Social Cooperation Even In Unfavorable Circumstances -- what does it teach us?

|Peter Boettke|

Social cooperation under the division of labor is the central theme of economics even if it isn't always stated precisely that way.  This theme permeates economics from the beginning of the formation of the discipline as a systemic field of study --- consider Adam Smith's declaration that "The greatest improvement in the productive powers of labour, and the greatest part of skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour"; or his discussion of "the butcher, baker and brewer" or the pin-factory; and consider his extended discussion of the provision of a common-woolen coat:

Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation.

The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production.

How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! how much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world! What a variety of labour too is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith, must all of them join their different arts in order to produce them….

[I]f we examine, I say, all these things, and consider what a variety of labour is employed about each of them, we shall be sensible that without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to what we very falsely imagine, the easy and simple manner in which he is commonly accommodated…

Social cooperation which yields productive specialization and is guided by free exchange even among anonymous and distant (geographically and even socially) actors is among the central mysteries that economic analysis is equipped to unlock.  Such coordination of economic activities through time is a puzzle, the role of economic self-interest within a framework of private property and freedom of contract, and the guiding role of relative prices and profit-and-loss accounting provide the solution to that puzzle.

Note here in the way I am settling up the puzzle, it does not have an obvious easy solution --- it is complex, and because it is complex it is complicated.  We learn more about the power of the price system to guide economic activity to realize the gains from trade and gains from innovation the more puzzling the socially cooperative outcome is.  Understanding the division of labor in a household, or on a farm, is important to grasp, but the cooperation and coordination that occurs seems to be a product of astute management and leadership.  But that collapses our understanding of social order to that of an organization.  Social order, however, is decidely not that order we see in a well managed organization.  We want to explore social cooperation without command, not only command directed order.

Thus, for our understanding of social order to be sharpened we must be willing to tackle situations where both social and geographic distance would seem to present an insurmountable puzzle.  How could peoples so far apart, who speak different languages, believe in different gods, distrust strangers, ever come to cooperate with one another to realize the benefits of productive specialization and mutually beneficial exchange?

To get at this cooperation among strangers, our PPE research group at George Mason University has been studying for the past 20 years social cooperation in unfavorable circumstances --- Soviet black markets, post-communist transition, extra-legal enforcement in underground economies, the emergence of self-regulation in financial markets, less developed economies, failed and weak states, after war reconstructions, post-atrocity justice, post-disaster recovery, mafia and organized crime, evolution of currency in war torn regions, pirates, and prison gangs.  The questions that unite all these projects relate back to the central mystery of social cooperation -- how do individuals turn situations of conflict into opportunities for cooperation through productive specialization and mutually beneficial exchange?  How do they stumble on the rules that will enable them to live better together than apart?  By studying situations where it is least likely for individuals to solve these problems, yet we see that empirically they have in fact solved these problems to a considerable extent we learn how robust institutional solutions to the social dilemma are in fact.  

Theory and history in the modern political economy of everyday life.  Social cooperation without command is not limited to situations characterized by homogeneous actors in small group settings with low discount rates.  Cooperation without command is possible even with heterogenous actors in large group settings with high discount rates.  Consider the following documentary of the social order of San Quentin Prison in CA.

 

The situation isn't pretty, but despite the ethnic divides and the agent characteristics, social order rather than social chaos rules the political economy of everyday life.  In many ways, in a strict interpretation of the theory of self-regulation, the cooperative outcome should not emerge.  But instead, we see that the possibility of "ordered anarchy" is more wide spread than the strict interpretation of the theory of self-regulation would have led us to believe.

King's College Professor David Skarbek's brilliant new book, The Social Order of the Underworld provides a rich analytical and historical discussion of how this social oder within prison populations emerge.  His first paper on this was written in my constitutional political economy class ... "Putting the 'Con' Into Constitutions," JLEO, 26 (2) 2010.  Since that time, David has devled deeper and deeper into the underworld of prison gangs and prison life to explicate the mechanisms that produce "honor among thieves" (well not really, but somewhat compared to the imagined alternatives).

The great social thinker Thomas Schelling captures the essence of David's contribution to political economy:

This is a fascinating study of what the title suggests. It is also a remarkable study of a "natural experiment" in the evolution of government. Put a couple of thousand men, not of the nicest kind, into close confinement with limited communication facilities and little government, and see what happens. What happens is government, based largely on ethnic gangs, with hierarchy, rules, and sometimes written constitutions. The basic problem to be solved is the management of the market for drugs, and solving that leads to genuine institutions. A great read.

David Skarbek has made a major contribution to our understanding of the robustness of Smithian solutions to Hobbesian dilemmas.  Just as R. A. Radford helped a generation of economic thinkers understand the power of invisible-hand explanations through his analysis of WWII POW camp, Skarbek's work will enable readers to get a glimpse of the amazing ability of individuals and groups of individuals to engage in collective action to discover rules that will enable them to live better together, and in doing so strengthen our understanding of the self-governing capacity of human beings.

Brilliant book, meticulously researched, well argued, and clearly written.  Order now for you and your students edification and pure pleasure in reading well written and well done social science.

Comments

[Brad]

Unless the book is very different than the Putting the Con in paper, I have a hard time seeing this as cooperation without command or a Smithian solution to a Hobbesian problem. In return for protection, prison gang members appear to give up much of their liberty, including the liberty to change their minds about membership. Because our government does not protect their life, liberty and property once they are in prison, they create their own government. Because the Mexican Mafia did not provide effective protection there was an opportunity for Nuestra Familia to create a rival government. Its organizers create rules that established a more effective government. These governments provide some security of property rights and facilitate voluntary transactions, drugs for money, but the creation of the government sounds like pure Hobbes to me. And, ultimately, they rely upon the threat of force, which they claim the sole legitimate right to use. The economics of gangs is certainly interesting, and I look forward to reading Skarbek's book, but I don't seem to be seeing the same thing in the story that you do.

[Peter Boettke]

Brad,

I would argue that private governance is a slightly different beast than public government. This is about the contracting of governance even in situations where we should expect such contracts to be very difficult to conclude.

As I said, it isn't pretty, but it also didn't require an external (3rd party) enforcer. And what is interesting in the documentary is the discussion about how inter-group cooperation is reached. Again not pretty, and not without some very real ugliness, but not non-existent as theory might predict given the circumstances.

Order without command is indeed possible.

BTW, David's book is very much more developed from that original JLEO paper --- please do give it a serious look. And judge on its own merits, not necessarily my interpretation of the project.

Pete

[Daniel Kuehn]

I echo a lot of Brad's thoughts here but draw somewhat different conclusions from it. I don't think the mistake is in identifying this as Smithian per se, it's in identifying it as "anarchy". This is how government (as in the state) as a specific form of governance emerges. Thankfully it's often prettier than prison gang institution (though not always!). It's precisely an understanding of the emergence of government as a part of an unplanned social order that should lead us to question some of the more simple-minded dialectics associated with concepts like anarchy.