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Indirect Reciprocity— Power of Reputation

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The moment there is suspicion about a person’s motives, everything he does becomes tainted.

—Mohandas Gandhi

“Give and it shall be given unto you.” This oft-quoted line from Luke’s Gospel story of Jesus’ birth, ministry, and resurrection seems to be just another example of direct reciprocity, which I described in the last chapter. But take a moment to think about this phrase and you will see that there is a crucial difference: it is not entirely clear who is doing the giving in response to your act of generosity. Perhaps it is a family member, friend, or workmate. But it could be a stranger too, or indeed several strangers.

Many people might interpret the quote as meaning that, if you are generous, a reward is promised in a subsequent world, a paradise or heaven. But my favorite interpretation is that the reward comes to you in the here and now. Kindness will elicit kindness. In this way, circles of humanity, tolerance, and understanding can loop through and around our society. Either way, it is a powerful form of cooperation, and its implications are huge, shaping how we behave, how we communicate, and how we think.

Even two millennia ago, in Luke’s time, one can see that this idea of “what goes around comes around” was already commonplace, certainly among the authors of the Gospels. Mark 4:24 says: “And he said unto them, Take heed what ye hear: with what measure ye mete, it shall be measured to you: and unto you that hear shall more be given.” Matthew 7:2 puts it another way: “For with what judgment ye judge, ye shall be judged: and with what measure ye mete, it shall be measured to you again.” What is remarkable is that all kinds of fascinating consequences spin out of this perspective.

In a small group, say a village, what we call indirect reciprocity bestows tremendous advantages, by allowing me to benefit from the experience that others in our clan had when dealing with you. (“Ugg has always been fair when it comes to trading tools for food. But Igg can’t be trusted.”) When dealing with you, I take into account more than just our dealings with each other.

While direct reciprocity relies on your own experience of another person, indirect reciprocity also takes into account the experience of other people. Mathematicians could say that indirect reciprocity is a broader category that includes direct reciprocity, but the two mechanisms are analyzed in quite different ways: to dissect the direct form we need to look at repeated games, as we did in the last chapter. To understand the indirect form we need to recognize the power of reputation.

Exploring the indirect form of reciprocity is important because it is critical for society. Direct reciprocity—“I’ll scratch your back and you scratch mine”—operates well within small groups of people, or in villages where there is a tight-knit community where it would be hard to get away with cheating one another. In small societies, indirect reciprocity is also at work, as people create, observe, and report the soap opera of everyday life. But by the time of Christ, Eurasia’s middle latitudes were straddled by the Roman Empire, the Parthian Empire, the Kushan Empire of Central Asia and Northern India, and the Han Empire of China and Korea. To extend and thrive, these sprawling societies had to depend on more than just direct reciprocity.

Societies could more easily evolve to become larger, more complex, and interconnected if their citizens depended on economic exchanges that relied on indirect reciprocity. Today, this is central to the way we conduct our affairs and cooperate. With the help of gossip, chat, and banter we are able to gauge the reputation of other people, sizing them up, or marking them down, to decide how to deal with them. This sheds light on both the proliferation of charity and of glossy celebrity gossip magazines.

Thanks to the power of reputation, we think nothing of paying one stranger for a gift and then waiting to receive delivery from another stranger, thanks also to the efforts of various other people whom we have never met and will never meet—from the person who packs our gift to the one who checks our credit rating. In our vast society it is a case of: “I scratch your back and someone else will scratch mine.” We all depend on third parties to ensure that those who scratch backs will have theirs scratched eventually.

Under the influence of indirect reciprocity, our society is not only larger than ever but also more intricate. The increasing size of modern communities can now support a greater subdivision of physical and cognitive labor. People can specialize when networks of indirect reciprocity enable a person to establish a reputation for being skilled at a particular job. Thanks to the power of reputation, great collections of mutually dependent people in a society can now sustain individuals who are specialized to an extraordinary degree, so that some of its denizens are able to spend much of their time thinking about how to capture the quintessence of cooperation in mathematical terms while others are paid to think about how to express mathematical terms about cooperation in plain English. It’s amazing.

This link between the size of a settlement and the specialization of its inhabitants was recorded in ancient times. Xenophon, an Athenian gentleman soldier, wrote in the fourth century BC that the bigger a settlement was, the more finely divided its labor: “In a small city the same man must make beds and chairs and ploughs and tables, and often build houses as well; and indeed he will be only too glad if he can find enough employers in all trades to keep him. Now it is impossible that a single man working at a dozen crafts can do them all well; but in the great cities, owing to the wide demand for each particular thing, a single craft will suffice for a means of livelihood, and often enough even a single department of that; there are shoe-makers who will only make sandals for men and others only for women. Or one artisan will get his living merely by stitching shoes, another by cutting them out, a third by shaping the upper leathers, and a fourth will do nothing but fit the parts together.”

SuperCooperators

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