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Comments on: Recordkeeping Alters Economic History by Promoting Reciprocity by Basu et al. (2008) Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis, October 17-18, 2008

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Comments on: Recordkeeping Alters Economic History by Promoting Reciprocity by Basu et al. (2008). Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis, October 17-18, 2008. Human Sociality. - PowerPoint PPT Presentation

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Page 1: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

Comments on:Recordkeeping Alters Economic History by Promoting Reciprocity

by Basu et al. (2008)

Shyam SunderConference on Experimental Social Sciences

Washington University, St. Louis, October 17-18, 2008

Page 2: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Human Sociality

• Vernon Smith: Rationality in Economics: Constructivist and Ecological Perspectives, puts human sociality at the heart of the ecological processes that defined what we are and how we got to be what we are.

Page 3: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Exchange

• The tendency to truck, barter and exchange, involving reciprocation, is the source of a good deal of economic efficiency.

• It is not unreasonable to argue that the “fitness” advantage arising from gains from exchange might have helped select reciprocation as an inherent trait that got hard wired into our brains through biological evolutionary selection.

Page 4: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Specialization

• A parallel process of social selection based on the same source of fitness may have encouraged specialization.

Page 5: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Institutions as Social “Hard-Wiring”

• Perhaps the brain researchers have already determined the extent to which reciprocation is hard-wired into us.

• Institutions can be thought of as the social equivalents of biological hard-wiring;

• Perhaps not quite as hard, but similar in a sense. Biological hard-wiring constrains conscious choice in ways which are pervasive and unobstrusive.

• In the social domain, institutions also define and frame our expectations, choice sets and consequences of choices we make.

Page 6: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Brain Science and Institutions in Economics

• The questions raised by Smith about human evolution bring us to the confluence of two major streams of thought:

• The recent advances in brain sciences, and • The new found enthusiasm for study of

institutions in economics as reflected in the work of Douglass North and experimental economics.

Page 7: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Evolution of Humans and Society

• A study of brain sciences and socio-economic institutions can help us understand better the nature of man and society, and how they have come about.

• In this conference we have seen both these streams addressed from different perspectives.

Page 8: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Reciprocation and Memory

• John Dickhaut et al. take us closer to the origins of our brain and our institutions.

• They show that reciprocation calls for memory, and memory facilitates reciprocation.

• This simple, and perhaps to some people ex post obvious, finding has important implications.

Page 9: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Deconstructing Exchange

• What does it take to engage in an exchange?– Objects of exchange,– Property rights to the objects,– Mechanism to enforce the property rights before

and after the exchange,– Information, memory and processing capacity in

the brain

Page 10: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Brain Capacity for Exchange

• To Assess the desirability of the objects• To Assess the desirability of the exchange• Execute the exchange.• These demands of exchange multiply rapidly with – Number of objects– Attributes of objects, – Number of parties involved in the exchange, and – Passage of time that might elapse between actions

necessary to complete the exchange.

Page 11: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Focus on Memory

• Dickhautet al. paper hints at the biological and social co-evolution that may have accompanied the development of brain, reciprocity and exchange,

• They wisely focus on one very specific and important element—the memory, and for very good reason.

Page 12: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Response to Demand for Memory Exceeding Available Capacity

• As a layman, I assume that memory is an essential function of brain.

• What happens when the gains of exchange push humans toward engaging in more, and more complex exchanges

• But they may not have had the neural equipment to handle the complexity and thus be prevented from reaping those benefits.

Page 13: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Out-of-Body Memory• Complexity of exchange could have been bounded by

memory until the fitness advantage conferred by exchanges helped expand memory over time.

• Given the generational cycle of a couple of decades, human evolution is slow, and this process would have taken a long time.

• Apparently, humans had enough brain capacity to supplement the internal memory by external devices.– Georgescu-Roegen’s theory about technology aids as

extension of human biology• If this is how it happened, to me at least, that is the

real miracle• This extension of memory is worthy of investigation in

itself for several reasons.

Page 14: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Extension is Not Trivial

• Supplementing internal memory by external devices requires additional memory (perhaps of a different kind than the constrained memory)

• It also calls for creating/utilizing other brain resources

• Making, reading, and interpreting charcoal marks on a cave wall would have called for a large array of brain resources that may or may not have existed.

Page 15: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Example of Brain Resources/Processes

• Conceptualizing/schema for external memory• Mapping internal memory to visual and hand actions• Memorizing the link between the internal memory

and external representation• Reading the external markings for interpretation and

recovery of original internal memory• Of course, the paper is not concerned with how our

brains managed to achieve all of the above (and probably much more)

Page 16: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Results

• The deals only with the link between complexity of exchange, demand for additional memory and efficiency of resulting exchanges

• In my assessment, the conclusions of the paper are well-justified, and this work points to some very interesting directions for future work.

Page 17: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Results

• Recordkeeping alters the character of reciprocal exchange

• Enables better recall of past outcomes• Promotes accurate reputation formation• Promotes better coordination of economic

activity• Reduces risk, and encourages investment

(exchange)

Page 18: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Questions

• I would very much like to see another experiment on measuring the complexity of exchange response to the availability of additional memory– It is possible that we may discover other constraints

on brain resources• While it may not be reasonable to expect

inclusion of such an experiment in the current paper, I think such an experiment would be easy to design and conduct, and will add significantly to the importance of these results by endogenizing complexity

Page 19: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Questions• The experiment in the paper focuses on the private decision making

functions of external memory devices• Indeed, many external memory devices have this private character.• However, some external memory devices have a public character,

and may serve not only the private decision making functions for the parties involved, but also the common knowledge functions associated with the dispute resolution and contract execution aspects of the exchange

• Some of the memory devices discovered in archeological record may have had such public functions (clay tokens, baked envelopes)

• Since dispute resolution and contract execution is also important for economic efficiency an attempt to disentangle the private and public functions of external memory might be worthwhile at some point

Page 20: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

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Other Questions

• I am also curious about:• Is there evidence of reciprocity in species other

than humans. • How transaction specific is any such reciprocity? • What is the role of time dimension in reciprocity?

How much time can pass between the two reciprocal acts without the right/obligation involved getting diluted significantly?

Page 21: Shyam Sunder Conference on Experimental Social Sciences Washington University, St. Louis,

Enjoyed the paper.Thank You!

[email protected]/faculty/sunder