A brilliant player wants a referee, for only when the game has appropriate rules can he really show his talents. While the sports of baseball and football haven't changed much in the last century, the economy has -- and American financial regulation hasn't had an overhaul in 70 years. The challenge for the Obama administration, along with the U.S. Congress and our SROs, is to invent a new and better American version of the capitalist game.-Akerlof and Shiller in the WSJ on April 23, 2009.
Human history has been blighted with dark ages in which our games were little different from the games played by animals in the jungle. Eat or be eaten. Might makes right. During these dark ages, drawing a short straw on health or wealth in the birth lottery meant a life sentence of hunger, ignorance, and fear. A lifetime of hard work was often not enough to guarantee a person her own welfare, much less the welfare of her children.
Civilization writ large can be understood as an effort to redefine the rules of engagement we knew in our ancestral environment. At some moment in time long ago, two competing groups of people either explicitly or implicitly agreed not to kill each other in competing for scarce resources. We will never know exactly what this first agreement looked like, but it is at least plausible that it would have substituted combat for some other form of a competition -- a competitive game. Each group could hold the other accountable to the rules of the new game by the implicit threat of mutually destructive violence should cheating be found. Cheating, and hence violence, did not and have not disappeared as a result of new games being adopted. But as Robert Axelrod demonstrated first with Tit-for-Tat, the individuals or groups that adopt a default strategy of cooperation (or in this context, playing by the rules), reserving punishment only for cheaters, over time outperform other strategies in nearly any local environment. In other words, human civilization evolved to play formal games, games with symbolic rules and procedures agreed in advance.
This shift from chaotic violence to the order of symbolic rules and procedures has had ramifications far beyond mere escape from violence. In the negative space created by the escape from violence, there was room for individuals and groups to develop the knowledge and skills useful to learning and experimenting with strategy in the formal games. Strategies for winning became overlaid on the rules and procedures, and on the commitment to play by the rules and procedures. So long as the agreements that formed the lower layers of this hierarchy of rules remained stable, there was opportunity for individuals to earn reward and recognition from their group by proposing winning strategies. Over time, reward and recognition began to flow to the individuals who were better equipped to learn, analyze, and make strategy rather than the individuals who were more likely to have won in an environment of violent chaos.
This shift in reward and recognition itself was a source of conflict within some groups. It was probably easier for groups to give rewards and recognition to the individuals who came up with winning strategies when those individuals were also the strongest warriors. But over time, as symbolic rules replaced chaotic violence, the coincidence of these traits became less necessary. One choice for the strong bodied but weak minded was to try and impose their own violent order on the group. But when that option failed, it only made it less likely to be attempted in the future. Another was to leave and found another group. This strategy was risky, but more likely to succeed over the long-term should the founding of the competing group be successful. Depending on the fecundity of the new group relative to the old, the new group might overwhelm the old with shear numbers, thereby imposing a violent disorder.
But somewhere over the course of human history, perhaps toward the end of the Dark Ages, it seems that the cooperative groups picked up enough momentum to squeeze the more violent groups into the cracks and crevices of global civilization -- into place like Papua New Guinea, for example. And once the creative power of these cooperative groups was unleashed, it began to transform the face of the earth. Not since Greece and Rome has so much art, music, architecture, law, and technology been developed so fast.
Within this new, non-violent order, the rules of the game themselves have been subject to evolution. Not only are we playing a game rather than killing one another, we are constantly looking for better games to play. Cultural evolution is evolution within evolution. Capitalism is a game that everybody can play, although like any game there will be winners and losers.
[MFM Note: I had most of this post together in April and didn't like it. I circled back around today, made a few edits and am now posting. Comments are welcome. This is a little diffuse even for me.]