  When a population is engaged in successive prisoner's dilemmas, indirect
reciprocity through reputation fosters cooperation through the emergence of
moral and action rules. A simplified model has recently been proposed where
individuals choose between helping or not others, and are judged good or bad
for it by the rest of the population. The reputation so acquired will condition
future actions. In this model, eight strategies (referred to as 'leading
eight') enforce a high level of cooperation, generate high payoffs and are
therefore resistant to invasions by other strategies. Here we show that, by
assigning each individual one out of two labels that peers can distinguish
(e.g., political ideas, religion, skin colour...) and allowing moral and action
rules to depend on the label, intolerant behaviours can emerge within
minorities under sufficient economic stress. We analyse the sets of conditions
where this can happen and also discuss the circumstances under which tolerance
can be restored. Our results agree with empirical observations that correlate
intolerance and economic stress, and predict a correlation between the degree
of tolerance of a population and its composition and ethical stance.

Physics and Society;Populations and Evolution