What do Avner Greif and Simon Gächter have in common?

By Jens Prüfer

Building bridges between the research communities studying Institutions & Organizations, on the one hand, and Behavioral and Experimental Economics, on the other hand, was the goal of the TILEC (Tilburg Law and Economics Center) workshop on Economic Governance and Social Preferences, thereby following up on two workshops focusing on Economic Governance and Competition (in 2010) and Economic Governance and Organizations (in 2013). Four keynote speakers and eight contributed papers, which originated from a call for papers attracting 85 submissions, complemented by a poster session, kept the audience busy in Tilburg, the Netherlands, on September 3rd and 4th.

Avner Greif (Stanford) started the gathering with a talk about about social organizations and Simon Gächter (Nottingham) concluded it on the same topic. Yet, their research methodologies were highly complementary. Greif spoke about the institutional evolution of context-dependent (hence: social) organizational forms in China and Europe throughout the last millenium. Aided by a game-theoretical model and extensive data sources, he concluded that the different moralities promoted by Catholicism and Neo-Confucianism triggered the different development paths of the two regions. Gächter, in contrast, reported on insights from a cross-cultural social dilemma lab experiment that he and his co-authors had conducted in 45 countries - the largest research endeavour of this type to date. Based on the results, they constructed rankings regarding observed cooperation, useful punishment, and inefficient punishment among players unknown to each other, which were characterized by a striking similarity to cross-country rankings of development indicators, thereby suggesting a close link between cultures of impersonal cooperation and economic success.

In his talk, Mark Ramseyer (Harvard) explained by means of three examples from his experience studying Japanese institutions the dismal consequences that can occur if researchers do not know the origins of the data they work with - both insightful and entertaining. And Roland Bénabou (Princeton) presented an intuitive model studying the behavior of investment managers that showed how bonus payments of workers in multiproduct firms can be excessive at equilibrium. He also derived an optimal interior level of competition – which implies that too much competition can distort investment managers’ incentives so much that total welfare declines. Many other inspiring papers, studying the functions and interactions of social preferences and man-made rules that aim at fostering cooperation by means of theory, lab and field experiments, and extensive data work, ensured a constantly high level of discussions both during and between the academic sessions.