Institutional Success with Common-Pool Resources

1. Institutional Success with Common-Pool Resources Is Empathy the Key? Gary Lynne Contemporary Collaborators: Natalia Czap, Economist, UMD Hans Czap, Economist, UMD Mark Burbach, Geoscientist, Humanist, UNL William Hayes, Philosopher, Entrepreneur, BC/Thailand

2. Alternative Economic Framework, Theory and Model • MetaeconomicsFramework (MEF): “The Me Needs a We to be, but without a Me there is no We” (makes Ethics, the Moral Dimension…the We… explicit in the framework) • Dual Interest Theory (DIT): I&We, Self&Other(shared)-interest, Ego ‘n’ Empathy • Dual Motive Model (DMM): Egoistic-hedonistic and empathy-sympathy based motives, joint and non-separable

3. Go Beyond and Transcend NCE “…neoclassical economics is …subject of constant criticisms from within and from without…. Notion that one might somehow abandon it, in favor of one or another alternative, founders on the enormity of the prospective cognitive loss… had better accept, therefore, that for now and the forseeable future, neoclassical economics is the core of the subject. Instead of looking for an alternative theory to replace it, we should try to imagine an economic theory that might transcend its limitations.” (Leijonhufvud, 2004, p. 5)

4. Econ 101 Balance tipped Egoistic-hedonistic rational self-interest Other (shared) interest of little to no concern “Pushpins and Poetry” Balanced toward self-interest only

5. Econ 101 • Single-minded egoistic-hedonistic utilitarian (perhaps the male head of household, at least* historically?) • Strict Father discipline: Complete self-control, disciplined always • Extreme greed is extremely good: Vertical axis is optimal path (Scrooge!) • Even if a social good e (poetry) is recognized it is a simple tradeoff with private good d (pushpins)

6. Econ 101 • Completely cognitive, rational choice: No role for emotions and feelings (solid path 0G) • No role for habit coming out of the subconscious • No acknowledged role for the social dimension, unity with causes like sustainability, etc. • Amoral (albeit a “moral order” of the Strict Father is presumed; ethical system hidden in the “invisible hand” of the market) • Ordinal utility

7. Homo Economicus is Evolving (Thaler, 2000) • Will begin losing IQ • Will become a slower learner • Will become more heterogeneous • Will become more focused on understanding cognition • Will distinguish normative and descriptive theories • Will become more emotional • We would add: Will become more empathetic (see Rifkin, 2009; DeWaal, 2009; Singer, 2009; Sheeder and Lynne, 2011)

8. Triune Brain Suggests Metaeconomics Framework (MEF) On empathy, see: Singer, T. “Understanding Others: Brain Mechanisms of Theory of Mind and Empathy.” In: Glimcher, P.W., Camerer, C.F., Fehr, E. and Poldrack, R.A (Eds.). Neuroeconomics: Decision Making and the Brain. New York, NY: Elsevier, 2009.

9. Broadens notion of “rational choice” to include empathy, self-control, integration and balance System 2 System 1 Social-Emotions: Compassion, shame, awe, insympathy with (“poetry”) Self-Emotions: Fear, anger, hedonistic (“pushpins”)

10. Neural Functioning in Metaeconomics Framework (MEF) Rational Choice (two interests) Ego ‘n’ Empathy: Value Self-Control (Engagement) Self-interest Other(shared)-interest System 2 Cognition (Intelligence) Egocentric Empathetic Conscious Affective hedonism, “it feels good,” e.g. take more water from the common-pool, maximize profit and utility Affective “in sympathy with” e.g. share the water in the common-pool, act on the basis of how you would wish to be treated, a bit of self-sacrifice Automatic (subconscious, feelings, two emotional tendencies) System 1

11. Metaecon 101Dual Interest Theory (DIT) Striking a balance: Restrain/temper self-interest Egoistic-hedonistic path 0G of rational self-interest Rational own-interest: Integration, balance and synergy on a rational (including self-control) path 0Z of own(internalized dual)-interests (notice the bit of self-sacrifice in both domains...) Empathetic-sympathetic path 0M of rational other (shared)-interest Metaecon has Empathy, and Self-control, at the Core of Economic Framing

12. Incommensurability (and Synergy) Paradox: Self-sacrifice leads to the potential for “sum-greater-than- sum-of-the-parts” outcomes* Metapreferences: “choices without prices without apologies” (after Vatn and Bromley, 1994); see Sheeder and Lynne, 2011)

13. DIT as “Old” Theory “Researchers await a new theorist who will assimilate the old theories and present an integrated theory incorporating previous concepts and propositions. A cynical colleague of mine once said that such a task requires the services of someone in marketing because the ideas will not be new ones but merely old ones presented in new packaging.” (Lester, 1995, p. 161)

14. Metaecon 101 • Dual minded pragmatist, doing best they can on path 0Z, satisficing not maximizing, representing pursuit of rational own-interest • Rationally (with effort put into self-control, most of the time) integrating and balancing Strict Father (0G) with Nurturant Parent (0M) on path 0Z • Rational choice influenced by the emotions (often running on automatic, dotted paths 0G and 0M) • Habits at work: Keep doing what works until “irritated” into cognitive consideration; we then evolve new “sufficient reasons” (Bromley, 2006) on new path 0Z

15. Metaecon 101 • Choice characterized by a bit of self-sacrifice (altruism) in both domains of interest. • Not always fully in control (self-control waxes and wanes) as we move around between paths 0G and 0M (egoistic-hedonistic pleasure v. empathetic-sympathetic tempered choices) • Irrational outside of paths 0G and 0M

16. Metaecon 101 • Broadened notion of what we mean by rational choice, now including a key role for the emotions, a bounded rationality within the paths 0G and 0M • Cognitive and emotional processes come together on path 0Z • Cardinal utility, “back to Bentham” as in Kahneman et al (1997) • Two qualitatively different, likely incommensurable utilities at work

17. MEF and IAD Framework DIT gives “evaluative criteria”: Empathy tempering and restraining self-interest on path 0G External Variables Biophysical Conditions DMM Action Situations Interactions Attributes of Community MEF Evaluative Criteria Rules-in-Use Outcomes

18. Number of Studies Going Back to 1980s • Both institutional and behavioral (recycling and conservation) papers • See Curriculum Vitae at http://agecon-cpanel.unl.edu/lynne/resume/cvlynne.pdf • Looking herein at most recent USDOE and USDA projects • All point to a potential role for empathy-sympathy in tempering and restraining self-interest

19. U.S. Department of Energy Carbon Sequestration and Global Climate Change

20. Sautter et al (2011): Conservation Tillage (CT) Empathy tempering, restraining self-interest a – p < 0.01; b – p < 0.05; c – p < 0.1

21. Evolution of DIT • By the time of this paper, have taken solid steps away from the egoism-altruism version of DIT (see Lynne, 1999, 2006a,b) toward the egoism-empathy (and sympathy) notion • Working on refining the “in sympathy with” notion… connecting it with the idea of a shared ethic, after Solomon (2007) (see cite in the Sautter et al. paper). • Solidly connected the empathy-sympathy domain to the moral dimension, the ethical domain… an ethic arising, first, from empathy, and second, from sympathy (or not) , in temporal sequence

22. Started experimental research on the role of empathy • Experiments are contextualized • Market for carbon offsets: contributions to global public goods (no local benefits as in the traditional PGG) • Downstream water pollution: 3-player dictator game with emotional feedback • Upstream-downstream property rights: Coase (property rights)-type game with emotional feedback or monetary punishment • Framing plays a crucial role • Self-interest (Ego) frame (emphasis on profit) • Empathy frame (Other-interest, walking-in-the-shoes-of-others)

23. Market for Carbon Offsets • Ovchinnikova et al. 2009 (JSE) Induced empathy plays substantive role in selling offsets

24. Market for carbon offsets Cont’d • Comparing an experiment with and without reflections on one’s decisions Pecuniary incentives (price difference) matters much less (Model 1H&1I) if one is asked to reflect on the consequences of her/his decisions (as compared to when one is not asked – Model 2H&2I)

25. USDA Grant, 2006-2010 Targeting Watershed Vulnerability and Behaviors Leading to Adoption of Conservation Management Practices

26. Survey Research: Sheeder and Lynne (2011) • Two elaborations, developments in DIT: • Being “in sympathy with” now viewed as the basis for an ethic, the moral dimension, explicitly considered part of MEF, the key aspect of the other-interest in DIT • Framing self-interest as more primal, yet conditioned and tempered by the “other virtues” reflected in the other (shared, but internalized within own-self)-interest • Still about “own-interest” , not the interests of others, not other-regarding, but rather still only ownself-regarding (but now in two domains within the own-interest)

27. Upstream-Downstream Common-Pool (Pollution) Problem Empathy expressed re: downstream users

28. Sympathy with downstream users

29. Experimental Lab: On Downstream Water Users • Collected data from 216 laboratory participants during period July 12-18, 2010 • General result: 216 profit maximizers would have earned $9288… while we paid out only $6200… they “took” substantively less than the maximum, and shared at something approaching a 50:50 ratio…suggests, generally, that empathy-sympathy at work!!

30. For UF, “nudging” empathy-sympathy matters; nudging egoistic-hedonistic tendencies not significantly different from neutral: Egoistic-hedonistic self-interest more primal? UF/DWU already internalizing it

31. Downstream water pollution • Czap et a. 2012 and Czap et al. 2013 • UF/DWU already faced higher stakes in downstream water quality: Internally nudge their own environmental consciousness by a magnitude comparable to empathetic nudge for UF

32. Downstream water pollution Cont’d Adding empathy significantly increases the explanatory power Significance: *** - p<0.01; ** - p<0.05; * - p<0.1.

33. Example of an emotional feedback (communication) screen in Empathy Frame. Costs /sacrifice to empathize/sympathize

34. Expression of positive and negative emotions   Emotional punishments and rewards during the play of the game are based on the more immediate payoff-relevant information (such as lake cleanliness), rather than framing or priming at the start of the game.

35. USDA Grant, 2012-2014 Center for Agricultural and Food Industrial Organization – Policy Research Group (Cafio-prg)

36. Structure of the Coasian Experiment Property Rights Activity Pre-game: Role determination Performance Top 50% Bottom 50% Role assignment PRO PRNO Quiz on Instructions Quiz on Instructions PRO PRNO PRO:Initial Allocation Game decisions: 2 rounds PRO: Transfer PRNO: Feedback? CAFIO – Policy Research Group

37. Experimental Treatments: 2X3 matrix design • 6 treatments • 2 property rights assignments • Upstream Farmer is a PRO • Downstream Water User is a PRO • 3 feedback conditions • No feedback (control) • Monetary punishment (fine) • Induced empathy-sympathy (frowney emoticon) CAFIO – Policy Research Group

38. Upstream-downstream property rights (work in progress) Imposing a monetary fine is detrimental to the payoff of Non-Owner of Property Rights, while emotional feedback leads to an increase of the payoff.

39. Upstream-downstream property rights (in progress) • More skewed to ownself if UF is PRO: Historical Norm? Note: “Head-enders” at either end*

40. Bottomline: What have we learned from both survey and experimental research? • Empathy-sympathy plays a significant and substantive role when it comes to environmental decisions • Reflecting, walking-in-the-shoes-of-others decreases the importance of the pecuniary incentives (as it leads to tempering, restraining self-interest, if individuals choose to enter “into sympathy with” the shared cause) • Appealing to empathetic-sympathetic considerations leads to more balanced (more equal) distributions than when monetary incentives are used alone

41. Implications for Conservation Policy and Institutional Design • Empirical results from past 2-decades of empathy (and sympathy) studies confirm the Bromley (2006) contention that we need to move beyond welfare economics based policy and institutional design • Empirical results suggest that policy developers and institutional designers, as well as program facilitators, need to “nudge” empathy-sympathy on the part of everyone affected by and engaged in the use and management of the common-pool resource

42. Connecting with IAD Related Research Empathy (and Sympathy) based communication Leading to common-pool sustainability (Success)?

43. Ostrom (2009) • Communication is key variable • Communicate face-to-face, or by any and all other means, could find good outcomes • Enough communication to design own* sanctioning system, works even better • Predictions of noncooperative game theory work only without communication (and then only roughly so)

44. Ahn and Ostrom (2010) • Communication (whether in small or large groups) is “an important factor in facilitating cooperation” (p. 1585) • Especially important, however, in the small group from round 4 to round 5, got much closer to the best outcome in second round than did the large group • Results substantiate the finding that “face-to-face communication plays a major role in allowing groups to find cooperative solutions in social dilemma settings”

45. Future work: Empathy and Communication • Ho: Communication works because it facilitates the expression of empathy and evolution of sympathy • Empathize first, which induces communication: Walk-in-shoes-of-other common-pool resource users stirs one to engage the other person(s), works better within smaller, known groups • Sympathize with (or not) second, following from the communication, the interaction • In the case of successes, individuals have, as a result of said communication, 1) joined in sympathy with (e.g. formed a shared ethic of sustainability) shared cause, and, then, 2) work* to temper and otherwise restrain their self-interest behavior accordingly

46. Janssen et al. (2011) • Stationary bandits* were randomly assigned in these experiments • Inequality of access hinders cooperation (not precluding it, but hindering it) • Upstreamers “need to restrain** themselves” (p. 1597) • This need to restrain the self-interest only tendency is independent of several contextual variables, including: • Expertise of the participants • Real-time computer game v. paper and pencil experiment • Anonymous student groups v. known community members • No communication v. text chat • Framing of the experiment • Suggests research needed on “subtle contextual variables” that may have a stronger*** effect

47. Future Work: Empathy (and Sympathy) as a Subtle Contextual Variable • Ho: Successful common-pool institutions facilitate expressions of empathy and evolution of sympathy with the shared cause of sustaining the resource • Ho: Empathy is especially important in the situation where the stakeholders have different/asymmetric roles (such as upstreamers and downstreamers) rather than symmetric roles (fishermen or irrigators)

48. Anderies et al. (2011) • Institutional responses made on theoretical* basis found inadequate • Theoretical representations have typically been too simple and context** independent • Experiments have explored context and micro-situational variables: • Found that homo economicusappears in only a “very narrow range of conditions and for a small proportion*** of the population” • Generally, individuals pursue a wider range**** of aims than just profit maximization*****

49. Future work: Empathy-Sympathy Leading to Wider Aims • Ho: Individuals pursue dual, joint, nonseparable, and incommensurable motives, “push-pins AND poetry”, “profit from the common-pool AND sustainability of that common-pool” • Ho: Bit of self-sacrifice (with potential of synergy) at work in a common-pool choice, not about max U (at least not max self-interest U), homo-satisficus

50. Janssen and Rollins (2012) • Tend to find lower levels of cooperation* in asymmetric social dilemmas (p. 221) • Tend to (in asymmetric dilemmas) to contribute in proportion* to their endowments, while in common-pools, they tend to equalize earnings • Speculate: Historically, individuals faced less complex dilemmas, giving them time and experience to evolve*** norms, which served to help them in dealing with more complex dilemmas like common-pool allocations in irrigation situations