Economics and Balanced Reciprocity.

Kevin Cox
4 min readOct 27, 2023

Generalised reciprocity is human behaviour that involves giving without expecting a specific outcome. It is based on the universal moral norm that people should treat others as they would want to be treated. This type of reciprocity emphasizes the importance of fairness, respect, and mutual benefit in human interactions.

However, there are other types of reciprocity, including negative reciprocity, where a person attempts to get something for nothing. It is common among people who do not know each other well. Negative reciprocity refers to exchanges where one party attempts to act entirely in their own self-interest in pursuit of material advantage.

Balanced reciprocity involves a direct exchange in which something is traded or given with the expectation that something of equal value will be returned within a specific time period. It involves three stages: the gift must be given, it has to be received, and a reciprocal gift has to be returned. This reciprocity reinforces social bonds and is common in non-market (gift) economies.

Economic man, also known as homo economicus, is an idealized model of human behaviour in mainstream economics. It assumes that individuals act rationally, possess perfect knowledge, and seek to maximize their personal utility or satisfaction. In other words, economic man behaves with negative reciprocity.

The Cost of Negative Reciprocity in an Economy

Economics based on negative reciprocity assumes that the increase in profits of Negative Reciprocity is additive. If one person gets something for nothing, it means it has been paid for by someone who did the work but did not get the reward. This action is not beneficial to society but rather a cost. The person who performed the work without compensation may retaliate by repeating the same action to someone else as it was done to them.

If there were no negative reciprocity with the first party, then it would not be necessary for the other party to use negative reciprocity. Both parties increasing their income unnecessarily increases GDP, but it needn’t happen, which drops it from GDP. The same goods and services are produced — but for less cost, and that is an increase in economic productivity.

Negative reciprocity occurs when people become rich with little effort. The most common case used to be land ownership, where peasants rented land and gave a portion of their output to an owner of the land. This is called rentier behaviour but has become commonplace with the increase in rented Capital or money.

Interest on Bank Loans and Negative Reciprocity

The government licences Banks to rent new money for Nations. Banks profit by collecting interest or rent on the money, keeping all the profit. This is an example of Negative Reciprocity as Bankers take a risk while the Bank requires little effort as the Borrower takes most of the risk and all of the effort to pay the interest. The Bank can turn the Negative Reciprocity into a Balanced Reciprocity by returning some interest to the Borrower.

Returning interest is achieved by some of the interest paid, reducing the amount owed and speeding up the movement of Capital. Speeding up the movement of Capital increases the productivity of Capital and benefits the nation.

The Reserve Bank can use Balanced Reciprocity and require licensed Banks to follow it. The Reserve Bank can ask the Banks to target different areas of the economy by requiring most of the profits from interest for particular types of loans to remain with the borrower and encourage investment in other areas by most of the interest on loans from savings staying with investors. For example, most of the profits from loans to home occupiers should stay with the borrowers, while most profits from loans for new production, like new houses, should stay with the lenders.

Balanced Reciprocity and Company Profits

The idea of Balanced Reciprocity can extend to Company Profits, with Companies sharing their profits with consumers and workers. When profits are shared, customers can better judge the value they are receiving, and this can supplement the operation of free markets in setting prices and hence profits. Balanced Reciprocity on profits is a lower-cost way of setting fair prices than free markets.

The government can also mandate the sharing of all regulated industries like natural monopolies like gambling, alcohol, roads, water, and electricity.

Balanced Reciprocity and Taxes

Taxes for income redistribution perform the same task as Balanced Reciprocity and hence should reduce the need for taxes. Taxes themselves can use the same idea, but the lenders can be citizens who prepay their taxes and receive a discount when they use the prepayments to pay their taxes.

Balanced Reciprocity reduces the money needed to operate an economy as many profits come from lower prices for goods and services. Lower prices for the same goods and services define economic productivity, and an economy built around Balanced Reciprocity will be a lower-taxed and more productive economy. Governments can influence markets' operations to favour beneficial investments rather than the current market operations favouring areas of Negative Reciprocity.

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Kevin Cox

Kevin works on empowering individuals within local communities to rid the economy of unearned income.