Hierarchy and the Scaling of Trust

From early human groups, to classical republics, to modern open-source software communities, many societies scale cooperative economic activity through hierarchies of trust: a public, coarse, and slowly evolving rank order that regulates who is trusted, by how much, and by whom. We model such a hierarchy as a family of stationary sequential equilibria in which principals condition trust on the agent’s seniority and agents condition cooperation and mobility on their continuation value. We show that as the number of tasks individuals can be entrusted to do for others increases, the maximum community size compatible with cooperation scales linearly. Further, we show that hierarchies enjoy dynamic evolutionary stability: active members strictly prefer the hierarchy to more egalitarian alternatives, and hierarchies may even lead to the breakdown of trust in these communities. We map the hierarchical equilibrium to key features of the early Roman Republic to explain its ability to scale and ability to absorb new members relative to its more internally egalitarian but exclusive rivals like Carthage and Athens, before describing how our model applies elsewhere, from the emergence of hierarchies in early human societies to open source software groups.