ABSTRACT: Overexploitation of renewable resources today has a high cost on the welfare of future generations. Unlike in other public goods games, however, future generations cannot reciprocate actions made today. What mechanisms can maintain cooperation with the future? To answer this question, we devise a new experimental paradigm, the ‘Intergenerational Goods Game’. A line-up of successive groups (generations) can each either extract a resource to exhaustion or leave something for the next group. Exhausting the resource maximizes the payoff for the present generation, but leaves all future generations empty-handed. Here we show that the resource is almost always destroyed if extraction decisions are made individually. This failure to cooperate with the future is driven primarily by a minority of individuals who extract far more than what is sustainable. In contrast, when extractions are democratically decided by vote, the resource is consistently sustained. Voting is effective for two reasons. First, it allows a majority of cooperators to restrain defectors. Second, it reassures conditional cooperators that their efforts are not futile. Voting, however, only promotes sustainability if it is binding for all involved. Our results have implications for policy interventions designed to sustain intergenerational public goods.
The key insight of this experiment is that a system based on simple democratic rules can overcome the tendency of small groups of people to rationally over exploit resources in the current generation leading to resource collapse. Given that there will always be some probability that there will be individuals who rationally have no regard for future generations, resource collapse is (almost) certain to occur. However, the authors show that simple democratic voting rules binding all participants are effective in restraining this rational, generationally selfish, behaviour. Consequently, resources are sustained over multiple generations of participants.
This paper dove-tails with a two of key areas related to intergenerational investment & the role of government.
The first is Hamilton’s (1964) work on with how individuals maximise ‘inclusive fitness’ based on intergenerational genetic relatedness. Any altruistic behaviour that either increases, or at worst maintains, the reproductive potential of future offspring will become the dominant trait so long as exploitive free-loading behaviour can be held in check. That is, the behaviour is an evolutionary stable strategy (ESS). This paper provides an elegant simple heuristic (rule) – majority voting – that achieves this ESS outcome. Critically, this simple behavioural heuristic exists in real decision making settings and not just in theoretical models.
Secondly, the experimental results fit very nicely with David Colander & Roland Kuper’s work on the application of complexity theory to public policy – ‘Complexity and the art of public policy‘. They view the primary role of government as promoting positive social norms, “setting the rules and tone of the social game” as opposed to a centralist role in directly allocating resources. They also highlight the need for markets to operate under a set of social rules in order to function optimally. Hauser et al.’s experiment illustrates the benefits of matching simple social rules for coordination, ‘regulation’, and leaving the market to do the actual coordination of the resources. In this experiment we see a simple rule (heuristic) being applied, majority voting, leading to a socially desirable outcome of intergenerational equity. Importantly, this rule is not judgemental about what the outcomes should be. There is no government in this game that says that ‘this much needs to be allocated to future generations’. The government simply sets the rules for coordination. It is the participants themselves, you could say the ‘market’, who then behave in a manner that determines the preferred intergenerational outcomes.
Also, this interaction between simple behavioural heuristics and economic complexity fits within the ‘bounded rationality’ framework of Herbert Simon (1964) and Gerd Gigerenzer & Daniel Goldstein’s (1996) work on the power of simple heuristics in decision making under uncertainty.
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Hamilton, W. D. (1964). The genetical evolution of social behaviour. Journal of theoretical biology, 7(1), 1-16.
Simon, H. A. (1962). The architecture of complexity. Proceedings of the American philosophical society, 106(6), 467-482.
Gigerenzer, G & Goldstein, DG 1996, ‘Reasoning the fast and frugal way: models of bounded rationality’, Psychological review, 103(4), 650.
The misBehaving Economist 