Matt Ridley on evidence that free markets make people nicer

MONTESQUIEU'S "SWEET COMMERCE" AND COBDEN'S "GOD'S DIPLOMACY"

The “ultimatum game” is a fiendish invention of economists to test people’s selfishness. One player is asked to share a windfall of cash with another player, but the entire windfall is cancelled if the second player rejects the offer. How much should you share? When people from the Machiguenga tribe in Peru were asked to play this game, they behaved selfishly, wanting to share little of the windfall. Not far away, the Achuar in Ecuador were much more generous, offering almost half the money to the other player — which is roughly how people in the developed world react.

What explains the difference? The Machiguenga are largely isolated from the world of markets and commerce. The Achuar are used to buying and selling to and from strangers at markets. The same pattern emerges throughout 15 small-state societies all over the world, in a fascinating study done by the Harvard anthropologist Joe Henrich and his colleagues. The more integrated into the commercial world people are, the more generous they are. As one of the authors, the economist Herb Gintis, summarises the results: “Societies that use markets extensively develop a culture of co-operation, fairness and respect for the individual.”

This would not have surprised Montesquieu, who spoke of “sweet commerce”, or Voltaire, who marvelled at the friendly collaboration of “the Jew, the Mahometan and the Christian” on the floor of the London stock exchange, or Adam Smith, David Ricardo and Richard Cobden, the radical champions of free trade in the early years of the industrial revolution.

Cobden said: “Free trade is God’s diplomacy and there is no other certain way of uniting people in the bonds of peace.” He was right. Recent studies have confirmed that commerce is the main cause of peace....