Instincts and institutions: the rise of the market

Abstract

How did cooperation emerge in large-scale, fluid societies? Standard theories based on direct and indirect reciprocity between self-regarding agents cannot explain the high level of impersonal exchange observed in developed market economies. Drawing upon recent research from across the behavioral sciences, we attribute the emergence of cooperation in early trade to an evolved characteristic of human psychology which makes revenge sweet: people are willing to pay a price to punish those who betray their trust. Once cooperative expectations became fixed, institutions such as the law merchant and ethnic trading networks, as well as certain 'bourgeois virtues,' helped sustain and extend trade during the Medieval period. Our argument continues the tradition begun by F.A. Hayek in The Sensory Order (1952), by providing an integrated explanation for the rise of the market based upon the coevolution of human psychology, culture and institutions. In our conclusion we revisit Hayek's (Hayek 1976, 1978 analysis of the conflict between our instincts and the institutions that have created the market order.

4. Social Groups and Adapted Minds

“…Institutions and Human Nature Efficiency is here strictly understood with reference to their power to influence behavior and not whether the resulting behavior is optimal or rational. In fact, given that our evolved cognitive systems evolved in ancestral environments, institutions that seem 'natural' to the human mind might often be ill-suited to solve the problems of modern-day mass society (Carvalho & Koyama, 2010).…”

The naturalness of (many) social institutions: evolved cognition as their foundation

“…In fact, given that our evolved cognitive systems evolved in ancestral environments, institutions that seem 'natural' to the human mind might often be ill-suited to solve the problems of modern-day mass society (see also Carvalho & Koyama, 2010). Efficiency is here strictly understood with reference to their power to influence behavior and not whether the resulting behavior is optimal or rational.…”

Το Πρόβλημα Της Αποτίμησης Των Θεσμικών Διαρρυθμίσεων

“…Κομβικό ρόλο για την επιτυχή συντονιστική δράση των μηχανισμών της αυθόρμητης τάξης, αλλά και ευρύτερα για την επωφελή -ατομικά και συλλογικά -λειτουργία του ανταγωνισμού και των υπολοίπων εξελικτικών μηχανισμών, έχει το πλαίσιο κανόνων που διέπει αυτές τις διαδικασίες , Langlois 1992, Lavoie 1994b). Οι κανόνες προσδιορίζουν σε μεγάλο βαθμό το εύρος των προσδοκιών που αναπτύσσουν τα άτομα και της συνεπακόλουθης δράσης τους (Horwitz 1998, Loasby 1999, Carvahlo & Koyama 2010,Rizzello 2002, Wenzel 2010.…”