Cheating Because They Can: Social Networks and Norm Violators

Settlers flocking to boomtowns on the American western frontier were faced with the same task that communities in weak states all across the globe face: self-governance. Reputation mechanisms and community punishment can enforce cooperation in these environments, but existing theories ignore the role of social networks in spreading relevant news. Explicitly building networks into a theory of informal governance produces two previously unforeseen insights. First, how easy it is to persuade a person to behave cooperatively depends on how central or peripheral the person is to his community. Some community members can even be so peripheral that persistent cheating makes sense for them despite the threat of a sullied reputation. Low but persistent levels of settler-native conflict can be understood as the result of rational choices rather than accidents. Second, accounting for social networks reveals that informal institutions face a tradeoff between being fully efficient and being egalitarian: efficient institutions must discriminate. Additionally, I argue that sweeping generalizations may arise as a heuristic for dealing with the relevant-but-more-taxing-to-calculate network position. This logic can help make sense of the prevalence of racism in the mining towns, and why only certain non-white settlers bore the brunt of it. Current version: February 14, 2014. A special thanks to all those who offered feedback on earlier versions, especially Bob Bates, Jim Robinson and Ken Shepsle. Assistant Professor, Department of Politics, New York University. 19 West 4th St. Rm. 219, New York, NY 10012. (212) 992 8087. [email protected]