prior probability

How does law get started? We presented and critiqued some game theory models of law and cooperation in our previous posts (June 10 and June 11). It turns out that the problem of group cooperation was first illustrated by our intellectual hero David Hume (pictured below) with this memorable example: “Two neighbours may agree to drain a meadow, which they possess in common; because it is easy for them to know each others mind; and each must perceive, that the immediate consequence of his failing in his part, is, the abandoning the whole project. But it is very difficult, and indeed impossible, that a thousand persons should agree in any such action; it being difficult for them to concert so complicated a design, and still more difficult for them to execute it; while each seeks a pretext to free himself of the trouble and expen[s]e, and would lay the whole burden on others.” (Hume’s Treatise of Human Nature, Clarendon Press (2nd edition, 1978), p. 538.) In short, getting a thousand people to drain a common meadow will be just as difficult as getting a thousand people to hire a sheriff or create a common government.

But what if, instead of draining a particular meadow at a particular time, the neighbors want to build a general meadow-draining business? If there are only two neighbors, they could form a partnership or a limited liability company or a privately-owned corporation. But this business firm solution could work even if there are a thousand neighbors! In fact, modern-day business corporations can have thousands–even millions–of shareholders. Corporations thus solve Hume’s metaphorical meadow-draining problem by separating ownership and control–the many (the shareholders) and the few (management). Now, what if, instead of creating a business to drain meadows, the neighbors created a business to produce and enforce laws? Maybe the world of big business–specifically, the legal structure of corporations–provides a clue to solving Hume’s meadow-draining problem. We will explore this ingenious solution in our next post.

Illustration of David Hume by Petra Eriksson

In my previous post I summarized a popular game theory explanation of group cooperation: collective action. Or in the words of one notable game theorist, “the players beforehand set up a contract, or hire a sheriff, or make a kind of institution whose aim it is to punish [free riders and defectors].” In other words, all we need to do is to create some type of enforcement mechanism that rewards cooperators or punishes defectors. But how? Here, I will identify two big problems with this particular theory of group cooperation:

1. The regress problem. This first problem is that such an external enforcement mechanism will itself be subject to free rider and defection problems at both the formation and operation stages of the mechanism. Like I mentioned in my previous post, there is a chicken-and-egg problem here: we need an enforcement mechanism to promote cooperation, but at the same time, we need cooperation to have a working enforcement mechanism. So, how does law get started? Take the example of hiring a sheriff. Who pays the sheriff’s salary? The sheriff himself is a public good, so from a purely theoretical perspective, the same free rider problems that bedevil the provision of ordinary public goods should also be present when people are trying ex ante to set up the enforcement mechanism.
2. The forced rider problem. The other problem with game theory models of group cooperation is a moral one: why should anyone be forced or compelled to pay for the sheriff’s salary? Yes, free riders and defectors can cause cooperation to unravel, but morally speaking, don’t people have a natural right to opt-out of collective arrangements that they don’t like or disagree with? Even if you reject natural law, how should we deal with “conscientious objectors” like Quakers and others minority groups who want to follow their own rules or establish their own separate enclaves?

Notice too that the forced rider and regress problems identified above are actually closely related. How? Because the existence of forced riders implies the possibility of conflict among competing groups! When conflicts occur between groups (not just inside them), how do we resolve such inter-group conflicts without recourse to a higher-level or meta-enforcement mechanism, i.e. without avoiding the regress problem identified above? Stated in game theory terms, even when the benefits of cooperation exceed the costs, defection might still be the best strategy so long as there are a sufficient number of suckers who are willing to pay the costs of cooperation. Could the solution reside in an emotive or Humean theory of natural law? I shall sketch such a solution in my next post.

As we have mentioned in many previous posts (see here, for example), we agree with legal philosopher John Finnis that one of the goals of law is to solve coordination problems and promote human cooperation. But one of the main weaknesses with or blind spots in Finnis’s work is that he doesn’t bother to address the following key question: how can law and cooperation actually get started? Simply put, there is a chicken-and-egg problem here: we need law to punish defectors and promote cooperation, but we need cooperation to have a legal system capable of enforcing contracts and punishing defectors. In a word, cooperation is hard.

For his part, mathematician and game theorist Karl Sigmund describes several solutions to this fundamental puzzle in this fascinating conversation. (The link includes both video and audio of the conversation, along with a complete transcript.) Among other things, Professor Sigmund describes two standard methods for promoting cooperation among two individuals in the absence of law: Humean reciprocity (“tit for tat”) in iterated or repeat interactions and reputation mechanisms (“indirect reciprocity”) in the absence of repeat interactions:

Cooperation is so obviously the secret to success of the human species, and one of the reasons why is reciprocation—tit for tat—and other strategies for sustaining cooperation in a repeated interaction between two players. If you do not have these repeated interactions, you have to look for different mechanisms to support cooperation. One of them would be indirect reciprocity. This works even if the two players meet only once provided that they can have some information about each other. In other words, it works if the players have a reputation that can be assessed by the other players. Then it’s quite obvious that you are inclined to trust someone with a good reputation and to collaborate with them versus someone who has a bad reputation.

What about when n is greater than two? In short, what about groups? In this case, one solution is for members of the group to set up institutions and enforcement mechanisms ahead of time to punish defectors:

There is a much more stable situation that occurs when the players beforehand set up a contract, or hire a sheriff, or make a kind of institution whose aim it is to punish those who eventually will free ride [i.e. defect]. This is a different thing. You set up a kind of police force beforehand. Nowadays, this happens all the time. Whenever you make a collaborative enterprise, you go first of all to a lawyer, you set up some contracts, and if you break these contracts, you are punished. But the interesting thing is that this happens also in situations that are much more elementary.

Professor Sigmund then devotes the remainder of his talk explaining how corruption can undermine cooperation and the rule of law. (For a technical summary and analysis of cooperation, check out Martin Nowak’s excellent paper: “Five rules for the evolution of cooperation.” Here is an ungated version of Nowak’s paper.) For my part, one of the things I like the most about game theory models is that they make difficult problems tractable by simplifying the world around us; for example, game theory reduces choices and actions to two ideal types: cooperate or defect. But broadly speaking, game theory approaches to law and cooperation suffer from several deficiencies. In particular, I will identify and discuss two big problems with such models in my next post.

Standard Game Theory Model of Cooperation

We have been highly critical of Zuckerberg in the past, but Peggy Noonan, an influential political pundit, takes anti-Zuckerberg “mood affiliation” bias to a whole new level in this mostly incoherent and anecdotal op-ed for The Wall Street Journal. The main problem with Peggy Noonan’s diatribe is that it focuses only on the “bad” aspects of Facebook:

Facebook’s famous sins and failings include the abuse of private data, selling space to Russian propagandists in the 2016 presidential campaign, monopolistically acquiring competitors, political mischief, and turning users into the unknowing product.

Let’s put aside the fact that Facebook has taken steps to remedy its privacy abuses, that the Russians did not sway a single vote, and that there are no barriers to entry into the social media market. As our friend and colleague Tyler Cowen, an economist and hyper-blogger with pro-business mood affiliation biases of his own, makes clear, one must also be willing to weigh the “good” aspects of Facebook, Google, and other Big Tech firms:

I would like to speak up for the tech companies, especially the big ones. They have brought human beings into closer contact with each other than ever before … mostly through social media. They also have placed so much of the world’s information at our fingertips, and more often than not it is accessible within minutes or even seconds. Whatever problems these developments may have brought in their wake, they are unparalleled achievements and arguably the greatest advances of the contemporary world.

So, what happens when competing mood affiliation biases collide? If you are a consequentialist, isn’t it obvious …?

A paternalistic attempt to make Yosemite National Park’s Half Dome rock formation safer for hikers may have paradoxically backfired. In 2010, Yosemite began to issue permits through a random lottery to visitors who wanted to scale the famed 2700-meter-high Half Dome. Park officials hoped the permit process would improve safety by limiting the number of climbers. But according to this report, the permits may have made matters worse: “When researchers analyzed search-and-rescue data on and around Half Dome from 2005 to 2015, they found no significant difference in the number of deaths and injuries after Yosemite began to issue permits. But because the permitting halved the number of visitors who hike the trail, the number of serious incidents per person effectively doubled.” (Here is a link to the full research article.) For my part, I just have one question for these researchers: permits or no permits, were the hikers allowed to carry selfie sticks?

There have been many calls to abolish the U.S. Immigration and Customs Enforcement (ICE) agency. But what if, instead of abolishing ICE, we considered a more modest political proposal? What if we just abolished E-Verify instead, a costly and ineffective program that generates significant false positives (over 80% of “illegal” workers are able to circumvent the system) and a non-trivial amount false negatives (some 64,000 legal workers per year are erroneously flagged as illegal)? Also, even if E-Verify were costless and 100% accurate, why should we tolerate this direct interference with liberty of contract, our natural right to enter into contracts with whoever (whomever?) we wish? In any case, a complete E-Verify dataset is presented below:

Check out this excellent essay by Anastasia Berg and Jon Baskin. (Hat tip: The Amazing Tyler Cowen.) This essay hit close to home, for it explores the moral amd strategic dimensions of intellectual and scholarly discourse, exposes the sheer hypocrisy of most academics and public intellectuals, and explains the relevance of the ideas of Leo Strauss to our contemporary political landscape. Here is the first paragraph of their thought-provoking essay:

Nobody shares all their private complaints with an audience, but how do we know how much to share and with whom? Certainly, in the name of various kinds of shared commitments, it seems best to hash out your differences in private: a team of magazine editors need not disclose every editorial dispute to an article’s author; a couple’s well-being is usually best served by avoiding arguments in the presence of the in-laws. But how far does the strategic logic behind these decisions extend into public intellectual life? Should we attempt to publicly air disagreements with those who are, broadly speaking, on the same “side” of a political, social or spiritual debate as we are, or should we shelter those disagreements from public view in the name of some greater good?