Thursday, 18 December 2008

Call me an idiot but I am not stupid

Cocktail of the day. A little bit of behavioural economics mixed with genetic evolutionism.

First a well known experiment; €10 and 2 persons, one of the persons makes an offer on how to split the money, the second accepts or rejects the offer. If the offer is accepted both subjects split the money as offered, if the offer is rejected no one gets any money. The interesting thing of this experiment is not that in most of the cases the offer is fair and close to half of the money, the interesting part is that for very unfair offers, for example a 8 / 2 split, the second subject rejects the offer. In this case both subjects loose. Why does not the second subject think that after all €2 is better than nothing? Well it seems that the natural response by human beings is to reject unfairness, even if it does not benefit them in the short term.

So is it just that humans have developed a sense for fairness and punish the unfair, or is it that we know that several behaviours are not good for the group (the apparent altruism described by Richard Dawkins in his book "The Selfish Gene") and as part of the group we punish anyone trying to break the equilibrium in the group? I believe so, by punishing behaviours that are against the group we make sure that in the future selfish behaviours will be less likely to happen.

Under certain circumstances by losing we all win, and thus we are ready to take the pain. But this altruism may have its limits. Take for example the countries were corruption is generalized, it happens at all levels from the top officials to the layman. In those societies the equilibrium is already broken and it makes no difference to punish any individual for her greed as it won't make any difference for the group as a whole. Thus once corruption is installed in a society it is so difficult to eradicate because the cohesion principles of the group are already broken.

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