May 19, 2011

Paper of the day: History, Expectations, and Leadership in the Evolution of Cooperation

This is the abstract of the most recent coauthored paper by Acemoglu , who is one of the most influential economists.
We study the evolution of the social norm of "cooperation" in a dynamic environment. Each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game. "History" matters because agents only receive noisy information about the play of the previous generation and their interpretation of these signals is shaped by history. We characterize the conditions under which history completely drives equilibrium play, leading to a social norm of high or low cooperation. The impact of history is potentially countered by "prominent" agents, whose actions are more visible (in our baseline model, observed by all future agents), and who can leverage their greater visibility to influence expectations of other agents and overturn social norms of low cooperation. We also show that in equilibria not completely driven by history, there is a pattern of "reversion" whereby play starting with high (low) cooperation reverts toward lower (higher) cooperation.
Basically, leaders can change a historical path. Which seems to be the case of Botswana. In fact, it seems that behind every economic miracle there is also an effective leader behind it. This does not mean that other factors do not matter.

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