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clusion in turn triggers the disposition to reciprocate. In effect, the en-
actment of popular reforms generates an environment of face-to-face
assurance giving that builds trust and a resulting disposition to coop-
erate, in much the same way that discussion promotes cooperation in
public goods experiments.
The contribution that strong reciprocity makes to tax compliance
doesn™t imply that the Internal Revenue Service (IRS) should disavow
punishments for evasion altogether. That would be foolhardy because
of the variability of individual dispositions to cooperate in collective
action settings. With no risk of punishment, evasion would become
commonplace among dedicated cheaters, whose defections would in
turn unleash a contagious form of demoralization among the vast run
of reciprocity-minded taxpayers.
The difference between effective incentives and ineffective ones, ex-
perimental and other empirical data suggest, lies in the social mean-
ings that they express. Enforcers should therefore carefully select cases
to nourish the perception that tax evaders are deviants, not normal citi-
zens.32 It is already commonly believed that a certain number of indi-
viduals of exceptional venality will evade taxes even when nearly all
the rest of us are complying. The existence of coercive incentives un-
derstood to be aimed at those persons, then, doesn™t dispel trust; on the
contrary, it helps to assure the honest multitudes that they are not be-
ing exploited when they choose to pay their taxes. A model case, in
this sense, was the tax-fraud prosecution of hotel magnate Leona
The Logic of Reciprocity 351



Helmsley, who expressed open contempt for income taxes as some-
thing that ˜˜only the little people pay.™™33
In addition, of¬cials should always juxtapose trust-enhancing infor-
mation with penalties. Auditing crackdowns and other high-pro¬le
modes of enforcement may back¬re, the evidence suggests, because
they function as a cue that evasion is widespread. To counteract this in-
ference, enforcers should be sure that the good news that the vast major-
ity of citizens voluntarily comply always gets at least equal billing with
the bad news that a small minority don™t. They should take advantage
of the attention that high-pro¬le prosecutions naturally attract to publi-
cize positive information akin to that shown to generate even higher
rates of compliance in the Minnesota Tax Experiment.
Unfortunately, tax authorities often do just the opposite. Competing
with other agencies and programs for appropriations, the IRS routinely
exaggerates the inadequacy of its own enforcement powers and the
resulting extent of evasion.34 Usually timed to be reported by the me-
dia the week before personal income taxes are due, IRS-generated sto-
ries of the agency™s own inef¬cacy in enforcing the law predictably
generates resentment in those who routinely obey it.35 ˜˜Are You a
Chump?™™ a Forbes magazine cover story asked its tax-paying readers
as the magazine reported on the supposed decimation of the IRS™ en-
forcement capacity.36
The United States, in truth, enjoys a relatively high tax compliance
rate. But that hardly means that things can™t be made worse. Like other
high-cooperation equilibria sustained by reciprocity dynamics, the dis-
position of Americans voluntarily to pay their taxes can be ˜˜tipped.™™ If
by rattling its saber one day and pleading poverty the next, the IRS
succeeds in inducing enough taxpayers to believe that cheating is in-
deed widespread, the result could be a self-reinforcing wave of eva-
sion. This could create a new, low-cooperation equilibrium that, as
the durability of Europe™s disobedient tax culture attests, can be very
dif¬cult to reverse. Ironically, by embracing the conventional-theory
strategy of ˜˜incentives, incentives, and more incentives,™™ the IRS risks
making tax compliance into exactly the type of intractable collective
action problem that the conventional theory envisions it to be.

12.4 ˜˜Not in My Backyard™™

Various types of public facilities”including highways, airports, pris-
ons, hazardous waste dumps, and the like”impose disproportionate
352 Kahan



burdens (noise, perceived physical danger, health risks) on persons
who live near them. Accordingly, even when individuals recognize the
bene¬ts of these facilities for society at large, they often resist efforts
to locate them within their own communities”a phenomenon that po-
litical scientists refer to as the ˜˜not in my backyard™™ phenomenon or
˜˜NIMBY.™™37
The conventional theory of collective action sees NIMBY as another
expression of individuals™ propensity to withhold costly contributions
to public goods and instead to free ride on the contributions of others.
Accordingly, the standard model proposes an incentives-based solu-
tion: that the communities best-situated to host a particular facility be
compensated for the burden associated with it, presumably out of the
proceeds of a tax imposed on the individuals who bene¬t from the fa-
cility but who reside elsewhere.38
This strategy, however, has an unimpressive track record. In the
twenty years since Massachusetts enacted a widely lauded compensa-
tion scheme, not a single community has accepted”or been forced to
accept”a hazardous-waste facility siting.39 The results have been the
same in numerous other states and Canadian provinces that have tried
to induce communities to accept potentially hazardous facilities with
compensation.40
Indeed, there is evidence that compensation schemes at least some-
times make the NIMBY problem worse. According to some studies, res-
idents often bridle at ˜˜compensation offers . . . as attempts to buy them
off or bribe them.™™41 The potential of incentives to back¬re in this way
has been con¬rmed experimentally by Swiss economists Bruno Frey
and Felix Oberholzer-Gee, who showed that a compensation offer dra-
matically reduced (from just over 50 percent to less than 25 percent)
the number of laboratory subjects willing to assent to a nuclear waste
storage facility in their community.42
It would be a mistake, however, to conclude that compensation
schemes never work. At least some opinion studies have shown that
offers of compensation can signi¬cantly increase willingness to ac-
cept the siting of a noxious facility.43 Moreover, compensation in
one form or another has nearly always been a part of the successful
waste-facility siting efforts in the United States and Canada in recent
decades.44
While failures predominate, it™s fair to conclude that ˜˜studies show
a high degree of variability in the ability of compensation to change
public opinion™™ toward siting.45 But precisely because they are not uni-
The Logic of Reciprocity 353



formly positive, these results furnish little support for the conventional
theory™s account of NIMBY. Clearly, something more than the weigh-
ing of material costs and bene¬ts is going on when communities de-
cide whether to resist or to accept noxious facilities.
That something more, opinion analyses suggest, is the moral and
emotional reaction of residents to siting proposals. Individuals who in-
terpret the decision to impose a site on their community as signifying
the low social status of its residents”who believe that they are being
˜˜dumped on,™™ symbolically as well as literally”are more likely to re-
sist.46 Those who distrust government institutions generally also are
less likely to tolerate the siting of a noxious facility in their vicinity,47
as are those who believe that societal bene¬ts and burdens in general,
and the burdens associated with a particular facility, are being distrib-
uted inequitably.48 The perception that the racial composition of the
community is playing a role in this process can create intense opposi-
tion in minority communities, which historically have been least able
to muster the political resources necessary to resist forced sitings.49
These are the sorts of factors that one would expect to in¬‚uence the
reactions of individuals who behave like moral and emotional recipro-
cators with respect to civic obligations. When called upon to accept
risks or inconveniences in the interest of the public good, individuals
who believe that societal bene¬ts and burdens are being inequitably
distributed by fundamentally unjust political institutions unsurpris-
ingly answer, ˜˜No.™™
Reciprocal motivations also explain another factor relevant to the
acceptance of toxic waste facilities: the origin of the wastes. A wealth-
maximization model suggests that waste source should be irrelevant:
home-grown wastes are every bit as hazardous as out-of-town ones.
But in fact, individuals are much more likely to accept disposal facili-
ties for wastes produced locally.50 This makes sense insofar as individ-
uals are likely to accept a waste disposal facility in a spirit of positive
reciprocation when they understand that the waste was generated by
bene¬cial local activities.
The uneven effect of compensation schemes also conforms to the
logic of reciprocity, which implies that the effect of incentives in dissi-
pating or promoting trust depends critically on citizens™ moral and
emotional priors. Imagine a society whose citizens begin with the belief
that societal burdens are being equitably distributed through a just po-
litical process. We might expect those individuals, as reciprocators,
to be relatively accepting of noxious facilities in their community. If
354 Kahan



authorities try to purchase acceptance with incentives, however, these
same individuals might revise their views, inferring that other com-
munities must in fact be unwilling to accept such impositions volunta-
rily. As a result of this perverse cueing effect, the NIMBY phenomenon
will grow in strength, as individuals reciprocate the perceived resis-
tance to such facilities by strengthening their own resistance to them.
This reaction plausibly explains the results the experiment con-
ducted by Frey and Oberholzer-Gee. Homogeneous, democratic, and
small, Switzerland has an admirable history of resolving disputes over
the allocation of societal bene¬ts and burdens through a fair process of
deliberative give-and-take. The Swiss subjects in this experiment there-
fore interpreted the offer of a cash payment as evidence that the norm
of mutual accommodation had broken down in the case of nuclear
waste and became predictably indignant at attempts to buy their as-
sent to a risk that others refused to endure.
But now imagine the perhaps more typical U.S. or Canadian case of
a community whose residents start off with the belief that society™s
resources are being inequitably distributed as a result of a fundamen-
tally unjust political system. As reciprocators, they are likely to resist
the nearby siting of a noxious facility. Yet in this kind of political cli-
mate, there is at least some potential for compensation to work. Not
only does compensation help to offset the material inconveniences or
risks associated with the facility, the very offering of it conveys a de-
gree of respect that previously had been denied them by powerful
institutions and interests.
Case studies suggest that compensation is most likely to have this
positive effect when incentives are part of a negotiated, ˜˜bottom-up™™
siting process rather than a centrally administered ˜˜top-down™™ one.51
Even with compensation, the imposition of a site by a centralized
bureaucracy is likely to provoke negative reciprocal motivations. The
authority of administrators to dictate the site location suggests that
others are unwilling to accept the facility voluntarily, a signal that is
reinforced by the need to offer compensation. When voluntary accep-
tance is solicited, however, communities that historically have been
disadvantaged are likely to feel respected and empowered; compensa-
tion is no longer seen as degrading. In addition, the process of negotia-
tion is likely to create a climate akin to the face-to-face discussions in
public goods games: When they are able to discuss the situation with
remote political authorities, and are granted veto power, local com-
munities are likely to be assured that others are willing to contribute
The Logic of Reciprocity 355



their fair share to dealing with the problem. Accordingly, they re-
ciprocate positively by showing greater receptivity to placement of the
facility.
These effects, case studies suggest, feed on each other, generating
multiple behavioral equilibria. Again, in Massachusetts, which enacted
a top-down, dictate-plus-compensation regime in the 1980s, one com-
munity after another fought off attempts to locate hazardous waste
facilities within their borders, whereas in Wisconsin, which has a
bottom-up, negotiated-compensation scheme, a succession of commun-
ities have come forward to accept such facilities.52 Provinces in western
Canada have had similar strings of successes with the negotiated-
compensation strategy.53
The key to solving NIMBY, in short, is trust. Various sources of
evidence suggest that individuals can be made receptive to the siting
of noxious facilities in their communities if they can be made to be-
lieve that society is committed to treating their interests with re-
spect. Appropriately structured bottom-up, negotiated-compensation
schemes”ones framed to emphasize respect for the interests and au-
tonomy of prospective host communities”are one way to reverse
deep-seated resentments and thus excite a reciprocal openness to siting
decisions. If individuals can™t be made to believe that the burden of
accepting a noxious facility is being fairly reciprocated either in kind
or by like sacri¬ces, the current of resentment that fuels NIMBY will
be dif¬cult to reverse, even with ¬nancial incentives.

12.5 Street Crime

The conventional theory sees crime prevention as just another collec-
tive action problem. As a society, we are all better off when we univer-
sally refrain from theft and like forms of predation. But as individuals,
each one of us is better off free-riding on whatever restraint our neigh-
bors display while engaging in as much looting and pillaging as possi-
ble. Public order is, in short, a public good, one that will always be in
short supply if individuals are left to their own devices. If this is how
one thinks of the problem of crime, then the obvious solution is to cre-
ate incentives that bring individual interests into alignment with collec-
tive ones. Hence, the threat of punishments for those who break the
law.
The conventional theory of collective action thus naturally gives rise
to the law enforcement strategy of deterrence, which can be neatly
356 Kahan



formalized in terms ¬rst proposed by Bentham54 and later re¬ned by
Becker.55 As wealth maximizers, individuals, according to this theory,
commit crime when the gain, G, is greater than the expected punishment,
which is equal to product of the speci¬ed penalty, P, and the certainty,
C, that it will be imposed. Thus, crime is deterred when P ‚ C > G.56
Of course, it is ef¬cient or collectively wealth-maximizing to deter
crime only if the social cost of P ‚ C is less than the social losses associ-
ated with the crimes that P ‚ C deters. Accordingly, society must be
attentive to the cost of various P ‚ C pairings. This attentiveness gener-
ally favors severity over certainty, since maintaining a high likelihood
of detection and conviction (C) requires a continuing investment in
police of¬cers, judges, prosecutors, public defenders, and so forth,
whereas a high level of punishment (P)”assuming it deters and thus
doesn™t have to be imposed all that often”won™t cost much to imple-
ment and will allow society to economize on the various components
of law enforcement.57
This turns out to be a fair summary of the guiding philosophy of
American criminal law enforcement in the last twenty-¬ve years”the
results of which do little to vindicate the wisdom of the conventional
theory. Variance in the severity of punishment has consistently been
shown to explain little, if any, of the variance in incidences of robbery,
burglary, homicide, drug dealing, and other street crimes across place
and time. Certainty of conviction makes a difference, although a rela-
tively small one.58
What matters much more are a diverse collection of social conditions
and public attitudes. Thus, communities characterized by low ˜˜social
organization™™”as measured by the quality and vitality of voluntary
civic associations”tend to have more crime.59 So do ones where insti-
tutions lack ˜˜legitimacy,™™ as measured by the willingness of individu-
als to view the decisions of lawmakers and -enforcers as intrinsically
entitled to deference.60 ˜˜Social in¬‚uence™™”the tendency of individuals
to conform their behavior to those around them”also contributes to
the incidence of crime, generating multiple crime-rate equilibria inde-
pendent of the expected penalty for law-breaking.61
Where these factors are conducive to criminality, many individuals
will break the law notwithstanding very severe penalties. Indeed, there
is reason to believe that severe penalties can deleteriously affect the
attitudes and social conditions that lead to crime: massive incarcera-
tion, particularly when concentrated in minority, inner-city commun-
ities, disrupts social organization and taxes institutional legitimacy.62
The Logic of Reciprocity 357



Because it thus results in a great number of citizens being sent to jail
for a long periods of time, the conventional deterrence strategy turns
out not to be particularly cost-effective after all”not to mention mor-
ally problematic on a host of nonutilitarian grounds.
The contribution that social conditions of this sort make to street
criminality”and the potentially perverse effect of the classical deter-
rence strategy on these conditions”can be systematized and re¬ned
by the strong reciprocity theory. The diverse psychological and social
factors that predict crime suggest that reciprocity dynamics are at
work within not just one but rather three interlocking collective action
dynamics. The ¬rst consists in whatever mismatch exists between the
interests of society in law-abiding behavior and the interests of indi-
viduals in committing crime. This is the public order collective action
problem that occupies the attention of the conventional theory. The
contribution that social in¬‚uence makes to crime suggests that in this
collective action setting as in others, many individuals behave like
reciprocators”they tend to respect the security of others in their per-
sons and property in proportion to their perception that others are do-
ing the same.63
The second collective action problem focuses on the collective good
of community self-policing. Neighborhoods can do a lot to protect them-
selves from crime. Individuals can watch over one another™s resi-
dences. People can take an interest in the activities of one another™s
children, alerting parents when they see neighborhood kids veering
into trouble or even taking the effort to steer them out of trouble
themselves.64 Individuals can make their communities safer just by
maintaining a conspicuous presence on its sidewalks and streets, espe-
cially at night.65 It collectively bene¬ts the community when everyone
engages in these activities. Yet it remains in the interest of each individ-
ual to free ride on the willingness of others to monitor and mentor, and
simply hang out while attending exclusively to his or her own private
business, especially where such activities can expose those who engage
in them to risk or inconvenience.
The impact of social organization on crime suggests that reciprocity
dynamics play a large role in determining how citizens respond to
the community self-policing dilemma as well. Where they regularly en-
counter each other in voluntary associations”from churches to school
groups, from neighborhood improvement organizations to local cham-
bers of commerce”citizens are much more likely to observe other
individuals contributing to common endeavors and to reciprocate by
358 Kahan



doing the same. In atomized communities, in contrast, individuals are
necessarily thrown back on their own devices; they are much less likely
to see examples of public-spirited behavior and thus much less likely
to sustain self-reinforcing patterns of common regard and concern.66
The third collective action problem hinges on the public good of
citizen-police cooperation. The police obviously bene¬t when citizens co-
operate with them by supplying them with information about crime.67
Citizens bene¬t, too, when the police diligently attend to their needs
and treat them with respect in daily encounters. Yet it will often be in
the individual interest of citizens and police of¬cers not to behave in
these ways. When individuals report crimes, they expose themselves
at a minimum to inconvenience, but also to the risk of violent retalia-
tion at the hands of those they are reporting.68 Where the law is per-
ceived to be illegitimate, or enforcers arbitrary or biased, individuals
who cooperate with the police are likely to experience personal guilt
or to be stigmatized by other members of the community.69 For their
part, the police might perceive that forgoing aggressive treatment of
private citizens sometimes makes it harder for them to ferret out infor-
mation necessary to solve crimes, or even exposes them to physical
risk.70 They might also prefer to avoid the risks and inconveniences
associated with safeguarding private citizens from crime.
Reciprocity dynamics ¬gure signi¬cantly in a community™s capacity
to negotiate this collective action problem as well. Citizens are most
disposed to cooperate with police when institutions enjoy a high level
of legitimacy. Whether institutions are perceived as legitimate, it has
been shown, is determined largely by whether citizens believe they
are being treated in a fair and respectful way by police and other
decisionmakers.71 In effect, citizens reciprocate respectful treatment
with cooperation and obedience, and disrespectful treatment with
resistance”not only to the directives of individual decisonmakers, but
to the commands of the law more generally.72 How compliant or resis-
tant, deferential or de¬ant citizens are perceived to be no doubt in¬‚u-
ences the willingness of the police in turn to interact with them in a
civil rather than a coercive fashion and otherwise respond attentively
to their needs.73
The inef¬cacy of the conventional deterrence strategy is a conse-
quence of the effects it has in inhibiting reciprocal cooperation within
these three collective action settings. Considered in isolation, the effect
of the conventional deterrence strategy on the public-order collective
action problem is ambiguous. It™s implausible to think that the threat
The Logic of Reciprocity 359



of punishment has no restraining in¬‚uence, particularly on individuals
who for whatever reason are not restrained by the socially inculcated
dispositions such as shame and guilt.74 At the same time, as the effect
of high-pro¬le tax auditing campaigns suggests, it seems reasonable to
infer that conspicuously severe penalties for street crimes might some-
times operate as a cue that criminality is in fact widespread, an infer-
ence that, through reciprocity dynamics, would dilute the motivation
of some individuals to respect the rights of others.
But even assuming that its effect on the public order dilemma is
positive on the whole, the classical deterrence strategy clearly has a
negative effect on the community“self-policing and the citizen“police-
cooperation dilemmas. Public law enforcement and community self-
policing are, economically speaking, substitutes for one another”the
more a community has of one, the less it needs of the other in order to
hold crime in check. Accordingly, as the state purports to assume a
larger share of the deterrence burden through adoption of severe pen-
alties, it actually undermines (at least to some extent) the incentive
that individuals have to collaborate with each other to safeguard their
communities from crime.75 As public enforcement suppresses commu-
nity self-policing in this way, citizens have less occasion to observe one
another making conspicuous contributions to the safeguarding of their
own communities from crime. Having less exposure to monitoring,
mentoring, and creating a street presence individuals (as reciprocators)
become even less inclined to engage in such behavior themselves.76 In
effect, severe penalties crowd out and mask the disposition of indi-
viduals to contribute to community self-policing, making it all the
more necessary to employ severe penalties.
Severe penalties also discourage individuals from cooperating with
the police. Such penalties increase the likelihood that the targets of
reporting will retaliate. Indeed, if severe penalties are used to compen-
sate for a low certainty of detection and conviction, most individuals
will perceive that the likelihood of obtaining any bene¬t from report-
ing is largely futile anyway. In addition, particularly in minority com-
munities, severe penalties help to construct the perception that the
system is unjust. Accordingly, it is when the state penalizes criminal
wrongdoing severely that individuals are most likely to be inhibited
from cooperating out of guilt or fear of being branded a collaborator.
Confronted with an uncooperative citizenry, the police are likely to re-
spond by engaging in heavy-handed enforcement”to compensate for
the dearth of private tips, protect their own security, or simply to vent
360 Kahan



their frustration. This behavior by the police will in turn provoke citi-
zens to be even less cooperative. Deprived of the bene¬ts associated
with community support”which turns out to be the most potent
weapon for combating gangs77 ”the state will be forced to resort to
even more severe penalties, thereby aggravating the citizen-police co-
operation problem all the more.78
Ultimately, the negative effect of the classical deterrence strategy on
the community“self-policing and citizen“police-cooperation dilemmas
vitiates whatever positive effect the strategy might have had on the
public-order dilemma. Convinced that those in the community will
not do anything to stop crime, and resentful of a heavy-handed state,
individuals are likely to respond by engaging in more law breaking,
which then feeds on itself as the spectacle of rampant criminality
induces others to abandon whatever compunction they might have
felt not to prey on their neighbors. The result is a self-sustaining high
crime-rate equilibrium, fueled by distrust and various forms of nega-
tive reciprocity.
Is there a strategy for combating street crime that we should expert
to work better from a reciprocity point of view? There is”namely, the
selective delegation of law enforcement and punishment functions to
networks of private anti-crime associations.
Chicago has implemented a model form of this type of community
policing. Under CAPS”the Chicago Alternative Policing Strategy”
the Chicago Police Department divided the city™s most crime-ridden
neighborhoods into a collection of ˜˜advisory councils,™™ which usually
were comprised of no more than two or three city blocks. Each council
was assigned a ˜˜beat of¬cer,™™ who was under strict instructions (at a
time when the white mayor desperately feared a successful challenge
from a minority candidate) to translate the council™s grievances into an
agenda of problems to be solved by policing strategies acceptable to
community residents.79
The strategies that turned out to be the most acceptable involved the
selective privatization of a variety of law-enforcement tasks. One of
these was order-maintenance policing. In events dubbed ˜˜Operation
Beat Feet,™™ ˜˜March for Peace,™™ and ˜˜Good Guys Loitering,™™ the ad-
visory councils organized large numbers of law-abiding citizens to
occupy the streets of disorderly neighborhoods. By establishing a ˜˜pos-
itive people presence,™™ these citizens transformed those neighborhoods
into law-abiding ones during hours when they otherwise might have
been expected to be a center of criminal activity.80
The Logic of Reciprocity 361



CAPS also privatized criminal investigations. At advisory council
˜˜beat meetings,™™ citizens frequently complained about sources of dis-
order that the police lacked the resources to investigate. When this
happened, the citizens themselves were encouraged to gather the evi-
dence necessary to obtain legal relief. On one occasion, citizens facili-
tated the closure of a noisy tavern, that attracted disorderly patrons by
furnishing evidence of chronic health code violations. On another occa-
sion, citizens contributed to the jailing of a slumlord, whose rundown
tenement had become the site of drug-dealing and gang activity, by
collecting evidence of ˜˜reckless disregard™™ for public safety.81
Finally, CAPS facilitated instances of private shaming. One involved
a two-year picketing campaign, in which homeowners demonstrated
outside the home of a slumlord who had allowed his properties to be-
come the sites of deadly gang activity. The demonstrators ˜˜were fed up
with the noise, crime, violence, and general unrest that stemmed from
the problem buildings. . . . They hoped they could make the building
owner as uncomfortable in his home as he was making them in theirs.™™82
This form of highly participatory and decentralized law enforcement
proved to be as successful as it was unorthodox. Examining crime and
opinion data, criminologists Wesley Skogan and Susan Hartnett have
concluded that in the neighborhoods in which CAPS operated, trust in
the police grew signi¬cantly, as did trust among neighbors. All forms
of street crime”from drug distribution to robbery to homicide”
dropped.83
The behavioral mechanisms at work in CAPS can again be explained
in reciprocity terms. In effect, CAPS promoted trust, and hence re-
ciprocal cooperation, within each of the three collective action set-
tings that construct the problem of street crime. First of all, CAPS had
a positive effect on the community“self-policing dilemma. Whereas
traditional policing strategies risk displacing community self-policing,
CAPS assigned certain highly conspicuous elements of law enforce-
ment to community residents themselves. As they observed their
neighbors attending and speaking up at council meetings”and there-
after participating in order-maintenance demonstrations, public sham-
ings, and the like, citizens learned that their neighbors were in fact
willing to take an active role in safeguarding their community from
crime. Those who formed this impression could thereafter have been
expected to reciprocate, either by participating in CAPS initiatives
or by entering into less formal arrangements to watch out for one
another™s interests.
362 Kahan



The CAPS approach to community policing also helped to promote
positive reciprocity within citizen“police-cooperation setting. Citizens
long accustomed to seeing the police as simultaneously indifferent
to their needs and disrespectful of their rights were now exposed to
highly responsive and solicitous of¬cers. Unsurprisingly, citizens grew
more trustful and thus more willing to cooperate with the police. In ad-
dition, CAPS made it easier to cooperate with the police by negating
social meanings that can make such behavior an occasion for guilt or
ostracism. Those who took part in CAPS were not likely to view them-
selves or to be viewed by others as turning their fellow citizens over to
an alien or occupying force; rather they were participating in forms of
self-governance visibly supported by other members of the commu-
nity. The police, too, no doubt reciprocated the greater willingness of
citizens to cooperate with them by treating citizens more respectfully
in return, thereby generating an even greater willingness among citi-
zens to cooperate with the police.
Because it had these effects on the community“self-policing and
citizen“police-cooperation problems, CAPS likely had a positive effect
on the public-order dilemma as well. In a climate in which they trust
each other and the state more, individuals are more likely to obey the
law. Through reciprocity dynamics, moreover, such obedience feeds
on itself.
The strong reciprocity theory explains why we should expect selec-
tive privatization to result in a self-sustaining, high-cooperation, low-
crime equilibrium. And it implies that this equilibrium is likely to be a
stable and lasting one.

12.6 Other Applications

The strong reciprocity theory has implications for a broad range of
policy problems in addition to tax collection and the siting of noxious
facilities. It™s possible to sketch several in broad outline.

12.6.1 Fraud and Corruption
Like the disposition of individuals to engage in tax evasion, the dis-
position of individuals to engage in fraud or corruption appears to
depend on whether they think other individuals are engaged in such
behavior.84 This implies that high-pro¬le campaigns to crackdown on
such behavior, like high-pro¬le crackdowns on tax evasion, can back-
¬re.85 Indeed, when government invests more to deter fraud, individu-
The Logic of Reciprocity 363



als have less incentive to invest in credibly signaling to others that they
are trustworthy and honest, and hence reliable as trade partners. Be-
cause individuals reciprocate honesty with honesty, the suppression of
individuals™ efforts to display honesty to others will predictably reduce
the disposition of individuals to behave honestly, thus making penal-
ties for dishonesty less effective. A better policy, again, is to make citi-
zens aware that those around them are basically honest.
Or at least that is the best policy where individuals are in fact gener-
ally honest. In a condition of pervasive distrust”such as that which
exists in many former Eastern bloc nations”strong penalties for fraud
and dishonesty may be the only thing that works. Moreover, in such a
climate, penalties for dishonesty may in fact promote rather than un-
dermine trust. Individuals who resent fraud and corruption are likely
to interpret the advent of credible penalties as evidence that others
around them now feel the same way they do and are prepared to do
something about it. Some of those individuals will be moved to recip-
rocate by behaving more honestly themselves, inducing still others to
do the same, until a new condition of self-reinforcing cooperation is
reached”at which point maintenance of high penalties may be less
necessary.86

12.6.2 Information and Technology
Ideas are understood to be a classic public good. We all bene¬t from
useful inventions, engaging works of literature, effective medicines,
and the like. But why should any one of us endure the cost associated
with producing them when we can freely avail ourselves of the inven-
tive labors borne by others? The conventional theory again resorts to
incentives, here in the form of intellectual property rights that permit
inventors to exclude others from use of their ideas absent the payment
of a fee.87
But strong reciprocity complicates the picture once again. A growing
body of work has documented that within certain ¬elds”including
basic scienti¬c research and many types of computer software de-
velopment”individuals will reciprocate spontaneous contributions
to a collaborative inventive enterprise with like contributions of their
own, generating innovations that rival and often surpass the quality of
those achieved through proprietary modes of production.88 When this
happens, the deadweight losses and administrative costs inevitably
associated with intellectual property rights needn™t be endured to
secure the public bene¬ts of invention. Indeed, university scientists,
364 Kahan



computer hackers, and other reciprocal producers tend to suspend the
free exchange of ideas once they come to suspect that those with whom
they are collaborating are intent on appropriating the commercial
value of those innovations for themselves.89 An intellectual property
regime that is insensitive to the contribution that reciprocity norms
make to invention can thus sti¬‚e rather than stimulate innovation.

12.6.3 Democracy
The application of the conventional model of collective action to demo-
cratic politics yields public choice theory. According to this theory, citi-
zens, because they are self-interested wealth maximizers, will forego
public spirited deliberation and instead organize themselves into inter-
est groups for the purpose of extracting rents.90 To combat this dy-
namic, policy analysts have proposed a wide variety of structural
devices”from campaign ¬nance laws91 to term limits92 to line item
vetoes93 to budget process reforms94 ”all of which seek to raise the
cost or reduce the bene¬ts of organizing into special-interest pressure
groups.
The strong reciprocity model suggests a different analysis. As a posi-
tive matter, it points to a substantial body of empirical research sug-
gesting that the behavior of elected representatives is limited by
informal norms that discourage unconstrained efforts to redirect public
resources toward one™s own constituencies.95 Thus, reciprocity dy-
namics already make at least some contribution to containing special-
interest politics.
As a prescriptive matter, the strong reciprocity model warns us not
to assume that structural reforms will invariably reinforce reciprocity
norms in this setting. Policies designed to counteract public choice
pressures do more than change political actors™ incentives to engage in
rent-seeking; they also broadcast to citizens and their representatives
that rent-seeking is the behavior we expect political actors to engage in
whenever it is in their interest to do so. Because individuals are recip-
rocators, they are likely to respond to this message by displaying even
less restraint in the pursuit of their material interests in democratic po-
litical life. Thus, reforms aimed at reducing incentives to behave in a
self-interested fashion might well dissipate reciprocity-based norms
that now hold such behavior at least partially in check, and thereby
increase special-interest rent-seeking on net. The strong reciprocity
model thus underscores the anxiety that too readily accepting the
public choice picture can make it the reality of our political life.96
The Logic of Reciprocity 365



At the same time, however, the strong reciprocity model under-
scores how reforms that re¬‚ect different assumptions might stimulate
public spiritedness. For example, scholars have proposed that the state
award citizens two types of monetary grants: ˜˜stakes™™ that they can
use as they see ¬t upon adulthood and ˜˜patriot dollars™™ that they can
contribute to the political campaigns of their choice.97 The ¬rst of these
proposals expresses a societal commitment to assuring individuals a
fair chance to realize their life plans, the second society™s commitment
to assuring individuals a fair chance to in¬‚uence the political process
irrespective of their personal wealth. It™s plausible to believe that
many citizens will reciprocate the goodwill embodied in these schemes
by contributing more readily to the well-being of society and by refrain-
ing from purely self-seeking political behavior. And when citizens ob-
serve public-spirited behavior of this sort, still more citizens will be
moved to behave in the same way. These proposals, then, are another
example of how appropriately expressive law”even in the form of
cash subsidies”can be expected to accentuate reciprocal cooperation.

12.6.4 Good Samaritanism
Breaking with the traditional Anglo-American position, several U.S.
states have in recent years enacted laws that oblige individuals to assist
strangers in need when they can do so without risk to themselves.
Such laws are intended to counter the supposed growing indifference
of Americans”particularly urban-dwelling ones”toward the well-
being of strangers.98
The strong reciprocity theory, however, warns that such laws may
do more to construct than to remedy such indifference. Some individu-
als will see the apparent necessity of a penalty for nonassistance as
con¬rmation that most citizens don™t genuinely care about strangers™
well-being. Those individuals, the strong reciprocity model predicts,
will respond by showing less concern themselves. Financial incentives
to assist others are also likely to obscure morally motivated acts of
assistance, thereby diluting a signal of good intentions that would
otherwise have moved individuals to reciprocate in kind.
Substantial experimental evidence suggests that it simply is not the
case that Americans are disinclined to render assistance to strangers in
need.99 The way to strengthen citizens™ resolve to render such assis-
tance, the strong reciprocity theory implies, is to correct the mispercep-
tion that others lack such resolve”a goal that can be achieved through
public commendations of individuals who engage in heroic behavior.
366 Kahan



12.7 Conclusion

The main”indeed only”selling point of the conventional theory of
collective action is its asserted behavioral realism. Individuals, it tells
us, are inherently self-seeking. Accordingly, we can™t count on them
voluntarily to subordinate their material interests to the good of so-
ciety; rather we must alternately bribe and threaten them through
a costly regulatory apparatus, the maintenance of which not only
depletes our common resources but itself creates myriad opportunities
for advantage-seeking by self-interested individuals and groups. It is
hard to imagine a less inspiring account of our motives and our pros-
pects. But if the ugly picture the conventional theory paints is right,
then we™d be fools to avert our eyes from it.
It turns out, however, that the conventional theory isn™t right. Indi-
viduals in collective action settings might not behave like saints, but
they don™t behave like ¬ends either. They can be counted on to contrib-
ute to collective goods, the emerging literature on strong reciprocity
shows, so long as they perceive that others are inclined to do the same. Bribes
and threats are not nearly so necessary as the conventional theory
would have us believe; the law can instead enlist our cooperation by
furnishing us with grounds to trust one another to contribute our fair
share to society™s needs. Indeed, when the law relies only on bribes
and threats, it breeds the impression that citizens can™t trust one an-
other to contribute to collective goods voluntarily, thereby undermin-
ing their motivation to reciprocate one another™s public spiritedness.
Whatever truth there is in the conventional theory is an artifact of the
common acceptance of that theory™s bleak assumptions.
So we should now reject them. To replace the conventional theory of
collective action, we should construct a new and more appealing one
founded on our nature as reciprocators. The logic of reciprocity not
only re¬‚ects a more realistic understanding of individual emotional
and moral commitments. It makes the hope that citizens will be mor-
ally and emotionally committed to contribute to the common good
more realistic.

Notes

1. See Mancur Olson, The Logic of Collective Action (1965).
2. See id. at 1“2.
The Logic of Reciprocity 367


3. See Herbert Gintis, Samuel Bowles, Robert Boyd, and Ernst Fehr, Moral Sentiments
and Material Interests: Origins, Evidence, and Consequences, chapter 1 of this volume;
¨
Ernst Fehr and Simon Gachter, Reciprocity and Economics: The Economic Implications
of Homo Reciprocans, 42 Euro. Econ. Rev. 845 (1998); Ernst Fehr and Urs Fischbacher,
The Economics of Strong Reciprocity, in chapter 5 of this volume.

4. This conclusion is elegantly demonstrated by a variety of different means by Robert
Axelrod in The Evolution of Cooperation (1984).
¨
5. See Fehr and Gachter, supra note 3.
6. See Peter H. Reingen, Test of a List Procedure for Inducing Compliance with a Request
to Donate Money, 67 J. Applied Psy. 110 (1982); see also Robert B. Cialdini, In¬‚uence:
Science and Practice 96“97 (describing techniques used to create impressions of wide-
spread charitable giving) (3d ed. 1993).
7. See Elliot Aronson, The Social Animal 29“30 (7th ed. 1995); Robert B. Cialdini, Ray-
mond R. Reno, and Carl A. Kallgren, ˜˜A Focus Theory of Normative Conduct: Recycling
the Concept of Norms to Reduce Littering in Public Places, 58 J. Personality & Social Psy.
1015 (1990).
8. See Stanley Milgram, Hilary James Liberty, Raymond Toldeo, and Joyce Wackenhut,
Response to Intrusion into Waiting Lines, 51 J. Personality & Social Psych. 683 (1986);
´
Bernd Schmitt, Laurette Dube, and France Leclerc, Intrusions into Waiting Lines: Does
the Queue Constitute a Social System? 63 J. Personality & Social Psych. 806 (1992).
9. See Truman Bewley, Fairness, Reciprocity, and Wage Rigidity, chapter 11 of this vol-
ume; George A. Akerlof, Labor Contracts as Partial Gift Exchange, 47 Q.J. Econ. 543
(1982); William Dickens and Lawrence Katz, Inter-Industry Wage Differences and
Theories of Wage Determination, NBER Working Paper No. 2271, at 25“26 (1987); Law-
rence Katz and Lawrence Summers, Industry Rents: Evidence and Implications, in
Brookings Papers on Economic Activity, Microeconomics 209 (1989). See generally Ef¬-
ciency Wage Models of the Labor Market (George A. Akerlof and Janet Yellen, eds., 1986).
10. These patterns are illustrated graphically in ¬gure 12.3.
In this particular representation, there are three equilibria. One (selected arbitrarily for
illustration) is around 50 percent: if participants in a collective action setting perceive that
about half of the other participants are contributing in the period tn , then about half will
choose to contribute in the period tnþ1 , which means that about that many will contribute
in the period tnþ2 , and so forth and so on. But this middle equilibrium is relatively unsta-
ble. If as a result of some exogenous shock, more than 50 percent are induced to contrib-
ute in tn (say, 60 percent), then an even higher percentage than that will be willing to
contribute in tnþ1 (70 percent), leading a still higher percentage in tnþ2 , and so forth and
so on until contribution levels top out at the high-cooperation equilibrium at the upper
right hand corner. Similarly, if for some reason less than 50 percent contribute in tn (say,
40 percent), then an even smaller percentage will contribute in tnþ1 (30 percent), leading
to an lower contribution level in tnþ2 , and so forth and so on until contributions bottom
out at the low-cooperation equilibrium on the lower left hand corner. The corner equilib-
ria, moreover, are relatively stable: exogenous shocks may result in temporary boosts or
drops in contributions but unless they are big enough to push the contribution level back
across the 50 percent tipping point, collective behavior will quickly settle back into the
corner equilibrium from which it started. See generally Thomas C. Schelling, Micromo-
tives and Macrobehavior (1978) (developing formal model of tipping points and feedback
368 Kahan


% of Population




Dedicated Intolerant Neutral Reciprocators Tolerant Dedicated
Free-riders Reciprocators Reciprocators Cooperators
Collective Action Disposition

Figure 12.3
Multiple equilibria and tipping points.


effects); Randal C. Picker, Simple Games in a Complex World: A Generative Approach to
the Adoption of Norms, 64 U. Chi. L. Rev. 1225 (1997) (same).
11. See generally Armin Falk and Urs Fischbacher, Modeling Strong Reciprocity, chapter
6 of this volume.
12. See, for example, Robert Cooter, Normative Failure Theory of Law, 82 Cornell L. Rev.
947, 976“977 (1997); Timur Kuran and Cass R. Sunstein, Availability Cascades and Risk
Regulation, 51 Stan. L. Rev. 683, 688“689, 746 (1998); Cass R. Sunstein, On the Expressive
Function of Law, 144 U. Pa. L. Rev. 2021, 2032“2036 (1996).

13. See John O. Ledyard, Public Goods: A Survey of Experimental Research, in The Hand-
book of Experimental Economics 111, 156“168 ( John H. Kagel and Alvin E. Roth eds.,
Princeton University Press 1995); Elinor Ostrom, Collective Action and the Evolution of
Social Norms, 14 J. Econ. Perspectives 137, 146 (2000).
14. See Elinor Ostrom, Policies that Crowd Out Reciprocity and Collective Action, chap-
ter 9 of this volume. See generally Bruno S. Frey, Not Just for the Money: An Economic
Theory of Personal Motivation (1997); Uri Gneezy and Aldo Rustichini, A Fine Is a Price,
29 J. Legal Stud. 1 (2000) (¬nding that ¬ne increased rather than decreased abuse of day
care center rules by parents); Uri Gneezy and Aldo Rustichini, Pay Enough or Don™t Pay
at All (unpublished manuscript, April 1999) (¬nding that incentives decreased rather
than increased performance of individuals soliciting charitable donations); Richard M.
Titmuss, The Gift Relationship: From Human Blood to Social Policy (1971) (¬nding incentives
suppress donation of blood); Bruno S. Frey and Reto Jegen, Motivation Crowding
Theory: A Survey of Empirical Evidence, J. Econ. Surveys (forthcoming).
The Logic of Reciprocity 369


15. See Gintis, et al., supra note 3; Fehr and Fischbacher, supra note 3; Ernst Fehr and
¨
Simon Gachter, Cooperation and Punishment in Public Goods Experiments, 90 Am. Econ.
Rev. 980 (2000).
16. See generally Dan M. Kahan, Social In¬‚uence, Social Meaning, and Deterrence, 83 Va.
L. Rev. 349 (1997).
17. See generally Micale G. Allingham and Agnar Sandomo, Income Tax Evasion: A The-
oretical Analysis, 1 J. Pub. Econ. 323 (1972).
18. See id. at 842; Frank A. Cowell, Cheating the Government: The Economics of Evasion 74
(1990); Steven Klepper and Daniel Nagin, The Criminal Deterrence Literature: Implica-
tions for Research on Taxpayer Compliance, in 2 Taxpayer Compliance 126, 142 ( J. Roth
and J. T. Scholz ed., 1989).
19. See, for example, Harold G. Grasmick and Wilbur J. Scott, Tax Evasion and Mecha-
nisms of Social Control: A Comparison with Grand and Petty Theft, 2 J. Econ. Psych. 213,
225, 226 table 2 (1982).
20. See James Andreoni, Brian Erard, and Jonathan Feinstein, Tax Compliance, 36 J. Econ.
Lit. 818, 841 (1998).
21. See Robert B. Cialdini, Social Motivations to Comply: Norms, Values, and Principles,
in 2 Taxpayer Compliance 215 ( J. A. Roth and J. T. Scholz ed., 1989); James P. F. Gordon,
Individual Morality and Reputations Costs as Deterrents to Tax Evasion, 33 Euro. Econ.
Rev. 797 (1989); Klepper and Nagin, supra note 18, at 144; Steven M. Sheffrin and Robert
K. Triest, Can Brute Deterrence Back¬re? Perceptions and Attitudes in Taxpayer Compli-
ance, in Why People Pay Taxes 193 ( J. Slemrod ed., 1992).
22. See, for example, Grasmick and Scott, supra note 19, at 226 and table 4; Wilbur J.
Scott and Harold G. Grasmick, Deterrence and Income Tax Cheating: Testing Interaction
Hypotheses in Utilitarian Theories, 17 J. Applied Behavioral Sci. 395, 403 table 1 (1981).
23. Marco R. Steenbergen, Kathleen M. McGraw, and John T. Scholz, Taxpayer Adapta-
tion to the 1986 Tax Reform Act: Do New Tax Laws Affect the Way Taxpayers Think
About Taxes?, in Why People Pay Taxes 9 ( Joel Slemrod ed. 1992).
24. See id. at 29“30.
25. See id.
26. See James Alm, Isabel Sanchez, and Ana De Juan, Economic and Noneconomic Fac-
tors in Tax Compliance, 48 KYKLOS 3 (1995); Cowell, supra note 18, at 102“103.
27. See Steven M. Sheffrin and Robert K. Triest, Can Brute Deterrence Back¬re? Percep-
tions and Attitudes in Taxpayer Compliance, in Why People Pay Taxes 193, 194“195 ( J.
Slemrod ed., 1992) (suggesting interdependence of taxpayer decisionmaking should gen-
erate multiple behavioral equilibria); see also Cowell, supra note 18, 112“113 (developing
theoretical model predicting multiple compliance equilibria based on interdependence of
taxpayers™ decisions to evade).
28. See Richard D. Schwartz and Soya Orleans, On Legal Sanctions, 34 U. Chi. L. Rev.
274, 298 (1967).
29. See Steven M. Sheffrin and Robert K. Triest, Can Brute Deterrence Back¬re? Percep-
tions and Attitudes in Taxpayer Compliance, in Why People Pay Taxes 193, 211“213 ( J.
Slemrod ed., 1992).
370 Kahan


30. See id.
31. See Stephen Coleman, The Minnesota Income Tax Compliance Experiment: State Tax
Results (1996).

32. See Cialdini, supra note 21, at 215.
33. See the Wicked Witch Who Has Poisoned the Big Apple, Times (London), Sept. 3,
1989 (˜˜˜She deserves everything she gets, she™s scum,™ said one of hundreds of people
who waited outside the federal courthouse in Manhattan on Wednesday to jeer at
Leona.™™).
34. See, for example, David Cay Johnston, A Smaller I.R.S. Gives Up On Billions in Back
Taxes, N.Y. Times, Apr. 13, 2001, at A1.
35. See, for example, Tom Brazaitis, Wimpy IRS Emboldens Cheats, Plain Dealer (Cleve-
land, OH), Apr. 18, 2001 at 11B; Amy Feldman and Joan Caplin, Should You Cheat on
Your Taxes?, Money, Apr. 2001, at 108.

36. Janet Novack, Are You a Chump?, Forbes, Mar. 5, 2001, at 122.
37. See generally Don Munton, Introduction: The NIMBY Problem and Approaches to
Facility Siting, in Hazardous Waste Siting and Democratic Choice 1 (D. Munton ed., 1996);
Barry G. Rabe, Beyond NIMBY: Hazardous Waste Siting in Canada and the United States 1“2
(1994).
38. The classic statement of this analysis is Michael O™Hare, ˜˜Not on My Block You
Don™t™™: Facility Siting and the Strategic Importance of Compensation, 25 Pub. Pol. 407
(1977).
39. See Kent E. Portney, Siting Hazardous Waste Treatment Facilities 28 (1991); Rabe, supra
note 37, at 36“37.
40. See id. at 39“44.
41. Munton, supra note 37, at 17.
42. See Frey, supra note 14, 69“75.
43. See Howard Kunreuther and Doug Easterling, The Role of Compensation in Siting
Hazardous Facilities, 15 J. Policy Analysis & Management 601, 605“606 (1996); Howard
Kunreuther, Douglas Easterling, William Desvousges, and Paul Slovic, Public Attitudes
Toward Siting a High-Level Nuclear Waste Repository in Nevada, 10 Risk Analysis 469,
480 (1990).
44. See Munton, supra note 37, at 16; Douglas J. Lober, Beyond NIMBY: Public Attitudes
and Behavior and Waste Facility Siting Policy 124“125 (Ph.D. Dissertation, Yale Univer-
sity, School of Forestry & Environ. Stud., 1993).
45. See at Kunreuther and Easterling, supra note 43, at 605.
46. Lober, supra note 44, at 120; see also Kunreuther et al., supra note 43, at 470; see also
Paul Slovic, M. Layman, N. Kraus, James Flynn, J. Chalmers, and G. Gesell, Perceived
Risk, Stigma, and Potential Economic Impacts of High-Level Nuclear Waste Repository
in Nevada, in Risk, Media, and Stigma ( James Flynn, Paul Slovic, and Howard Kunreuther
eds., 2001).
The Logic of Reciprocity 371


47. See Robin Gregory, Howard Kunreuther, Doug Easterling, and Ken Richards, Incen-
tive Policies to Site Hazardous Waste Facilities, 11 Risk Analysis 667, 672 (1991); Kun-
reuther et al., supra note 43, at 472; Lober, supra note 44, at 140“142.
48. See Kunreuther and Easterling, supra note 43, at 601“602; Lober, supra note 44, at
145.
49. See id. at 145; Rabe, supra note 37, at 21.
50. See Lober, supra note 44, at 126; Rabe, supra note 37, at 44.
51. See generally Kunreuther and Easterling, supra note 43, at 618; Munton, supra note
37, at 19“20; Rabe, supra note 37, at 59.
52. See Kunreuther and Easterling, supra note 43, at 618; Lober, supra note 44, at 222“
223.
53. See Geoffrey Castle and Don Munton, Voluntary Siting of Hazardous Waste Facilities
in Western Canada, in Hazardous Waste Siting and Democratic Choice 56“57 (D. Munton
ed., 1996); Rabe, supra note 37, at 61“81.
54. See Jeremy Bentham, An Introduction to the Principles of Morals and Legislation,
reprinted in The Utilitarians (1961).
55. See Gary Becker, Crime and Punishment: An Economic Approach, 76 J. of Pol. Econ.
169 (1968).

56. See id.
57. See id.; Richard Posner, An Economic Theory of Crime, 85 Colum. L. Rev. 1193
(1985).
58. See generally Daniel Nagin, Criminal Deterrence Research at the Outset of the
Twenty-First Century, 23 Crim. & J. 1 (1998).

59. See Robert J. Sampson, Stephen W. Raudenbush, and Felton Earls, Neighborhoods
and Violent Crime: A Multilevel Study of Collective Ef¬cacy, 277 Science 918 (1997).

60. See Tom R. Tyler, Why People Obey the Law (1990).
61. See Kahan, supra note 16, at 359“360.
62. See Jeffrey Fagan and Tracey L. Meares, Punishment, Deterrence, and Social Control:
The Paradox of Punishment in Minority Communities (Columbia Law School Public Law
& Legal Theory Working Paper No. 10, Mar. 25, 2000).
63. See Kahan, supra note 61.

64. See generally Elijah Anderson, Streetwise: Race, Class, and Change in an Urban Commu-
nity 3, 70“77 (1990) (discussing role of generalized youth supervision, and consequence
of its deterioration, in containing crime in inner-city); Tracey L. Meares, Social Organiza-
tion and Drug Law Enforcement, 35 Am. Crim. L. Rev. 191, 204, 207 (1998) (surveying em-
pirical evidence).
65. See Jane Jacobs, The Death and Life of Great American Cities 29“35 (1961).
66. See Meares, supra note 64; Robert D. Putnam, Bowling Alone: The Collapse and Revival
of American Community (2000).
372 Kahan


´´
67. See generally Mart±n Sanchez Jankowski, Islands in the Street: Gangs and American Ur-
ban Society 193, 202“203 (1991) (arguing that cooperation between community and police
is both necessary and suf¬cient to destroy viability of criminal gangs).
68. See George Akerlof and Janet L. Yellen, Gang Behavior, Law Enforcement and Com-
munity Values, in Values and Public Policy 180 (Henry J. Aaron, Thomas E. Mann, and
Timothy Taylor eds. 1994).
69. See id. at 181“182; Anderson, supra note 64, at 190, 195“196, 205.
70. See Tom R. Tyler, Trust and Law Abidingness: A Proactive Model of Social Regula-
tion, 81 B.U.L. Rev. 361, 368“369 (2001).
71. See id. at 367“368, 376“378, 385“386.
72. See id. at 389.
73. See Anderson, supra note 64, at 202“203; cf. Tyler, supra note 70, at 369, 384 (noting
potential for displays of aggression to feed on each other in encounters between police
and citizens).
74. See generally Harold G. Grasmick and Donald E. Green, Legal Punishment, Social
Disapproval and Internalization as Inhibitors of Illegal Behavior, 71 Crim. L. & Criminol-
ogy 325 (1980).
75. See generally Tomas J. Philipson and Richard A. Posner, The Economic Epidemiol-
ogy of Crime, 39 J. L. & Econ. 405 (1996); Keith Hylton, Optimal Law Enforcement and
Victim Precaution, 27 Rand J. Econ. 197 (1996); Omri Ben-Shahar and Alon Harel, Blam-
ing The Victim: Optimal Incentives for Private Precautions Against Crime, 11 J. L. Econ.
& Org. 434 (1995).

76. See Anderson, supra note 64, at 57“58.
77. See Jankowski, supra note 67, at 202“203.
78. See Akerlof and Yellen, supra note 68, at 192“193, 195.
79. See generally Wesley G. Skogan and Susan M. Hartnett, Community Policing Chicago
Style (1997).
80. See id. at 174“175, 225.
81. See id. at 166“167, 175“176.
82. Id. at 177“178.
83. See id.

84. See Jon Elster, The Cement of Society: A Study of Social Order 278“270 (1989); Peter H.
Huang and Ho-Mou Wu, More Order without Law: A Theory of Social Norms and Orga-
nizational Cultures, 10 J.L. Econ. Org. 390 (1994).
85. Elster, supra note 84, at 270.
86. See generally Susan Rose-Ackerman, Corruption and Government: Causes, Conse-
quences, and Reform (1999).
87. See generally Kenneth J. Arrow, Economic Welfare and the Allocation of Resources
for Invention, in The Rate and Direction of Inventive Activity: Economic and Social Factors
The Logic of Reciprocity 373


609 (1962); Harold Demsetz, The Private Production of Public Goods, 13 J.L. & Econ. 293
(1970).
88. See, for example, Yochai Benkler, Coase™s Penguin, or, Linux and the Nature of the
Firm, Yale L.J. (2003); Arti Kaur Rai, Regulating Scienti¬c Research: Intellectual Property
Rights and the Norms of Science, 94 Nw. U.L. Rev. 77 (1999).
89. See Benkler, supra note 88; Rai, supra note 88.
90. Olson, note 1 above, is again the foundational work. See also James M. Buchanan and
Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy
(1962).
91. See, for example, Ian Ayres and Jeremy Bulow, The Donation Booth: Mandating Do-
nor Anonymity to Disrupt the Market for Political In¬‚uence, 50 Stan. L. Rev. 837 (1998).
92. See generally Elizabeth Garrett, Term Limitations and the Myth of the Citizen-
Legislator, 81 Cornell L. Rev. 623 (1996) (critiquing use of term limits to counteract public
choice dynamics).
93. See Elizabeth Garrett, Accountability and Restraint: The Federal Budget Process and
the Line Item Veto Act, 20 Cardozo L. Rev. 871 (1999).
94. See Elizabeth Garrett, Rethinking the Structures of Decisionmaking in the Federal
Budget Process, 35 Harv. J. Leg. 1113 (1998).
95. See generally Donald P. Green and Ian Shapiro, Pathologies of Rational Choice Theory:
A Critique of Applications in Political Science (1994).
96. See Jerry Mashaw, Greed, Chaos, and Governance: Using Public Choice to Improve Public
Law (1997).
97. Bruce Ackerman and Anne Alstott, The Stakeholder Society (1999); Bruce Ackerman
and Ian Ayres, Voting with Dollars (Yale Univ. Press 2002).
98. See Daniel B. Yeager, A Radical Community Of Aid: A Rejoinder to Opponents of
Af¬rmative Duties to Help Strangers, 71 Wash. U.L.Q. 1 (1993).
99. See Bibb Latene and John M. Darley, The Unresponsive Bystander: Why Doesn™t He
Help? (1970) (reporting experimental results showing that failure to intervene is attribut-
able to errors in perception especially likely to occur in group settings).


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13 Social Capital, Moral
Sentiments, and
Community Governance

Samuel Bowles and Herbert
Gintis




13.1 Introduction

Social capital generally refers to trust, concern for one™s associates,
and a willingness to live by the norms of one™s community and to pun-
ish those who do not. These behaviors were recognized as essential
ingredients of good governance among thinkers from Aristotle to Tho-
mas Aquinas and Edmund Burke. However, political theorists and
constitutional thinkers since the late eighteenth century have taken
Homo economicus as a starting point and partly for this reason have
stressed other desiderata”notably, competitive markets, well-de¬ned
property rights, and ef¬cient well-intentioned states. Good rules of the
game thus came to displace good citizens as the sine qua non of good
government.
The contending camps that emerged in the nineteenth and early
twentieth centuries, advocating laissez faire on the one hand or compre-
hensive state intervention on the other as the ideal form of governance,
de¬ned the terms of institutional and policy for much of the twentieth
century. Practically-minded people who (either by conscience or elec-
toral constraint) had adopted less dogmatic stances in favor of seeking
solutions to social problems never accepted the cramped intellectual
quarters of this debate. But it ¬‚ourished in academia, as a glance at
mid or even late twentieth-century comparative economic systems
texts will show. The shared implicit assumption of the otherwise polar-
ized positions in this debate was that some appropriate mix of market
and state could adequately govern the economic process. But the
common currency of this debate”in¬‚ated claims on behalf of sponta-
neous order or social engineering”now seems archaic. Disenchanted
with utopias of either the left or the right as the century drew to a
close, and willing to settle for less heroic alternatives, many came to
380 Bowles and Gintis



believe that market failures are the rule rather than the exception and
that governments are neither suf¬ciently informed or suf¬ciently ac-
countable to correct all market failures. Consequently, social capital
was swept to prominence not on its merits, but on the defects of its
alternatives.
Those to the left of center are attracted to the social capital idea
because it af¬rms the importance of trust, generosity, and collective
action in social problem solving, thus countering the idea that well-
de¬ned property rights and competitive markets could harness sel¬sh
motives to public ends to such an extent as to make civic virtue un-
necessary. Proponents of laissez faire are enchanted with social capital
because it holds the promise that where markets fail”in the provision
of local public goods and many types of insurance for example”
neighborhoods, parent-teacher associations, bowling leagues, indeed
anything but the government, could step in to do the job.
American liberals, along with social democrats and market socialists,
might not have joined in support of social capital had the limits of
governmental capacity and accountability not been unmistakenly dem-
onstrated in the bureaucratic arrogance and the dashed hopes of ¬ve-
year plans around the world. Conservatives might have been less avid
about social capital if their once-idealized institutions had fared better.
But the Great Depression in the past century, as well as growing envi-
ronmental concerns and rising inequalities at the century™s close, tar-
nished the utopian capitalism of the textbooks. The demise of these
liberal and conservative illusions of the past century thus cleared the
intellectual stage for social capital™s entry.
Thus, a decade ago, otherwise skeptical intellectuals and jaded poli-
cymakers surprised and impressed their friends by touting the remark-
able correlation between choral societies and effective governance in
Tuscany, warning of the perils of a nation that bowled alone, and quot-
ing Alexis de Tocqueville on America as a nation of joiners. President
George Bush the elder urged Americans to turn away from govern-
ment to the ˜˜thousand points of light™™ of a vibrant civil society, and
then-First Lady Hillary Clinton told us that ˜˜it takes a village to raise a
child.™™
The social capital boom re¬‚ected a heightened awareness in policy
and academic circles of real people™s values (which are not the em-
pirically implausible utility functions of Homo economicus)”researchers
began to ask how people interact in their daily lives, in families, neigh-
borhoods, and work groups, not just as buyers, sellers, and citizens.
Social Capital, Moral Sentiments, and Community Governance 381



All recognized the bankruptcy of the ideologically charged planning-
versus-markets debate.
Perhaps social capital, like Voltaire™s God, would have to have
been invented had it not existed. It may even be a good idea. It is not
a good term. Capital refers to a thing that can be owned”even a so-
cial isolate like Robinson Crusoe had an axe and a ¬shing net. By
contrast, the attributes said to make up social capital describe rela-
tionships among people. ˜˜Community™™ better captures the aspects of
good governance that explain social capital™s popularity, as it focuses
attention on what groups do rather than what people own. By a com-
munity, we mean a group of people who interact directly, frequently,
and in multi-faceted ways. People who work together are usually com-
munities in this sense, as are some neighborhoods, groups of friends,
professional and business networks, gangs, and sports leagues. The
list suggests that connection, not affection, is the de¬ning characteristic
of a community. Whether one is born into a community or one entered
by choice, there are normally signi¬cant costs to moving from one to
another.
In the next section we propose an alternative framework, which
we term ˜˜community governance.™™ We begin with some examples and
describe some experimental evidence demonstrating the plausibility of
the underlying behavioral assumptions. We doubt that the commonly
used survey instruments are reliable predictors of actual behaviors.
For example, Glaeser et al. (2000) found that the standard questions
about trust, popularized by Fukuyama (1995) and others, are entirely
uninformative about either the respondent™s experimental behavior in
a trust experiment for real money or the respondent™s daily behavior
(for instance, willingness to loan possessions to others). We then turn
to some endemic problems with community governance and chal-
lenges to be addressed by those who share our conviction that policy
design should recognize and enhance the complementarities among
markets, states, and communities. Similar proposals are advanced by
Ouchi (1980), Hayami (1989), Ostrom (1997; this volume, chapter 9)
and Aoki and Hayami (2000). We close with some speculations about
the future importance of community governance.
Our analysis is predicated on the fact, established in chapters 1 and 5
that the individual motivations supporting peer monitoring and other
aspects of community governance are not captured by either the con-
ventional self-interested preferences of Homo economicus or by uncondi-
tional altruism towards one™s fellow community members. Rather, it is
382 Bowles and Gintis



predicated on strong reciprocity, which is a predisposition to cooperate
in a collective enterprise, and a predisposition to punish those who
violate cooperative norms, both of which are individually costly but
conducive to strong social capital.
We will attempt to show that
(i) community governance addresses market and state failures, al-
though it typically relies on insider-outsider distinctions that may be
morally repugnant;
(ii) well-designed institutions make communities, markets, and states
mutual reinforcing rather than alternatives, although as described
in chapter 9, poorly designed institutions can crowd out community
governance;
(iii) some distributions of property rights are better than others at fos-
tering community governance and assuring harmony among commu-
nities, states, and markets; and
(iv) the small scale local interactions that characterize communities are
likely to increase in importance as the economic problems that commu-
nity governance handles relatively well become more important.

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