The Review of Austrian Economics, 18:3/4, 241–280, 2005.
2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.
Reciprocity and Social Order: What Do Experiments
Tell us About the Failure of Economic Growth?
KEVIN A. MCCABE email@example.com
Interdisciplinary Center for Economic Science, George Mason University, 4400 University Drive,
MSN 1B2, Fairfax, VA 22030
Abstract. This paper makes three observations for policy-makers, interested in promoting economic growth,
based on the experimental work done at the Interdisciplinary Center for Economic Science. First, safeguards must
be put into place to protect impersonal exchange from our innate desire for personal exchange. Second, policy must
take into account the heterogeneity of individual cognitive strategies that are observed in economics laboratories.
Third, policy must be test-bedded in economic experiments where the status quo is modeled as an ecologically
rational response to the economic environment and the proposed policy change occurs in an environment where
individuals have access to a full repertoire of personal exchange behaviors.
KeyWords: experimental economics, impersonal exchange, social change
JEL classiﬁcation: C93
Over the course of the last century economists have made signiﬁcant progress in under-
standing what makes economies work, and why they fail. What is harder to explain is why
humans often get it wrong? Or may be more importantly, why we can’t ﬁx things when they
are wrong! The answer must ultimately lie in our human nature. But what aspect of human
nature is responsible? Is it greed? Conceit? Spite? Love? Ignorance? While all of these may
contribute it may be that none of these are necessary or sufﬁcient for economic failure.
Instead, research by experimental economists, behavioral economists, neuoreoconomists,
economic historians, and institutional economists, suggests that the main culprit is “our
natural propensity to truck, trade, and barter” that Adam Smith saw as a basic axiom of
Adam Smith certainly understood the different motives that individual faced in their
personal lives versus the marketplace. Two quotes that appear in Vernon Smith’s “Two
Faces of Adam Smith” nicely summarize this understanding.
“It is not from the benevolence of the butcher, the brewer, or the baker, that we ex-
pect our dinner, but from their regard to their own interest.”—Wealth of Nations,
“How selﬁsh so ever man may be supposed, there are evidently some principles in his
nature, which interest him in the fortune of others, and render their happiness necessary