Sanctioning institutions have a clear competitive advantage over sanction-free institutions.

We have ways of making you cooperate. And, according to a paper published in the April 7th issue of Science, these ways don’t involve sitting back and letting you choose whether or not you want to.

A team comprised of researchers from the University of Erfurt in Germany and the London School of Economics demonstrated that while initially most people will choose to be part of an institution that does not reward good deeds or punish bad ones, nearly all will eventually migrate to a sanctioning disciplinarian institution, given the option.

According to Bernd Irlenbusch, a behavioral economist at the London School of Economics and one of the paper’s authors, the researchers set out to examine the relative effectiveness of these two types of institutions in order to determine why groups that punish uncooperative members survive so robustly.

“The sustainability of punishment institutions has indeed been questioned because of the detrimental effects of punishment, the unpleasant flavor that comes with such institutions and because of the efficiency losses arising from the high costs associated with punishment—both for the punisher and the norm violators,” Irlenbusch said via e-mail.

The researchers tested the competitive advantage of sanctioning by setting up two virtual institutions: one with both reward and punishment and one with neither. Subjects first chose an institution and then voluntarily contributed between zero and 20 monetary units to a public good for the group. The members of the sanctioning unit were allowed to reward or punish their group members based on how much each person contributed to the pot. A member paid one monetary unit in order to reward or punish a peer, by either taking away three monetary units from a non-cooperator or bestowing one monetary unit reward on a high cooperator.

In the first of the study’s 30 iterations, almost two-thirds of the subjects chose the sanction-free institution, but about half of those were free-riders—meaning they contributed little or nothing to the public good. The mean contribution to the public good in this institution was low. In the sanctioning institution, the mean contribution was higher, and cooperators who gave a very large portion of their bounty to the public good heavily penalized the low contributors.

As the exercise continued, almost the entire group migrated to the sanctioning institution, where the average contribution climbed to 19 monetary units. The average contribution in the meager sanction-free institution dropped to zero.

“In an appropriate institutional framework, in which effective social sanctioning is possible, a minority of individuals may establish a cooperative environment by demonstrating moral courage,” Irlenbusch said. “Although humans have strong resentments against a society with effective means of sanctioning, the breakdown of cooperation in the sanction-free alternative ‘converts’ them.”

While reward may seem like a kind alternative to punishment, Irlenbusch said both the sanctioning behaviors in this study and the preliminary results of a forthcoming study show that punishment is the more sustainable method. He noted that punishment is more economic: While a positively-sanctioning institution needs to constantly supply rewards, the threat of punishment alone is usually enough to secure the members’ cooperation.

Irlenbusch noted that research into what makes humans sacrifice for the greater good is necessary to appropriately address future challenges.

“A deeper understanding of the circumstances of human cooperation is of great interest given that some of the world’s most pressing issues, such as global climate change, may require people to act in the best interest of the entire world population,” he said.

Originally published April 6, 2006

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