The origins of (a culture of) cooperation

Abstract We study an investment setting involving time-inconsistent elites and non-elites. The latter embrace norms that provide an intrinsic return on cooperation and may switch to a risk-sharing activity yielding a higher marginal intrinsic return. A more severe consumption risk and/or a smaller investment return increase the profitability of risk-sharing and, in turn, foster cultural accumulation. A limited investment payoff, instead, pushes the elites to enact an inclusive political process to incentivize the non-elites and the latter to reciprocate with strong norms signaling cooperation despite its limited return. These predictions are consistent with data on 44 Mesopotamian polities observed between 3050 and 1750 BCE. While the diffusion of interest-free loans of agricultural products and major irrigation infrastructures was negatively related to the harvest value, the spread of formal merchant institutions was linked to the distance to the trade circuits. Moreover, major irrigation projects were implemented where the climate was more erratic (JEL H10, O13, P00, Z10).