Preference modification vs. incentive manipulation as tools of terrorist recruitment: the role of cultureProblem of Acting as SocietyInformation and CoordinationProblem 2--Commitment: Without Enforcement, Can We Cooperate?An Example of “Cultural” DifferenceShibbolethMy Definition of “Culture”Culture Is “Inherited”Origins: Two ConceptsThe Questions that interest me…Slide 11Emergence of “Culture”: David Hume has Lunch at Café Hayek (where orders emerge)Slide 13Order vs. Design: Which is Culture?Choices Emerge…. Do Preferences?Slide 16Will Culture Disappear?The End of HistoryInstitutional Design: Information….and CommitmentStep back for a moment…. The Fundamental Human Problem (according to Munger)Two ApproachesThe Problem….Origins of cultureI. Commitment Device: Real PietyThe Trust GameHierarchy and Strategic UncertaintySlide 27II. Club Goods: Good WorksGame 1: Prisoner’s DilemmaGame 1: Prisoner’s Dilemma with External Enforcement: Defectors are Tortured & their Families KilledGame 1  : Prisoner’s Dilemma with External Enforcement: Defectors Feel Really BadGame 2: Culture WarGame 3: U.S. in Iraq—1992 No Equilibrium….Game 3: U.S. in Iraq—2005 Side Payments….”Be Rational”If Club Goods….Slide 36If Preferences….A movie: Positive Feedback….Preference modification vs. Preference modification vs. incentive manipulation as incentive manipulation as tools of terrorist tools of terrorist recruitment:recruitment: the role of the role of culturecultureMichael Munger, Departments of Michael Munger, Departments of Political Science and EconomicsPolitical Science and EconomicsDuke UniversityDuke UniversityFriday, Sept 30, 2005Friday, Sept 30, 2005Problem of Acting as SocietyProblem of Acting as SocietyCan a group of people who disagree come to a Can a group of people who disagree come to a consensus? consensus? I want…you want…what do I want…you want…what do wewe want? want? COLLECTIVE CHOICE PROBLEMCOLLECTIVE CHOICE PROBLEMEven if they do agree, how could they coordinate Even if they do agree, how could they coordinate their actions? their actions? INFORMATION / INFORMATION / TRANSACTIONS COST PROBLEMTRANSACTIONS COST PROBLEMEven if they all know what to do, why would they Even if they all know what to do, why would they do it? do it? FREE RIDER / FREE RIDER / COLLECTIVE ACTION PROBLEM COLLECTIVE ACTION PROBLEMInformation and CoordinationInformation and Coordination““The peculiar character of the problem of a rational economic The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem economic problem of society is thus not merely a problem of how to allocate "given" resources—if "given" is taken to of how to allocate "given" resources—if "given" is taken to mean given to a single mind which deliberately solves the mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how to problem set by these "data." It is rather a problem of how to secure the best use of resources known to any of the secure the best use of resources known to any of the members of society, for ends whose relative importance members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to problem of the utilization of knowledge which is not given to anyone in its totality.” (F.A. Hayek, 1945, anyone in its totality.” (F.A. Hayek, 1945, AERAER).).Problem 2--Commitment: Without Problem 2--Commitment: Without Enforcement, Can We Cooperate?Enforcement, Can We Cooperate?Common Knowledge Basis of CooperationCommon Knowledge Basis of Cooperation—When I You Know That I Know that it is —When I You Know That I Know that it is in your interest to cooperate…in your interest to cooperate…Can we account for irrational acts? Can we account for irrational acts? Suicide bombings, sacrifice of a life? Are Suicide bombings, sacrifice of a life? Are the bombers duped, or confused?the bombers duped, or confused?We tend to think the state is the only We tend to think the state is the only answer….but…..answer….but…..An Example of “Cultural” DifferenceAn Example of “Cultural” Difference““shibboleth”--The word is often combined shibboleth”--The word is often combined with the word “cultural.”with the word “cultural.”Its general meaning is meanIts general meaning is mean an unspoken an unspoken but shared understanding of something but shared understanding of something that identifies insiders, and distinguishes that identifies insiders, and distinguishes outsiders because they do not share this outsiders because they do not share this understanding.understanding.ShibbolethShibbolethJudges 12, 5-7, Judges 12, 5-7, King James 21st Ed. BibleKing James 21st Ed. Bible5 And the Gileadites seized the passages of the 5 And the Gileadites seized the passages of the Jordan before the Ephraimites; and it was so, that Jordan before the Ephraimites; and it was so, that when those Ephraimites who had escaped said, "Let when those Ephraimites who had escaped said, "Let me go over," that the men of Gilead said unto him, me go over," that the men of Gilead said unto him, "Art thou an Ephraimite?" If he said, "Nay,""Art thou an Ephraimite?" If he said, "Nay,"6 then said they unto him, "Say now Shibboleth." 6 then said they unto him, "Say now Shibboleth." And he said "Sibboleth," for he could not frame to And he said "Sibboleth," for he could not frame to pronounce it right. Then they took him and slew him pronounce it right. Then they took