The cooperative economy: A vision for tackling society’s grand challenges

As Dovev Lavie says, the economic system in Western societies has produced huge growth and material wealth. But in recent years, especially in the wake of globalization, it has also led to an intense concentration of that wealth and gross economic inequality. Today, around 45% of global wealth resides in the hands of 1% of the population – an imbalance that has become more and more extreme over time. In 2009, according to Oxfam, 380 billionaires held the same wealth as the poorest half of the population. A decade later, just 26 billionaires possess the equivalent wealth. In the United States, three individuals possess more wealth than the poorest half of the population.

Winners and losers

The winners in this game are mostly multinational corporations (especially the big tech firms) which are able to capitalize on the current economic system at the expense of other stakeholders as they drive out or acquire their competition using self-preferencing and other techniques. Even though it seems that this benefits consumers in terms of the availability of products and services, eventually consumers lose out as they are left with fewer choices.

Related to this issue are growing concerns about data privacy. With the emergence of artificial intelligence and other tools used in digital platforms, it seems these systems know us better than we know ourselves and are using algorithms to convince us to purchase things we might not otherwise deem necessary. Ultimately, we are losing freedom of choice as we are driven to produce and consume ever more. The problem is, we cannot afford it.

Identifying the root cause

While policymakers and politicians grapple with attempts to implement fairer policies and processes, Lavie argues that their efforts are doomed to fail as they are – unwittingly or otherwise – lopsided to one aspect of human nature: self-interested opportunistic behavior.

Opportunistic behavior, driven by greed, is “motivating and facilitating” the system. But human nature is not simply opportunistic or selfish. We are also able to behave pro-socially, or cooperatively – the opposite of opportunistically. Pro-social behavior means enhancing the welfare of others at the cost to oneself, which runs counter to the basic assumptions of traditional economic theory and business logic.

Not all humans act out of material incentives. In fact, what humans fundamentally want is to be happy – and there are many ways to achieve happiness that don’t come at the expense of someone else. Indeed, the reverse may be true: we may derive happiness or fulfillment from putting the interests of others in front of our own.

Returning to the corporate world, while the profit principle may seem to defeat this argument, Lavie cites many instances where we see the contemporary corporation behaving differently. In Silicon Valley, for example, we see established companies helping startups who will likely compete with them in the future. This seems to run counter to the profit-maximization principle but, Lavie argues, such “pro-social” behavior could be explained by the fact that the established companies received support early on and have a sense of gratitude as a result – they are happy to pay it forward and help others.

Again, this suggests that not every individual or company is opportunistic in nature, and not all of them would try to increase their wealth at the expense of others.

Reward the outcome you want: pro-social behavior

Obviously, not everyone is pro-social; there is a distribution among the population at large. In fact, research in psychology suggests that about 30% of us show high levels of pro-social behavior – i.e., the inclination to help others and behave cooperatively – while about 23% of us are opportunistic. But most of us are conditionally pro-social. This means that, if we observe that others in our environment are behaving pro-socially and not trying to benefit at our expense, we are likely to follow suit. Conversely, if we see that the system is reinforcing opportunistic behavior, we are forced to adapt to the norm and behave similarly. Unfortunately, the current Western economic system shows a preference to maximize profits at the expense of societal values. In other words, because the current system works in favor of those who pursue profit at the expense of societal values, it is not fully aligned with human nature. If we properly align the basic principles underlying the system, we are likely to see a change in behavior.