Market Integration and Prosocial Behavior: Evidence from the Standard Cross-Cultural Sample. E. Anthon Eff, Associate Professor, Department of Economics and Finance, Middle Tennessee State University   Malcolm McLaren Dow, Professor Emeritus of Anthropology and Mathematical Methods in the Social Sciences, Northwestern University

From the literature: Experimental games conducted by ethnographers show that more generous behavior is seen in societies with higher levels of market integration. In this paper: Test to see if prosocial behavior (generosity, honesty, trust) is associated with markets, using Standard Cross-Cultural Sample, a data set containing wide range of human societies. Two econometric issues: Galton’s problem Missing data

Experimental games conducted by Ethnographers Henrich, Joseph, Robert Boyd, Samuel Bowles, Colin Camerer, Ernst Fehr, Herbert Gintis, et al. (2004). Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies. Oxford University Press. ________________ (2005). “’Economic Man’ in Cross-Cultural Perspective: Behavioral Experiments in 15 Small-Scale Societies.” Behavioral and Brain Sciences 28(6):795-855 Efferson, Charles, Masanori Takezawa, Richard McElreath. (2007). “New Methods in Quantitative Ethnography: Economic Experiments and Variation in the Price of Equality.” Current Anthropology 48(6): 912-919. Lesorogol, Carolyn K. (2007). “Bringing Norms In: The Role of Context in Experimental Dictator Games.” Current Anthropology 48(6): 920-926.

Fifteen societies in Henrich et al.

Ultimatum Game Donor (ethnographer): Gives $10 to Proposer Proposer: Offers $2 to Responder Responder has 2 options: Accepts $2, Proposer keeps $8. Rejects $2, Donor keeps entire $10 Responder can “punish” Proposer by rejecting offer. Proposer has incentive to keep offer high.

Dictator Game Donor (ethnographer): Gives $10 to Proposer Proposer: Offers $2 to Responder Responder has one option: Accepts $2, Proposer keeps $8.

Source: Henrich et al. (2005: 801) Mean in industrialized nations=0.45; mode=0.5 Source: Henrich et al. (2005: 801)

Noteworthy: High variation in ultimatum game offers. Many ultimatum game offers less generous than in industrialized societies. Much variation in game results can be explained by society-level variables: especially market integration.

Relationship between Ultimatum game offer and market integration: Fifteen societies in Henrich et al. Source: Henrich et al. (2005: 809)

Two possible reasons for variation in UG results over ethnographic cases. Games cued specific shared norms. Clearly happened in some cases: Au and Gnau: proposers made generous offers which responders rejected. (norm: status seekers give gifts that impose obligations) Lamalera: proposers made generous offers. (norm: defined protocol for dividing whale meat after hunt) Generalized prosocial dispositions—members of some societies are “nicer” on average than others.

prosocial dispositions=fn(markets; control variables) Theoretical reasons for markets to encourage generalized prosocial dispositions Adam Smith: merchants need to have a good reputation to stay in business. The more commercialized a society, the higher its standards of “probity and punctuality.” Evolutionary game theory: “indirect reciprocity” leads to direct benefits through reputation effects (cooperation partners easier to find). Test with model: prosocial dispositions=fn(markets; control variables)

Adam Smith: “Whenever commerce is introduced into any country, probity and punctuality always accompany it. … Of all the nations in Europe, the Dutch, the most commercial, are the most faithfull to their word. The English are more so than the Scotch, but much inferiour to the Dutch, and in the remote parts of this country they are far less so than in the commercial parts of it. This is not at all to be imputed to national character… It is far more reduceable to self interest… A dealer is afraid of losing his character, and is scrupulous in observing every engagement. When a person makes perhaps 20 contracts in a day, he cannot gain so much by endeavouring to impose on his neighbours, as the very appearance of a cheat would make him lose. Where people seldom deal with one another, we find that they are somewhat disposed to cheat, because they can gain more by a smart trick than they can lose by the injury which it does their character… When the greater part of people are merchants they always bring probity and punctuality into fashion, and these therefore are the principal virtues of a commercial nation.”

Standard Cross-Cultural Sample World divided up into “culture regions,” one well-documented society picked from each of these, for total of 186 societies. Over 2,000 variables gradually added. Full range of human societies, so that any statement that claims to hold universally for humans can be tested.

Diverse sample. For example, many subsistence types…

…and, many settlement types:

SCCS: Africa

Dependent variables Three dependent variables: degree to which society inculcates trust, honesty, generosity in children.

Dependent variable: Generosity

Generosity

Independent variables selected Three types of “sociality”: Nepotism, Reciprocity, Coercion (van den Berghe 1981). Prosocial behavior is most valuable for reciprocity, and therefore most likely to be encouraged in societies emphasizing reciprocity. Seven independent variables related to reciprocity: Three market-related variables: extent of internal markets; external markets; presence of true money. Two dummy variables for presence of inheritance rights in property: movable property and real property. Two variables for cooperative activity: sharing of food; communal use of land. Twelve control variables.

Independent variables with expected signs

Two econometric problems in SCCS data Galton’s problem Missing data

First problem: Galton’s problem Observations not independent. Common descent (language phylogeny) Cultural borrowing (geographic distance) In regression context, Galton’s problem will cause biased coefficients and biased standard errors.

Galton’s problem example: Hypothesis: Drinking alcohol dampens the libido of religious specialists. alcohol wives Ecuador 1 0 Iran 0 2 Ireland 1 0 Morocco 0 3 Spain 1 0 Yemen 0 4 Pearson correlation= -0.9332565, p-value=0.0065 Adapted from Victor de Munck and Andrey Korotayev. 2000. “Cultural Units in Cross-Cultural Research.“ Ethnology 39(4): 335-348 An observed correlation between a pair of cultural traits across cultures could be due to the borrowing of the traits, as a package, from a common source (“horizontal transmission”), or could be due to their transmission, as a package, from a common ancestor (“vertical transmission”), or could be due to a true functional relationship.

Correcting for Galton’s problem

Correcting for Galton’s problem (continued)

Second problem: Missing Data Society markin markout money commland sharefood Nama Hottentot NA NA 1 NA NA Kung Bushmen 1 4 1 3 6 Thonga 4 4 3 3 6 Lozi 3 3 1 3 NA Mbundu NA NA 4 NA NA Suku 2 2 4 2 2 Two solutions: Listwise deletion Multiple imputation

Listwise deletion Society markin markout money commland sharefood Nama Hottentot NA NA 1 NA NA Kung Bushmen 1 4 1 3 6 Thonga 4 4 3 3 6 Lozi 3 3 1 3 NA Mbundu NA NA 4 NA NA Suku 2 2 4 2 2 Lose three observations. Lose all of the information in the cells marked in red. Of 186 societies, 156 would have been dropped using listwise deletion. No longer testing against the full range of human societies. Losing the big advantage of the SCCS. Probable sample selection bias.

Multiple imputation Society markin markout money commland sharefood Nama Hottentot 3 4 1 2 3 Kung Bushmen 1 4 1 3 6 Thonga 4 4 3 3 6 Lozi 3 3 1 3 6 Mbundu 4 5 4 3 1 Suku 2 2 4 2 2 Replace missing values with imputed values, drawn from conditional distribution. Create several (5 to 10) new data sets with imputed values. Society markin markout money commland sharefood Nama Hottentot 2 3 1 1 2 Kung Bushmen 1 4 1 3 6 Thonga 4 4 3 3 6 Lozi 3 3 1 3 4 Mbundu 3 5 4 5 3 Suku 2 2 4 2 2 Society markin markout money commland sharefood Nama Hottentot 3 5 1 2 3 Kung Bushmen 1 4 1 3 6 Thonga 4 4 3 3 6 Lozi 3 3 1 3 5 Mbundu 2 6 4 4 2 Suku 2 2 4 2 2

Multiple Imputation Intuitive justification for using multiple imputation: King, Gary, James Honaker, Anne Joseph, and Kenneth Scheve. (2001). “Analyzing Incomplete Political Science Data: An Alternative Algorithm for Multiple Imputation.” American Political Science Review 95(1): 49-69. Developed most popular methods for producing multiple imputed data sets: Schafer, Joseph L. (1997). Analysis of Incomplete Multivariate Data. London: Chapman & Hall. Developed methods for combining estimates from multiple imputed data sets into single estimate: Rubin, Donald B. (1987). Multiple Imputation for Nonresponse in Surveys. New York: J. Wiley & Sons.

Results Four models. All pass usual diagnostics. Generosity as dependent variable Honesty as dependent variable Trust as dependent variable Trust as dependent variable, with instruments for honesty and generosity as independent variables Market-related variables do not have the expected effects (2:1 diminish effort to inculcate prosocial behavior). Rules for assignment of property rights through inheritance diminish prosocial behavior. Sharing food encourages inculcation of generosity.

Signs of coefficients for reciprocity-related independent variables: unrestricted model (sign of restricted model in parentheses, when significant).

Interpretation Initial expectation: Markets encourage inculcation of generalized prosocial behavior. Finding: Expectation not supported. Conclusion: Ultimatum Game results may have more to do with cuing of specific shared norms than they do with generalized prosocial dispositions. But? How can cuing of specific shared norms be systematically associated with market integration?

Hypothesis Capitalism: commodification of everything; erosion of shared norms (Simmel). Capitalist societies are pluralistic, strangers can’t assume share same norms (Hayek). Shared norms make exchanges more predictable, generate trust. Lack of norms makes exchanges less predictable; proposers in games might make higher offers to compensate for risk (lack of predictability)—especially in ultimatum games. Suggestive evidence from study by Lesorogol (2007) (for dictator games).

Dictator game results: meat-sharing vs abstract. Source: Lesorogol 2007: 923

Hypothesis (continued) Specific shared norms cued in UG offers. Shared norms different in each society, hence expect wide variation in offers across societies (which we see). Markets weaken shared norms, creating uncertainty, causing UG offers to rise in societies with more market integration (which we also see). No systematic association between market integration and generalized prosocial dispositions (shown in our models using the SCCS).