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Hometown U: Experimental economics probes future cooperation

  • Author: Kathleen McCoy
  • Updated: September 28, 2016
  • Published September 27, 2015

Next spring, Alaska and Norwegian college students will participate in an educational pilot program that explores shared management of Arctic resources. This "proof-of-concept" eventually will shape an entire course on cooperation and conflict in the Arctic.

Eventual plans call for both universities to offer the course and professors from both schools to teach relevant segments. Students in Tromsø and Anchorage will overcome a 10-hour time difference to participate in experiments and collaborate on projects. Funding will provide for some student and faculty exchanges in spring.

Norwegian economists from the Arctic University of Norway (UIT) approached faculty at the University of Alaska Anchorage's experimental economics lab for help designing the course and developing their own lab. The Alaska team includes Jonathan Alevy, Lance Howe, Lee Huskey and Jim Murphy.

The Norwegian commitment, said visiting UIT economist Jan Sand, comes because his countrymen "see that there is potential for both conflict and also — possibly and necessarily — for cooperation, to develop and extract resources." The Norwegians say they value economic experiments as a research and teaching tool and hope to duplicate UAA's success. After a decade, Alaska's lab is ranked in the top 10 percent worldwide.

Managing the Arctic's resources will be a mammoth challenge. As it stands, many sovereign nations surround the Arctic, but they don't agree on borders. Even if they did, resources like fish and mineral and oil deposits don't mind them. So as the ice recedes, competition flares for access to those resources. Potential for conflict abound.

Murphy, a former Rasmuson chair, said he and colleagues think about how the Arctic, in some ways, is like a piñata.

"You have this resource that is not accessible at the moment," he said. At parties, people take whacks at the piñata while everyone else stands around watching. When a lucky walloper breaks through, candy flies and a free-for-all ensues. Tussles, or satisfaction, are both potential outcomes.

In the Arctic, nature is taking the whacks while the rest of us stand around watching, he says, waiting for the presumed flood of "candy" and potential chaos. In this scenario, Arctic nations must make decisions about conflict and cooperation that play right into the framework of experimental economics.

"If you are a nation, how much of your resources do you put into militarization, preparing for a conflict or staking a claim to the resources?" Murphy asks. "If you don't invest in that, you'll get nothing. Militarization itself doesn't generate anything good, but failing to do so can leave you with nothing. "

Then, there's diplomacy: How much do you invest in that, counting on good outcomes from your skillful negotiations? Thirdly, how much do you spend trying, like Shell, to extract a resource?

Experimental economics can be useful in structuring international agreements that reduce the chances of conflict.

"You can't solve something until you know what the problem is -- what are the sources of conflict and what are the sources of cooperation?" Finding that out begins to sound a lot like the course these experimental economists are working to co-create.

For the pilot, Murphy says the economists will guide students through existing "social dilemma" experiments posing classic limited-resource challenges—such as multiple parties tapping the same fishery. In real-time experiments, students will have to figure out whether to cooperate or compete for resources.

Collectively, participants know that if they slow down the harvest, more fish will be left for tomorrow. Yet, individually, they have a strong incentive to make more money by aggressively harvesting today. As Murphy explains, "What is in the individual best interest is not what is in the society's best interest." The point of the experiment is to tinker with the arrangement to get the most cooperation from all parties.

For UAA, very attractive components of working with UIT are the chance for student and faculty exchanges, and the opportunity to build a community of Northern peoples with overlapping interests. As UAA's Huskey put it, "We can see the Arctic from our window."

Kathleen McCoy works at UAA where she highlights campus life in social and online media.

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