Who do they think we are?

New insights into human behaviour and what motivates social co-operation has vital lessons for our politics, suggests Duncan O’Leary.

All political ideas start with a view of what people are really like. Classical economics holds that we are rational beings, concerned with maximising our own happiness. Altruists reject the idea that everyone is out for themselves. Liberals believe in people’s capacity to make choices in their own interests. Paternalists contest this.

These ideas about who we are shape political projects from the start. They frame the way we understand the world and provide the assumptions on which laws are made. The economist focuses on incentives; the altruist appeals to the better angels of our nature. The Liberal opens up choices for individuals; the Paternalist seeks to protect people from themselves.

Politicians and philosophers have long recognised this essential starting point. ‘What is government itself, but the greatest of all reflections on human nature?’ wrote James Madison, America’s fourth President. ‘If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary’. The American constitution, underpinned by these ideas, is an historic attempt to constrain the darker side of human nature.

What some have tried to constrain, others have sought to harness. In Adam Smith’s famous phrase, ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner but from their regard to their own self-interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.’ This fundamental insight lay behind the victory of market economics over state socialism, two centuries after Smith’s words were first published.

Today’s politics looks set to polarise again. Across Europe Radical parties, like Podemos in Spain and Syriza in Greece, are either in office or are serious contenders for it. In the UK, Jeremy Corbyn leads a transformed Labour Party. His aim, like those of his allies across Europe, is to create a fundamentally different sort of society. As British politics gears up for the kind of debate not seen for more than two decades, it is worth dwelling on what picture our politicians have of people. Who do they think we are?

What makes this exercise intriguing is that both sides claim an optimistic view of human nature. ‘Socialists are pessimists’ argued George Osborne last year, ‘They don’t trust human instincts. They think they’re selfish. They want to suppress them with a more powerful state and more pervasive rules.’ This was more than an isolated piece of rhetoric: compassion has become a watch-word for Conservative modernisers for several years now. Perhaps the biggest criticism levelled at David Cameron’s Big Society was that it asked too much of people, not too little.

Meanwhile, Jeremy Corbyn’s remarkable rise is based on idealism not just about what government is capable of, but what people are willing to vote for. Neal Lawson, the Chair of the Left-wing pressure group Compass, wrote recently that he had voted for Corbyn because ‘Socialism has to be about believing the best in each other and having empathy.’ As the work of Nick Pecorelli, of The Campaign Company, shows, the Labour membership has shifted dramatically towards this set of values.

Are the optimists right? Can successful political projects – and governing programmes – be built on the idea that, essentially, people are good? Or should politics cleave to the idea that self-interest always wins in the end? Should Conservatives stick to free market ideas rather than toying with notions of voluntary giving and participation? Should the Left accept that it must either pitch ‘the many’ against ‘the few’, or find ways of persuading the rich that inequality is, in fact, against their interests?

Conditional co-operators

People are complex, of course. Some are naturally more altruistic, others more self-centred. Many of us are capable of being selfless on one day, or in one set of circumstances, but selfish the next. Generalisations are difficult and imperfect. But academics at the University of Nottingham have been gathering together the evidence about when and why people can be persuaded to do things for and with others. Their conclusion is that a large proportion of us can be described as ‘conditional cooperators’. We are willing to cast aside narrow self-interest if we are convinced that others will do the same.

The Nottingham academics cite a growing literature, based on experiments repeated all over the world. Two experiments in particular make the point. The first of these is the so-called Gift Exchange Game. This game involves two individuals, assigned randomly to the roles of ‘employer’ and ‘employee’. In this game, the employer is asked to make a wage offer to the employee. The employee then chooses a degree of ‘effort’ to put in. The more effort the employee decides to put in the higher the employer’s profits become – but the lower the employee’s wage falls.

In the Gift Exchange Game the rational, self-interested employee will always make minimal ‘effort’, thereby preserving as much of their wage as possible. The rational, self-interested employer should understand this and offer a low wage from the outset, preserving their own share of the money. However, wage offers and employee effort are highly correlated in the game – if employers make generous wage offers, employees respond with high levels of effort, despite this being against their own interests. The Gift Exchange Game shows how people match generosity with generosity.

A second game cited by the Nottingham researchers is the Ultimatum Game. This game involves two individuals, again assigned to roles – a ‘proposer’ and a ‘responder’. The proposer is given a fixed sum of money and asked to divide that sum between himself and the responder as he sees fit. The responder then has two choices. He can either accept the offer or reject it. If the responder accepts the offer, both parties keep the amounts allotted to them. If he rejects the offer, both sides end up with nothing.

In the Ultimatum Game the rational, self-interested responder will accept whatever they are offered, on the basis that even a small amount is better than nothing at all. The rational, self-interested proposer should understand this and therefore make a very low offer. However, on average, proposers make offers of 30 to 40 per cent of the available money and responders reject offers of below a 20 per cent share. The Ultimatum Game illustrates how we are willing to make sacrifices to punish others when we believe we are being treated unfairly.

Both these experiments provide examples of what researchers call ‘strong reciprocity’: a willingness to cooperate when others do, paired with an instinct to punish those who free ride. The Nottingham academics show how these patterns hold for more complex experiments involving groups, rather than just two individuals.

In games involving many people cooperation can be more fragile, especially over extended periods of time, but a large proportion of participants are willing to play along when others do – and punish those who free ride, even at their own cost. Behind these patterns of behaviour lies neither the altruist hailed by today’s politicians nor the rational, self-interested individual of classical economics. Instead it is ‘homo reciprocans’ – someone willing to work with others on a reciprocal basis.

Lessons for politics

These insights tell us something important about how to govern well. Political theory pays much attention to why States are needed: to provide public goods, to help pool risk, to alleviate poverty and so on. We discuss too little how States maintain public legitimacy to do these things. More often than not, it is an absence of reciprocity – perceived or real – that is the problem.

Welfare is the classic example of this, as evidenced by public concerns over ‘scroungers and ‘benefit tourism’. Such concerns are frequently dismissed as a mirage, created by politicians or the media. But the question is why these things catch the public imagination. The answer is a deeply held attachment to reciprocity. People fear free riding – and become angry when they find their own contributions entitle them to very little. No amount of fact-checking will address this: for conditional cooperators, it is not the scale of the problem that is at stake but the principle behind it. The answer must be to move towards a system which does more to link entitlements to prior contribution.

Crime is another social policy area where reciprocity plays a fundamental part. ‘Broken windows’ theory has become a guide for policing in the US, UK and around the world. Its enduring insight is that people stop cooperating when they see signals that others have done so. Litter breeds more litter. Graffiti breeds more graffiti. These small clues create the disastrous impression that social norms are no longer being observed. The point of ‘broken windows’ policing is not so much the deterrent effect on offenders; the secret lies in convincing conditional co-operators that others are playing by the rules.

Criminal justice reform requires the same insights. Detached observers make the case for a greater emphasis on prisoner rehabilitation. Some frame this as an act of compassion, others simply as ‘what works’. But crime is perhaps the ultimate example of social cooperation breaking down – and as the Nottingham academics show, people will punish free riders, even at their own cost. Most of us are pragmatists ready to sign up to rehabilitation policies if they work, but not if this comes at the expense of offenders facing punishment. Politicians determined to take rehabilitation seriously, as the Justice Secretary looks to be, must find a way to navigate this.

This deep-felt desire for reciprocity matters in the marketplace too. We know the practical value of markets – their capacity to allocate resources, their ability to generate innovation. But, as with the State, we have been too casual about when and why market economics commands public support. The political genius of markets is that they are based on reciprocity. Market exchanges are voluntary so, in theory, people only enter into transactions that benefit them. We make money by through being useful to others. But in practice this is not always the case – and it is when this sense of mutual benefit breaks down that economic populism gains ground.

The financial sector suffers from this problem the most. The bailouts following the financial crisis were the antithesis of reciprocity. High private rewards were followed by socialised losses, followed by high private rewards again. As the economist Andrew Lilico wrote recently, the effect of this was to persuade many people that capitalism is designed to ‘keep the foolish or unlucky-rich rich at the expense of everyone else’. As Lilico writes, the political effect of the bailouts was to reinvigorate anti-capitalist arguments. Perhaps the biggest priority in British politics should be preventing the need for them again in the future.

Another reciprocity deficit can be found in consumer markets where companies have too much power, either because buyers have too little information, or sellers have too little competition. In either scenario, the risk is that companies make money at the expense of consumers, rather than in service to them. This problem expresses itself in public concerns (and newspaper campaigns) over ‘rip-offs’. At the time of writing, the Competition and Markets Authority is investigating the UK’s energy and retail banking markets, in addition to an Ofcom-led review of the Communication Market. This suggests a problem we have yet to solve. Politicians and their advisers on the Right and Left are right to worry.

Public disquiet over high and low pay can also be understood through this lens. It is now the case that Chief Executives of Britain’s biggest listed companies are paid 183 times more than average employee. Until last month, there were Premiership football clubs paying their stars hundreds of thousands of pounds each week, but unwilling to pay cooks and cleaners a living wage of £7.85 an hour. The problem is that relationships in many workplaces seem increasingly one-sided – much like the offers rejected in the Ultimatum Game. Populist politics re-emerges when enough conditional cooperators decide that they are no longer willing to accept this. ‘Predistribution’ may have failed as a political slogan, but there is something important in it.

Conclusion

The lesson from all this is not that compassion is redundant, or that self-interest can be wished away. The former is needed to solve some of society’s most pressing concerns; the latter must be contained and harnessed as Madison and Smith understood. But it is reciprocity that is too often overlooked as the ingredient that binds people together within institutions and in wider society.

It is an idea that traverses traditional Left and Right boundaries, challenging both in the process. It asks the Left to recognise that ‘fairness’ is a nuanced concept for most people, which involves notions of contribution and desert. People can be deeply compassionate, but do not want governments that promise to do everything for people. Similarly, it asks the Right to be vigilant about whether markets are serving the public interest – and to accept that when either side gains too much power in an exchange, the promise of reciprocity is lost.

Most of all, this emerging body of work requires politicians who are neither dreamers nor cynics, but instead have a more rounded picture of us all in their minds when they form ideas and create laws. That picture should be of homo reciprocans – or someone who lives by a fairly simple rule: I will if you will.