Tax evaders prefer institutional punishment

( -- Selfish behaviour is a threat to successful coexistence and mutual cooperation. In many cases this human cooperation is based on punishing those who do not cooperate. There can be two different forms of punishment here: direct punishment by peers and institutionalised punishment by institutions like the police. Arne Traulsen, Torsten Röhl and Manfred Milinski from the Max Planck Institute for Evolutionary Biology in Plön conducted a behavioural experiment to study what form of punishment people prefer under which conditions. The scientists have demonstrated that people only prefer the costly institutions of punishment if those that cooperate, but do not wish to punish others, are themselves punished.

In all human societies there are not only individuals who are willing to cooperate, but also those who do not cooperate. People who enrich themselves from a public good without contributing to it themselves are known as free-riders. In behavioural experiments, many people punish such behaviour. However, all modern societies have institutions that take the task of punishing wrongdoers away from the individual. Therefore, people do not directly punish others themselves, they have them punished instead. Establishing an institution to do this job is expensive, and the costs still must be paid even if no crimes are committed. By rights, institutionalised should only be used if many crimes are committed and the benefits therefore exceed the costs.

However, the form of punishment a society chooses depends on how that society deals with second-order free-riders. These are individuals that cooperate but do not punish, thereby cutting the cost of punishment. Because those wishing to punish others, will incur costs and, depending on the circumstances, can even expect them to object. Such second-order free-riders should, therefore, be at an advantage as long as they are not themselves punished.

Without first-order free-riders, second-order free-riders go unnoticed. However, a society with both first and second-order free-riders loses its cooperative equilibrium, as the selfish behaviour of individuals is not punished and they are allowed to succeed within society. “The way we deal with second-order free-riders is key to the establishment of cooperation within society, in order to ensure that the system is not subverted and permanently destabilised,” says Traulsen.

The scientists used a public goods game, a classic model in experimental economics, to study the effect of the two forms of punishment. If second-order free-riders cannot be punished, there are only few players who decide to support institutional punishment. In these cases, punishment is meted out individually. The punishment follows as a reaction to an incident and punishes the wrongdoer quickly and directly. It requires no planning and is inexpensive, as it only costs money if people actually commit a crime. However, if second-order free-riders can be punished, people overwhelmingly opt for punishment by the police – thereby mutually compelling each other to support institutional punishment.

They thus prefer the costlier method, the police, even though it is less efficient. Institutionalised punishment reduces the number of crimes so greatly that the cost-benefit ratio shifts to their detriment: high police taxes to punish a small number of criminals. All the same, few players switch to the less expensive method of direct punishment as they would immediately be punished. “So in our experiment efficiency is traded for stability,” says Milinski. These findings bear out the results of a model of game theory developed in 2010 by Karl Sigmund from the University of Vienna and his co-authors addressing the question of how police-like institutions could come into being.

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When reputation is at stake, punishment becomes more responsible

More information: A. Traulsen, T. Röhl, and M. Milinski, An economic experiment reveals that humans prefer pool punishment to maintain the commons, Proc. Royal Soc. London B, July 4, 2012, doi:10.1098/rspb.2012.0937
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Citation: Tax evaders prefer institutional punishment (2012, July 5) retrieved 21 September 2019 from
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Jul 05, 2012
The premises are flawed;
1) People who succeed must be punished.
2) People who won't punish success must be punished.

Only a socialist would find this acceptable.

They thus prefer the costlier method, the police, even though it is less efficient. Institutionalised punishment reduces the number of crimes so greatly that the cost-benefit ratio shifts to their detriment: high police taxes to punish a small number of criminals.

This is obviously not the case. The number of crimes resulting in institutional punishment will rise in direct proportion to the amount of institutional space, thus reducing the individual cost of interment. Just look at the American prison system to validate this observation.

BTW, the title has nothing to do with the article and even implies that people prefer to be put in prison. Obviously not true.

Jul 05, 2012
the alarming thing is that bankers and their peers have become the institutions, with lots of lobby and old politicians in their boards of oversight, who is gonna punish them?

Jul 05, 2012
I suppose a lot depends on what a society is wanting someone to "cooperate" with. The title mentions tax, the article may imply it (free-riders) but doesn't specifically mention it. Sometimes countries and societies are founded by the efforts of "free-riders" who may later be considered by history to be patriots. The historic American Boston Tea Party comes to mind. It's a matter of perspective.

Jul 05, 2012
I am free! I will not tolerate any punishment! I'm not your subordinate!

Besides, taxes are mostly wasted anyway. So the hell with it.

Will Ocare be a costly, useless disaster? Ever seen its flowchart?

Besides, what makes you think that others may order you around anyway?

Devil take them all.

Jul 05, 2012
This 'punishment' business is out of control in the US. We have a guy doing hard time in Federal Prison for importing orchids without the proper paperwork.

Jul 06, 2012
Likely we're either rich, a wage slave or a free-rider. In either case pick your poison.

Jul 06, 2012
You are assuming that I must abide by others' decisions about myself and my belongings. Let them abide by mine!

I **encourage** tax "evasion". It is actually rational self-defense. If you want something, get together with like-minded others and do it yourself.

For instance, I wouldn't lift a finger to defend Israel.

Well, maybe *one* finger.

Jul 07, 2012
Sometimes the something you need takes the resources of a large number of people to accomplish. Like a road, or a bridge. What if you have a preponderance of people who would benefit, but who didn't want to contribute? Anarchy never built anything.

Jul 08, 2012
Ever heard of spontaneous self-organization? The entire universe has always been doing this. If people must be coerced, then you cannot explain how and why some of us get up and do things, because we choose to do them.

If everyone must be coerced, then there is no free will.

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