universalistic also provides the basis for choosing the strategy ‘Brave’ to represent this second form of reciprocity in later chapters. 6 For this reason, experiments (including strong reciprocity ones) based on trust or investment or the ultimatum game do not convince me as fully satisfactory for the purpose of assessing philía-reciprocity in so far as they assume non-repeated games. 7 Elsewhere, I applied a non-repeated evolutionary-game methodology (see Bruni and Smerilli 2004). As a matter of fact there can be anonymous phenomena where the reciprocity dimension also proves relevant (as in public goods contribution). Such phenomena are important to civil life, but not necessarily relevant in the description of this second kind of reciprocity. 8 ‘Friendship being divided into these kinds, bad men will be friends for the sake of pleasure or of utility, being in this respect like each other, but good men will be friends for their own sake, i.e. in virtue of their goodness. These, then, are friends without qualification; the others are friends incidentally and through a resemblance to these’ (NE, VIII, 4). 9 The Experimental and Behavioural Economics literature engaging on the ultimatum game seems unanimous in reporting plentiful evidence – as we have seen in Appendix 1 – in support of the role of intentions in non-contractual interactions. 10 In Christianity, philía comes to designate the law of the New People (mutual love, the new commandment given to the Church by Jesus: philadélphia). In contrast with Aristotelian philosophy, Stoic philosophy had already pointed out the universalistic character of philía. With Christianity, though, a new type of relationship, agápe, gradually arises, with its universalistic nature and with its symbol, the Jesus crucified, bringing an utterance of love for the enemy (the non-friend) and breaking the tendency to electiveness that philía inevitably conveys. As mentioned, the three-partition of love into eros, philia and agape is one of the (hidden) fil rouge of this book. 11 The emphasis on dispositions appears even stronger once we take into account some changes intercurred between the first version of the Catechism (in the manuscript of Elementi di Commercio – Elements of Commerce) and a later version published about ten years later with the Lezioni, when his elaboration of the economic interaction was more mature. In the later version, Genovesi added a new proposition (between the ones previously indicated by 8 and 9), where he states that ‘we must try to be sociable with one another’. He specifies that social relations are possible only among people who are ‘reciprocally and sincerely friendly with one another’, and this requires ‘sincere and reciprocal confidence’ in one another’s ‘virtue’. Since ‘simulations of virtue’ will sooner or later be discovered for what they are, the only sure way to secure the benefits of society is to be truly virtuous – that is, to have a sincere disposition towards reciprocal friendship (Part 2, Chap. 10, Sec. 11). This revision of the first version of the Catechism seems to be Genovesi’s reply to the problem illustrated by Hume with the character of the sensible knave, the free-rider who takes advantage of cooperation without having any disposition to friendship (and hence without caring to reciprocate). Like Hume, Genovesi addressed the problem by claiming that our interests are better served by dispositions to reciprocity and friendship rather than by opportunistic and instrumental calculations based on single actions: on this point, see Gauthier (1986). 12 The fact that Axelrod interprets T as a self-interested strategy reveals a first difference: in my interpretation, T is more generously understood. 13 I am aware that my interpretation of the B strategy is unconventional. In fact, game theorists commonly explain the adoption of a T strategy (B included) by a rational player as a form of enlightened self-interest, according to the results of

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the ‘Folk Theorem’: see, among others, Binmore (1998, 2005). Actually, even this interpretation is not too far from the rationale of philia: friendship can also be seen as just a ‘mutual advantage’ relationship, as we’ll discuss in the next chapter. In the formal model illustrated in the following chapters, the possibility of making mistakes will be ruled out, so making strategies T and T1 perfectly coincident. It is a huge simplification with respect to what happens in reality, but it makes easier the technical analysis. Hence, procuring that X obtains the lowest payoff [− c] and Y the highest [b]. Strategy T1 thus thus yields an even greater risk compared to T: T1 bears no guarantee that her co-player will start to cooperate again and will not be defective anymore. Thus characterized, T1 is the best strategy in terms of individual expected utility, on condition that her co-player will play T1 as well. For the same reason, forgiveness and loss restoration are only granted among similar-minded players (never to ‘non-friends’). It is worth recalling that this kind of reciprocity, in all the versions that the literature reports, displays some form of punishment and reparation – we mentioned this point in Chapter 1. In particular, models based on strong reciprocity (or social reciprocity: Carpenter and Matthews 2004) describe interactions in which subjects are inclined to punish those who violate a norm in joint actions (in the absence of enforcement) even if this proves costly (implementing a punishment causes a loss of utility they wouldn’t suffer if they decided to overlook the violation): ‘Reciprocity is more likely promoted, as in our model, by strong reciprocators who reward pro-social behaviour and punish antisocial behaviour even when this behaviour reduces within group fitness’ (Bowles and Gintis 2004, p. 18). For a review, see Fehr and Gätcher (2000).

5 Unconditional reciprocity 1 Kolm writes: ‘Reciprocity is treating others as they treat you’ (2006, p. 1). 2 An excellent contribution on the topic of art and gratuitousness is Hyde (1983). 3 An act of forgiveness has a different meaning when it is performed in the name of agápe or philía. In friendship, forgiveness is mostly motivated by the advantages related to the continuation of the relationship and, in this sense, is conditional. On the contrary, forgiveness moved by agápe involves no calculations nor measures: on this point see Natoli (1996). On the kind of unconditionality of agápe, see footnote 8 (infra). 4 This is an important characteristic of those experiences of reciprocity that take place in moments of crisis: actions of type B or C tend to become non-cooperative when π tends to 0. In those moments, only non-conditional reciprocity can avoid implosion of social bonds. 5 Terminology concerning cooperation (and reciprocity, in our case) in game theory is inaccurate: the term ‘cooperation’ should only be employed when both actions are cooperative (whereas a single agent’s action should not be termed ‘cooperation’, independently of actions of others). More precisely, other terms should be preferred like ‘cooperation-oriented action’, hardly an ‘economic’ expression to be acknowledged in ordinary language. 6 The very same conclusion is reached by the sociologist Sorokin (1954), who despite clearing the eros-agápe contradiction introduced by Anders Nygren’s classic study (Eros and Agápe 1930) still fails to distinguish between philía and agápe. The English translations of Bolthanski are based on the Italian text. 7 The aim of Kierkegaard is to clearly distinguish between the ‘earthly love’ (eros and philia) and the ‘Christian love’ (agape): ‘Christian love [agape] teaches love to all men, unconditionally all. Just as unconditionally and strongly as earthly love tends towards the idea of there being but one single object of love, equally

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unconditional and strongly Christian love tends in the opposite direction’ (p. 41). It is an approach not far from mine, but I claim that is possible to join ‘unconditionality’ with ‘reciprocity’ (one form of). 8 In order to provide an adequate foundation for the concept of ‘gratuitous reciprocity’ in this non-conventional way, it would be necessary to articulate an extensive reflection centred on the theory of gift, but it is not my intention to do so (given the nature of this book). I limit the extent of that reflection to this long footnote with the aim of summarizing the originary concept of agápe taken as fundamental by those theories that recognize a relation between agápe and the ‘renounce to reciprocity’. Agápe – both in the Pauline version and in the whole new testament – is always framed within a general vision of Christian humanism, Christian community life and the anthropology and sociology that take the Trinitarian life as an archetype. The new law of the community gathering around agápe is the ‘new commandment’, which is simultanously a matter of reciprocity and philía. Life in this community is koinonía, is communion, is like a body made of members that bound to each other (see St. Paul’s Letters to the Corinthians). God himself, as revealed by Jesus of Nazareth, is by nature communion, reciprocity, Persons-in-relation (Trinity). The ethic we can derive from the New Testament is essentially based on mutual love, and only rarely (mainly as a paradoxical and prophetic manifestation) love is portrayed as a unilateral act and not included within the horizon of reciprocity. Consider, for example, the parable of the ‘unmerciful servant’ (Mt. 18: 23–24). Jesus tells the story of a king who decides to forgive a large debt to his servant. After the debt has been cleared, the latter meets an old debtor of his for a much smaller sum, who, in turn, asks him to forgive the debt. The servant does not forgive his debtor and sends him to prison. The king then, having acknowledged the fact, takes back his forgiveness and sends the servant to prison, because he had been unable to forgive his similar. In this parable we find several elements of philía-reciprocity (calculation, conditionality, disposition, transitivity, even strong reciprocity) together with the elements of gratuitousness (the king, in forgiving the debt, does not calculate nor poses any condition). And yet the parable is told by Jesus to illustrate the rationale of his Kingdom, the new rationale of love that he intends to teach his disciples, agápe. It’s the logic of ‘gratuitously receiving’ and hence of ‘gratuitously giving’. The agapic logic can renounce to all forms of conditionality, but still remains a form of reciprocity. The same line of interpretation is endorsed by Caillé (2000) with ‘unconditional-conditionality’ (that he applies to any form of gift). An interpretation of agápe as gratuitousness and reciprocity, largely documented and theologically grounded, can be found in the Italian theologician Piero Coda (1994). In this perspective, agápe is still seen as a dimension that can enter all forms of human relationality: there can be an ‘agapic’ contract, an ‘agapic’ philía and an ‘agapic’ gift, just like there are non-agapic contracts, friendships and gifts. It’s the understanding of agápe that inspires my book: I do not identify agápe with plain unconditionality, because, as we will see, in some contexts contracts may be an instrument even more congenial to agápe than unconditional gifts. As I review this note, I realize how difficult it is to exhaust such a complex issue in just a few words. It seems that I could say, however, that the key to the solution of the problem we are debating is the Christian comprehension of God as Trinity and the idea of the human person accordingly derived. In this view: who is the subject of agápe: is it the individual or the person? Very briefly: the individual yields just a fragment but contemplates a vocation to totality, the person is totality but holds the singularity within. Thus, the person-totality as such seeks no return, but because it includes the singularity, ultimately awaits the return of reciprocity, not just as something reaching from outside, but rather as something that is, as I regard it, ‘interiority overturned’. For a

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theological-philosophical analysis of the relation individual-person-reciprocity, I refer to Zanghì (2004). Even a lack of reciprocity remains a matter of reciprocity. Actually, by following an unconditional logic one basically escapes the typical game-theory strategic thinking, because the strategy is no longer chosen by taking the other’s moves into account. In this view, even those who in a repeated Prisoner’s Dilemma play strategy N do not actually employ that kind of strategic thinking, because they are no longer subjecting their actions to the actions of the other players. See, among others, Elster (1985). The intrinsic component of the action derives its philosophical roots from the ‘ethics of virtues’: virtuous actions are performed because of their intrinsic value and, only as an indirect effect, they also produce individual benefits. This idea is central to Aristotle’s Nicomachean Ethics, but can be found earlier: ‘virtue does not spring from riches, but riches and all other human blessings, both private and public, from virtue’ (Plato, The Apology of Socrates, 17). Virtue, and in particular its civil dimension, needs reciprocity, but the virtuous action is not conditional upon the response of others because is basically self-rewarding: for a critical discussion of the paradox of virtues in Aristotle, cf. Bruni (2006a, Chap. 3). This is why ancients onwards a rather paradoxical element has been associated to the ‘good life’, to happiness: happiness needs reciprocity, but only virtues (i.e. intrinsic motivation and not instrumental behaviour) can arouse it. In fact, in Greek ethics, even in its highest forms, reciprocity is always philía, hence never purely unconditional. We have to wait the encounter of the Greek and Christian ethics for the unconditionality of agápe to appear. Therefore, this different kind of agent is not a pure consequentialist, like the standard economic agent we met in mainstream economics literature; that is, this agent does not evaluate the goodness of actions based exclusively on the consequences that those actions produce, but takes into account both a deontological component, more strictly related to values, and a procedural component, more strictly related to the kind of relationships within which her actions are implemented. What we’ve said so far suggests that, when the game is repeated, reciprocity is simpler because is ‘less demanding’. It is hard to keep the expression ‘game’ in this kind of interaction, because there is no more a strategic reasoning (at least in the G agent). Nevertheless, it is worthwhile to keep the structure of the game in order to same the concept that even in this case of unconditional reciprocity the outcomes depend on the others’ reply. Pointedly, this game is not a Prisoner’s Dilemma case (from the point of view of an agent G) because, despite conserving its non-cooperative nature, the inequalities of payoffs are not respected (cf. footnote 78). We could have added a quantity ε to the payoff of Coop/Coop in order to express the ‘additional’ gain in terms of satisfaction or happiness that can only be derived when reciprocity arises from mutual gratuitousness and as an estimate of the ‘relational good’ which could not otherwise be traced back to the sum of the individual intrinsic rewards. In that case a Coop/Coop payoff would be (5 + ε, 5 + ε). Indeed, if an agent didn’t have any intrinsic reward, her payoffs in a Prisoner Dilemma would be: Coop/Coop = (b − c), Non coop/Coop = b, Coop/Noncoop = − c, Non coop/Non coop = 0. One possible way (not the only one) to calculate the threshold value is to consider that cooperation may be played in the first round if the significance of the intrinsic reward (ε) was higher than the value that makes the agent indifferent between the choice of cooperation and noncooperation. We call pb the probability of meeting a cooperative-agent (or G) and

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(1 − pb) the probability of meeting an non-cooperative agent. Therefore, for a player to adopt strategy a cooperative move in a non-repeated PD, thus deciding to start with an act of cooperation, the following inequality must obtain: pb (b − c) − (1 − pb) c + ε > pbb. Then: (b − c) + ε > b, which entails ε > c. Thus, if in the repeated game the agent chooses to adopt strategy G (always cooperate), she is taking into account the possibility of paying a cost c in each turn (if meets, in the worst case, always a non-cooperative agent): consequently, one way of taking into account this intrinsic element, we can say that in order to understand why an agent can rationally choose a G strategy, it is to say that the value for ε must be greater than c/(1 − π). It has to be noted that this values is quite huge: if, for instance, c = 1 and π = 0.9 (that means that the average duration of the game is 10 rounds), the threshold value of ε is 10 (10 times c). Another possible calculation of this threshold value is to consider that although a G strategy can pay −c each round, nevertheless G gets ε in each round too, and so the threshold value would be just c. I would prefer to use the higher value c/(1 − π) in order to emphasize that when one chooses to play G in a repeated Prisoner’s Dilemma game she is aware of the possibility to pay the cost of cooperation (c) every round, but she cannot be sure when the decision has to be made that in the future rounds the intrinsic reward of cooperation will remain always the same (ε) once experienced the non-cooperation and the exploitation during the game. Actually, there can be other many ways of measuring the threshold value. It is possible to imagine that also the other strategies depend on the value of ε: one can opt for strategy B, on the other hand, if the intrinsic reward is high enough to risk the first step (like B does), but not to risk continuing cooperating should the other player not continue to: we will say, therefore, that c < ε < c/(1 − π) (see the previous footnote). Finally, the agent will adopt strategy C if ε < c. In the following analysis, however, for keeping the analysis as simple as possible, we assign ε only to strategy G. The only strategy I do not regard as a strategy of reciprocity in a Prisoner’s Dilemma-like game is N. We ascribe 0 as a value for the intrinsic reward only to N-players. Actually, it could be also possible to imagine for N (or for X strategy) a negative intrinsic value associated to cooperation: an anti-social agent, for instance, could assign negative value to cooperation. By defining C in a way such that she no longer cooperates should she meet NC in the second round, the threshold value for C relative to N will be ε >cπ. If, on the other hand, we assume that C continues playing as in a tit-for-tat for the whole length of the game, then the threshold value (always relatively to N) will still be greater. In fact, it is plausible to model strategies C as a continuum (with 0 < ε < c). This is also the conventional way of interpreting the results of evolutionary game theory, which embraces the methodology used in the applications of evolutionary biology to social sciences (or ‘memetics’). Each strategy is thus associated to a specific gene or specie, resulting in a biunique correspondence between types of strategies and types of agents. In this view, agents cannot change strategy because they are ‘genetically’ bound to one: extinction and imitation are the unique forms of change admitted, but can only be played in a subsequent round (by the ‘offspring’). We actually begin with the analysis of repeated games, and leave aside evolutionary ones, but we will refine the analysis by introducing the evolutionary technique later on in the work (and in a fairly simple version). The reader familiar with game theory may now feel a little disturbed by the (apparent) confusion between the methodology of repeated and evolutionary games: mine is a choice (aimed at keeping the discussion easy to follow, without losing the hook to real life); as we proceed, anyway, this apparent confusion should gradually dissolve.

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25 But there is something more to say on this issue (although the model won’t show it): by activating all the three forms of reciprocity in civil life, it is possible that there will be a contamination among different logics of reciprocity. Strategies are not normally additive and independent of one another: when an agent contemplates the logic of G among others, this circumstance has an impact of the other logics as well: this will not be apparent in terms of the payoffs, but the contract from simple ‘mutual advantage’ becomes or, at least, is perceived as a form of ‘mutual assistance’ (à la Genovesi), and friendship has a more open and universalistic breadth, so that the customer and the supplier, the employer and the employee will come across each other with the attention and dignity one shows towards a friend. We will overlook the issue of contamination in the technical analysis, but we won’t forget of its existence. 26 Whatever interpretation we endorse, the analytical discussion remains the same (we’ll see that what ultimately counts is the frequency of each strategy within a population). Besides, whether or not we can track a biunique correspondence between strategies and agents is an aspect that can be relevant to the interpretation of the model but not to its technology. For this reason, in the following discussion we will speak of ‘B-types’ or ‘B-, G-, . . . types’: having added this footnote, I shall now be able to preserve the effectiveness of the ‘person-type’ rhetoric, especially useful in many applicative examples, despite the awareness that the same ‘types’ might decide to follow different strategies in different contexts. 27 Very briefly, I just point to the fact that even within the G-area (like the other areas, in fact) agents are not identical: we have a continuum of infinite strategies, which I group into four types. Above a certain threshold, who plays strategies G go from strategies that highly resemble strategies B to those in the graphic stand to the very right, as a consequence of the high value of ε. For this reason the civil dynamic also depends on the ‘threshold values’ of G-types: confronted with a shock in the values of c or π, the effect on the overall cooperation in a population will differ if G’s actions are concentrated around the border between B and G (c/(1 − π)) or else to the very right of this point – in this second case, for instance, an increase in c, or a in π, might cause no significant effect in the amount of Gs, while this effect would be significant in the opposite case. The ‘critical mass’ models (à la Schelling) provide a great instrument to study this kind of dynamic, but this approach is not developed here. 28 It is worth noticing that all four forms of relations (G, B, C, N) can express civility and civil virtues (although N does not qualify as a strategy of reciprocity in a game). Once more, the ‘civility’ of a given action is decided in many cases by the specific context in which one operates (obviously, there are also actions that are plainly uncivil in any context). 29 In this simple model, I take the variable ε as primitive and don’t go any further into the explanation of its ‘technology’ (the factors that determine ε). Alessandra Smerilli (2007) has elaborated a more sophisticated theory of intrinsic motivations that connects two factors: ‘we-thinking’ and self-esteem. 30 Note that receiving satisfaction or utility from behaviour without thinking of the consequences (for oneself and others) can have – and in fact often along history has – detrimental civil effects. Here I can only mention this factor, but it surely demands special attention on its own. 31 The higher risk for G players compared to B players depends on the negative payoff that G receives when G meets N: after the first round, while B stops cooperating and pays nothing, G continues to cooperate at his own expenses. 32 An alternative way to picture the various forms of reciprocity, certainly not typical of the economic tradition, is to associate the choice of strategy G to a kind of rationality that differs in nature from the rationality informing the first and second

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kinds of reciprocity. We could say that while the first two forms (especially the first) are expressive of some sort of utilitarian ethics or philosophy, where the criterion for the choice of optimal strategy in a given context is the maximization of utility (or ‘happiness’, or ‘satisfaction’, or ‘pleasure’), the third form is instead expressive of a deontological ethics, in which the respect of the categorical imperatives imposes to give up the very idea of calculation and the agent chooses a given strategy on the bases of non-utilitarian tenets. In line with this interpretation are also those authors who explain unconditional actions by means of a nonutilitarian and non-instrumental rationality: Max Weber with ‘value-rationality’, Shaun Hargreaves-Heap with ‘expressive rationality’ (Hargreaves-Heap et al. 1994). A similar approach is offered by Jon Elster (1985), who proposed an account of unconditional cooperation in terms of a form of rationality that is different from the economic one. But what difference would there be between the two visions, i.e. between the economic-utilitarian-instrumental view and these other and diverse forms of rationality? Behaviours inspired by intrinsic motivations might always be read as ‘instrumental’ or utilitarian (e.g. I bring a bottle of wine to my friend as I go there for dinner because I am pursuing the aim of expressing my appreciation to the host and, thus, of feeling satisfied with the result I achieve). Hargreaves-Heap, for example, rules out this possibility, because the goal of ‘expressing something about oneself’ doesn’t fit the framework of standard economic rationality, jeopardizing the notion of given goals that is indispensable in that approach. The idea of ‘expressive rationality’, on the other hand, is based on the assumption that an individual who performs an action does not always ‘calculate’ the consequences of that action. Finally, I believe that reading every act according to the instrumental view (from the mother who loves her child, to the martyr who gives her life in the name of faith, to the speculator investing on the stock market, etc.) not only renders tautological and vacuous the idea of utilitarian-instrumental rationality (which instead is, in his domain, hermeneutically rich), but in the end is doesn’t help us in grasping the peculiarity of some kinds of actions compared to others. Having said that, I personally continue to prefer the interpretation that has been outlined in the text. This is actually the way of dealing with psychological payoffs in the so-called social preferences theory: for a review see Fehr and Fishbacker (2002). Cf. also Sen (1997). This parsimonious approach is methodologically in line with the so-called Indirect Evolutionary Approach (cf. Guth 1994), which, however, I extend here also to repeated game, where do not consider intrinsic reward in the payoffs of the game is more difficult to justify in the mainstream game theory, because here payoffs are just transformations of the utility function of the agents. The justification for not considering ‘ε’ is easier for the evolutionary analysis (why the reproductive success has to depend on motivation?). This point remains still controversial also after this discussion. In fact, there is at least one open point about the imitation mechanism (on which is based the dynamic replicators of the next chapters): are we sure that imitation follows basically just ‘objective’ payoff and not only the ‘intrinsic reward’ of people? The intuition behind my choice is the distinction between short and long run: in the long game of life the material or ‘objective’ results are really determinant for imitation – I will come back later to this point. Only in the particular case when G meets another G (under the hypothesis that G was able to realize to be facing another G). Cf., supra, note 29. Tit for Tat is not so far from the law of ‘Eyes for Eyes and Teeth for Teeth’. I would thank Fabrizio Panebianco for this example.

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6 Dynamics of reciprocity in a heterogeneous world 1 Axelrod’s article was significantly and eloquently entitled: The Emergence of Cooperation Among Egoists. 2 In a Prisoner’s Dilemma repeated-game, the number of possible strategies becomes larger than two billions right after the fifth round. 3 The idea of making four strategies interact is not new: see, among others, Taylor (1976), where three of his strategies considerably resemble our N, G and B, and Sugden (2004, pp. 210ff.). Cf. also Antoci Sacco and Zarri (2004, 2007). 4 We must never forget that even N would be worse off in a world populated exclusively by other N agents: their advantage is greater where there are cooperative strategies (to ‘exploit’). 5 In the following we’ll suppose, as mentioned, that agents do not make mistakes so as to simplify the algebraic analysis. 6 Why choose the Prisoner’s Dilemma as the paradigm of interaction in the study of reciprocity? We mentioned earlier (see Appendix 1) that researchers working on ‘strong reciprocity’ typically use sequential games (trust or ultimatum game), which offer more sophisticated tools for the analyses of the motivations underlying action. In fact, when these authors (such as Gintis) develop evolutionary analyses, they too will adopt a Prisoner’s Dilemma structure, because it is a game in which the simplicity/efficiency relation is particularly high, and because it matches a number of situations where cooperation-reciprocity might emerge (or not) without enforcement, and, more importantly for me, where there is an individual incentive to free-riding, or, in other words, where cooperation is always challenging and threatened by individual opportunism. Therefore, we maintain the simplification (indeed, other games may be used, such as the ‘hawk-dove’ game, or the ‘Stag Hunt’ game), but I do not see it as overly restrictive in terms of results and applicability. 7 Overall, in the analytical discussion we assume that the only language available to the players is their behaviour, and we will not examine signs of verbal communication nor reputation effects, while being aware (from both experiments and practice) that such elements typically make reciprocity more likely to arise. From a methodological perspective, my choice might therefore seem ‘sparing’, but I think it will provide a more realistic representation of the social dynamics. 8 For instance, consider the encounter of an agent playing B with an agent playing N. B will be able to tell that her opponent is not a B agent from the outcome of their first confrontation (because she will have obtained −c instead of the payoff she would have gained had she met B, i.e. b − c; still, she cannot be sure whether she faced C or N); thus, being a Tit-for-Tat strategy, the second round onwards she will go on playing NC. The same goes for N: she will know she has not met an N if the payoff obtained after the first round is b instead of 0, which she would have obtained in case she had met N or C (I refer to the payoffs introduced in Chapter 3). We are not assuming, therefore, that players can recognize with certainty the strategy they’re confronting, for otherwise they would know what move their opponents will play in the following round (a possibility we have intended to rule out). In our discussion, we assume instead that the players never know with certainty which strategy they’re facing. For a player to identify her counterpart’s strategy, two additional assumptions are necessary: (a) agents do not make mistakes; and (b) each player has perfect knowledge of the structure of the game and of the space of the strategies (i.e. each player is aware of how many strategies inhabit her world and of the moves those strategies involve). Then, if an agent C knows that the only strategies she could interact with are her own and N, B and G, she will be able to grasp, after a few initial moves, to be playing with one and only one strategy (assuming that errors are ruled out). On the contrary, if the players do

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not possess all this information (i.e. if information is incomplete) and hence they ignore how many ‘inhabitants’ live in their world (2 or n), behaviour alone will not suffice to tell which strategy they are facing; they can only establish their own optimal behaviour on the basis of the other’s moves. Moreover, if we conceded that errors might occur, a move of cooperation could be a mistake made by a noncooperation strategy (and vice versa). In our overall discussion, we will not suppose players to have perfect knowledge of the game; they simply play their own strategy and we, from the outside, will be the only one to have knowledge of how many strategies are in fact interacting (observing from above like a sort of demiurge, ‘God’). All this serves the purpose, among others, of justifying the fact that C rationally continues to cooperate even though she is facing G, not because of a high (or positive) intrinsic reward, but simply because she is not in a position to know that the other is playing G (the other might be playing a strategy X which, e.g., stops cooperating after the second or the nth unreciprocated act of cooperation)! Axelrod, among others, goes in this direction: ‘There is no way to be sure what the other player will do on a given move’ (1984, p. 308). That is, the sum of payoffs weighted for the probabilities (usually a linear equation). Let me just add that I do realize how somebody might feel a bit let down by the choice of employing the ‘simplicistic’ and hypercriticized (even by me, and on many occasions) criterion of expected utility, especially after the pretended anthropological complexity attached to the analyses of reciprocity in previous chapters. I concede that the disappointment is indeed justified, but I want to stress that, here, the expected utility I refer to only maintains the label of the hedonistic and utilitarian notion of utility, and that despite adopting at times the technique of evolutionary methodology, I do not endorse the philosophical implications of ‘memetics’ (where ‘meme’ stands for ‘gene’: it extends the applicability of the results of evolutionary biology to the social dynamics) nor, a fortiori, of sociobiology. There are many ways of calculating expected utility: I will take a linear equation equal to the expected value of the payoffs multiplied by their respective probabilities or frequencies, which is the standard approach. I apologize because for an unfortunate linguistic combination, the reader will have to find a way out of the confusion that symbols might create: while b and c (small letters) indicate the payoffs of the game (standing for ‘benefit’ and ‘cost’), B and C (capital letters) are the names of two strategies, respectively, ‘Brave’ and ‘Cautious’ reciprocity. Usually, in case of a population with only two agents, pn = 1 − pb. Actually it tends to 1, because we know that pb, being a probability, can never be higher than 1. In Appendix 2 we also apply the evolutionary analysis to this encounter. We can anticipate that unless p is lower than 1/2, the threshold value is negative and hence Ub is always higher than Uc. In fact, as we will explain in more detail in Appendix 2, C is penalized compared to B (for a number of rounds higher than 2), because b > c. This line is followed by Sugden (2004, Chap. 6). After Chapter 4, where we identified philía mainly with strategy T1, someone might ask whether we got rid of this strategy. As we said, for the sake of simplicity, we have assumed that players B do not make mistakes: therefore, T and T1 are the same. If agents G had no interaction with C, nor with other strategies, but only interacted with themselves – as in a sort of niche – they may survive and evolve, but I see this result as inconsistent with the methodological approach we have undertaken so far. In fact, two moves of cooperation in a row would be enough for strategy G to

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activate agents C. We employ a strategy that is in this sense ‘redundant’, but more general and able to activate other variants of cautious types (i.e. a strategy C’ that do not cooperate unless after, to say, n* moves of cooperation in a row of her opponent). 20 Biologists (Maynard Smith, 1982, has played a crucial role) have taken the language of game theory from economics, but later economists use the biological analogies in order to explain social matters. Something similar happened at the very beginning of the theory of evolution: Darwin took the idea of natural selection from Malthus (an economist), but later the evolutionary metaphor and philosophy has influenced economists and social scientist via Darwinism. 21 ‘I am now much more cooler about memes than in the past’, said Binmore in a seminar at LSE (‘Natural Justice’, 8.2.2006), a message that we can find again in Binmore (2005). 7 Three is better than two 1 In Appendix 2, in fact, we have seen that the conclusions drawn by comparing the expected utilities turned out to be consistent with the evolutionary analysis. 2 Notice once again that this repeated game has an indefinite horizon; therefore, the players are never in a position to know when the game will end (in every round the probability of having one more round to play is still constant and equal to π). The average length of the game is given approximately by 1/(1−π), that is, the value of the series when the length of the game tends to infinity. 3 The America’s Cup sailing contest, for an example, could give an idea of a ‘Round Robin’ tournament, whereas the Wimbledon Tennis Championship is rather more similar to the logic of an evolutionary game (the less performing players are eliminated very quickly). Actually, a repeated game with an infinite or indefinite horizon (due to the presence of π) is different from the America’s Cup (or from a football championship), simply because in these contests the number of matches is fixed from the beginning, and thus everyone knows when the last round is being played (furthermore, such contests cannot be described as a Prisoner’s Dilemma). Clearly, this method of competing (Robin round tournament) has some limitations: for instance, when an aggressive strategy (like N) meets a cooperative strategy (like G), the first will ‘take advantage’ of the latter until the last round, thus gathering higher scores. In an evolutionary approach, instead, the less efficient strategies are eliminated in the preliminary stages of the game (the reasons I chose repeated games are outlined later on in the chapter). In fact, compared to Axelrod’s tournament, the situation I am assuming is somewhat different. In Axelrod’s tournament, 63 programmes developed by various researchers were taken and confronted with each other in interactions 200-rounds long on average (the value of π was then close to 1); to each strategy corresponded exactly one programme. The winner was eventually strategy T, Tit for Tat. In the second part of his article, Axelrod, switching to an evolutionary approach, reintroduces the frequencies and probabilities. In our discussion, on the contrary, the frequencies of the different strategies within a population have a critical role, as we are about to see. 4 See, infra, ‘The evolution of reciprocity’ section. 5 If, in fact, π
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8 The interpretation of parameter b, on the other hand, is less univocal. b is, on one side, the advantage of N over B or G, because it is the payoff of NC/C. At the same time, however, (b − c) is the payoff of cooperation. Therefore, when there is an increase in the value of b, the payoffs of cooperation and non-cooperation both rise (each to a different extent). 9 For example, if in a certain period t the threshold value is 20 per cent, an exogenous intervention (e.g. issuing a new law) makes the cost of reciprocity rise from 1 to 2, while leaving b and π unchanged, the threshold value will double to 40 per cent (2/5): hence, if B are now less then 40 per cent, N will prevail over G. 10 Because (b − c) and c appear in the denominator of the threshold value of G. 11 In Axelrod’s original tournament the Tit for Tat strategy was the winner. 12 In assigning values to the payoffs, we need to bear in mind the conditions outlined in Chapter 3 (p. 53), in order to preserve the Prisoner’s Dilemma framework. 13 For the proof, see Appendix 3. 14 In fact, b is also the payoff obtained by N playing with B in the first round and always when playing with G. The relative weight of this payoff is lower than the reward of reciprocity (b − c) because B cooperates with two strategies (B, G), while N can gain b only from G (and from B in the first round). This is why an increase of b can be interpreted here as a higher payoff paid to reciprocity. The same can be said, however, for varying values of c. 15 The imitation of the fittest is the most popular but not the only possible methodology of imitation present in the literature. 16 The points internal to the simplex are combinations of the frequencies of the three strategies. The vertexes represent situations in which only one strategy prevails: only N in the point N, only B in B and only G in G. The coordinates of N (in terms of probabilities) are therefore (1,0,0), for B (0,1,0) and for G (0,0,1). Along the sides we have combinations of two strategies only; so the side BG (dotted line) says we have fixed points only (that is, on side BG the two strategies coexist). The vertex N (with the black dot) is an attractive point, that is, a point the dynamics converges to, while f is a saddle point (it can be approached from above, but is not stable). From this it can be inferred that only in the presence of attractive vertexes it is possible to reach an equilibrium composed of one strategy only (N in this case). The internal arrows show the evolutionary dynamics for each starting point (that is, depending on the combinations of the strategy frequencies). For a more detailed discussion, see Bruni and Smerilli (2007). 17 The triangle, in fact, represents one face of a pyramid in the space R3. 18 Due to the way the simplex has been built (see Appendix 3), the fixed point f has the following coordinates: f≡

bπ − c c(1 − π)

冢(b − c)π, (b − c)π, 0冣.

The first coordinate expresses the frequency of N, and the second expresses the frequency of B (and obviously in case the first rises, the second will decrease). If N was equal to 1, the vertex N would only be composed by non-cooperative strategies. The position of f then depends on b and c (as we have interpreted them in the c previous paragraphs), and on the value of π. In particular, for π → , the point f b will move closer to B. This explains why it is important – for cooperation to arise in c a repeated game – to pose π > . Below this value, the equilibrium of the population b – for given values of c and b – will tend to non-cooperation. On the other hand, if

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π → 1, then the point f will tend to move towards N with a very low probability of converging to non-cooperation. For low values of π, we will have therefore that, ceteris paribus, the probability of agents N exclusively prevailing is very high; with π very high, instead, it will be very likely that the equilibrium will feature the coexistence of B and G. I think in particular of the relationship between parents and children, and of the couple’s relationship during the so-called ‘good times’. It should be noticed that not all family relations can be described as Prisoner’s Dilemma games, although free riding (the typical element of the Prisoner’s Dilemma) is a highly relevant matter in the life of the family and communities in general. This result is the exact opposite of Becker’s well-known ‘Rotten Kid Theorem’, which claims that if the head of the family behaves altruistically, then the other members of the family will behave like him or her, even if they are selfish. Sticking to everyday examples, I am thinking of conditional actions, such as ‘no studying, no videogames’ or ‘you won’t be allowed to watch tv, unless you clear the table after dinner’, ‘if we can’t go once each to pick the kids from school, then let’s hire an external helper’. Like those, for example, who are generally inclined to open to the worst off, but would turn into dramatically intolerant and xenophobe individuals if the situation was perceived as excessively unconditional.

8 In praise of heterogeneity 1 One should bear in mind that, being this a non-evolutionary, repeated-game analysis, the statement can aspire to no global validity (such as ‘G will definitely prevail over B’), but only serves the purpose of suggesting a trend observable at a certain moment in time (this does not undermine its value as a reference for analyses and applications, as well as for the arguments carried out so far). 2 In fact, through the evolutionary approach (see, supra, ‘The evolution of reciprocity’, p. 143) we learnt how, under some conditions, G and B may coexist. 3 As a matter of fact, from Proposition 10 (here expressed in terms of π) we have: pnc cpc π> , which implies (given the values b = 4, c = 1 and pc = pb): Ug > Un + pcb bpc when π > 0.5. It may be noticed that, when b = 2 and c = 1, the trend of the previous graph is confirmed, because π should be greater than 1 for Ug to be higher than Un (but, because π expresses a probability, it is always π ≤ 1). 4 Interestingly, if pg is very small (and particularly smaller than 0.0625), even Ug, while lower than Ub, is higher than Un. 5 Here the threshold value of pg is 0.206349, which is higher than the threshold value in case 2. 9 Reciprocity is one, but reciprocities are many 1 Throughout our discussion, in particular, we assumed the performance and the spreading of the each strategy to be related to the payoffs of the game (and to its length). In the evolutionary analyses, it was further assumed that the bestperforming strategy of reciprocity would be imitated by others, until eventually establishing itself in the population. In fact, as repeatedly mentioned, we know that cultural evolution is rather more complex than the biological evolution of the species (Cavalli Sforza and Feldman 1981; Nowak 2006). My opinion is that even in cultural evolution we are not ultimately determining, through our choices (and personal satisfactions), the evolution of a given culture: particularly

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in the economic and civil life, organizations evolve and develop in response to the environment. Historically some religious groups have shown a similar evolution, gradually falling, after the founder’s generation, into some kind of exacerbated formalism, and wholly departing from the fraternity of agápe they originally avowed. These remarks intend to show how, historically, the detractors of conditional reciprocity have often unintentionally become the greatest enemies of agápe. Furthermore, this helps making sense of the fact that many who became founders in virtue of some ‘charismatic’ intuition (despite typically ignoring game theory!) ascribe a fundamental importance to the rule or statute of their communities: this form of ‘contract’ (such is the substance of a statute) makes the mutual love of agápe sustainable in time. After all, the story of the Israeli people also begins with a pact, a contract (the ‘Law’ or Covenant) between God and his people. In some contexts, even public action can be read as a G-strategy, capable of activating or unlocking situations of non-cooperation. With regard to these final applications and as a general methodological precaution, it should be noted that some of the examples we are about to make, but also some of the previous ones, cannot be adequately described as a Prisoner’s Dilemma, the game that we have generally used as the ground to build the models of earlier chapters. For instance, the competition amongst firms to attract customers (whether or not responsible) does not reflect a Prisoner’s Dilemma logic, whereas it would if we were to understand social responsibility as a form of contribution to some public good (a good belonging to the collectivity, natural environment, etc.). As seen, the Prisoner’s Dilemma is an effective way of describing situations featuring an incentive to free-riding. Although we talk of types of firms, the methodological remarks concluding Chapter 5 apply: a type-G firm does not uniquely perform type-G actions (for we have seen that it may not survive if it did), but is an organization that also counts strategies G amongst its possible actions; and in our particular case, these strategies drive the firm’s practical approach to social and civil responsibility. On the other hand, a type-B firm does not count unconditional actions and strategies in its repertoire (except for a first move in a game) or, if it does, their importance is minor. Finally, as we have seen again and again, type-C firms are purely conditional and N always defects. In these cases, each firm will embrace CSR procedures by adapting them to the its particular model, rather than the other way round; in C- and B-type firms, on the contrary, CSR is artificially ‘added’ to the firm’s structure through an ‘external’ ethical code or protocol and firms will try to model themselves accordingly (as much as they can). It is worth spending a few words on the phenomenon of motivation crowding out, widely explored nowadays in economics (Frey 1997) and psychology (Deci and Ryan 1991). It has been acknowledged (and experimentally demonstrated) that when intrinsic motivations confront more instrumental motivation (and motivation can be observed), the action of the intrinsically motivated could suffer disturbance. On this view, then, if type-G firms were to interact with firms B and C, the fact of being equalized to the latter might produce a crowding out effect on gratuitous behaviours. I claim, however, that this phenomenon does not apply to the context we are examining (or to the next two applications). Why? First of all, because experimental evidence basically tends to reveal that motivational interferences occur normally within the same persons, as in the case of a subject who acts out of gratuitousness and at some point starts to be paid for that same action. Interferences amongst subjects are another matter altogether that, in certain case, can occur when A’s motivation in a direct A–B relation can have effects on B’s performances (cf. Stanca et al. 2007). As it is, co-existence does not imply

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uniformity, and the comparison of similar realities typically strengthens intrinsic motivations, rather than weakening them (the so-called motivation crowding-in takes place in this case). A different and more dangerous situation occurs when different subjects are treated in an undifferentiated way from the fiscal or juridical point of view (for instance, with laws that fail to acknowledge the social value of gratuitousness and tend to equalize social cooperatives to ‘normal’ for-profit firms). But, this would be not quite a motivation crowding-out, as rather an economic and political crowding-out: indeed, a constant worry in our societies. Our discussion, on the contrary, presupposes (and urges!) that the different be treated differently. I am grateful to Giuseppe Argiolas who gave me the cue for writing this footnote. The first Monti (in Perugia, Ascoli, Foligno in the central of Italy) date back to as early as the second half of the fifteenth century. Private (Jew or Christian) banks (the Italian banchi) already existed, mainly in Venice, Genua or Florence: the economy of the ancient Italian Maritime Republics and of the Comuni were extremely dynamic and the emerging figure of the merchant–entrepreneur needed credit, so credit had to be provided: here it was the demand to create supply. Loans on interest were prohibited (as theorized by Aristotle, who considered their practice unnatural), but merchants would still pay interests, stiff interests to be sure; then, at their last gasp, they would perhaps build some church as a form of reparation for their sins: be it as it may, the economy both demanded and offered credit. I am always amazed at how the Franciscan movement, through the cultivation of poverty (‘Madonna Povertà’) as the highest ideal and truly inspired by the love for the poor (and the city), has been able to make way to the first popular banks of the modern age! We refer here to the cohabitation of B and G as illustrated in the simplex (cf. supra, pp. 144ff.).

Appendix 1 1 On the differences between behavioural and experimental economics, both developed in the 1970s, see Bruni and Sugden (2007). 2 Pantaleoni (1898), for instance, used to call ‘species egoism’ the motive behind all those seemingly altruistic actions aimed at promoting a higher individual well-being in the future. 3 Elster (1989) and Hollis (1998) both aim at establishing a kind of social rationality different from economic rationality, in order to explain the arise of cooperation in a market context. 4 For a recent and convincing review, see also Sobel (2005), while among the first economists to study reciprocity in economics was Kolm (1984). 5 The key element in Rabin’s theory is the existence of a ‘psychological’ payoff in addition to the monetary payoff when the player plays kind (whereas in monetary terms she would be better off by not trusting the other). The idea of the psychological payoff has been disputed by those who, like Binmore for example, endorse a ‘revealed preferences’ approach (if an agent has chosen a strategy, this reveals, ex post, what she prefers). As a matter of fact, if we interpret payoffs not in monetary terms but in utility terms, the distinction between material and psychological loses its analytical meaning (although it conserves an hermeneutical value). On this topic, see also Battigalli and Dufwenberg (2005) and Pelligra (2005). 6 The two authors particularly stress one innovative aspect of their theory (partly deviating from Rabin’s), as they claim that it ‘explains the relevant stylized facts of a wide range of experimental games. [. . .] Further, the theory explains why subjects behave differently in treatments where they experience the actions of real

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persons compared to treatments where they face “actions” caused by a random device. [. . .] Finally, the theory explains why in bilateral interactions outcomes tend to be “fair” whereas in competitive [and anonymous] markets even extremely unfair distributions may arise’ (Falk and Fischbacher 2000, p. 1). The authors use the ‘kindness term’, the ‘intention factor’ and ‘reciprocation term’ to give formal definition to these assumptions. The kindness term summarises how kind player 1 considers the action of player 2. This will depend both on the ‘outcome term’ (payoffs) and on the ‘intention factor’ (intentions); the latter, in turn, will depend on the set of alternatives the agent had to choose from, as we have already mentioned. The ‘reciprocation term’, instead, represents the answer to the other player’s action: it measures player 1’s influence on player 2’s payoffs (that is, the effects of her action on the other’s situation). The parameters so obtained are then combined with the ‘reciprocity parameter’, indicating the importance of reciprocity for each player (in his own preferences); if this parameter is zero, the homo reciprocans becomes homo oeconomicus again, plainly interested in material payoffs. The also make a point on the differences between reciprocity and inequality aversion. Many amongst the strong reciprocity models are set in the context of public good games (see Bowles and Gintis 2004). Fehr and Gächter (2000) have carried out several experiments in the attempt to explain and verify reciprocating behaviours. In particular they have come to the following significant conclusions: (a) reciprocity has been observed also in oneshot games and in contexts in which it is ‘costly’ to implement; (b) reciprocating behaviours are displayed also when agents ignore the identity of the subjects they are interacting with (anonymity); (c) reciprocity has also been ascertained when players are guaranteed that their behaviour cannot be observed; (d) reciprocating behaviours have also been reported when monetary payoffs are particularly high. For a review, see Sobel (2005) and Bowles and Gintis (2004). Pointedly, the key question arising from these experiments is: What kind of reciprocity are we talking about?

Appendix 2 1 The analytical results contained in this and the next two appendices are parts of a joint work with Alessandra Smerilli. 2 To prove it, we need to recall the notion that the series 1+a+a2+a3+ . . . tends to 1/(1−a) (with the exponent tending to infinity). See also Footnote 29. 3 In order to calculate the expected utilities, we need to apply a simplification in characterizing the strategies B and C. As a matter of fact, if B and C were described as pure Tit for Tat strategies, the agents would alternately exploit each other. When agents C meet B, in every round they alternate the role of ‘the exploiter’ and ‘the exploitee’: C will take advantage of B in the first round, B will take advantage of C in the second, C will exploit B again in the third and so on. The unfolding of the game would lead therefore to the sheer alternation of ‘cooperation’ and ‘non-cooperation’. Similarly, when agents B meet C, they alternate b and −c, whereas they would be able to establish cooperation among themselves (an insight into the calculation of expected utilities for this case was anticipated on p. 83, Note 10). Therefore, we assume that when agents B meet C non-cooperation sets in from the second round and persists through all subsequent rounds. In other words, we assume that B is some variant of the pure Tit-for-Tat strategy, and similar to the so-called ‘Trigger’ or Grim (Nowak, 2006) strategies, when agents B face C’s non-cooperation in the first round, they will stop cooperating, starting from the second round (this ‘radicalization’ of B is necessary only

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when B plays with C types: the logic of the model does not require that B is trigger also when plays with other cooperative strategies such as B or G). This way, they will play ‘cooperation’ in the first round (and always ‘non-cooperation’ thereafter), thus assigning the payoff bπ to B and πc to themselves. What calls for such a ‘sparing’ description of the strategy used to represent philia? After all, we could define B in a way as to make them able to recognize C (on the grounds of the other’s behaviour in the second round, for instance), in which case they would therefore be able to cooperate with C (as in Sugden, 2004, for example). My choice is mostly driven by the wish to highlight the critical role that ‘electiveness’ or ‘nonuniversality’ plays in the dynamics of philia: a friend reciprocates with another and is disposed to forgive, on the condition that the other is and will remain a friend. Philia does not extend to the non-friends, those who do not participate in the relationship. This should help us illustrate more vividly the difference between the electiveness of philia and the universalism characterizing strategy G, unconditional gratuitousness, which extends to everyone and is therefore able, contrary to philia, to activate even the ‘cautious’ (C) despite their being nonfriends – with some meaningful civil consequences we are about to examine. 4 When meeting G, C earns b in the first round; the second round onwards, because G (contrary to B) persists in cooperating, C will start cooperating as well, and each agent will earn (b − c) at every round. Appendix 3 1 Bomze (1983), p. 210. 2 Ibid. Appendix 4 1 These are calculated by taking into account the specifications for the case of strategy B meeting C (and vice versa) that were introduced in note Error! Bookmark not defined. 2 I thank Robert Sugden for this example.

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Index

agapé 48, 50, 58 anonymity: of markets 16; Prisoner’s Dilemma 29 Aristotle 4, 9, 38, 39–40, 41–2, 49 art 48, 89–90 Axelrod, R. 43, 61, 68 B strategies see brave reciprocity (philía/ friendship) (B) Bacharach, M. 29, 30 Becattini, G. 1 Becker, G. 24–5 Behavioural Economics 2 benevolence, cooperation without 16–21 Binmore, K. 31, 66 blood donations 6–7 Boltanski, L. 50 brave reciprocity (philía/friendship) (B) 39, 42–4, 49; and corporate social responsibility (CSR) 91–2; and microfinance 94; value-based management and fair trade 95–6; vs cautious reciprocity (C) 63–4, 106–8 appendix; vs non-cooperation (N) 61–3, 102–6 appendix; see also threedimensional world (NBG strategies) Bruni, L. 22; and Smerilli, A. 58, 90, 94; and Stanca, L. 4; and Sugden, R. 17 C strategies see cautious reciprocity (C) cautious reciprocity (C) 3; civil-life dynamics 88–90; and corporate social responsibility (CSR) 91, 92, 93; fourdimensional world 79–85, 114–22 appendix; and intrinsic reward 52–3; and microfinance 94; repeated, without enforcement 32–7; twodimensional world 86–7; value-based

management and fair trade 95, 96; vs brave reciprocity (B) 63–4, 106–8 appendix; vs gratuitousness (G) 64–5, 108–10 appendix choice 47–8, 56 Christian logic of agapé 48, 50, 58 civic and private virtues 20–1 civil conditionality of microfinance 93–4 Civil Economy 15, 32, 42, 96; vs Political Economy 16–21 civil happiness 96–7 civil society 15, 17–18, 19–20, 31, 59–60, 74 civil-life dynamics 88–90 civilization, market as 14–15 commerce see market(s) ‘conditional-unconditionality’ 40, 41 conditionality 6–7, 11, 31, 49; of philía (friendship) 40 cooperation: contractual 30–2, 36; without benevolence 16–21; see also non-cooperation (N) corporate social responsibility (CSR) 91–3 cultural change 58 cultural selection 65–7 Darwin, C. 59, 65 Deci, E.L. and Ryan, R.M. 4 disposition 41, 44 economic confidence 20 economic theories: contemporary 1–12, 24–6, 98–102 appendix; historical 13–24 Edgeworth, F.Y. 22–4 electiveness of philía (friendship) 40, 45 enforcement 30, 31–2; repeated cautious interactions without 32–7

156

Index

equality 39, 49 ethical confidence 20 eudaimonia 4, 9 evolutionary perspective 65–7, 73–7; gratuitousness, motivation, preferences, utility and 55–8; intrinsic motivation 121–2 appendix; simulations 118–21 appendix exchange of equivalents 32 expected utility 56–7, 61–6 passim 68–75 passim 102–6 appendix Experimental Economics 2 fair trade and value-based management 94–6 fairness 99–101 appendix Falk, A. and Fischbacher, U. 101 family: as market 25; NBG analysis 77–8 Fehr, E.: et al. 11–12; and Gätcher, S. 46, 102 feminist perspective 3 feudal vs market relations 16, 17 Filangieri, G. 19 first form of reciprocity: characteristics 31–2, 39–40; vs second form of reciprocity 40–2; see also cautious reciprocity (C) forgiveness 40, 43–4, 64 four-dimensional world 79–85, 114–22 appendix fraternity, market as 18–21 free trade see market(s) freedom 39–40, 48–9 friendship (philía) 38–42, 44–5; and market relations 16–17, 19–20, 22, 24; vs agapé 50; see also brave reciprocity (philía/friendship) (B) G strategies see gratuitousness (unconditional reciprocity) (G) game theory 24, 25–6; see also evolutionary perspective Genovesi, A. 4, 13–14, 15, 18–21, 39, 42 ‘genuineness’ of motivations 2–3, 7 gifts 49–50, 89–90; vs loans 94 ‘good life’ 3 good(s) see public good(s); relational goods gratuitousness (unconditional reciprocity) (G) 47–50; and corporate social responsibility (CSR) 92, 93; delicate role of 87–8; and intrinsic

motivation 50–8; and microfinance 94; no civil life without 88–90; preferences, motivation, utility and evolution 55–8; as relational goods 10; and social economy networks 96; value-based management and fair trade 94–5, 96; vs cautious reciprocity (C) 64–5, 108–10 appendix; see also threedimensional world (NBG strategies) Gui, B. 8, 9 happiness 3–4, 96–7 Hollis, M. 4–5, 6–7, 86 Hume, D. 20–1, 33 Hyde, L. 89–90 identity 9, 42 imitation 66, 74 independence in markets 16 individuality 29 instrumentality 21–2, 24–5, 29 intentions see intrinsic motivation/ reward; motivations/intentions interpersonal dimension see sociality intrinsic motivation/reward 47–9, 74; and cultural change 58; evolutionary analysis 121–2 appendix; and gratuitousness 50–8 ‘invisible hand’ of markets 18, 30 Kierkegaard, S. 50 market(s): and civilization 14–15; as fraternity 18–21; and friendship (philía) 16–17, 19–20, 22, 24; ‘invisible hand’ 18, 30; sociality in the 16–21 Marshall, A. 24 Maynard Smith, J. 66 ‘memes’ 65–6 Menger, C. 24 microfinance 93–4 motivations/intentions: first vs second form of reciprocity 41–2; ‘genuineness’ of 2–3, 7; as relational goods 10; see also intrinsic motivation/reward mutual assistance 19, 42 mutual love 8, 17, 26 N strategies see non-cooperation (N) non-cooperation (N) 28–31, 32, 33, 35–6, 86–7; and corporate social responsibility (CSR) 93; and microfinance 94; social economy networks 96; value-based management

Index and fair trade 94–5; vs brave reciprocity (philía/friendship) (B) 61–3, 102–6 appendix; see also threedimensional world (NBG strategies) ‘non-tuism’ 22, 24 Nowak, M. 65, 66 Nussbaum, M. 8, 9–10 outcomes 47–8, 50 Pareto, V. 1, 21–2 payoffs: fitness 38, 65–6, 67; low 43, 44; Prisoner’s Dilemma 28, 29, 30; see also intrinsic motivation/reward philía see brave reciprocity (philía/ friendship) (B); friendship (philía) pluralism, need for 91–3 political confidence 20 Political Economy: post-Smith 21–4; vs Civil Economy 16–21 political–institutional realm 87 Prisoner’s Dilemma (and related games) 28–31; repeated 32–7, 42–4; strategies of reciprocity 60, 67, 68–9; see also specific strategies private and civic virtues 20–1 private goods 9 psychological studies 3–4 public confidence 19 public good(s) 9, 18; game 101–2 appendix Rabin, M. 99–101 rationality: instrumentality 21–2, 24–5, 29; ‘we-rationality’ 4–7, 11; ‘weak rationality’ 17 reciprocity: definitions xv–xvi; forms xvi–xviii relational goods: definitions 8–9; properties 9–11 repetition: first vs second form of reciprocity 40–1; game strategies 32–7, 42–4 Robinson Crusoe economics 25–6 second form of reciprocity: characteristics 39–40; vs first form of reciprocity 40–2; see also brave reciprocity (philía/friendship) (B); friendship (philía) self-interest 1, 16, 17; vs willingness to sacrifice 2–3 Sen, A. 55 Sethi, R. and Somanathan, E. 66 simultaneity, as relational goods 10

157

Smith, A. 4, 13–15, 16–18, 19–21, 22, 23, 30, 39 social economy networks 96 social poverty traps 36 sociality: in contemporary economic theory 1–3, 24–6; in the market 16–21; non-instrumental (‘tuism’) 22–4; and well-being 3–4 strategies of reciprocity 60, 67, 68–9; see also specific strategies strong reciprocity 32–3; and philía (friendship) 39; vs altruism 11–12 ‘sucker’ behaviour 11, 47 Sugden, R. 4–6, 9, 34, 41, 43, 44, 47, 66, 71, 98–9; Bruni, L. and 17; Gold, N. and 29 sympathy 16–17, 18, 22, 23 T strategies see Tit for Tat (T) strategies ‘team reasoning’ theory 4, 5–6, 7 third form of reciprocity see gratuitousness (unconditional reciprocity) (G) Thompson, G.F. 31 three-dimensional world (NBG strategies) 69–71, 110–14 appendix; and cautious reciprocity (C) 53–4, 79–85, 88–90; evolution of reciprocity 73–7; examples 77–8; numerical analysis 71–3 Tit for Tat (T) strategies 34, 43–4 Titmus, R. 6 Todorov, T. 46 trust 20 ‘tuism’ 22–4 two-dimensional world 69, 86–7 Uhlaner, C. 8, 9 unconditional reciprocity see gratuitousness (unconditional reciprocity) (G) utility: expected 56–7, 61–6 passim 68–9, 68–75 passim 102–6 appendix; gratuitousness, preferences, motivation, evolution and 55–8; vs virtue, friendships of 41–2 value-based management and fair trade 94–6 Varoufakis, Y. and Hargreaves-Heap, S.P. 68 Verri, P. 96 Vico, G. 96–7

158

Index

virtue vs utility, friendships of 41–2 virtuous relations in markets 16 vocation 48–9 volunteers 44–5 Von Neumann, J. and Morgenstern, O. 25–6

‘we-rationality’ 4–7, 11 ‘weak rationality’ 17 well-being 3–4 Wicksteed, P. 22, 24, 41 Yunus, M. 93–4