1. QMSS Summerschool, Ljubljana
June 29, 2005
QMSS Summerschool, Ljubljana

2. QMSS Summerschool, Ljubljana
Soulava necklaces
Mwali bracelets
June 29, 2005
QMSS Summerschool, Ljubljana

3. Emergence of an Exchange Network: The Kula-Ring
Inter-island exchange between previously hostile groups
No central authority or enforcing agent
Stable rules prescribing which island visits which other island
June 29, 2005
QMSS Summerschool, Ljubljana

4. QMSS Summerschool, Ljubljana
The Kula Ring
June 29, 2005
QMSS Summerschool, Ljubljana

5. Emergence of the Kula-Ring: Rationalist Explanation
actors minimize transaction costs
exchange with nearest neighbors leads to the formation of proto-coalitions
exchange between proto-coalitions produces ring-like structure
ring-like structure most efficient
June 29, 2005
QMSS Summerschool, Ljubljana

6. Emergence of the Kula-Ring: Culturalist Explanation
Identities
Identity of membership in ‘Kula Ring’ community established by participation of outsiders in rituals and ceremonies
Signaling
Participation in rites signals reliability and trustworthiness and facilitates screening out outsiders who might wish to benefit from joining the club by passing/faking as insiders
In human societies, the role of identity plays a even greater role in identifying cooperators
from non-cooperators. Frank (1988) has emphasized the role of clues to emotion (e.g., facial
expressions, body language) in promoting cooperation in human societies: the ability
of individuals to reliably identify noncooperators and interacting only with trustworthy
partners. I have, for the past two decades, developed the economics of identity which
emphasize the crucial importance of clues to, or symbols of, identity such as kinship and
ethnic status in facilitating trade in less-developed economies characterized by contract
uncertainty. The ‘Kula Ring’ and the ethnically homogeneous middleman group (EHMG)
are examples of exchange institutions, alternative to contract law, in which the identity of
partners matters in establishing exchange relationships (Landa 1978, 1981, 1983, 1994,
1996).
The famous ‘Kula Ring’ of Papua New Guinea, described by anthropologist Malinowski
(1922), is characterized by elaborate rules of the ‘Kula Ring’ game governing exchange,
including the circulating of two different gift-exchange objects perpetually around the
ring. ‘Kula Ring’ gift exchange is accompanied by extravagant rituals, ceremonies, and
magic rites performed by ‘Kula Ring’ trading partners. Such extravagant rituals, rites, and
ceremonies may be interpreted as the cultural equivalent of the peacock’s tail: they establish
the identity of partners as members of the ‘Kula Ring’ club/community, while acting as
reliable signals for screening out outsiders who might wish to benefit from joining the club
by passing/faking as insiders. ‘Kula Ring’ partners who abide by the rules of the game
are able to benefit from commercial exchange with their left- and right-hand partners all
around the ring of islands. In the pre-‘Kula Ring’ days, there were much raiding, warfare and
even instances of cannibalism among the tribes inhabiting the ring of islands in Papua New
Guinea. ‘Kula Ring’ partnerships make it possible for otherwise hostile tribes to cooperate
with each other; these partnerships are in fact peace treaties established by warring tribes
to form political and trade alliances thus making it possible for the ‘Kula Ring’ partners to
come to each other’s markets to engage in commercial trade. The ‘Kula Ring’, by facilitating
peaceful inter-tribal trade, economizes on transaction costs by making it possible for each
tribal Big Man to engage in commercial trade with their partners to the left and right side
of the ‘Kula Ring’ (Landa 1983, reprinted in Landa 1994, chapter 7).
Landa, J. Journal of Bioeconomics 1: 95–113, 1999
Massims from one tribe often require outside tribe members to participate in
magical and ceremonial rites before establishing an exchange relationship as well. By
requiring outside tribesmen’s involvement in magical rites, tribes are able to further
screen their potential trading partners. Conversely, quasi-religious participation by the
outsider signals his trustworthiness in trade. Indeed, quasi-conversion to another group’s
religion proved so powerful a signal in securing a stable trading relationship between
religion proved so powerful a signal in securing a stable trading relationship between heterogeneous groups that is was used rather frequently among stateless tribes
historically for this purpose.
How well did the Kula Ring’s gift-exchange system work? “As long as
ceremonial exchanges continued to take place assuring that peace prevailed, the linked
groups could continue to carry on other mutually advantageous activities, such as trade”
(Dalton 1978: 160). The Kula Ring’s use of shared religious practice proved extremely
effective as well. By engaging/associating with the customs and practices of outsiders,
individuals from the heterogeneous groups inside the Kula Ring signaled their credibility,
securing peaceful exchange between one another without a formal institutional
arrangement.
economics of identity to discuss the importance of recognition
and cues of identity in facilitating cooperation in nonhuman and human societies.
June 29, 2005
QMSS Summerschool, Ljubljana

7. Emergence of the Kula-Ring: Structuralist Explanation
Disadvantages of ring-like structure
Advantages of network closure
advisory trust
third party monitoring
safety valve for exchange
June 29, 2005
QMSS Summerschool, Ljubljana