The historic wealth of Istanbul and Singapore owed much to their positions on the Bosporus and the Malacca Strait, respectively. Situated on an essential link in the flow of wealth, the elites of these cities profited from their hold-up power.
An ongoing project of the Behavioral Sciences Program at SFI is exploring this basic idea, but applied to wealth differences within societies: Social networks with bottlenecks like the Bosporus or the Malacca Strait may support high levels of wealth disparity. Similarly, the company store stands between the miner and the suppliers of the necessities of life on which his family depends. The elevated prices that the miner pays results from the hold-up power that stems from what network theorists call the ‘centrality’ of the company store.
An NSF-funded research project is exploring the effects of network structure on wealth inequality. In February over 40 anthropologists, economists, and others will review their research so far and chart new directions.
“The amazing thing about this project,” says Eleanor Power, former SFI Omidyar Fellow now at the London School of Economics and co-Primary Investigator on the project, “is that we have the data being collected in almost 50 communities around the world and for two different periods of time, all using the same measurement protocols.” The scope of the data will allow systematic comparisons across vast differences in technology, culture, and institutions.
“A key research objective,” says SFI External Professor Matthew Jackson, a project leader from Stanford University, “is to determine which types of networks, inequality, and other institutions can exist together — are consistent with each other — and which are not.”
SFI Professor Samuel Bowles, another project leader, explains, “based on our theoretical work with former SFI Omidyar Fellow Willemien Kets and SFI External Professor Rajiv Sethi, there are good grounds to think that economies with star-like networks will be more unequal than those with more densely connected networks. But we’ll see what we learn from the data.”
Jeremy Koster of the University of Cincinnati is among the project organizers: “Coordinating a quantitative project in collaborative cross-cultural research of this magnitude requires a lot of interdisciplinary brainstorming, trust-building, and skill sharing; this is why we are coming back to SFI in February.”
Read more about the "Economic Network Dynamics of Wealth and Inequality" Workshop, running February 5-7