Reciprocity, reputation and trust

Ostrom argues that what makes society work together are the core relationships of reciprocity, reputation and trust. She identifies reciprocity as a class of strategies for human behavior or games between individuals, the most famous being tit-for-tat. Reciprocity is necessary to drive human behavior towards norms of trust and reputation. If the other side cooperates, you can cooperate to achieve common good. If the other side does not cooperate, most societies can enforce some kind of punishment, such as naming, shaming and isolation.

Most people use reciprocity to acquire a reputation by doing short-term action that has costs, but creates long-term net benefits. Trust is the valuable asset that creates social cohesion. Without trust, societies break up because people vote with their feet. The tragedy of the commons occurs because individuals do not trust each other and therefore elect to do their own thing selfishly.

In order to break these collection action traps, Ostrom emphasizes the importance of communications and also civic education. If our school textbooks praise self-interest, are we surprised that our financial industry has greedy Gordon Geckos and Bernie Madoffs?

Ostrom also suggests that the role of the state has to change, because she felt that “national governments are too small to govern the global commons and too big to handle smaller scale problems.” She argues for governments to work with civil society, giving them enough space and support to handle the small problems that government bureaucracies cannot handle efficiently. In other words, she argues against the simplistic view that world problems are solved only by governments or private enterprise. There is a major role for citizen participation for the public good.

Traditionally, Asian society sees governance as divided between the state and the family. The rise of the corporate world created governance between the state, the firm (private enterprise) and the family. Today, there is a new class of civil society, in which citizens want to work with each other to look after their common interest, such as environmental protection, education, public health or social welfare. There is increasing awareness that governments cannot solve all problems, and bureaucracies can often be the problem, not the solution of our social ills.

Thanks to Ostrom, we are reminded that governments need to work with civil society to create social cohesion. Most bureaucracies around the world are not equipped to think or function like that. But that is the way of the future.

Andrew Sheng is Adjunct Professor at Tsinghua University, Beijing and University of Malaya. He was formerly the Chairman of the Securities and Futures Commission, Hong Kong.

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