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Do Markets Make People More Generous?

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Do Markets Make People More Generous?

A recent study of 15 small-scale societies suggests yes.

By Ronald Bailey

Karl Marx crystallized a still-common distaste for markets in his
Communist Manifesto when he thundered that the bourgeoisie and the
markets they thrive in had "left remaining no other nexus between man
and man than naked self-interest, than callous 'cash payment.'" Marx's
idea-still held dear to the hearts of anti-market protesters outside
World Trade Organization and World Economic Forum meetings-is that
markets destroy all fellow-feeling, leaving humans cold, cruel

We denizens of market societies might feel in our bones that it just
isn't so. And there's some new social science on our side. A recent
study investigating how members of 15 different small-scale societies
handle several economic games provides intriguing evidence that the
more closely a society is integrated into markets, the more its members
exhibit such laudable values as fairness and sharing. The societies
investigated by economists and anthropologists organized as the
MacArthur Foundation's Norms and Preferences Network ranged from
hunter-gatherers to slash-and-burn horticulturalists on five

To probe the attitudes held by members of these societies toward
sharing and fairness, the researchers used several experimental
economics games. One of these is called the Ultimatum Game. In it,
researchers provisionally allot a divisible pie ($10, say) to one
player. This player, the "proposer," offers a portion of the pie to the
second subject, the "responder." The responder, who knows both the
offer and the total amount of the pie, chooses to either accept or
reject the offer. If the responder accepts, he or she gets the amount
offered and the proposer gets the remainder. If the responder rejects
the offer, neither player receives anything.

Rationally speaking, one might expect that the proposer would offer as
little as possible ($1, say) and that the responder would never reject
an offer because, after all, one dollar is better than nothing.
However, experimental economists have shown in hundreds of experiments
in nearly two dozen countries that subjects rarely act in that purely
self-interested way. In fact, a very robust research finding is that in
modern societies, 50 percent is the most frequent amount offered by
proposers, and responders commonly reject offers under one-third. After
examining a number of different explanations, most researchers are
convinced that those choices are based on a sense of what the players
regard as fair. Since these experiments are usually conducted using
undergraduates, the Preference Network researchers wondered if the
results would hold true across societies. Hence, this new study.

The experimenters offered participants the equivalent of a day or two's
wages in their societies. The researchers found that the average offers
from proposers ranged from a low of 26 percent to a high of 58 percent
and that the most frequent (modal) offers ranged from 15 percent to 50
percent. Some groups, such as the Machiguenga and Quichua in South
America and the Hadza in Africa, offered around 25 percent of the pie.
The most frequent offer from Machiguenga proposers was 15 percent. Even
more interestingly, only one Machiguenga responder rejected such low

In a strict sense, uneducated Machiguenga Ultimatum Game players are
more economically rational than most undergraduates in developed
countries. On the other hand, researchers found that proposers in two
societies in New Guinea, the Au and the Gnau, often made "hyper fair"
offers of more than 50 percent. Strangely, such hyper fair offers were
often rejected. The Preference Network researchers conclude that this
unusual result occurs because, in both societies, accepting a gift
strongly obligates the recipient to reciprocate at a later time and in
a way chosen by the initial gift-giver.

The researchers used four aspects to rank each society: (1) payoffs to
cooperation, (2) market integration, (3) anonymity, and (4) privacy.
The payoffs-to-cooperation aspect looks at how important cooperation is
in earning a living in each society. Market integration weighs the
importance of trading in daily life. Anonymity is concerned with how
frequently members of a society meet with strangers. And privacy
describes the ability of members of a society to hide away goods and
keep secrets. The researchers conclude, "differences between societies
in market integration and the importance of cooperation explain a
substantial portion of the behavioral variation between groups."

Societies like the Machiguenga and Hadza that deal with few outsiders
and are not economically dependent on people other than close kin are
the stingiest players. The Orma in Africa and the Achuar in South
America, who are more integrated into markets, tend to play more like
undergraduate students. They are more generous and more likely to
punish stingy proposers. The Lamalera of Indonesia, who rely on
extensive cooperation among non-kin to coordinate complicated whale
hunts, are the least stingy players, offering an average of 58 percent.
"The higher the degree of market integration and the higher the payoffs
of cooperation, the greater the level of prosociality found in
experimental games," according to the researchers.

What are the larger implications of this research? "I would say
societies that use markets extensively develop a culture of
cooperation, fairness, and respect for the individual," says Herbert
Gintis, a self-described former Marxist economist at the University of
Massachusetts. Gintis is co-director of the Preference Network team.

Gintis speculates that markets bring strangers into contact on a
regular basis, encouraging people to develop more concern for others
beyond their family and immediate neighbors. Instead of parochialism,
being integrated into markets encourages a spirit of ecumenism.
"Extensive market interactions may accustom individuals to the idea
that interactions with strangers may be mutually beneficial," the
researchers theorize. "By contrast, those who do not customarily deal
with strangers in mutually advantageous ways may be more likely to
treat anonymous interactions as hostile, threatening, or occasions for
opportunistic pursuit of self-interest."

In other words, societies that don't have regular contact with
strangers tend to behave more like classical kin-selection evolutionary
theory predicts they will: Members are altruistic toward their own kin
and relatively hostile to strangers.

Markets teach participants the habits of cooperation, trust, and
fairness. These lessons are apparently carried over even into
situations like the Ultimatum Game, in which the incentive structure
encourages participants to be completely selfish. The lessons taught by
market interactions are so powerful that many people will willingly
forego benefits in order to punish those whom they feel have treated
them unfairly. They will, for example, reject stingy offers in the
Ultimatum Game. This insight has important consequences. "One of the
central points is that the only way for prosociality to work is to have
good punishment systems," says Gintis. In other words, in order to get
people to behave, a society needs both carrots and sticks.

Gintis' team's research is dispelling the myth of happy generous
savages who are corrupted by contact with markets and modern societies.
It turns out that the more they participate in markets, the more
generous and filled with apparent fellow-feeling they tend to be.

Based on his research, Gintis believes that history traces humanity's
rise from tribal selfishness to more cosmopolitan liberality. "Market
societies give rise to more egalitarianism and movements toward
democracy, civil liberties, and civil rights," Gintis points out.
"Market societies and democratic societies are practically
co-extensive." And they are more generous too.

Ronald Bailey is Reason's science correspondent and the editor of Earth
Report 2000: Revisiting the True State of the Planet(McGraw-Hill)

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