Moderate wealth inequality may enable cooperation within a group, suggests an analysis of theoretical models and behavioural experiments published this week in Nature. Although extreme inequality prevents cooperation, if individuals differ in social productivity then some inequality in endowment can be necessary for cooperation to prevail.
In social dilemmas, overall welfare is maximized if all individuals cooperate, which is more likely when individuals interact repeatedly. Most models of this concept - known as direct reciprocity - assume that the participants are alike in every way except for their willingness to cooperate or not. In real life, however, participants differ in many aspects, including how many resources they receive, and how efficiently they can produce social goods.
Martin Nowak and colleagues designed a revised model to account for different sources of inequality among individuals: the amount of money a participant begins with, how much benefit they can generate for others, and how much they benefit from public goods. The authors find that although severe inequality prevents cooperation, if subjects differ in productivity and more productive individuals receive larger endowments, then cooperation can emerge. These findings were supported by an online behavioural experiment (a two-player game) with human participants.
The authors conclude that maximizing cooperation requires a delicate balance between different types of wealth inequality, such that individuals who are more effective in generating social goods should have larger endowments.