"We're Fair Because We Care"

Published in HealthSCOUT

splitting bill

(Or maybe we’re just protecting our reputation)

By Patricia Lynden

How did the concept of fairness evolve?

Through caring what other people think about you, says a report in September's Science Magazine.

Biologists have arrived at this conclusion through a new analysis of the Ultimatum Game, long a favorite technique by which economists particularly, try to understand seemingly "irrational" human behavior.

Here is how it works: The game is played by two people. Person A is handed $100 by the scientists doing the study and told to offer Person B in another room a portion of the money. If B accepts the deal they both get to keep the money, but if B rejects the money neither one will get anything.

Now, rationally you would think that B would happily accept whatever portion of the $100 is offered since it's free money, and even $1 is more than he had before.

Not so, scientists have found. Time and time again, B will refuse any amount he considers unfair -- usually less than 30 percent.

Consequently, A usually winds up offering B close to half of the $100.

So the question for scientists is how to explain such seemingly irrational behavior.

Or, put another way, why did the concept of fairness evolve?

This report says that B is afraid his reputation will suffer if he accepts too small an amount, says lead author Martin A. Nowak, Ph.D., head of the program in theoretical biology at Princeton's Institute for Advanced Study.

"In a real situation there is a chance that interactions like this do not take place anonymously and unobserved," Nowak says. People live in communities and "it is likely that it is known that [B] is someone who has never accepted less than 40 percent." So if A knows B's reputation "then the whole game has a tendency to go to fairness."

"To reject an offer is always costly because without any reason [B] is giving away the possibility of getting some money," continues Nowak. "But what you buy for this cost is the reputation as someone who is a tough negotiator and who demands a fair share." So even if you lose this game, "you buy a higher probability that next time someone else will offer you more."

Amazingly, he says, the game has the same results even in poor countries where $100 amounts to three months' salary.

Of course there is also the question of why B thinks it is "fair" for him to share 50-50 in money he didn't earn. Nowak agrees: "While working on this I realized that this is pretty arbitrary. What needs to be explained is why evolution has equipped us with an instinct that calls 50-50 essentially fair."

Game theory, for all the seeming artificiality of its exercises and its over-simplification of human behavior is "serious stuff," says Alvin E. Roth, Ph.D., a game theory expert and an economics professor at Harvard. It can be used to explain both nature and nurture.

Roth says that while biologists like Nowak use game theory to understand our basic nature, social scientists like himself "use evolutionary models not as models of biological evolution but as models of adaptations over time. The things economists are interested in are adaptations that have occurred since the invention of agriculture. So that's in the last 10,000 years. There isn't a lot of human evolution that has gone on in that period. Most of our adaptation to our economic environment is cultural and not biological."


Copyright © Patricia Lynden 2010-2013. Photo from iStockPhoto. Site designed by Bruce R. Jaffe.