ABSTRACT

A deal of contemporary social science is a stalemate between theories assuming economic rationality on the part of actors and theories counterposing action as variously motivated by the desire to comply with norms, to maintain a sense of identity, or to do good. Scholz’s theory of the evolution of cooperation is a positive theory of why cooperation should evolve by virtue of the rationality of players seeking optimum payoffs. Second, it is a positive theory of what is the best strategy for securing compliance with the law. Analyses of what makes compliance rational and what builds business cultures of social responsibility can converge on the conclusion that compliance is optimized by regulation that is contingently tough and forgiving. Punitive enforcement engenders a game of regulatory cat-and-mouse whereby firms defy the spirit of the law by exploiting loopholes, and the state writes more and more specific rules to cover the loopholes.