Nudge: The Final Edition

by Richard H. Thaler

The behavioral economics literature does offer an idea about one possible way forward. Recall that people playing the public goods game are conditional cooperators; they cooperate if others do. In a series of experiments, the behavioral economists Ernst Fehr and Simon Gächter have shown that cooperation in repeated public goods games can be increased if players are allowed to punish noncooperators at their own expense.10 The way this works in the game described earlier is that if Player A observes that Player D (whose identity is masked) is not contributing, A can punish D. For each dollar A is willing to pay, D’s payoff is reduced by three dollars. Note that A gains nothing directly from punishing—and indeed has to pay for the privledge of punishing a noncooperator. As a result, Econs would never punish anyone in this game. But well-meaning (or possibly spiteful) Humans do punish! It turns out that the introduction of an option that no Econ would use greatly increases cooperation. In fact, with these rules in place, cooperation increases as the game is repeated—just the opposite of what is observed under the normal rules.