How Wealth Accumulation Can Promote Cooperation

So I can't be accused of being completely biased in all my posts, I offer this paper for consumption:

How Wealth Cooperation Can Promote Cooperation

Abstract:

"Explaining the emergence and stability of cooperation has been a central challenge in biology, economics and sociology. Unfortunately, the mechanisms known to promote it either require elaborate strategies or hold only under restrictive conditions. Here, we report the emergence, survival, and frequent domination of cooperation in a world characterized by selfishness and a strong temptation to defect, when individuals can accumulate wealth. In particular, we study games with local adaptation such as the prisoner's dilemma, to which we add heterogeneity in payoffs. In our model, agents accumulate wealth and invest some of it in their interactions. The larger the investment, the more can potentially be gained or lost, so that present gains affect future payoffs. We find that cooperation survives for a far wider range of parameters than without wealth accumulation and, even more strikingly, that it often dominates defection. This is in stark contrast to the traditional evolutionary prisoner's dilemma in particular, in which cooperation rarely survives and almost never thrives. With the inequality we introduce, on the contrary, cooperators do better than defectors, even without any strategic behavior or exogenously imposed strategies. These results have important consequences for our understanding of the type of social and economic arrangements that are optimal and efficient."

There are however some caveats I would add (in addition to those examined by the authors). The main one is the desire for relative wealth over absolute wealth. In the stock market (in particular) it is how much money one has relative to one's peers that is often the guiding force, this may increase temporary defections. It also fails to examine more complex strategies (such as Tit-For-Tat as they mention) and particularly strategies that would arise if an 'eliminating' element was added. If it were the case that competitors can be eliminated if they face a large loss. Obviously the elimination of competitors is an element in the economy and even cooperative oligopolistic arrangements don't stray away from this.


    There may also be problems relating to kabals, where cooperating groups operate at the expense of other elements of society (again oligopolies). One should also note that the gini coefficient tends to rise drastically in this set up (approaching 1) and this leads to ill-effects as examined in previous threads, including the undermining of trust that is essential to cooperative strategies.

Thoughts Blogosphere?