The design of effective institutions of cooperation is a difficult task, whether in the analog or digital worlds. Many of the important opportunities in human economic life for plus-sum, mutually-enhanced outcomes come in defection-prone packages Classical economic modeling is not much help. Focusing principally on output, it often presumes the availability of property and contract and gives insufficient attention to the structural requirements of cooperative interaction.
A combination of game theory and institutional economics helps to redress the balance. We can suggest a fairly general description of cooperative structures as those where the dominant solution is such that the potential cooperators will be willing to choose to enter into the game. Thus institutions can be seen as part of a restructuring process of mechanism design, changing the dominant solutions in potentially fruitful interactions from those with poor cooperative outcomes to those that will make taking part “individually rational.”
Oliver discussed how these institutions can take a broad range of forms, such as conventions of property, promise keeping, truth-telling, and submission to authority, and how they can exist in a similarly broad range of milieu. Examples include the internal psychology of values and commitment, informal cultural expectations, formal institutions like law, mechanical devices like a coke machine and computer code.
Oliver R. Goodenough is currently a fellow at The Berkman Center for Internet and Society at Harvard Law School, a Professor of Law at the Vermont Law School and an Adjuct Professor at Thayer School of Engineering at Dartmouth College. He has also held appointments as a Visiting Professor in the Department of Neurology at Charité Universitätsmedizin, Berlin, a Visiting Research Fellow in the Department of Zoology at the University of Cambridge and a Lecturer at the University of Pennsylvania Law School. He is a Research Fellow of the Gruter Institute for Law and Behavioral Research, and heads its Planning and Programming Committee.