Binding the Future

Humanity currently faces long-term risks, including climate change, biodiversity loss, global pandemics, and more. Addressing these challenges requires intergenerational cooperation, as a single generation cannot solve them absolutely. Mechanisms that help develop cooperation in social dilemmas within a single generation include reciprocity, third-party punishment, and central enforcement institutions, but these do not function optimally in an intergenerational context.

A study by Prof. Oren Perez from the Faculty of Law and Eliran Halali from the Department of Psychology at Bar-Ilan University examined the behavioural aspects of implementing a binding mechanism - an "intergenerational regulation" tool that can prevent one generation from acting in ways that ignore the needs of future generations. The findings suggest room for optimism and regulation design.

An example of failure in addressing the climate challenge is the new phenomenon of climate-washing. Many companies have recently published commitments to reduce carbon emissions and eliminate them entirely by 2050. However, studies indicate that these commitments are not reliable. A 2023 report by the InfluenceMap research institute found that nearly 300 companies out of the Forbes 2,000 list that published climate commitments are at risk of "greenwashing." A 2024 study by the European Central Bank cast doubt on the effectiveness of climate commitments by leading banks, given their lending patterns.

A binding mechanism can ensure the continued effectiveness of the actions required to deal with intergenerational dilemmas. It helps mobilize the current generation's political support in initiating a chain of intergenerational cooperation, both by ensuring the continued effectiveness of the effort and by addressing the problem of distrust in the willingness of future generations to act altruistically. These binding mechanisms belong to a unique category of "intergenerational regulation" tools designed to bridge the trust gap between generations.

Halali, head of the Social-Organizational Psychology program, and Perez, head of the School of Sustainability and Environment at Bar-Ilan University, experimentally investigated the behavioural aspects of implementing a binding mechanism to promote intergenerational cooperation. They examined whether people would be willing, voluntarily, to invest in a binding mechanism (despite the harm to their personal welfare) and examined the effect of adding the option to implement a binding mechanism on the survival of the common pool across generations.

The 97 participants in the study were assigned to chains of five generations. Each participant represented one of the five generations. The first participant received a resource of 100 units, which they shared with future generations. The resource refilled to 100 units if the participant passed at least 50 units to the next generation - that is, used no more than 50 units. In the control group, each participant (generation) could choose between two options: consume all 100 units, which would deplete the pool so that none of the future participants (generations) could use it and earn a bonus; or consume 50 units, which would meet the pool's renewal threshold (refilling to 100 units), so that the next participant (generation) could choose how to use the resource and earn a bonus. In the experimental group, participants were given the additional option of a binding mechanism: they could bind the hands of the next participant (generation) by investing 10 units in a binding mechanism (consuming only 40 units). The binding mechanism prevents the next participant from consuming the entire resource (100 units), leaving only the option to choose between consuming 50 units or activating a binding mechanism.

The study had three main findings: First, there is a significant group in the population of long-term altruists who are willing to give up personal gain to improve not only the welfare of the next generation but also that of the generation after it (as opposed to short-term altruists who only look at the next generation after them). In the first generation, 27% of participants chose to invest in a binding mechanism designed to ensure the welfare of the third generation by binding the hands of the second generation (alongside 38% who exhibited short-term altruism, taking only 50 units from the shared resource, and 35% egoists who took the entire resource for themselves).

Second, it was also found that commitment mechanisms yield long-term benefits by increasing the number of chains that managed to preserve the shared pool across all generations (compared to the control group). While in the group with the binding mechanism, 48.5% of the generation chains survived until the fourth generation, in the control group whose participants were not exposed to the option of a binding mechanism, only 24.8% of chains survived until the fourth generation.

Finally, the study's findings also indicate the development of a norm of investing in a binding mechanism. Although the binding mechanism was voluntary, subsequent generations to the first generation tended to continue using it.

The study's findings have several implications for designing intergenerational regulatory tools. First, significant support was found for activating a binding mechanism in the first generation despite its cost. This finding indicates public support for embedding binding mechanisms in the climate context, particularly given the concern about climate-wash. Second, the choice to invest in a binding mechanism reflects a lack of trust in the willingness of the second generation to act altruistically. This finding can support the construction of institutions that can bridge the gap between current and future generations, thereby developing the necessary trust. Israel was among the first countries to adopt such a mechanism in the form of the Commissioner for Future Generations (unfortunately, the Knesset abolished the institution of the Commission in 2010). Finally, the finding that the incorporation of a binding mechanism had a positive effect on the rate of intergenerational aggregate welfare (despite being voluntary and involving a cost) provides justification for adding binding mechanisms to the regulatory toolkit in Israel.

For the full article: https://ssrn.com/abstract=4681907