"Self-Enforcing Arrangements and Heterogeneous Groups"

A conventional wisdom in the literature contends that without a system of formal enforcement, heterogeneous groups are unable to peacefully interact for mutual benefit and are prone to eruptions of violent conflict. This article maintains that the amount of such conflict has been dramatically overstated and the occurrence of peaceful interaction dramatically understated. The common view reverses the empirical reality of the world. Historical evidence indicates that where formal institutions are absent, heterogeneous individuals signal credibility to one another by engaging in shared customs and practices, enabling peaceful intergroup exchange. This evidence challenges prevailing beliefs and suggests that peaceful cooperation characterizes most heterogeneous group interaction. Copyright 2006 American Journal of Economics and Sociology, Inc..