Download How and Why did Fairness Norms Evolve?

Emergence of Institutions:
A Game Theory Approach
Ken Binmore
[email protected]
Game Theory and Institutions
• New Institutional Economics?
Game Theory and Institutions
• New Institutional Economics?
• Transaction costs explain deviations from
competitive equilibrium?
Game Theory and Institutions
• New Institutional Economics?
• Transaction costs explain deviations from
competitive equilibrium?
• Institutions as “rules of a game”?
Game Theory and Institutions
• New Institutional Economics?
• Transaction costs explain deviations from
competitive equilibrium?
• Institutions as “rules of a game”?
• Example: fairness as an institution?
Multiple Equilibria
Within game theory, the problem of stable institutions
can be abstracted as a version of the
Equilibrium Selection Problem
Multiple Equilibria
Within game theory, the problem of stable institutions
can be abstracted to be a version of the
Equilibrium Selection Problem
Realistic games nearly always have many Nash equilibria.
Institutions are a social device for selecting and operating
one of the equilibria in our game of life.
Multiple Equilibria
Within game theory, the problem of stable institutions
can be abstracted as a version of the
Equilibrium Selection Problem
Realistic games nearly always have many Nash equilibria.
Institutions are a social device for selecting and operating
one of the equilibria in our game of life.
Traditional economics evades the equilibrium selection
problem by looking only at models with a single equilibrium.
Multiple equilibria are dismissed as “pathological”.
Big Bang or Evolution?
Peter Murell
Avinash Dixit
Sewell Wright Problem
Quic kTime™ and a
TIFF (Unc ompres sed) dec ompres sor
are needed to see this pic ture.
Sewell Wright
Big Bang or Evolution?
fitness
local
optimum
fitness landscape
characteristic
Big Bang or Evolution?
fitness
basin of attraction
Big Bang or Evolution?
fitness
local
optimum
climb out with many
simultaneous mutations?
global
optimum
basin of attraction
Big Bang or Evolution?
fitness
local
optimum
big bang
global
optimum
evolutionary correction
Adherent versus Contractual
Organizations
John Wallis
A
a
a
a
a
Leader (or elite)
chooses an
equilibrium
Adherent versus Contractual
Organizations
John Wallis
A
a
a
a
a
Leader (or elite)
chooses an
equilibrium
repeated
game
Adherent versus Contractual
Organizations
James Madison
A
a
c
C
c
Leader (or elite)
chooses an unfair
equilibrium?
Facilitates the emergence
of a challenging sub-coalition
around a potential new
leader who proposes a
fair equilibrium.
Adherent versus Contractual
Organizations
Peter Murell
William III
(of Orange)
A
B
a
a
a
a
b
b
b
b
Louis XIV
Adherent versus Contractual
Organizations
Douglass North
A
a
a
a
a
B
The existence of coalition B
changes the
b game played
internallybby coalition A.
b
b
Adherent versus Contractual
Organizations
John Wallis
equilibrium chosen by
explicit or implicit bargaining
A
B
a
a
a
a
b
b
b
b
Adherent versus Contractual
Organizations
John Wallis
AA
aa
aa
aa
aa
equilibrium chosen by
explicit or implicit bargaining
C
c
c
BB
bb
bb
bb
bb
Adherent versus Contractual
Organizations
John Wallis
equilibrium chosen by
explicit or implicit bargaining
A
B
a
a
a
a
b
b
b
b
John Mackie’s
Inventing Right and Wrong
Metaphysical moral philosophy
is unsound. Look instead at:
Anthropology
Game theory
Social Contracts
The social contracts of pure hunter-gatherer
societies have two universal properties:
No bosses
Fair division
Pure hunter-gatherers
Toy games
Adam’s strategies
dove
dove
hawk
hawk
Prisoners’
Dilemma
Stag Hunt
Toy games
Eve’s strategies
dove
hawk
Prisoners’
Dilemma
dove
hawk
Stag Hunt
Toy games
Adam’s payoffs
dove
dove
hawk
2
3
hawk
0
1
Prisoners’
Dilemma
dove
hawk
dove
hawk
4
0
3
2
Stag Hunt
Toy games
Eve’s payoffs
dove
hawk
dove
hawk
2
3
0
1
Prisoners’
Dilemma
dove
hawk
dove
hawk
4
3
0
2
Stag Hunt
Toy games
dove
hawk
dove
hawk
2
3
2
0
0
3
1
1
Prisoners’
Dilemma
dove
hawk
dove
hawk
4
3
4
0
0
3
2
2
Stag Hunt
Nash Equilibria
dove
hawk
dove
hawk
2
3
dove
1
hawk
2
0
0
3
1
Prisoners’
Dilemma
dove
hawk
4
3
4
0
0
3
2
2
Stag Hunt
Coordination Games
left
left
right
1
right
1
0
0
0
1
Driving
Game
0
box
1
ball
box
ball
1
0
2
0
0
0
2
1
Battle of
the Sexes
Reciprocal Altruism
2
3
2 2
0 3
22
03
1
0
22
03
1
0
3003
11
22
3
1
2
300
11
30
3
11
1
indefinitely repeated
Prisoners’ Dilemma
Reciprocal Altruism
d
2
3
2 2
0 3
22
03
1
0
22
03
1
0
3003
11
22
3
1
2
300
11
30
3
11
1
d
h
h
Grim strategy
Reputation and Trust
QuickTime™ and a
TIFF (LZW) decompressor
are needed to see this Sure
picture.
I trust
him. You know the ones
to trust in this business. The ones
who betray you, bye-bye.
Vampire bats share blood on a reciprocal
basis to insure each other against hunger.
Folk Theorem
Eve’s
payoff
efficient
equilibria
current
status quo
0
Adam’s
payoff
Equilibrium selection
Fairness is evolution’s solution to
the equilibrium selection problem.
QuickTime™ and a
TIFF (LZW) decompressor
are needed to see this picture.
QuickTime™ and a
TIFF (LZW) decompressor
are needed to see this picture.
Equilibrium selection
Fairness is evolution’s solution to
the equilibrium selection problem.
Fairness therefore evolved as a means of balancing
power---not as a substitute for power.
Deep structure of fairness norms
As with language, fairness has a
deep structure that is universal in
the human species. This deep
structure is embodied in Rawls’
original position
John Rawls’ original position
Veil of ignorance
Comparison of welfare
Enforcement
QuickTi me™ and a
TIFF ( Uncompressed) decompressor
are needed to see thi s pi ctur e.
Adam
I might be Adam
and Oskar might be
Eve. Or Oskar
might be Adam
and I might be Eve
Eve
QuickTi me™ and a
T IFF (Uncom pressed) decom pressor
are needed to see t his pict ure.
Oskar
John
Original
Position
implicit insurance
contracts
deep
structure of
fairness?
implicit insurance
contracts
original position
deep
structure of
fairness?
implicit insurance
contracts
Who is right?
original position
external
enforcement
self-policing
utilitarianism
egalitarianism
Harsanyi
Rawls
Modern Equity Theory
What is fair … is what is proportional.
Aristotle
Eve
slope is ratio of the players’
context-dependent
social indices
status quo
0
Adam
implicit insurance
contracts
original position
cultural evolution
external
enforcement
utilitarianism
self-policing
egalitarianism
standard of
interpersonal comparison
Utilitarianism and Egalitarianism
Eve’s
payoff
utilitarian outcome
egalitarian outcome
.
state of
nature
.
0
.
Adam’s
payoff
The slopes are determined by the standard of interpersonal comparison.
Utilitarianism and Egalitarianism
Eve’s
payoff
utilitarian outcome
egalitarian outcome
.
.
0
.
Adam’s
payoff
The slopes are determined by the standard of interpersonal comparison.
Utilitarianism and Egalitarianism
Eve’s
payoff
utilitarian outcome
egalitarian outcome
.
.
0
Adam’s
payoff
The slopes are determined by the standard of interpersonal comparison.
Utilitarianism and Egalitarianism
Nash bargaining solution
x2
.


0
(x1  1)(x2  2 )  c
.
x1


 of interpersonal comparison.
The slopes are determined by the standard
Cultural Evolution: Egalitarian Case
x2
Nash bargaining solution

.

.
egalitarian solution
.
x1
0

medium-run past
short-run present

Analogy with language
Chomsky discovered that all languages have
a deep structure which is universal in the human
species, but the particular language spoken in
a society is determined by its cultural history.
Fairness norms similarly have a common deep
structure, but the standard of interpersonal
comparison that is necessary as an input to the
original position is culturally determined.
Moral relativism
•
•
•
•
Need
Ability
Effort
Status
Social indices always respond to these parameters
in the same way, but the degree of response
varies with a society’s cultural history.
Reform?
QuickTime™ and a
TIFF (LZW) decompressor
are needed to see this picture.
Evolutionary Drift
antifitness
Quic kTime™ and a
TIFF (Unc ompres sed) dec ompres sor
are needed to see this pic ture.
local
optimum
Daniel Weissman et al
The Rate at which Asexual Populations
Cross Fitness Valleys
Theoretical Population Biology 10 (2009), 10-16.
Sewell Wright
characteristic