Institutions explain humans’ exceptional levels of cooperation. Yet institutions are at the mercy of the very problem they are designed to solve. They are themselves cooperative enterprises, so to say that institutions stabilize cooperation just begs the question: what stabilizes institutions? Here, we use a mathematical model to show that reputation can sustain institutions without such a second-order problem. Our premise is that cooperative dilemmas vary in difficulty. Some are easy: they can be solved by reputation alone because cooperation is cheap, behaviors are observable, or interactions occur within small groups of kith and kin. Others are hard: they cannot be solved by reputation alone. Humans need not tackle hard cooperation problems head on. Instead, they can design an institution, which (a) is based on an easy cooperation dilemma, and (b) generates enough new incentives to solve the initial hard cooperation problem. Our model leads us to view institutions as technologies that humans have invented and gradually refined to build the most mutually beneficial social organizations that can be sustained by reputation alone. Just as a pulley system helps lift heavy loads with minimal effort, institutions maximize the potential of limited reputational incentives, helping humans achieve extended levels of cooperation.
Lie-Panis, J., Fitouchi, L., Baumard, N., & André, J. (2023, July 13). A model of endogenous institution formation through limited reputational incentives. https://doi.org/10.31234/osf.io/uftzb
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