September 30, 2009

The ultimatum game--don't monkey around with it

Don't offer this guy a bum deal.

A classic experiment in behavior economics challenges the image of people as rational agents who always act in their own material self interest. It's called the ultimatum game and it works like this:

there are two players, one with say $10 and the other with nothing. Player A decides how to split the money and makes a take it or leave it offer to Player B. Player B can either accept what is offered or veto the whole deal.

While it would technically be in Player B's rational interest to accept whatever is offered, even if it's only $1, most people in that position insist on a fairer division, even if it means walking away from a bad deal with nothing at all.

In most games, the average amount offered was $4.71. When people in Player B's position were asked what the lowest amount they would take would be, the average answer was $2.59. As Michael Marmot put in in The Status Syndrome,

"Players were prepared to tolerate a degree of inequality if the absolute reward to them was great enough. But if the inequality increased sufficiently, or the absolute rewarded went down enough, the game wasn't worth it, and they opted for both getting nothing."

That's also the way some monkeys play it. James Surowiecki in an old New Yorker column relates the following:

...the primatologists Sarah F. Brosnan and Frans B. M. de Waal released a study showing that female brown capuchin monkeys seem to have a sense of fairness, too. Pairs of capuchins had been trained to give Brosnan pebbles in exchange for slices of cucumber. This idyllic monkey market economy was disrupted, though, when the scientists changed the pay scale, rewarding one monkey with a delicious grape and the other with the same measly old cucumber. Exposed to this injustice, the capuchins who were given cucumbers often refused to eat; forty per cent of the time, they stopped trading entirely. Things got worse when one monkey in each pair was given a grape for doing nothing at all. The other monkeys often responded by tossing away their pebbles; eighty per cent of the time, they stopped trading. The capuchins were willing to forfeit cheap food simply to express their displeasure at their partners’ unearned riches.

The point was not—as some of the news coverage suggested—that capuchins are innate sharers. (The capuchin who got the grape showed no inclination to give it up.) The monkeys want to distribute things fairly, not equally. They seem to believe that there should be a clear connection between work and pay. One variation of the ultimatum game shows that humans feel this way, too: instead of randomly assigning the proposer role, the researchers had the participants take a trivia quiz beforehand, and the ones who did best became proposers. Not one of their offers was rejected; apparently, people believed that a proposer who might be worthy of his status deserved to keep more of the money.

Our sense of fairness, in other words, demands that there be at least some relationship (however tenuous) between accomplishment and reward...

It looks like a sense of justice is a primate thing.

SPEAKING OF WHICH, justice lost a round yesterday in the US Senate finance committee. WV Senator Jay Rockefeller's public option amendment to the Baucus health care reform bill was voted down. It's not over yet as there is still a chance to amend the bill on the floor or when the House and Senate meet to reconcile their bills.
Here's a big Goat Rope "Thank You!" to Rockefeller for fighting the good fight.

THE GREAT DEPRESSION of the 1930s might have had a silver lining, according to this scientific study. Thanks to a certain hermit for passing this along.

IN THE HOLE. Economist Dean Baker takes on the deficit here.



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