The Constitution of Man Dictates the Constitutions of Men, Part 2 of the Rules of Capitalism Series
In Part 1 of this series I demonstrated that good rules make good capitalists but what determines good rules? Human nature guides social rules. Most people most of the time in most circumstances are honest and fair and cooperative and they want to do the right thing for their community and society. But most people are also competitive, aggressive, and self-interested and they want to do the right thing for themselves and their family. This evolved disposition sets up two potential areas of conflict: one, within ourselves, our selfish desire for self-improvement conflicts with our altruistic desire for social enhancement; two, our competitive desire to better our lot in life sometimes comes into conflict with the same desire that others have in themselves.
These potential sources of conflict mean that we need a society based on the rule of law with a suite of social institutions designed to set up rules of engagement between people that allow us all to meet both our personal and social needs. One of the first institutions was the system of private property, and it has an evolutionary basis to it. It begins with the natural propensity for animals to mark their territories and defend them through threat gestures and even physical aggression if necessary, thereby declaring the equivalent of private ownership of use to what was once a public good. Not all animals do this, of course, and they are not cognizant in any way that by so marking their territories they are making a declaration of ownership. Yet we can see in this example evidence for the evolution of a pre-moral emotion of acquisitiveness and possessiveness, not unlike such other moral emotions as empathy, revenge, and guilt seen in chimpanzees, capuchin monkeys, and other nonhuman primates.
The evolutionary logic runs like this: once a territory is declared taken by one animal, would-be trespassers have to invest considerable energy and risk grave bodily injury in attempts to acquire the property for themselves, so there is an endowment effect where we are more willing to invest in defending what is already ours than we are to take what is someone else’s (dogs, for example, will invest more energy in defending a bone from a challenger than they will in absconding with some other dog’s bone). The endowment effect with property ownership has a direct and obvious connection to loss aversion, where we are twice as motivated to avoid the pain of loss as we are to seek the pleasure of gain. Evolution has wired us to care more about what we already have than what we might possess, and here we find the evolved moral emotion that undergirds the concept of private property.
In the long history of humanity, as hunter-gathers morphed into consumer-traders and populations expanded from hundreds to thousands to millions, personal ties of friendship were necessarily displaced by more formal webs of trust through social institutions that developed rules and reinforced them.
A problem that becomes immediately apparent as soon as you think about it is that as the population of a community grows, the rules of how its members can live in relative harmony do not just grow in a linear fashion in lock step with the population. If two people in interaction represent a dyad, and three a triad, the expansion of a dyad into a triad does not require the addition of just one more rule, but many new rules. With each addition to the social equation the number of rules needed to insure social harmony and conflict resolution grows exponentially. This exponential growth in the potential for conflict is based on the fact that there are more people doing more things that may potentially conflict with what others want or need. From his studies of hunter-gatherer peoples in Papua New Guinea, for example, the UCLA evolutionary biologist Jared Diamond has shown what happens when you increase the population of a small hunter-gather group. In a band of, say, 20 people, there are 190 possible dyads, or two-person interactions (20 x 19 ÷ 2). But if a number of bands coalesce into a tribe of, say, 2,000 people, there will be 1,999,000 possible dyads (2000 x 1999 ÷ 2). The difference in population size between 20 and 2000 is 100, whereas the difference in possible dyads between these two populations is a startling 10,521. And imagine what such a calculation would be for a corresponding increase in triadic interactions.
Thus, the transition from bands and tribes of hundreds or thousands into chiefdoms and states of hundreds of thousands or millions represents a social leap so profound that it requires entirely new social technologies for communication, exchange, decision making, and conflict resolution. “Once the threshold of ‘several hundred,’ below which everyone can know everyone else, has been crossed, increasing numbers of dyads become pairs of unrelated strangers,” Diamond explains in 1997 book Guns, Germs, and Steel. “Hence, a large society that continues to leave conflict resolution to all of its members is guaranteed to blow up. That factor alone would explain why societies of thousands can exist only if they develop centralized authority to monopolize force and resolve conflict.”
The centralized monopolization of force is, indeed, how most societies in history solved the problems that arrived with larger populations, just as it was for the top-down control of the economy. In the context of Folk Economics, in the Middle Land environment of our Paleolithic past the evolution of reciprocal and indirect altruism led to the establishment of norms of reciprocity and the redistribution of food and other commodities among other members of the group. Such redistribution programs assure those who are successful in hunting or gathering on one day, will not starve when they return home empty-handed on another day. Diamond applies his dyad calculation to the economies of redistribution, showing that “the same mathematics that makes direct pairwise conflict resolution inefficient in large societies makes direct pairwise economic transfers also inefficient. Large societies can function economically only if they have a redistributive economy in addition to a reciprocal economy. Goods in excess of an individual’s needs must be transferred from the individual to the centralized authority, which then redistributes to the individuals with deficits.”
This conclusion makes sense from a Folk Economic perspective, where we simply scale up the social structure of hunter-gatherers into that of consumer-traders. And this is, in fact, what most societies have done throughout history in following their ancestral instincts. While it is true that throughout the history of civilization most societies included such top-down solutions as chiefdoms, kingdoms, monarchies, theocracies, dictatorships, and the like, that has all changed in the last half millennium with the development of divers new economic and political institutions. We have not simply increased the size and number of hunter-gatherer institutions and rules; we have added entirely new categories of social institutions, which in turn create entirely new categories of rules.
The bottom-up solution of democratic capitalism based on the guaranteed right of private property and democratic vote and the free and fair trade between citizens in the nation and with citizens in other nations, for example, has a proven track record of resolving conflicts relatively peacefully in states and empires numbering in the hundreds of millions. The addition of such relatively new concepts as private property and property rights—which assigns the right and use of a commodity to someone with stipulated rules of conduct that are socially recognized and mutually binding among all members of the group—are counterintuitive to our folk instincts and therefore require constant vigilance. Representative government allows everyone the right to participate in the construction of the rules of engagement and the social institutions that govern those rules and their enforcement, but this too has not come about naturally, but through the concerted efforts of social reformers going against the grain of deep time.