A standard public good game looks very similar to traffic regulation. In the traffic regulation coordination is essential. To achieve significantly higher payoffs. Drivers have to stick to the upper bound of inputs into the public game. Otherwise, the market unravels. However, there is a significant difference. With the analogy of traffic regulation, I will try to reason that the public good game unravelling is not a very surprising outcome. In fact, the outcome is driven by the effect of saliency. The public good game assumes away the most essential components of social interaction.
- RULES ARE NEVER EXOGENOUS. When you build a house it is reasonable to assume that the earth is flat. The same is with the idea of exogeneity of rules. For a given moment of time, it is reasonable to assume that one person or even a community should take roles exogenous. Meaning, that they are unable to change the rules. However, just like with the fact that the earth is not flat, rules are never exogenous. Institutional economics sheds light on the process. There are exist informal social norms that manifest themselves in the written law. The example that is close to me and seems convincing is the persistence of some social institutions in Russia. In the beginning of 20th century, Russia had legalised system of slavery. There were social norms coupled with legislation to allow one part of the population to rob the other one. Later after the revolution and supposedly in a different country, the very same social norm manifested itself in a different written law. People were not allowed to leave their permanent place of leaving, just like peasants in Czar Russia were not allowed to leave the villages. In 1950s repressions by Stalin were for the most part built on the notion of the enemy of the state. The government were specifically trying to divide the society. There were a lot of physical extermination not only of the enemies of the state but the whole families. The very same social norm manifested itself in the modem Russia, with the difference that there is no need for physical extermination because modern technologies allow manipulating social opinions more effectively to preserve the political regime. Modern enemies of the state are so-called liberals, people tend to think of them as enemies and when they are killed or put into jail it is perceived as something normal. The point here is that for people unwritten rules are more important than written rules. Written rules changes, to do so society just has to spend money on publishing new laws. At the same time unwritten rules, social norm, something that people perceive as acceptable are very persistent through centuries. Written rules include the organization of markets, the organization of financing of public goods, which is the area where the most corruption usually happens, and all of these are defined not by the reason, not the idea of efficiency, not the idea of good for everyone, but whether it is acceptable in the society to steal. Put differently, written laws are a manifestation of deeper characteristics of societies, those we do not systematically observe, yet we can feel it when we live in this society for a while. The public good game assumes away this characteristic. To mimic the real world we would have to wait for those characteristics to define the formal rules.
- NO SALIENCE. When people drive the car say naturally would come up to some form of regulation, because there is a feedback from the mechanism. The good example is the traffic in the India. There are no written laws insignificant portion of India. However, there is still coordination. The public good game does not provide any form of feedback to the participants. People are not explained the true consequences of their actions. In fact, to avoid experimenter demand effects the consequences are intentionally concealed. Also, it is considered a virtue when experimentees respond quickly in the experiment. Essentially, what’s happening is that subjects do not realize all consequences of their decisions. And the are not even given an opportunity to think about what they doing. Non-cooperation will lead to horrible consequences, they steal from themselves, but the consequences are felt only next round and the are not properly attributed. There is no salient mechanism to see the importance of coordination. This is akin to traffic regulation when people drive blindfolded. No mechanism in the real world have has no a disutility feedback whatsoever. A traffic regulation in India without any formal system of punishment works fine because over time people receive a negative feedback and realize that the coordination is important. This critique can be rephrased in the following manner. If we know that in the public good game contribution slowly goes down if we look at the first 10 grounds. How can we be sure that it will never start going up at some point in future? How can we be sure that people will never realize the importance of coordination if we only look at the first 10 periods? Imagine that in some remote village in India, that that has never seen cars before, cars has been introduced in a significant amount. Yes, at first there would be a significant coordination failure. People wouldn’t know how to achieve higher payoffs. They would park in random places, they would crash into each other. But at some point, they would realise that inputs from everyone would allow them to achieve at higher payoffs.
- RULES DON’T MATTER. For people, nothing is never about rules. There was an experiment when people were asked about what kind of articles are there in their constitutions. A lot of people included much more than the constitution actually includes. Why is it so? This is happening because nobody reads lengthy federal laws or ponderous books of regulation. In every community or society, there are exist notions of the right and the wrong. The notion of the right and the wrong are hypothetical notions. They are fictions, just like there is no perfect circle, nobody can draw one, however, an idea of the perfect circle exists. For the people there exist the idea of a good man and a bad man. And those people actually do not exist. There is no good people or bad people in the world. Because there is always exist a surrounding circumstance to turn a good person into a bad person and the other way around. What does it mean? It means that people infer the rules from the informal notions, prevailing social norms. A wonderful example is again driving a car. People don’t go and read laws and regulation one by one. It is possible that the exam requirements designed so that you would actually read them. But when a person seat behind the wheel and actually tries a car, when he actually engages with the mechanism, most of the behavior comes from the idea of conformity. People observe how people drive, how to park how kind the art to each other, should the healed or should they be pushy , Should the comply with the rules or should they become more all of them. The same happens in all forms social interactions. People might know what the what the written rules are, but what people actually do, those on four rules play much bigger role. A very good example is traffic regulation in Russia. In Russia nothing is ever about written rules, including traffic. When people pass exam the leader seat behind the wheel and engage with the actual society on the road. And they actually see how people drive. And the way people drive in Russia is crazy. It is Middle Ages. People are very rude. Nobody ever comply with the rules. It is typical when someone cuts you off or honks you. What does it mean? That means that even even if people do know the rules, what matters much more is the behavior of others. The notion of conformity Plays a much more bigger role, then the idea of rationality, or the idea that rules