Transcript Juan Camilo Cárdenas: Invisible hands working together

00:03 When you sit down at your table and you’re having bread and it was your own interest to buy the bread in the market and it was the self-interest of the baker to produce this bread and bring it to the market–that’s markets working that are guided by this invisible hand. You end up with food on the table and you end up with the baker getting some income to buy his own food for his own family. That’s supposed to be Adam Smith’s legacy; that these markets are good for making society work and the economy work.

00:37 So, markets sometimes don’t work that well. Sometimes these pursuits of self-interest by each of us; either buying, or selling, or producing, or consuming, produce consequences that are not desirable for society. We contaminate, we pollute, we overexploit a natural resource, we under provide certain public goods that are important for people.

00:59 When I began to study economics I was puzzled by the models of economics that I was reading in the textbooks. Experiments have been created in economics to study human behaviour and how human behaviour responds to different incentives. And this has been usually done in the laboratory, most of the time with college students.

01:24 In July of 1998 I went to a small village in the Pacific coast of Colombia called Jurubirá that lived mostly out of extracting resources from the mangrove forests. In this experiment the players are making decisions about the extraction of a natural resource and it’s a natural resource study that has joint access by all members of the community. And in this experiment each of the players needs to decide how much effort they put into extracting the resource. The more you extract of the resource, the better your payoffs but the more everybody extracts of the resource, the worse the payoffs for the group.

02:01 It was the first time that an experiment was conducted in which the players of the game, the participants in the game, were actual resource users of a resource that was of joint access. So since that very first experiment in 1998 I’ve been running experiments like this in the field in many places in Colombia and in other parts of the world–in Thailand, in Kenya, in South America, and now we are running even more experiments of this kind.

02:32 And during all these years I’ve been running these experiments to explore different variations of the conditions that may explain why sometimes people get together and cooperate in these games despite the heavy incentives to free ride.

02:46 Because we have actual incentives and actual cash involved in the experiments, we are inducing the possibility that by free riding and not cooperating people may try to make more money but yet we observed that on a regular basis many people are willing to cooperate and they do in fact cooperate, get together with the other players of the game, and they coordinate directions so that they maximize the group outcome on top of the individual interests.

03:15 Regulations externally imposed sometimes erode the willingness of people to cooperate in these situations. We have studied how much poverty or inequality in the group may affect the levels of cooperation. We have found often that groups where there is much inequality, you find that there’s mistrust within the players and that decreases the level of cooperation.

03:36 And more recently what we have been finding is how much of the context and the particular natural resource is related to the way they are willing to cooperate.

03:46 The biggest problem of cooperation facing humanity right now is the problem of climate change–it’s seven billion people trying to resolve a problem that is going to affect us all as a whole because of the conflict between the private interests and global interests. I believe that if we understand that there has to be a setting in which people trust each other, follow agreements at a greater scale…. Again, it’s the same human beings that are interacting in the local level and at the global level. Of course, the stakes are much bigger as you grow in scale but the human behaviour is the same.

04:27 You need to think about the different incentives involved in your decision making and how it affects your own wellbeing and the wellbeing of others.