The Devil's Dung? Money as a mechanism of generalized reciprocity in human societies

TL;DR

This paper explores how money functions as a mechanism for fostering generalized reciprocity in human societies, highlighting its evolutionary stability and the importance of regulating money supply to sustain cooperation.

Contribution

It demonstrates that money can be an evolutionarily stable strategy promoting cooperation, and emphasizes the role of money regulation in maintaining social reciprocity.

Findings

Money exchange promotes cooperation without relying on reputation.

Excessive liquidity can undermine the informational value of money.

Regulating money supply is crucial for sustaining social reciprocity.

Abstract

St. Francis of Assisi (1181/82-1226) famously called money the devil's dung, and indeed money is often associated with greed, inequality, and corruption. Drawing on Nowak's five rules for the evolution of cooperation, we argue here that money promotes the formation of circuits of generalized reciprocity across human groups that are fundamental to social evolution. In an evolutionary tournament, we show that money exchange is an evolutionary stable strategy that promotes cooperation without relying on the cognitive demands of direct reciprocity or reputation mechanisms. However, we also find that excessive liquidity can be detrimental because it can distort the informational value of money as a signal of past cooperation, making defection more profitable. Our results suggest that, in addition to institutions that promoted trust and punishment, the emergence of institutions that regulated the money supply was key to maintaining generalized reciprocity within and across human groups.