THE MISCONCEPTION: We could create a system with no regulations where
everyone would contribute to the good of society, everyone would benefit, and
everyone would be happy.
THE TRUTH: Without some form of regulation, slackers and cheaters will
crash economic systems because people don’t want to feel like suckers.
Before you hear about the public goods game, you need to understand the tragedy of the commons. The idea comes from a 1968 essay by geologist Garrett Hardin that suggested you aren’t very good at sharing
Imagine a giant lake filled with fish. You and three others are the only people who know about it. You all agree to take just as many fish from the lake as you need to eat. As long as everyone takes just what he or she needs, the lake will stay full of fish.
One day, you happen to notice one of the others has started taking more than he or she needs and is selling the extra fish in a nearby town. Eventually that person has a better fishing rod than you.
What do you do?
If you start overfishing too, you will also be able to get a better rod, maybe even a boat. Maybe you could partner up against the cheater. Maybe everyone will just start taking as many fish as desired. Maybe you could just tell the world about the lake. All of these scenarios will probably lead to the ruin of the common good. If you do nothing, the lake will still be able to support you and the other two, but the cheater wins.
Anger over unfair situations is something you can’t help but feel.
In situations like the imaginary lake above, in an effort not to fall behind, everyone loses. A big holiday meal, for example, can become a zero-sum game if everyone piles a plate, but if everyone takes only what he or she needs, everyone wins. The tragedy of taking from a common good is over time the common good will be depleted out of just a tiny amount of greed. One misguided exploiter can crash the system.
Greed is contagious.
So what about a public good, a thing which everyone contributes to instead of takes from? It seems the same is true. Cheaters can ruin the system, not by themselves, but because the infectious nature of their gluttony is spread as people catch on to being shortchanged. Unfortunately, research into human behavior shows you are not so smart when it comes to contributing to the public good.
The public goods game works like this:
A group of people sits around a table, and each person is given a few dollars. The group is told they can put as much money as they want in the community pot. An experimenter then doubles the pot, and everyone then gets an equal portion back.
If it’s ten people and everyone gets $2, and everyone puts in that money, the pot would be $20. It gets doubled to $40 and divided by ten. Everyone gets back $4. The game proceeds in rounds, and you would think everyone would just put the maximum amount in the pot each time—but they don’t. Someone usually gets the gist of the game and realizes that one can put in very little, or nothing at all, and start making more money than everyone else.
If everyone but you puts in $2, the pot would be $18. It gets doubled to $36 and everyone gets back $3.60 —including you, the one who put nothing in at all.
In experiments where this game is played so everyone can see who puts in a fair share, the pot tends to grow for a while and then it starts to shrink as people test the water by withholding funds. The behavior spreads, because no one wants to be a chump, and eventually the economy grinds to a halt. If people are allowed the option of punishing cheaters, the cheating stops, and everyone wins. If instead of punishment, people are given the choice to reward good players, the economy again crashes after a few rounds.
The crazy thing about this game is how illogical it is to stop contributing just because someone in the group is free riding. If everyone else is still being a good citizen of the game, everyone will still win. The old emotional brain kicks in, however, when you see cheating. It’s an innate response that served your ancestors well. You know deep down that cheaters must be punished because it takes only one cheater to make the economy sputter out. You would rather lose the game than help someone who isn’t helping you.
This game is sometimes used to illustrate how regulation is necessary to keep any sort of nonprofit public good alive. Streetlights would never get put along dark roads, and bridges would collapse if people weren’t forced to pay taxes. Purely logical creatures could be trusted to figure out life isn’t a zero-sum game, but you are not a purely logical creature. You will cheat if you think the system is cheating you.
The urge to help others and discourage cheating is something that helped primates like you survive in small groups for millions of years, but when the system becomes gigantic and abstract like the budget for a nation or the welfare system for an entire state, it becomes difficult to make sense of the world through those old evolutionary behaviors.
The tragedy of the commons can be used to make a case for private property in order to encourage you to take care of your piece of the world, but you might think not everyone is going to buy a fuel-efficient car and recycle plastic, so why should you?
The public goods game suggests regulation through punishment discourages slackers.
It isn’t you don’t want to help; you just don’t want to help a cheater or do more work than a slacker—even if your not helping leads to ruining the game for you and everyone else.
