Evolution, Social Cost, and Ideas to Change the World.

Over at Org Theory, David Stark has an interesting piece on game theory and sociology that is self-recommending.  One of the interesting observations in the post in the first paragraph:

Some years ago, when they were little kids, my children developed a hybrid game.They’d taken their Monopoly board over to a friend’s house.  They’d remembered to bring back the board, but they’d forgotten the houses and hotels.  What to do?  So, they started to use Lego building blocks in place of the houses and hotels.  But, with the Lego pieces offering more affordances, they immediately began to construct ever more elaborate structures.  Even when the Monopoly pieces were returned, the Legos were much preferred and they played it again and again that year while they were first-graders in Budapest. Was it Monopoly? Was it Legos?  It was “Legopoly.”  Over time the rules evolved away from bankrupting one’s opponents and toward attracting customers to the plastic skyscrapers that towered over the Monopoly plain. [emphasis mine]

While this is merely a story to illustrate a point I do think there is significant amount of game theory and experimental economics work with data to back it up (see Wilson, Kimbrough, and Smith’s “Exchange, Theft, and the Social Formation of Property” for experimental).  This story illustrates quite well the possibility of what Hayek called the “spontaneous evolution” of the “rules of the game.”  When there was a change in the way of doing things, that is, when the top-down rules could no longer be followed, the children took matters into their own hands, altering the rules in a way that suited their needs.  Through this evolution came about a less aggressive game.  The game changed from trying to harm your opponent via bankrupting them to a game of cooperation and creating products that attracted others.

However, this is also a quite simplistic view of the world. In his seminal work, “The Problem of Social Cost,” Coase observed that in a world of zero, or near zero, transaction costs, it is easy for people to come to cooperative agreements and that in the real world, a world of transaction costs, it may be more difficult to get people to work together. In the story observed above, there indeed were little barriers to facilitate cooperative, innovative behavior. The only thing that existed was the incentives, that is, the probability of making themselves better off in the game.  With a probability there is also risk that it could fail.

I sometimes feel that there are not enough libertarians who understand this.  They possess utopian, or near utopian, fantasies of the world being perfect and without transaction costs.  Those who believe in liberty tend to talk past people with genuine concerns and who believe there are places in which the state has a legitimate role in providing a social safety net or protecting society from others’ actions.  By no means am I advocating for state intervention, but we must see the big picture if we want to foster the ideas we hope will change the world.

Cross Posted at Rational Conduct.


One thought on “Evolution, Social Cost, and Ideas to Change the World.

  1. Pingback: evolution, social cost, and ideas to change the world. « rational conduct

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