Economists find in large groups, money facilitates cooperation

Aug 27, 2013 by Marcia Malory report
money

(Phys.org) —Early human societies consisted of small, tight-knit groups of individuals who knew each other. Members probably cooperated with one another based on prior experience and the expectation that individual beneficiaries of generosity would reciprocate. However, large, modern societies depend on transactions between strangers who may have no further contact after the transaction finishes. According to research by Gabriele Camera of the Economic Science Institute at Chapman University in Orange, California and his colleagues, money allows members of a large group to maintain trust when interacting with strangers, and therefore facilitates cooperation in modern societies. The study appears in the Proceedings of the National Academy of Sciences.

It's relatively easy to decide whether you should cooperate with someone you already know. Have they proved trustworthy before? If you do them a favor, are they likely to do something for you in the future? In early hunter-gatherer societies, where everyone knew everyone else, determining when to cooperate and when to refuse probably wasn't very difficult.

Today, however, we interact frequently with strangers. For society to run smoothly, we must cooperate with people we've never met before and may never see again.

To find out whether makes people in large societies more likely to cooperate, Camera's team designed a helping game, dividing subjects into pairs consisting of a "consumer" and a "producer." The consumer had the opportunity to help the producer, for a small cost.

The researchers placed the subjects in groups of 2,4, 8 and 32. When there were more than two people in a group, partners were unable to identify each other. As group size increased, the probability that current partners would be partners in the future, with an opportunity for reciprocation, decreased. Cooperation also decreased as group size increased.

In a later version of the game, the team gave subjects the opportunity to exchange tokens, which acted as an analog for money. A consumer could give a producer a token in exchange for help. This time, cooperation rates stayed the same, regardless of group size.

The researchers suggest that money provides stability as societies evolve and grow larger. It allows trust to exist in transactions between people who do not know each other. People trust that a stranger with money is less likely to try to get something for nothing than a stranger without money is.

Introducing money to a society does seem to incur a social cost. When tokens were included in the experiment, producers could either help in exchange for a token or help unconditionally, as a gift. Almost no gift-giving occurred at all. In comparison, earlier, when no tokens were available, all exchanges had been unconditional. Adding tokens caused the norm of monetary exchange to replace the norm of voluntary cooperation.

Explore further: Feeling bad at work can be a good thing

More information: Money and trust among strangers, PNAS, Published online before print August 26, 2013, DOI: 10.1073/pnas.1301888110

Abstract
What makes money essential for the functioning of modern society? Through an experiment, we present evidence for the existence of a relevant behavioral dimension in addition to the standard theoretical arguments. Subjects faced repeated opportunities to help an anonymous counterpart who changed over time. Cooperation required trusting that help given to a stranger today would be returned by a stranger in the future. Cooperation levels declined when going from small to large groups of strangers, even if monitoring and payoffs from cooperation were invariant to group size. We then introduced intrinsically worthless tokens. Tokens endogenously became money: subjects took to reward help with a token and to demand a token in exchange for help. Subjects trusted that strangers would return help for a token. Cooperation levels remained stable as the groups grew larger. In all conditions, full cooperation was possible through a social norm of decentralized enforcement, without using tokens. This turned out to be especially demanding in large groups. Lack of trust among strangers thus made money behaviorally essential. To explain these results, we developed an evolutionary model. When behavior in society is heterogeneous, cooperation collapses without tokens. In contrast, the use of tokens makes cooperation evolutionarily stable.

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User comments : 14

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Modernmystic
1.9 / 5 (8) Aug 27, 2013
So money isn't so eviiiiiiil after all?

Quite the contrary, it seems to foster stability and cooperation in human societies.

This was known to at least one philosopher without any studies needed. If you want cooperation you only have two choices to offer another person and money is the "nice" one.
JohnGee
2.3 / 5 (7) Aug 27, 2013
Modernmystic, I just saw you say something along the lines of "humans can do anything that is possible and maybe even bend the laws of physics." If you believe that, you must obviously believe we will achieve a Star Trek-esque post scarcity society someday. What is your take on money then?
PoppaJ
1.6 / 5 (7) Aug 27, 2013
money=cooperation what the hell? I did not need a study to state this. Look at the influence of money in politics. What a waste of research. But then again Money made it happen.
Roland
3.7 / 5 (3) Aug 27, 2013
Here's a clue: if someone wants your product and has cash, you don't need to trust that person. Money makes trust unnecessary. Humor note: search criterion: "site dilbert.com money"
rwinners
4 / 5 (4) Aug 27, 2013
Actually, unscrupulous people have long realized that money in a large society allow for the rapid and quite accumulation of power and the transfer of that power easily and without the public knowledge.
Gmr
3.7 / 5 (6) Aug 27, 2013
That's because money is a commonly accepted and readily trade-able abstraction of labor. As long as people are used to this abstraction, money works. In pre-abstraction societies, where the currency was itself the worth, people still tried to work the system by shaving coins or counterfeiting. They still do, in fact. If anything it exposes how gullible and trusting humans are by default.
JohnGee
1.6 / 5 (7) Aug 27, 2013
Money serves a purpose just like religion used to. Eventually, we will be rid of both.
antialias_physorg
4.5 / 5 (2) Aug 28, 2013
So money isn't so eviiiiiiil after all?

Maybe you missed that part in the article:
Almost no gift-giving occurred at all. In comparison, earlier, when no tokens were available, all exchanges had been unconditional.

Read: Money kills altruism (which most people would consider a good trait in someone)

if someone wants your product and has cash, you don't need to trust that person. Money makes trust unnecessary.

At first glance correct. But if someone has a product and a LOT of money then distrust may be merited (as that person is likely shafting you in the deal).
So I don't think it's quite as simple as "money equals cooperation under all circumstances"
sirupdzija
1 / 5 (1) Aug 28, 2013
So money isn't so eviiiiiiil after all?

Quite the contrary, it seems to foster stability and cooperation in human societies.

This was known to at least one philosopher without any studies needed. If you want cooperation you only have two choices to offer another person and money is the "nice" one.

no my friend, money is not evil, but it makes people to be evil. sure it did its part to help society advance to next level from feudal age, but now is the time to make a next step and get rid of money and introduce purely cooperative society based on favor system, tracked online, fully electronic and transparent so everyone has the right to see what someone else has bought, where and for how much in favors. clean and simple, like ebay only in favors trading for goods and favors in return, but you dont have to make favor back to same person you received it from, you can do it to totally new individual. just like money only without manipulation and with transparency.
CapitalismPrevails
1.3 / 5 (6) Aug 28, 2013
rwinners, your talking about legal fiat and not sound money.
kochevnik
1 / 5 (4) Aug 28, 2013
Money may advance cooperation between strangers, but it is debt that persuades the US to invade Syria simply to please Israel and the Saudi ruling family
BrianMacker
4 / 5 (1) Aug 29, 2013
The knowledge that money facilitates cooperation is nothing new. The fact that it is more essential for large groups is also nothing new. It is (or should be) ecnonomics 101. Where have these economists been living? In a cave?

The Austrian school of economics knew this well over 100 years ago and had stressed the issue of cooperation. Other things they point out that allow cooperation are property rights and free market prices. In fact, Mises showed that the reason why communist countries cannot operate efficiently is because lacking free market prices their economies cannot do "economic calculation". Look up the "economic calculation problem".

GMR, what you wrote, "That's because money is a commonly accepted and readily trade-able abstraction of labor.", is total nonsense. Money is best described as "the most marketable commodity". People who believe as you do make the mistake of thinking that labor dollars (look it up) and money are the same thing. They are not.
JohnGee
1 / 5 (3) Aug 29, 2013
rwinners, your talking about legal fiat and not sound money.

Have you ever studied Roman history? Fiat currency has nothing to do with it.
patnclaire
not rated yet Oct 08, 2013
We will never be rid of money or a medium of exchange. Witness BITCOINs. PNAS Money and trust among strangers cost money...ironic. Costs money to read about money.