Monday, 27 October 2008

Fairness, blokeyness and selfish gits

I'm at home feeling ill today, so trying to fit in a bit of reading. I thought I'd have a flick through another book on behavioural economics that I took a punt on recently which is Advances In Behavioural Economics, edited by Colin Camerer, George Loewenstein and Matthew Rabin. The paper I've been reading is Fairness and Retaliation: The Economics of Reciprocity by Ernst Fehr and Simon Gachter, which is all about... err... reciprocity. The influence of reciprocity is pretty well-established and comes in two forms - positive and negative. In the former case we respond co-operatively to friendly actions, in the latter we seek to punish hostile actions, often in quite a brutal way.

In a well-known experiment, two participants are given a prize, say £100, to divide between themselves. The way it works is that participant A gets to make the offer of how the money will split, and participant B gets to decide whether to accept it or not. The important points are that the offer can only be made once, and if participant B doesn't accept it then neither participant receive any money.

Now, if we were only driven by maximising self-interest, and not 'fairness', participant B should accept any offer, even if it is £1 for him/her and £99 for participant A. But actually, in the hundreds of times the experiement has been run, it turns out that many (in fact probably most) of us would rather reject an 'unfair' offer. In practice an offer where participant B will get 30% or less of the total is very likely to be rejected. Importantly this holds up even when the amounts of money involved are significant.

Notably further work has been done looking at male behaviour in these experiment and testosterone levels and there's a correlation. Males who reject 'unfair' offers have higher testosterone levels than those who accept them. I don't find this that surprising, as it seems like the expression of the desire not to be ripped off. That may undermine the cartoony views of some Righties that a desire for fairness is the whiney voice of the weak and feeble (it may also suggest that lefties have hairy backs).

It's worth noting in these types of experiments that we don't all act the same. While a majority of us exhibit reciprocal behaviour, both positive and negative, a large minority - 20% to 30% - behave completely selfishly. So actually behavioural economics provides some confirmation for typical Left and Right views of human nature. Most of us do want to reciprocate, but don't base your policies on that assumption, because one in three of us is a selfish git who will muck things up for you.


Mark Still News said...

What a load of B-----ks?

CharlieMcMenamin said...

I have a vague recollection of reading of experiments of this sort conducted on American undergraduates where the business and economics majors were statistically shown to be less generous/ more selfish than others.

The question then becomes: did they choose these pro-market courses because they think like this, or does knowing more about the operation of the market make them more selfish?

Tom P said...

Hi Charlie

Actually that would make a bit of sense, and I'd lean towards the course having an impact. There is some evidence that way a game is named has an influence on how people play it, and that if you appeak to a certain aspect of a person's background it can make them behave differently in a test scenario.

It may be that through the process of doing, say, an MBA that an individual develops a self-image that is more inclined to self-interested behaviour.