Institutions are the foundation of human societies. They encourage cooperation by rewarding helpful behavior and punishing selfishness. Yet they face a paradox: while institutions exist to promote cooperation, they also rely on their members’ cooperation to operate effectively. A recent study from the Max Planck Institute for Evolutionary Biology sheds light on how institutions arise and succeed.

The Cooperation Problem

The researchers analyzed two related dilemmas. The first involves high costs or limited monitoring, where individual reputation alone fails to secure cooperation. In the second, people can work together to alter the rules of the first dilemma, creating better conditions for cooperation.

This “nested” structure creates a powerful feedback loop. Even if reputation cannot directly solve the tougher first problem, it motivates people to contribute to collective action in the second. These efforts reshape the rules, making cooperation more achievable in the first dilemma.

A historical example from Tokugawa-era Japan illustrates how this works. Villages faced the classic “tragedy of the commons,” where individuals overused shared forest resources like firewood and timber. Without oversight, these commons risked collapse.

To solve this, villagers created a new role: forest detectives. These detectives monitored resource use and penalized rule-breakers, encouraging compliance. However, the institution itself needed oversight to prevent abuse of power. Monitoring the detectives proved simpler than monitoring every villager. A poor reputation could cost detectives their jobs and standing, keeping them honest. By solving this secondary, easier problem, the villagers created an effective system for managing their forests.

Institutions as Social Technology

The study suggests that institutions act like tools, amplifying human tendencies such as the desire for a good reputation. Just as a pulley magnifies force to lift heavy loads, institutions turn weak reputation effects into powerful incentives for cooperation. Over time, societies refine these systems to tackle increasingly complex challenges.

The research highlights how institutions leverage basic human motives to address collective problems. By understanding this dynamic, policymakers and leaders can design systems that better support cooperation in an interconnected world.