Identity, Trust and Altruism: Sociological Clues to Economics Development

CAE Working Paper No. 06-05

41 Pages Posted: 11 Jan 2007

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Date Written: August 2006


Much of economics is built on the assumption of individuals being driven by nothing but self-interest; and economic development is viewed as an outcome of the free play of such individuals. On the few occasions that economic recognizes the role of trust, integrity, in-group cooperation and altrusim, the tendency is to build up these from the axiom of individually selfish behavior. The aim of this paper is to break away from this individualist tradition and to treat as a primitive that individuals have hard-wired in them the 'cooperative spirit', which allows them often to work in the collective interest, even when that may not be in their self-interest. The main objective of the paper is to trace the consequences of this primitive. By using the basic structure of a Prisoner's Dilemma game and building into it assumptions of other-regardingness, the paper demonstrates how our selfish rationality interacts with out innate sense of cooperation. The model is used to outline circumstances under which cooperation will occur and circumstances where it will break down. The paper also studies how sub-groups of a society can form cooperative blocks, whether to simply do better for themselves or exploit others.

Keywords: cooperation, trust, altruism, identity, development, Prisoner's Dilemma

JEL Classification: C72, D10, Z10

Suggested Citation

Basu, Kaushik, Identity, Trust and Altruism: Sociological Clues to Economics Development (August 2006). CAE Working Paper No. 06-05, Available at SSRN: or

Kaushik Basu (Contact Author)

Cornell University - Department of Economics ( email )

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IZA Institute of Labor Economics

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Brookings Institution ( email )

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