Book Review on Solving Social Dilemmas: Ethics, Politics, and Prosperity, by Richard D. Congleton.
Economists love blackboards. Use chalk (or markers) to construct logically consistent abstractions of the world. They call them “models”. This has drawn ridicule from both academics and the general public. However, abstractions are often tested against the real world to assess their relevance to the model. Bad things (i.e. irrelevant things) are thrown away.
In Resolving Social Dilemmas, Roger Congleton turns this perspective on its head, asking how individuals in the real world create rules and norms that sustain cooperation through trial, error, and adaptation, and how these new solutions are later viewed abstractly by economists.
To illustrate this reversal, consider a small population at the beginning of a long-term scale. Cooperation is difficult to maintain because some members of a group may always act opportunistically (cooperation can be thought of as similar to exchange or trade). Therefore, rules must be developed to govern behavior.
In some cases, continued transactional discipline (i.e., forfeiting the flow of benefits from future cooperation in favor of short-term opportunism) may be sufficient. In some cases, the development of norms and reputations serves as a complement to that discipline. These and other norms are internalized and strengthened as we derive benefits from sustained cooperation. And they are transmitted through socialization.
“Norms,” “customs,” “rules,” and other terms more familiar to anthropologists fall broadly into what economists loosely refer to as “institutions” or “governance.” (This category also includes government laws.) In everyday language, people tend to refer to behavior that results from compliance with these institutions simply as “ethical behavior.”
When the relevant groups grow to the size of a village, the cooperation dilemma remains, but its shape changes. More people means that past solutions may become less effective. Therefore, norms need to be adapted. One option is to play around with existing rules. New rules may need to be introduced. This means a long trial and error process.
As the population grows from villages to cities, the problem changes again. Improvements continue, but we must also continue to innovate. This is inevitable because each round of collective growth is made possible by successfully addressing the problem of maintaining cooperation in the previous round. Each round introduces new problems to maintain cooperation and must be solved in order to continue to grow.
“In other words, ethics build markets, markets strengthen the very ethos that supports them, and together they create prosperity and enable both to thrive.”
This is why Congleton can write that “communities whose minds tend to support market exchange, team production, specialization, innovation, and public policy, which do not hinder economic development, benefit from broader and more productive commercial networks” (p. 23). In other words, ethics build markets, markets strengthen the very ethos that underpin markets, and together they create prosperity, allowing both to prosper.
This is the simplest summary that can be made of Congleton’s solution to the social dilemma. And it is a powerful way of expressing more formally the nature of economic development and the processes that individuals follow (and intuitively understand) to produce ‘governance’ in their daily lives. Economists will benefit from reading this book because it provides a way to conceptualize questions about institutional evolution. Economic historians can derive from it possible ways to solve specific problems regarding differences between countries. Development economists can use this to understand how “big plans” imposed from above can disrupt existing complex systems of governance, and how even the most rationally devised plans enacted by the most angelic planners can make things even worse.
Even this high rating does not do this book justice. For example, the entirety of Chapters 4 and 5 can form the basis for advanced undergraduate courses such as economic history, economic development, economic philosophy, history of economic thought, and political economy. If expanded in the way that some of the appendices provided by Congleton allow, they could potentially constitute an entire section of a core course for graduate students in economics. It can also easily be adapted as a way to bridge conversations with historians and sociologists.
Chapter 6 of this book provides a simple, accessible explanation of common law as “market-based law.” Freedom Fund adherents are aware of these arguments, but their full explanations are often written in lengthy treatises such as Theodore Pournet’s A Brief History of the Common Law (a misleading title; the book runs to 828 pages), Arthur Hogue’s The Origins of the Common Law, and (more contemporary) John Hasnath’s Common Law Liberalism. However, this chapter by Congleton summarizes the entire literature in an easy-to-understand manner. More importantly, Congleton expresses these ideas in language that draws people to the discussion. Most notably, it is also accessible to economists who sometimes have difficulty connecting legal concepts to economic concepts.
The understanding that emerges from this is that common law is flexible, allows room for new rules to be more smoothly adjusted in response to changes in society (especially as in the example of changes in scale), and that the ‘customary’ part makes enforcement cheaper.
Finally, the third part of this book could easily form the core of a course in the Politics, Philosophy, and Economics (PPE) curriculum. This combines the economics discussed above with history and philosophy and provides insight into why successful processes of improvement and innovation in the ‘governance’ of social dilemmas are effective in sustaining cooperation.
For more information on these topics, see:
Some may be tempted to dismiss Congleton’s book based on the realization that Congleton argues that rich societies are simply more ethical, while poor societies are made up of less ethical people. This is not his claim, so it would be wrong. Rather, Congleton argues that particular ethical systems, discovered through trial and error, innovation, and repeated experimentation, are simply suited to solving cooperation problems and sustaining markets. He summarizes this best himself: “Some ethical systems ameliorate or resolve a wider range of dilemmas than others” and “some internalized systems of ethical and normative rules support commerce more strongly than others” (p. 430).
In this, Mr. Congleton echoes Adam Smith’s belief that prosperity is not the product of a person’s personal virtues, but the rules that govern human behavior. So Congleton builds one of the best works I’ve read in years around this one sentence.
footnote
[1] Richard D. Congleton, Solving Social Dilemmas: Ethics, Politics, and Prosperity. Oxford University Press, 2022.
[2] Theodore F. T. Plucknett, A Concise History of the Common Law. Freedom Fund, 2010.
[3] The Origins of the Common Law, by Arthur R. Hogue. Freedom Fund, 1986.
[4] John Hasnas, Common Law Liberalism: A New Theory of Libertarian Society. Oxford University Press, 2024.
[5] William Easterly, 2021. Progress through consent: Adam Smith as a development economist. Rev Austrian Econ 34, 179–201. https://doi.org/10.1007/s11138-019-00478-5
