Fair
Trade as a public good is something that the majority would lay claim to being
a good principle – not everybody, but most. If the stakes are high, fair trade
may be hard to stick to, but even when they aren’t so high our competitive
natures may well sneak in a little stretching of the rules.
A
big question of course, is who sets the rules? Also setting rules has to go
along with enforcement, else we end up in situations like our current banking
game. The underlying difficulty appears to be how to get people to cooperate for the
general good in unregulated trading.
An
ideal situation for a lab experiment, as Eriksson and Strimling spotted, did it
and wrote it up last week (1). They tempted 116 students with promises of the
trading floor for a Public Goods game.
From
their individual cubicles, these nascent big bankers played in groups of four
for multiple round before being shuffled. At the beginning of each round, they
were handed a wad of 10 tokens from the forgiving public and they then decided
how much to join their three unseen friends in investing in that round. Every
token invested made half a token extra and the total investment was split
evenly regardless of the individual investment.
Anybody
who clings to the principle of fair trade as a public good would dump in most
of their cash knowing that if everybody did that, all get rich. What happened?
A lot of participants took a get rich line and put in very little, planning to
free load on the cooperating suckers Net result? Greed triumphs over sense and
cooperation, dragging everybody down. Doesn’t it sound familiar?
That
was the baseline. New games were set up where the meanies were revealed and
rewards and punishments were voted on by the players. No, nirvana was not attained
by these young financial warriors in that Swedish stronghold of learning.
But,
and isn’t it good that there can always be a but. When high meanie limits were
imposed to force investment and regulated with significant fines for
non-compliance, fair trade as a public good flourished.
Strong,
fair regulation, firmly imposed without fear or favor, may not have been the voting choice of the financial traders, but it ensured everyone had a goodly sized pie
slice. There was some latitude, so there were some winners and others not quite
so well off but no cubicle banking failed.
