On Cooperation
Our main trait to survive and evolve as a species is not our ability to pass information embodied in DNA through biological processes, but our ability to share knowledge and know how through complex systems such as economies and cultures. We create networks in which we accumulate wisdom — or ‘crystalized imagination’ as Cesar Hidalgo (2015) poetically expresses it — in products, services, protocols and technology. From genes to cells to humans to economies, it is not only through mutation and selection, but through cooperation that we augment our capacities to solve problems by creating higher levels of organization.
Darwinian evolution considers mutation as the generating force of diversity, and selection as a mechanism where the best suited individuals to a particular environment come out as the winners in the survival game. But, if evolution only depended on survival of the fittest and we were all here to survive, why is it that we see cooperative and altruistic behavior even in the lowliest creatures? Why is it that ants don’t actually eat leaves but take them to the colony to farm fungus? Why do they leave traces for others to follow instead of getting the whole reward for themselves? Why do we sacrifice our time and resources — weakening our fitness — to help our competitors — increasing theirs — instead of being busy increasing our chances to survive and reproduce regardless of others’ fortune? We know, as ants seem to do, that ‘farming’ gets a better outcome than ‘eating the leaf’ as we find it.
Martin Nowak makes a strong claim on cooperation considering it as the third pillar of evolution among mutation and selection. Nowak builds upon Darwinian evolution, explaining the role of cooperation:
From cooperation can emerge the constructive side of evolution, from genes to organisms to language and complex social behaviors. Cooperation is the master architect of evolution.
Like ant colonies, markets are complex systems formed by individuals following simple rules shaped by social interaction and signalling — through pheromones in the former and prices in the latter — with no central authority controlling what happens in the multi-million member network. Instead, social intelligence, ergo, the capacity of a network as a whole to compute information from the environment, emerges as a property that shapes interactions.
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Think for a second of your day-to-day activities and choose one product that you often use (it can be anything: a pencil, your daily coffee or your smartphone). Think about its history and ask yourself questions such as: Where does it come from? How many people, resources and types of technologies were used to produce it? Think about how many people, places and protocols has it been through to get to your hands when you demanded it. We can look at markets as super-organisms with computational power of its own, driven by none but by the collective action of many. We can look at the economy as a network of intricate relationships. The capacity of a network to accumulate and transfer knowledge and know how is crucial to find creative and innovative ways to solve problems; as Cesar Hidalgo stated: “markets not only make us richer, but wiser”. If cooperation augments our capacities to solve problems, we can say that cooperative societies become stronger and have a better systemic ability to overcome challenges gaining from diversity.
If we agree that cooperation makes us better off and allows humankind to augment its possibilities to find ever-improving ways to survive, we can also agree on the relevance to study the details of how we reach cooperation. Under what conditions we reach voluntary cooperation and how do we determine what forms of cooperation are better or worse. Notice that not every form of cooperation is desirable like corruption or system-harming behaviour from individualistic, selfish behavior.
Every seemingly inextricable problem can be zoomed in enough to detect the one line, the one infinitely repeated trajectory that is to build the patterns we ame to find. Economic-wise, our infinitely repeated action is the transaction, which will be taken as the basic economic unit of this analysis. A transaction is an act in which at least two individuals agree on taking over a joint task or make an exchange. The context in which such joint tasks are carried out matters.
81 years ago, Ronald Coase published The Nature of the Firm where he analyses the causes why firms emerge within the context of markets whereas it was widely acknowledged how markets worked through the price mechanism obviating the need of a central planner. He addresses the immortalized transaction costs that even led to a new economic study field: Transaction Cost Economics.
Today, his logic still valid and worthy to ask. Technology evolves and now we live in a highly connected world thanks to the invention of the Internet in the last decades of the 20th century. A combination of separate efforts in the fields of cryptography, math, game theory and suitable conditions gave rise to the emergence of a new technology which presents to us an alternative form of organization: blockchains.
My work is an attempt to analyse, from a transaction-cost economics approach, this new technology. It is based and inspired by Coase’s ideas, his attention to the details and emphasis on mechanisms to reach an efficient voluntary cooperation rather than a top-down regulation approach.
TO BE CONTINUED…
