Nice or nasty by nature?

My latest Mind and Matter column in the Wall Street Journal:

A new study by Dirk Helbing at ETH Zurich in Switzerland and colleagues has modeled the emergence of “nice” behavior in idealized human beings. It’s done by computer, using the famous “prisoner’s dilemma” game, in which a prisoner has to decide between cooperating with a comrade to get a mutual reward or avoiding a punishment by being the first of the two to defect to the other side. The Zurich team found that so long as players in the game stay near their (modeled) parents, the birth of a nice guy predisposed to cooperate can trigger “a cascade” of generous acts.

In other words, more togetherness and physical proximity across the generations allows the development of more pro-social behavior. “The clustering of friendly agents, which promotes other-regarding preferences, is not supported when offspring move away.” They also argue that networking via social media can promote niceness, which might surprise regular users of Twitter.

This is not the first work to find mathematical evidence that there are conditions under which cooperative behavior drives out selfish behavior. The key insight of the Zurich team is that both nice “homo socialis” and nasty “homo economicus” (the selfish boogeyman who supposedly reigns in classical economics) can be promoted by evolution under particular circumstances. So long as there is little geographic mobility, clusters of networked kin and friends develop, putting an advantage on being nice.

Most evolutionists now accept that kindness might be just as ancient and innate as selfishness. But it’s also clearly conditional: People tend to cooperate with relatives and frequently encountered acquaintances, not indiscriminately.

But does commerce promote or hinder cooperative behavior? Most people assume it hinders, but economists have been arguing since before Adam Smith that markets promote good behavior as people discover the mutual advantage in exchange. “Sweet commerce,” Montesquieu called it. A virtuous circle of voluntary cooperation allows both the producers and consumers of, say, bread or electricity to be better off.

As Joe Henrich of the University of British Columbia and colleagues found in a study a few years ago, the more people in small-scale societies are exposed to modern commerce, the more generous they prove to be when faced with a test called the “ultimatum game,”­ in which participants must offer to share part of a windfall but lose it all if the recipient rejects the offer.

So the notion of “Homo economicus,” schooled by capitalism to be shortsightedly selfish, is these days something of a straw man (“Homo stramineus”?). It is found more often being beaten up in the literature of social science than being celebrated in economics.

It is futile to ask whether people are naturally cooperative or selfish. They can be either, depending on the circumstances. Dr. Helbing cites “tragedies of the commons” where open access to a common-pool resource such as a fishery tends to result in overfishing that harms everybody—a sort of extended real-world version of the prisoner’s dilemma.

Yet various economists, including the late Nobel Prize winner Elinor Ostrom, have shown that in some cases communities can and do come together to solve such tragedies, often finding a middle way between nationalizing and privatizing the threatened resource.

Likewise, the bubbles and crashes that have afflicted asset markets ever since Holland’s tulipmania in the 17th century and right up to the subprime housing bubble are also cousins of the prisoner’s dilemma. If people would only cooperate not to bid asset prices above their fundamental values, then there would not be winners and losers when prices spike and crash.

As the Nobel-winning economist Vernon Smith (now of Chapman University) and colleagues found in laboratory experiments, markets in goods for consumption promote cooperation, but markets in assets for speculation and resale produce bubbles and crashes. Once again, the difference lies in the conditions, not in the people themselves.