(A VOLUME NT RIEL SAGE ACUNATION SMES TAS ) ELINOR OSTROM and JAMES WALKEPARTI Chapter 1 Chapter 2 Chapter 3 PART IL Chapter 4 Chapter 5 Contents Contributors Preface INTRODUCTION: SOCIAL DILEMMAS. AND TRUST Introduction Elinor Ostrom and James Walker Toward a Behavioral Theory Linking rust, Reciprocity, and Reputation Elinor Ostrom Gaming Trust Russell Hardin BIOLOGICAL FOUNDATIONS OF TRUST AND RECIPROCITY Biological Foundations of Reciprocity Robert Kurzban The Chimpanzee’s Service Economy: Evidence for Cognition-Based Reciprocal Exchange Frans B. M. de Waal ix xi rt 80) 103 105 128Preface Russell Sage Foundation. All of these meetings, in tur, have heen a part of a much broader project on trust organized by Karen Cook of Stanford University, Russell Hardin of New York Uni- versity, and Margaret Levi of the University of Washington. The first meeting, a Roundtable on Trust As a Political Variable, was organized by Margaret Levi and held on February 25 and 26, 1998. Participants included Valerie Braithwaite, Robert Frank, Margaret Levi, and Toshio Yamagishi. It was at this exciting meeting that Elinor Ostrom was first introduced to the Russell Sage project on trast. Immediately after this conference, Yamagishi, Levi, and Braithwaite joined Ostrom and James Walker at Indiana University to discuss some of the experiments that T his book is the result of a series of meetings on trust held at the could be run to examine the role of culture in the creation and main- tenance of trast. That small meeting resulted in an exciting research program with parallel experiments being conducted in Japan and the United States (see Nahoko Hayashi, Elinor Ostrom, James Walker, and Toshio Yamagishi, “Reciprocity, Trust, and the Sense of Control: A Cross-societal Study,” Rationality and Society 11(1): 27-46, As an out- growth of that effort, Nahoko Hayashi spent the spring semester of 1997 at Indiana University, allowing for considerable discussion there of the cultural foundations of trust. The pursuit of these activities was greatly helped by the support provided us by Peter Evans as part of a project on “Social Capital” administered by the American Academy of Arts and Sciences. Although skeptical of the use of experimental methods to study trust, as is evident in chapter 14 in this book, Margaret Levi invited Ostrom and Walker to organize a conference focusing on experimen- tal methods for the study of trust. One must deeply respect a scholar who is willing to invest precious resources in exploration of a new research method for addressing a topic of considerable importance. Not only does Levi conduct her own research with extensive care and.xii Preface nsight, but she is also willing to explore new and different ways of examining questions. Margaret Levi, Russell Hardin, and Karen Cook then invited us to onganize a conference on trust to meet at the Russell Sage Foundation from November 14 to 16, 1997. The participants in that conference were Karen Coak (Department of Sociology, Duke University), Rus- sell Hardin (Department of Politics, New York University), Margaret Levi (Director of the Center for Labor Studies, University of Washing- ton), Kevin McCabe (Economics Science Laboratory, University of Ar- izona), John Orbell (Department of Political Science, University of Oregon), Elinor Ostrom (Workshop in Political Theory and Policy Analysis, Indiana University), David Schmidt (Department of Ec nomics, Indiana University), Vernon Smith (Fconomics Science Labo- ratory, University of Arizona), James Walker (Department of Foo- nomics, Indiana University), Rick Wilson (Program Director, Political Science, National Science Foundation), and Toshio Yamagishi (Faculty Of Letters, Hokkaido University). Most of the participants at this one- ancha-half-iay meeting focused on an in-depth discussion of the the- retical work that Hardin, Cook, and Levi were engaged in and the experimental traditions of Yamagishi, Smith, McCabe, Ostrom, Schmidt, and Walker. This meeting also gave us an opportunity to begin to explore the possible evolutionary foundations of trust with a key pa- per presented by John Orbell, The working title of that conference was Behavioral Evidence on Trust. From that working group, a plan emerged for a sevies of papers that would be presented at a larger conference to be held at Russell Sage and would eventually be incorporated into a book. Most of the chapiers in the current volume were initially planned at that mid- November 1997 meeting. At that same meeting, Russel] Hardin raised some serious questions about survey evidence in measuring trust Hardin's concern with the overreliance on a few general questions led to the examination of that question at Indiana—an issue that is cise cussed here in chapter 12. During the next year, many of the chapters were put into initial draft and a second conference on experimental work relating lo the study of trust was held at the Russell Sage Foundation on February 19 and 20, 1999. The participants at this meeting were Karen Cook (Center for Applied Social and Behavioral Sciences, Stanford Univer- sity), Catherine Eckel (Department of Economics, Virginia Polytechnic Institute and State University), Russell Hardin (Department of Poli cal Science, Stanford University), Margaret Levi (Department of Polit- ical Science, University of Washington), Kevin McCabe, John Orbell, Elinor Ostrom, Carl Rhodes (Department of Government, Franklin and Marshall College], Bo Rothstein (Russell Sage Foundation), DavidIntroduction 5 sum ($10.00). Those in the position of individual 2 showed higher levels of reciprocity in the first round than had been exhibited in the Berg, Dickhaut, and McCabe study. Twenty of them returned more than the original sum received, leading to a positive-sum outcome for all involved. The second round followed a different pattern. Nineteen out of twenty of the individual 1s who had received positive returns in the first round made positive investments again in the second, and all three of the individual 1s who had received a negative return in the first round sent zero to their counterparts in the second round. The most significant difference in outcome was that only seven of the nineteen individual 1s received a positive net return in the second round. The reciprocity that had been exhibited in the first round was substantially reduced in the second and final round. These three studies illustrate the intricate relation between trust and expectations of reciprocity! In these experiments, a substantial proportion of individuals trusted that the person with whom they were paired—a stranger—would reciprocate trust by returning at least as much money as he or she had been sent by the first player. In all of these games, the predicted subgame-perfect equilibrium, assum ing that utility is adequately captured by monetary payoffs, is for individual 2 to return zero. Because individual 2 is predicted not to reciprocate, the prediction is also that individual 1 will not invest any- thing, owing to the risk of losing everything that is sent. In all three studies, tcust and trustworthy behavior exceeded predicted levels. On the other hand, the degree of trust and trustworthiness varies substantially.” A variety of contextual factors associated with the structure of these experiments helps to explain the variance. Individ- ual preferences toward payoffs, prior experience with this game structure, players’ capacity to learn more about the personal charac- teristics of each other, and ability of players to build reputations all appear to affect the decisions of players in both positions. A second major finding is thal the rates of trusting, reciprocity, and trustworthy behavior exhibit high variance across experimental conditions. Thus trusting and trustworthy behavior are not unchanging, universal at- tributes of all individuals but are rather the result of multiple contex- tual and individual attributes. Understanding trust and the conditions that are conducive to trust is a challenging task. These three studies illustrate how experimental methods can help social scientists learn more about trusting and trustworthy behavior and contribute to the testing of diverse theories about the origin, sus- tenance, and outcomes of trust and trustworthiness. Furthermore, the structure of these experiments has a parallel structure to situations that Robert ‘Trivers (1971) has posited as key for the expression of