From informal tribal affairs to formal democratic institutions

Vlad Tarko

Center for Institutional Analysis and Development,Eleutheria Foundation, Bucharest

   

Exchanges

Two people: A and BTwo products or services: x and y

A[x] & B[y] A[y] & B[x]

   

Exchanges

Two people: A and BTwo products or services: x and y

A[x(t1)] & B[y(t

1)] A[y(t

2)] & B[x(t

2)]

   

Exchanges

Two people: A and BTwo products or services: x and y

A[x(t1)] & B[y(t

1)] A[y(t

2)] & B[x(t

2)]

Why does the exchange happen?

A[y(t1)] > A[x(t

1)]

B[x(t1)] > B[y(t

1)]

   

Exchanges

Two people: A and BTwo products or services: x and y

A[x(t1)] & B[y(t

1)] A[y(t

2)] & B[x(t

2)]

Why does the exchange happen?

A[y(t1)] > A[x(t

1)]

B[x(t1)] > B[y(t

1)]

The possibility of error:

A[y(t2)] < A[x(t

1)] < A[y(t

1)]

B[x(t2)] < B[y(t

1)] < B[x(t

1)]

   

A and B are total strangers

Example:

x = a service A does to By = payment A receives for service x

The exchange:

A[x] & B[y] A[y] & B[x]

   

A and B are total strangers

Example:

x = a service A does to By = payment A receives for service x

The exchange:

A[x] & B[y] A[y] & B[x]

The method of payment:1. after

2. in advance3. mixed

   

A and B are total strangers

Example:

x = a service A does to By = payment A receives for service x

What the two people would do rationaly:

1. A[x] & B[y] A[ ] & B[x, y]

2. A[x] & B[y] A[x, y] & B[ ]

3.i. A[x] & B[y] A[y0] & B[x, y – y

0]

3.ii. A[x] & B[y] A[x, y0] & B[y – y

0]

   

A and B are total strangers

The magic of aggression (believable threat):

1. A[x] & B[y] A[ ] & B[x, y] B gets beaten

2. A[x] & B[y] A[x, y] & B[ ] A gets beaten

   

A and B are total strangers

The magic of aggression (believable threat):

1. A[x] & B[y] A[ ] & B[x, y] B gets beaten

2. A[x] & B[y] A[x, y] & B[ ] A gets beaten

The exchange happens in both cases...

   

The other use of aggression

Forcing someone to accept something s/he doesn't really want:

A[x] & B[y] A[y] & B[x]

A benefits: A[y] > A[x]B does not: B[x] < B[y]

x = suckers' payoffrole = lowers the threat level A needs to

deliver

   

This is how governments work!

Forcing someone to accept something s/he doesn't really want:

A[x] & B[y] A[y] & B[x]

A benefits: A[y] > A[x]B does not: B[x] < B[y]

x = a public „service”y = tax money

More authoritarian the state, poorer the services.

   

Inside a small community

Primitive tribes:

groups of 100-200 hunter-gatherers

Exchange facilitators, besides aggression:

- family ties

- reciprocity

- indirect reciprocity (reputation)

   

The phenomenon of trust

Due to the exchange facilitators the default attitude is changed:

Mutual distrust Mutual trust

Defections are dealt with- gossip diminished reputation

- exile, in extreme cases

Social pressure to conform

   

Voluntary exchanges

The concept of „voluntary exchage” is a consequence of the phenomenon of trust!

Prior to that you cannot distinguish:

- aggression as an exchange facilitator

from

- aggression as raw power used to trumple over other people's wishes

   

Psychological adaptations to social life

Reciprocal altruism the idea of fairness

Reputation & gossip information asymmetries are useless

those who withhold information are anti-social

Repeated interactions the phenomenon of trust

Aggression-based interactions with people from other tribes xenophobia

Insidethetribe

   

Inside a small community

Internal exchange facilitators:

- family ties

- reciprocity

- indirect reciprocity (reputation)

Relation with the outsiders:

- aggression-based.

This is all there was for more than 90% of our history!

   

The spread of Homo Sapiens

   

Here comes agriculture!

   

Consequences of agriculture

Poorer quality of food, but in larger quantities.

Food surpluses specialized clases of non-farmers:

- ruling class, - armies, - priests,

- manufacturers etc.

Living with farm animals diseases

   

Recent history in a nutshell:

Agriculture-based societies wiped out hunter-gather societies.

- Better guns and technology- Nastier germs - Standing armies

- Centralized governments

   

The origin of the state

The chief has a number of aids (friends and family) who:

- collect taxes- settle internal disputes

- organize engagement with other tribes (trade/war)

- organize public works

As the community got bigger the divizion of labor whithin government

the first state institutions formized rules of conduct

(after a long time) free entry into government

   

Problems with large communities

Partially identified by Jarod Diamond:

1. Solving and preventing conflicts between individuals

2. Decision making about public issues (the tragedy of the commons)

3. The barter system is no longer workable money missunderstanding money: „asking for interest is evil” (fairness) „the middle men are evil” (information assymetry) „inflation can make you rich” (more is better)

4. Large population densities insufficient resources

   

How tribal mentality solves them:

The magic solution: Centralized Authoritarian Control everything is owned by a small ruling class the ruling class itself is similar to a primitive tribe

1. Imposing a single public morality / religion2. Individuals obey the ruler's orders3. Redistributive practices (charity work)4. Imperialism and mercantilism

   

Modern solution:

The magic concept:Private Property Rights

(owning something no longer means that you are personally capable of defending it)

1. Rule of law2. Representative democracy

3. Free markets4. Free trade

   

The rule of law

Social function:

Creating trust between strangers

   

The rule of law

Social function:

Creating trust between strangers

Dilemmas:

How far can/may formal law diverge from informal social practices?

How does formal law evolve?

   

French law VS. American law

French law: the law is a clearly defined, so it is easier to defend yourself in court

American law: the formal law is closer to informal practices

French law: social issues are too complex for utilitarian analyses

American law: muddleing the difference between morality and legality

   

Legal abuse

The over-use of legislation when informal solutions are possible

The problem of the commons:Autocratic solutions Democratic/Capitalist

solutions Are they really working?

What can we learn from this transition?

   

Modern solution: End of history?

The magic concept:Private Property Rights

(owning something no longer means that you are personally capable of defending it)

1. Rule of law

2. Representative democracy Corruption & Paternalism

3. Free markets Conflict with the felling of fairness

4. Free trade