Bootleggers & Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics (11 page)

All this may sound a bit deep and curious, but if we stay with it, we face another question: How exactly do special interest groups know what passions to appeal to? Why not patriotism? Buy American? Why not saving downtown from price-cutting big-box stores? What about keeping the wheels of American industry turning? After all, lots of gods, idols, and demigods might do the job. The answer to these questions is important in guiding our narrative of what constitutes the winning Bootlegger/Baptist coalition. We ask the reader to indulge us as we digress into an exploration of several areas of the academic literature, starting with a look at Adam Smith and experimental economics. When we reach the destination, the patient reader will understand why we took the trip.

Adam Smith and the “Impartial Spectator”

The great Scottish philosopher Adam Smith ([1759] 1982) offered in his “other” great book,
The Theory of Moral Sentiments,
a compelling thought experiment to illustrate how humans interact with one another in a community setting. Smith claimed that we all have an “impartial spectator” embedded in our genetic makeup that can be called on to help us understand how our actions will be viewed by others. The impartial spectator is impartial in that no person’s preferences or interests are considered more important than any other’s and is a spectator in that this “man within the breast,” as Smith described it, focuses on the larger community and helps the searching individual figure out what is morally right and wrong.

By appealing to this impartial spectator, we are able to figure out where the sympathies of others truly lie (Adam Smith [1759] 1982, 132). According to Smith, the spectator helps us constrain our actions and offers guidance in what will be met with approval and what with disapproval. This is not to say that the impartial spectator is always accurate, as of course each person has his own underlying bias, or that people always follow what their impartial spectator dictates; we are free to ignore our consciences. But the idea is still a powerful one: the impartial spectator in general exists to ward off disagreeable behavior that could lead us into trouble with others. Think of it as a mental referee, helping people play the game of life.

In evolutionary terms, the impartial spectator can be seen as an emerging means of cooperating with others, allowing us to avoid constant conflict that would reduce our chances of survival. Those who find themselves in conflict with others are not long for this world, because their DNA risks being unceremoniously dumped from the gene pool. Those who survive are likely to have some innate sense of what will be met with approval from society and what will provoke ostracism or punishment.

Of course, the impartial spectator is no fool. Just as it can seek approval and facilitate social cooperation, it can also condemn inappropriate behavior by others. When the actions of others cause the impartial spectator to recoil in disgust, we react with an appropriate response. This mix of cooperation and censure is beneficial, because it ensures that those who do not deserve trust will more often be left out in the cold. As the saying goes, “Fool me once, shame on you. Fool me twice, shame on me.”
¹

Our interactions with others thus involve a peculiar form of cooperation, one marked by not only sympathy but also potential hostility. Put another way, this form of other-regarding behavior is intricately related to the notion of reciprocity. How we act toward another person is informed by the other person’s behavior as much as by our own. Please be patient, dear reader. We are on our way to discovering the answer to “Why Baptists?”

Reciprocity Observed in the Laboratory

Adam Smith’s notion of the impartial spectator suggests that we trust others but only so much as this is validated by subsequent actions. That is, trust is guided by reciprocity. Because trust in others is fragile, wealth-accumulating communities must find ways to strengthen the tendency to cooperate. Social norms that embody moral standards such as religious teachings, for example, form an impartial spectator that must be nurtured to sustain cooperation.

A large body of laboratory evidence from experimental economics illustrates the extent to which these norms of cooperation prevail. Vernon Smith (1998), winner of the 2002 Nobel Prize for his seminal work in experimental economics, wrote specifically on the link between Adam Smith’s impartial spectator and the lessons of the laboratory. According to Vernon Smith, our ability to reason what others are thinking is responsible for the community of personal relationships that ultimately facilitate economic growth. By relying on an inherent sense of trust, validated by subsequent reciprocal interaction, people may overcome short-run, selfish tendencies and instead engage in trade.

A set of economic experiments, known as the “trust game,” illustrates this lesson. In the trust game, each person is given a certain amount of money and paired with another person for a series of interactions. The first person, a “trustor,” decides whether to send the second person, a “trustee,” any of his cash. If he does, this money is automatically tripled upon receipt by the trustee. Once the transfer occurs, the trustee then decides how much of this tripled amount to send back to the trustor.

Simple self-interest would predict that the trustor would never send money to the trustee, since the trustee loses nothing in keeping it all. But the results show that actual human beings behave quite differently. In the original experimental sessions documented in Berg, Dickhaut, and McCabe (1995), more than 90 percent of the subjects decided to trust their counterpart by transferring at least some of their money. Of these trusting subjects, half were met with reciprocity that resulted in positive returns: their partners returned earnings greater than the original amount sent. Furthermore, the returned earnings were higher when trustors sent a greater portion of their original endowment. In other words, not only were most of the subjects more trusting than strict self-interest would predict, but at least half the trustees given the opportunity to “take the money and run” failed to do so. Though limited, trust clearly emerged in a manner unanticipated by strict self-interest in this experimental environment.

Although this evidence is not universally in favor of our implicit sense of trust with one another, it does provide support for the larger theory of reciprocity. Most of the trustors initiated trust with their counterpart, and of those who did, half were met with reciprocated trust. This result is remarkable given that these trustees were essentially giving up free money. From a narrowly self-interested perspective, the trustee could gain more by exploiting his partner’s trust than from cooperation. Nevertheless, trust emerged.

Remember, though, that if trust is violated, the impartial spectator beckons us to respond in kind. Another series of experiments, known as the “ultimatum” and “dictator” games, illustrates just how precarious trust can be once violated. These experiments pair persons up to determine how a certain amount of money will be split. In the ultimatum game, the first person decides how much money to offer the second person. The second person then decides whether to accept or reject the offered amount. If rejected, neither subject gains anything. The money is simply returned to the experiment. In the dictator game, the same rules apply except now the second person has no decision to make. Whatever the first person decides is final.

In the ultimatum game, strict self-interest would predict that the first person would send a trivial amount (that is, the minimum transfer, usually one dollar), and the second person would accept any distribution that resulted in his receiving anything more than zero dollars. In the dictator game, in contrast, strict self-interest predicts that the first person sends nothing, because the second person cannot reject the distribution.

Again, experimental results challenge this strict self-interest prediction. In the vast majority of reported experimental results, the first player in the ultimatum game chooses a percentage distribution between 70:30 and 50:50 (with the first player’s percentage shown first in the ratio). If the first player calls for a larger payoff than 70 percent for himself, the second player will tend to reject the deal. In the dictator game, the first player still tends to send a positive amount to the second person, though less than the typical amount offered in the ultimatum game, despite the second person’s inability to punish the first player.

Laboratory evidence shows just how hard it is to switch off our innate sense of trust and reciprocity. Take the ultimatum game. Not only does the second person tend to reject low distributions, at his own cost, but the first person already anticipates this, because very few grossly unequal distributions are even offered. In other words, both subjects are able to appeal to their respective impartial spectator in determining how to navigate the exchange in a way that helps both parties (or as Vernon Smith [1998, 7] calls it, “mindreading”). In the dictator game, the first person still recognizes the social context of the interaction. By offering a positive amount, he exposes a trustworthy nature.

This body of research supports the notion that human experience dating back several millennia generated genetic material that predisposed us to the cooperative behavior necessary for collective survival. For cooperation and cooperating communities to flourish, widely known and embraced social norms must embody wisdom of the ages. Again, the impartial spectator must be nourished. As we show in the next section, the lesson in all this is that successful Bootleggers and all other political agents must make a Baptist appeal.

Cooperation, Religion, Politics, and Wealth

The experiments we have described suggest that trust and reciprocity play an enormous role in human decisionmaking. In a sense, high degrees of trust and reciprocity provide low-cost mechanisms for inducing cooperation and perpetuating community social norms and moral values. From an evolutionary perspective, populations in which communities passed on cooperative genes and social customs thrived. Those in acrimonious communities did not. Making this point in his discussion of group survival, Matt Ridley (1997) builds on the work of zoologist Richard Dawkins (1976) and argues that human beings are genetically predisposed to cooperate.

But what about religion and political rhetoric? Again, why Baptists? Richard Dawkins (1976) argues that “actions” taken by the selfish gene “cause” human beings purposefully to seek genetic survival, which includes engaging in cooperative behavior. These efforts are fortified by cultural “memes,” such as those found in religious rituals, songs, poems, slogans, and political speech that replicate survival knowledge. Political memes—words, phrases, flags, and drumbeats—that systematically appeal to and reinforce religious, moral, and civic values replicate survival wisdom and strengthen the genetic predisposition to cooperate in surviving groups (Dawkins 1976, 192–94). Nelson and Greene (2003, 4) put forward another explanation that relates to meme replication by way of signaling theory. They “maintain that a person signals that he is trustworthy to some group by imitating its members’ behavior. In particular, he imitates their political behavior. This imitation is why ethnic groups and religious groups play such an important role in political behavior and civil strife.”

With meme replication and trust signaling, cooperation can yield far more than survival. As Robert Axelrod (1984) points out, mutual cooperation, or what he calls mutual altruism, contains the seeds of community-derived economies of scale for producing life-enhancing resources. Division of labor and specialization follow cooperation. Survival costs fall and cooperative communities flourish where less cooperative ones languish.

But there is still more. Institutions that promote cooperation may also promote trust, truth telling, and promise keeping. The cost of maintaining order falls as these habits of the heart become a community’s dominant moral values, which in turn form a basis for principle-based and duty-based moral advocacy (Buchanan 1994; Rose 2011). Political leaders who promote these high moral values may indeed promote a more efficient wealth-producing community, or at least so it would seem at this point in our story.

Separating the Politician from the Preacher

To bring us back to the original question: What about moral values and political rhetoric? Again, why Baptists? Religions that promote cooperation, conservation, and truth telling can be survival mechanisms. Priests and religious leaders, because of the critical role they play as interpreters of otherwise inexplicable events, often emerged to play the dual role of spiritual authority and tribal or community strongman. In this way, the religious or moral logic behind collective action merges with political mobilization of the group. Edicts that in another world might be viewed as strictly political, or as a strongman’s ranting, could be seen as interpretations of God’s will—providing a stronger motive for compliance than the displeasure of even the toughest tribal chief. Thus, in earlier periods—and even today—religious and political leaders could be the same people. Theocracies have been commonplace across time and space. If there were Bootleggers and Baptists, they were the same individual or entity.

Along these lines, James Montanye (2011, 40) notes that in “religiously homogeneous societies, such as ancient Rome, public provisions of religious ceremonies and rituals also might be warranted on public goods grounds,” which is to say homogeneous beliefs helped maintain order. The Roman model for maintaining order by way of the gods and deified emperors was adapted elsewhere by people who believed in just one God. Montanye (2011, 40) notes that the Massachusetts 1780–1833 constitution gave the people of the commonwealth the right to invest the legislature with authority to require mandatory church attendance and support of churches with public funds. The almost iron-clad Puritan link between religion and politics that emerged in America’s early history made it only natural that in his inaugural address, John Adams would thank an “overruling Providence for so signally” protecting the country from the outset (Micklethwait and Wooldridge 2009, 75). Seemingly, in this state of affairs, Bootlegger/Baptist coalitions with separable components would seldom arise. The Bootleggers were the Baptists, or vice versa. We find the early Massachusetts model applies across numerous countries today that have official state religions often subsidized by the public purse.