Altruistic punishment is a mean for enforcing norms of social cooperation, but there is another possibility altruistically rewarding people who cooperate with you. The key advantage of reward, compared to punishment is that it promotes social ties rewarding someone builds a social relationship with them.

Fixing cooperation

Think back to the examples of two player trust games, sending someone a signal that you trust that you approve of their behavior can be a very powerful motivator for continued cooperation. Punishments on the other hand break down social ties, altruistic punishments can be used as weapons for threats.

For example free riders can use altruistic punishment against cooperators. Suppose that one merchant consistently provides lower-priced goods on her online marketplace. Unscrupulous competitors might post disparaging and false reviews of that merchant online in order to reduce its reputation and drive its customers away.

There’s much less known about altruistic reward compared to altruistic punishment, but the best evidence suggests that reward might work at least as well as punishment encouraging cooperation. In one experiment groups of people were brought into the laboratory to play a cooperative game and different groups were allowed to engage in altruistic punishment, altruistic reward both or neither.

As you might expect from everything I’ve said so far cooperation completely broke down when neither punishment nor reward was possible, but when individuals could either reward good behavior or punish bad behavior in the groups all tended to cooperate effectively. The overall rate of cooperation was about the same in either case and wasn’t any better or worse when both options were available.

Punishment, not necessary

So with all touristic punishment and altruistic reward are both effective and both encourage cooperation why might we prefer only altruistic reward? Now let’s think about the consequences of punishment for the overall well-being of the group. Remember that altruistic punishment takes away resources either because of literal costs or loss time or energy, altruistic punishment makes the group worse off overall.

But, rewarding someone doesn’t make the group worse off it just transfers money from one person to another, altruistic rewards serve as signals of trust that don’t reduce the overall resources of the group. It’s important to treat this claim with some caution we know much more about how altruistic punishment can enforce cooperation that about how altruistic reward can encourage cooperation.

But there’s still something reassuring about the idea that cooperation doesn’t necessarily need enforcement through punishment, at least if the right incentives can be provided at the right time. Cooperation seems like a prototypical phenomenon within behavioral economics.

People’s real-world behavior was difficult to explain using traditional economic models, then economists created new models that incorporated psychological concepts like inequity aversion and desire for reciprocity. Understanding how people can enforce social norms has helped economists and psychologists explain some unexpected real-world decisions.

Group size is one key difference

Cooperation has an importance that goes well beyond behavioral economics and we shouldn’t underestimate how cooperation is shaped by traditional economic, political and cultural institutions. It’s present in all human societies, but it can take very different forms. Let’s think about the diversity of human society for moment.

Societies differ in many ways that might shape how the individuals therein cooperate. Group size is one key difference – nomadic and hunting groups are smaller than farming groups which are smaller than urban groups. Some groups are interconnected through markets – in our modern urban societies we are dependent on others when they purchase our food and everything else but in some agrarian society families or other small groups are separately responsible for their own food.

And there are many other institutions that could promote cooperation from religions to national pride the cultural practices. For cooperation these institutions matter, people who live in societies consisting of relatively small social groups tend to be more tolerant of antisocial behavior, they allow group members the most latitude before resorting to punishment.

Those in societies consisting of larger social groups are less tolerant and punish more readily. This makes sense, altruistic punishment is a key tool for enforcing cooperation in large groups and people in highly interdependent social groups, those societies where individuals don’t produce or forage their own food, they tend to show the most fairness in their interactions with others.

Cooperation begets more cooperation

That also makes sense given that social norms for fairness are likely to be strongest in highly interdependent groups. Cooperation isn’t necessarily a virtue in every setting. In some social groups cooperation is much more important than others and in almost every social group it’s better to be a conditional cooperator someone who cooperates when others are cooperating but who enforces social norms when others misbehave.

Cooperation begets more cooperation, leading to a stable mutually beneficial social setting. That’s the key lesson here: cooperation arises from the combination of self-interest, awareness to others actions and the gradual formation of social norms. We humans, with our ability to plan and are complex social networks can only hope to do equally well.