Thursday, December 20, 2012

Bumhug! Reciprocity, Presents and SPNE by IESDA.

It's not always easy to talk about trust and reciprocity. Many standard assumptions about them assume a rubber-and-glue relationship: your trust bounces off my reciprocity and sticks to you. That is, if I trust you and you prove trustworthy, then I'll trust you more next time. Similarly, if I distrust you and you reciprocate in kind, I will continue to distrust you in the future. Or so goes the assumption. Weirdly, many experiments find glaring exceptions to these predictions. Weirder still, anomalous results are only seldom presented as such. They're usually found in footnotes or an appendix. If you ask me, the apparent unruliness of reciprocity in lab settings is one of the most remarkable discoveries on experimental economics since Berg, Dickhaut and McCabe ran the first trust games in 1995.

If, as I secretly suspect and as the experimental results sort of hint at, trust and reciprocity are more orthogonal than they seem at first blush, and it's true that a prosperous anonymous, impersonal economy needs an admixture of both, then we should expect to find institutions that bolster both.

Gift-giving on holidays encourages reciprocity. The Dub-MOE doesn't mention it in his famous Forbes article, but perhaps the reason the institution of regularly giving in-kind gifts persists is that this institution exists as a bulwark against alienation.

Gift-giving might not be individually euvoluntary: I am softly coerced by my need to maintain good relationships with loved ones to buy them more or less thoughtful presents on Christmas and birthdays. Individually euvoluntary or not, gifts are almost definitely meta-euvoluntary: I strongly prefer to live and conduct my affairs in a society with high levels of reciprocity and if the price for that is that I have to brave the thicket of humanity in a Target in December, that's a cheap price to pay.


  1. To the tune of the Fugee's hit: "Coercing me softly with his mores, coercing me softly... with his mores. Forcing my choice with his mores, coercing me softly."

  2. It's always Fugees and Funyuns, isn't it?

  3. Re: bulwark against alienation.

    The nice thing about getting gifts is when someone gets you something that you actually did want; not only do you have satisfied preferences, but you know that someone else knows your preferences. This kind of intimacy is heartwarming and productive beyond the utility gained by the item. That's the "thought" that counts: they're thinking about you, and often.

    The economic problem comes when you either assume reclusive agency and entirely discount the value of habitual sympathy, or you try to apply the sympathetic model where the preferences of the recipient are not known by the giver. Constant returns dismisses the usefulness of gifting by construction.

    That's where Carden misses: food banks may represent a sympathetic match-maker, where the unpracticed sympathy of the giver is coordinated to meet the preferences of the recipient. Charitable organizations are a moral-market mechanism to deal with sympathy coordination problems. So the one person is allergic to corn. So what? The organization will give them pinto beans from someone else, and the creamed corn will go to someone who loves corn pudding.

    If you're going around with a ruler measuring utility trade-offs of gifts excluding sympathetic gains, it's little wonder you'll conclude the problem is poorly-channeled generosity. Perhaps the problem is instead that we suffer from a loss of ability to recognize others' preferences, and substitute a more expensive gift when we don't know what the right gift would be; the gift-giving institution evolved to display sympathy runs into problems when you remove the sympathy.


    Incidentally, the inscription above the Art column in the Library of Congress main reading room is, "As one lamp lights another nor grows less, so nobleness enkindleth nobleness." That's from 1718. Science has been dismissing this increasing returns stuff that the poets knew about 300 years ago. Shame on us, eh?


Do you have suggestions on where we could find more examples of this phenomenon?