Preference modification vs. incentive manipulation as tools of terrorist recruitment: the role of culture

1. Preference modification vs. incentive manipulation as tools of terrorist recruitment:the role of culture Michael Munger, Departments of Political Science and Economics Duke University Friday, Sept 30, 2005

2. Problem of Acting as Society Can a group of people who disagree come to a consensus? I want…you want…what do we want? COLLECTIVE CHOICE PROBLEM Even if they do agree, how could they coordinate their actions? INFORMATION / TRANSACTIONS COST PROBLEM Even if they all know what to do, why would they do it? FREE RIDER / COLLECTIVE ACTION PROBLEM

3. Information and Coordination “The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate "given" resources—if "given" is taken to mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.” (F.A. Hayek, 1945, AER).

4. Problem 2--Commitment: Without Enforcement, Can We Cooperate? • Common Knowledge Basis of Cooperation—When I You Know That I Know that it is in your interest to cooperate… • Can we account for irrational acts? Suicide bombings, sacrifice of a life? Are the bombers duped, or confused? • We tend to think the state is the only answer….but…..

5. An Example of “Cultural” Difference • “shibboleth”--The word is often combined with the word “cultural.” • Its general meaning is mean an unspoken but shared understanding of something that identifies insiders, and distinguishes outsiders because they do not share this understanding.

6. Shibboleth • Judges 12, 5-7, King James 21st Ed. Bible • 5   And the Gileadites seized the passages of the Jordan before the Ephraimites; and it was so, that when those Ephraimites who had escaped said, "Let me go over," that the men of Gilead said unto him, "Art thou an Ephraimite?" If he said, "Nay," • 6   then said they unto him, "Say now Shibboleth." And he said "Sibboleth," for he could not frame to pronounce it right. Then they took him and slew him at the passages of the Jordan; and there fell at that time of the Ephraimites forty and two thousand.

7. My Definition of “Culture” • Culture:The set of “inherited” beliefs, attitudes, and moral strictures that a people use to distinguish outsiders, to understand themselves and to communicate with each other.

8. Culture Is “Inherited” I have put quotations around the word inherited above, not because I am quoting anyone, but because the sense of the word is strained. Hair texture, eye color, general build…those sorts of things are inherited. They are hard-wired into the genetic structure of humans, and children are directly and entirely the product of their parents. Culture is obviously not inherited like this. We teach it to our children, or they learn it by tacit and perhaps unconscious exposure over time. But it makes sense to think of culture as an inheritance, or legacy from the past.

9. Origins: Two Concepts • Spontaneous Order • Intelligent Design Does order imply design? Strange disconnect—Many people who believe fervently in evolution in biology insist on the need for design and control in social and economic settings.

10. The Questions that interest me… • Are preferences tastes, truly primitive (chocolate v. vanilla), or are they culturally conditioned or even instrumenal? • Are moral beliefs important? Are such beliefs best treated as preferences or constraints? • Core values: relatively fixed, strongly held, primitives in terms of “preference.” Policy beliefs not held instrumentally, but as ends in themselves. Not irrational to sacrifice for beliefs

11. The Questions that interest me… • Are ideologies, or shared belief systems about right and wrong, the key to understanding moral beliefs? In the U.S., lots of research to say no. But Islam, or Maoism, may have implications for guerrilla movements… • Are ideologies a kind of spontaneous order, not explicitly designed but regular and consistent across people and across time? Ideas--like viruses? Reproduce, gain resources, but kill their host….

12. Emergence of “Culture”: David Hume has Lunch at Café Hayek (where orders emerge) Three claims about culture: • “Order” requires only regularity and consistency. Human beings choose actions based on moral conceptions, but also incentives and calculated gains that accrue to one action rather than another. • Purposive Action: I am going to adopt the convention that humans act purposively. (Didn’t say “rationally”) • People choose actions that they believe (rightly or wrongly) will lead to a goal that they consider (rightly or wrongly) desirable. These conceptions of right and wrong may be Humean conventions, not transcendent principles.

13. Emergence of “Culture”: David Hume has Lunch at Café Hayek (where orders emerge) • Surprising thing is that order can emerge, even from disparate and uncoordinated application of social convention. • Survival value of practices, or fashion, may be conscious reason for adoption. But it is a predictable, and measurable, consequence.

14. Order vs. Design: Which is Culture? • Coyote—Evolution • Dachshund / Chihuahua—Survival • Dandelion—Evolution • Rose—Survival • Wild Turkeys—Evolution • Domesticated Turkeys—Survival

15. Choices Emerge….Do Preferences? • Is there some evolutionary process that governs preferences? • Are human political beliefs “getting better” over time? • The key difference is the absence of any feedback mechanism by which the merits of the emergent order might be judged, or subjected to modification.

16. Douglass North makes this point quite forcefully:Necessary conditions for what economists think of as efficiency almost never exist in political realm… • …Efficient markets are created in the real world when competition is strong enough via arbitrage and efficient information feedback to approximate the Coase zero transaction cost conditions and the parties can realize the gains from trade inherent in the neo-classical argument. • But the informational and institutional requirements necessary to achieve such efficient markets are stringent. Players must not only have objectives but know the correct way to achieve them. But how do the players know the correct way to achieve their objectives? The instrumental rationality answer is that even though the actors may initially have diverse and erroneous models, the informational feedback process and arbitraging actors will correct initially incorrect models, punish deviant behavior and lead surviving players to correct models. (North, 1993).

17. Will Culture Disappear? • Ronald Heiner (1983) argues that as human interaction becomes more complex and uncertain, successful social institutions must reduce the information needed to achieve cooperation among individuals. • A person’s “overall behavior may actually be improved by restricting flexibility to use information or to chose particular actions” (p. 564). • Mom and Pop hardware store vs. Walmart • Farmers’ Market vs. Piggly Wiggly

18. The End of History What is the cheapest way of achieving cooperation? Formal rules and external enforcement, or culture and shame/guilt “enforcement”? Heiner (1983): “In general, further evolution toward social interdependence will require institutions that permit agents to know about successively smaller fractions of the larger social environment. That is, institutions must evolve which enable each agent in the society to know less and less about the behavior of other agents and about the complex interdependencies generated by their interaction” (580; emphasis in original). In WalMart world, ideologies would disappear. Western, market-based societies with weak parties and decentralized democratic institutions—the end of history?

19. Institutional Design: Information….and Commitment • Institutions are the humanly devised rules of the game that shape and direct human interactions. • Institutions reduce uncertainty by shrinking the choice set of all of the “players.” If the rules are not formalized, the players may spend too much time arguing over the rules, and less time competing in productive activities. The actual choice of institutions, however, is hard, since there are countless ways of restricting “bad” choices. What makes some institutions better than others? • The Preference Store: Metapreference

20. Step back for a moment….The Fundamental Human Problem(according to Munger) How can we construct or preserve institutions that make individual self-interestnot inconsistent with the common good?

21. Two Approaches • Madisonian “Ambition must be made to counteract ambition…” • Rousseauvian Transform the self, solve the problem of amour propre. Inscribe the law on the hearts of men. Some preferences are better than others.

22. The Problem…. • The nature of exchange: gains from trade. Both are better off. • But only if the exchange takes place: transactions costs are the ex ante costs of negotiating and measuring, and the ex post costs of enforcing. Transactions costs can easily overwhelm the potential gains from exchange. • Institutions and cultural beliefs: closely related to "common knowledge" problem in game theory. Shared meanings, iconography, language, symbols. Not just knowledge in the Hayekian sense, but also commitment • But also may entirely block progress, lock in institutions that are not Pareto optimal.

23. Origins of culture The literature contains two strikingly different accounts of the origins of culture, based on two very different conceptions of its function. One account is based on transactions cost and commitment, while the other rests on the problem of excludability and “club” goods. The two accounts are not mutually exclusive, but they do have strikingly different implications for our understanding of culture.

24. I. Commitment Device: Real Piety • Kreps (1990) • Hierarchy • Uncertainty Requires an organizing principle as a commitment device.

25. The Trust Game Honor Trust A +$20 B +$20 Total: +$40 Trust B A $10 B +$30 Total: +$20 A Do Not Honor Trust B Do Not Trust B A +$0 B +$0 Total: +$0

26. Hierarchy and Strategic Uncertainty It is B’s behavior that is in question; somehow B must persuade A that there is at least a high probability that B will honor A’s trust if A offers it. And there are real gains to be made here, so there are significant pressures at work to overcome this commitment problem. There are two apparently different but mathematically indistinguishable ways of solving the problem: • B could post a bond, or submit to some kind of binding third party enforcement that would punish him if he violates trust, or • B could persuade A that cares so much for A, or that B cares so much for his own honor, that he will not violate the trust, because it would not be in his interest to do so, given B’s self interest properly understood. Similar in terms of analytics, but a world of difference in terms of practical implications, and beliefs.

27. Hierarchy and Strategic Uncertainty Outside enforcement: Hobbes’ “covenants, without the sword, are but words…” Beliefs: Rousseau: “inscribe the law on the hearts of men…” • It is common to dismiss this difference, but in fact the distinction may be the very heart of the matter for the society. • Dead weight loss to society has two parts: (1) The size of the “transactions cost sector” of the society, and (2) Other exchanges precluded by an inability to reduce transactions costs to the point where those otherwise profitable transactions can take place • This loss is a direct function of the society’s set of moral beliefs that condition interactions. It will surprise no one at this point that I want to call this whole set of moral beliefs and conditioning factors for economic and social exchange by the vague name I mentioned earlier: culture….

28. II. Club Goods: Good Works A standard set-up for the club goods approach is Berman’s (2003): Imagine a community for which neither government nor markets function well. Local public goods usually provided by government such as public safety, law and order and welfare services are poorly provided or absent, while neither public nor private sectors efficiently deliver education, health services, or insurance. It would not be surprising for individuals in such a place to band together into communities which provide public safety, education, welfare services, and other local public goods through mutual insurance. (Berman, 2003, p. 2)

29. Game 1: Prisoner’s Dilemma ORDINAL PREFERENCES: 1 is good, 4 is bad

30. Game 1: Prisoner’s Dilemma with External Enforcement: Defectors are Tortured & their Families Killed ORDINAL PREFERENCES: 1 is good, 4 is bad

31. Game 1  : Prisoner’s Dilemma with External Enforcement: Defectors Feel Really Bad ORDINAL PREFERENCES: 1 is good, 4 is bad

32. Game 2: Culture War ORDINAL PREFERENCES: 1 is good, 4 is bad

33. Game 3: U.S. in Iraq—1992No Equilibrium…. ORDINAL PREFERENCES: 1 is good, 4 is bad

34. Game 3: U.S. in Iraq—2005Side Payments….”Be Rational” ORDINAL PREFERENCES: 1 is good, 4 is bad

35. If Club Goods…. If participation in terrorist organizations is primarily an in-kind payment for access to club goods, then policies that reduce the marginal value of such club goods will be most effective. A concerted effort to break up social networks, in cases where groups with terrorist ties (such as Hamas, or IRA) also provide local public goods such as schools, police services, etc., and replace those organizations with publicly provided services, would have an immediate impact out of all proportion to the cost. Though the dividing line between “police services” and “protection racket” may be blurred, it is clearly true that the IRA (in Northern Ireland) and Hamas (in the Palestinian territories or in other parts of the Middle East) provided services valued by many local citizens.

36. If Club Goods…. Furthermore, if the problem is an incentives-based choice, it becomes clearer why medieval punishments have often been employed by occupiers fighting resistance groups using terror tactics. The rack, drawing-and-quartering, or other public displays of savage retribution reduce the value of access to local public goods as a matter of simple cost-and-benefit calculations. While this observation does not justify the use of such tactics, it does explain why they have been so commonly observed throughout history.

37. If Preferences…. If, on the other hand, a preference for cooperation can be inculcated or selectively recruited, then such tactics are likely to backfire. If the primary good is psychological solidarity with an identifiable group, then public abuse or torture may only harden the resolve of those committed to cooperation with terror groups. To the extent that abuse of some populations solidify in-group vs. out-group psychological identifications, attempts to use incentives can precipitate the “culture war” setting described earlier in this paper. In that setting, publicly uncooperative behavior becomes valued as an end in itself, and even apparently Pareto-superior compromises on territory may be ruled out. If the preferences are primitives, not possible to compensate or buy out terrorists with alternative incentives.

38. A movie: Positive Feedback….