Cultural Norms, Evolutionary Psychology, and a Tiny Bavarian Grandmother

Professor Rossman raises many issues. No doubt these will be discussed further. I want to carve off one point that he makes and address it more deeply. The question is not so much whether he is wrong or right, but when he is right, and when the context might require rethinking.

In particular, I want to raise the issues of transaction costs, the “size” of the surplus in the exchange, and the way society thinks of the exchange being “disreputable” in the first place.

First, let me echo the point made by Professor Tabarrok: our brains are evolved to react to personal interactions in settings where dire need requires help. The idea of using the market to ration things that “should” (in the Stone Age, where our mental modules evolved) be shared, or perhaps never exchanged at all, affects something deep inside us.

Remember, whales have hips. They don’t have legs; but they have hips. This is a biological atavism: the tendency to exhibit, or revert to, ancestral type. In biology, an atavism is an evolutionary throwback, such as traits that persist because the evolutionary cost of retaining them is not high enough to engender their disappearance. Whales are descended from land (or, at a minimum, shallow water) mammals that returned to the sea. Their legs produced so much drag that evolution selected for “no legs.” But hips? Meh; not really a problem.

We humans were once constrained, in the absence of market institutions, to limited division of labor. Transaction costs limited us to groups restricted to about Dunbar’s number, something on the order of 150 persons or so. “Dunbar’s number” is that size of a group of people that can self-govern by norms of cooperation and reciprocity, because we can keep track of favors and what is owed.

Our minds, at an evolved emotional level, are not well suited to accept impersonal exchanges. Our reason allows us to exchange with people we don’t know, but our atavistic emotional lizard brains are screaming inside. It’s like when you get cut off in traffic: it’s dumb to want to get into a fight to “teach that guy a lesson,” if only because you’ll never see him again. But in the world of clans, and Dunbar’s number, your emotional response caused you to (1) provide the public good of norm enforcement, and (2) provide the private good of defending your rights, because you would fight even if you were likely to lose. The credible commitment problem is solved, in small groups, by emotions.

But it is the very nature of emotions that they are not rational. They have to be involuntary, in fact, if they are to serve their purpose. I was in Munich, in Germany, in 2009. Being just some yokel from the country, when I came to a crowd at an intersection, waiting for the light, I just looked both ways—no cars coming—and crossed the street.

There was a commotion behind me, and then I felt a “whap!” on my arm. A tiny Bavarian grandmother had tottered into the street behind me, and was hitting me with her umbrella. She was hissing loudly, “Kindermörder!! Kindermörder!!”

In her mind, the fact that I was ignoring the law meant that children might see me and also cross. I was a child murderer! Her small frail body was suffused with a cocktail of chemicals that essentially forced her to attack an adult male 30 years younger and 100 pounds heavier.

Frankly, I probably could have taken her. Instead, I was mortified as my own evolved emotional reaction—shame—kicked in. I tried to apologize, but by this time people were yelling at me from both sides of the street. I just scampered away, red-faced and humiliated. And I did not cross against the light again the whole time I was in Munich.

So, here’s my question: given that our reaction to “disreputable exchange” is in part an emotional reaction, and that reaction is a (possibly atavistic) product of norms that are preserved from an entirely different context of human interaction… what should we think about obfuscated exchange?

One possibility is the one I gave in my first post: obfuscation is a second best, and raises transaction costs compared to the “real” solution, where the transaction could be openly consummated.

But isn’t it true instead that obfuscation is a means of allowing the transaction, and to avoid being bashed with some oma’s umbrella?

In other words, isn’t it true that obfuscation is the lubricant for social intercourse?

Also from This Issue

Lead Essay

  • When the Invisible Hand Needs to Stay That Way by Gabriel Rossman

    In nearly all cases, markets are how most of us obtain and provide goods and services. But in some situations, recourse to markets is disfavored - whether rightly or wrongly - and in those cases, participants sometimes resort to what is known as an obfuscated exchange: Transactions may occur in which the good or service is provided, and in which the provider is compensated, but the whole thing still looks much less like a market transaction than it otherwise might. Examples are many, including everything from radio payola to Islamic finance. Professor Gabriel Rossman offers an introduction to this fascinating world and speculates on how cultures overcome their scruples about using markets.

Response Essays

  • Are Rossman’s Obfuscation Mechanisms Cynical, or the Best Available Compromise? by Michael C. Munger

    Michael C. Munger notes that objections to exchange typically arise from the perception of unequal bargaining power; these perceptions commonly are the source of the need to obfuscate. And yet obfuscation increases transaction costs. Even in the case of government subsidies to industry, obfuscation plays exactly this role, for we would perhaps find direct cash transfers even more objectionable than indirect, regulatory subsidies, which are not so easily talked about as just a sop to a favored few. But this is hardly the only time when obfuscation happens, and Munger concludes by promising to examine in a later essay when hidden exchanges should and should not be recommended.

  • Sleight of Hand-Out by Alan Page Fiske

    The examples that Gabriel Rossman analyzes are special cases of a general pattern, says Alan Page Fiske: What people say about social relationships commonly diverges from the actual nature of the relationship. This is not limited to obfuscation of market behavior; other things sometimes masquerade as commercial transactions instead, and various types of non-commercial interactions masquerade as one another. Further, individuals commonly act to preserve a beneficial ambiguity in their social relations, seeking to retain a pattern of options that would be foreclosed by a strict definition of the nature of their relationships. And at times, we may even be personally unaware of what our social minds are doing - and mischaracterize a relationship without realizing it.

  • How to Hide Trade from a Lizard by Alex Tabarrok

    Alex Tabarrok notes that for evolutionary reasons, humans tend to think in wealth-destroying ways about certain types of exchange. Obfuscation can help us work around the constraints of our lizard brains, saving lives in the process. Such happens in the obfuscated markets for organs in Iran and Israel. But obfuscation can do more than that: It can also allow participants to preserve certain kinds of social status that they might not want to forego. Obfuscation, then, is not mere dishonesty. It’s a way of negotiating social hierarchies while also participating in a market.

The Conversation