What Research Shows About How Selfish We Are
Posted on Jun 29, 2016 by Trevor in Science
Free market capitalism often assumes a high degree of selfishness, and competing systems, such as socialism, often assume a degree of cooperation. But what does the research show?
Economist Richard Thaler’s book Misbehaving: The Making of Behavioral Economics sheds some light. Below I have posted an excerpt related to research about human cooperation. Although it’s not strictly related to systems of government, people should refrain from making claims about human nature without understanding the evidence that has been accumulating.
There is another class of games that takes up the question of whether people are purely selfish (at least when dealing with strangers), as Econs are presumed to be. These are games about cooperation. The classic game of this variety is the well-known Prisoner’s Dilemma. In the original setup, there are two prisoners who have been arrested for committing some crime and are being held and interrogated separately. They each have a choice: they can confess their crime or remain silent. If they both remain silent, the police can only convict them of a minor offense with a sentence of one year. If they both confess, they each get five years in jail. But if one confesses and the other stays silent, the confessor gets out of jail free while the other serves ten years in jail.
In the more general version of this game without the prisoner cover story, there are two strategies, cooperate (stay silent) or defect (confess). The game theoretic prediction is that both players will defect because, no matter what the other player does, it is in the selfish best interest of each player to do so. Yet when this game is played in the laboratory, 40–50% of the players cooperate, which means that about half the players either do not understand the logic of the game or feel that cooperating is the just the right thing to do, or possibly both.
The Prisoner’s Dilemma comes with a great story, but most of us don’t get arrested very often. What are the implications of this game for normal life? Consider a related game called the Public Goods Game. To understand the economic significance of this game, we turn back to the great Paul Samuelson, who formalized the concept of a public good in a three-page paper published in 1954. The guy did not belabor things.
A public good is one that everyone can consume without diminishing the consumption of anyone else, and it is impossible to exclude anyone from consuming it. A fireworks display is a classic example. Samuelson proved that a market economy will undersupply public goods because no one will have an incentive to pay much of anything for them, since they can be consumed for free. For years after Samuelson’s paper, economists assumed that the public goods problem could not be solved unless the government stepped in and provided the good, using taxes to make everybody pay a share.
Of course, if we look around, we see counterexamples to this result all the time. Some people donate to charities and clean up campgrounds, and quite miraculously, at least in America, most urban dog owners now carry a plastic bag when they take their dog for a “walk” in order to dispose of the waste. (Although there are laws in place supposedly enforcing this norm, they are rarely enforced.) In other words, some people cooperate, even when it is not in their self-interest to do so.
Economists, psychologists, and sociologists have all studied this problem using variations on the following simple game. Suppose we invite ten strangers to the lab and give each of them five one-dollar bills. Each subject can decide how many (if any) dollar bills he wishes to contribute to the “public good” by privately putting that money into a blank envelope. The rules of the game are that the total contributions to the public good envelope are doubled, and then the money is divided equally among all the players.
The rational, selfish strategy in the Public Goods Game is to contribute nothing. Suppose that Brendan decides to contribute one dollar. That dollar is doubled by the experimenter to two dollars and then is divided among all the players, making Brendan’s share of that contribution 20 cents. So for each dollar he contributes, Brendan will lose 80 cents. Of course other subjects are happy about Brendan’s anonymous contribution, since they each get 20 cents as well, but they will not be grateful to him personally because his contribution was anonymous. Following Samuelson’s logic, the prediction from economic theory is that no one will contribute anything. Notice that by being selfishly rational in this way, the group ends up with half as much money as they would have had if everyone contributed their entire stake, because if everyone contributed $5, that amount would be doubled, and everyone would go home with $10. The distinguished economist and philosopher Amartya Sen famously called people who always give nothing in this game rational fools for blindly following only material self-interest: “The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.”
As with the Prisoner’s Dilemma, the standard economics prediction that no one will cooperate in the Public Goods Game turns out to be false. On average, people contribute about half their stake to the public good. There is still a public goods problem, meaning that public goods are not supplied in as great a quantity as people would want if they could all somehow agree to be cooperative, but the undersupply is about half as severe as the rational selfish model predicts—well, with one important proviso. When the game was played by economics graduate students, the contribution rate was only 20%, leading the sociologists Gerald Marwell and Ruth Ames to write a paper titled “Economists Free Ride: Does Anyone Else?”
A wisecracking economist might answer the question posed by Marwell and Ames’s title with “experienced players.” A robust finding in public goods experiments is that if a group of subjects play the game repeatedly, cooperation rates steadily fall, from the usual 50% down to nearly zero. When this result was first discovered, some economists argued that the initial high cooperation rates were due to some confusion on the part of the subjects, and when they played the game repeatedly, they learned that the rational selfish strategy was the right one. In 1999, the experimental economist James Andreoni tested this interpretation with a brilliant twist. After groups of five subjects played the game for the announced ten rounds and watched cooperation rates fall, the subjects were told that they would play another ten rounds of the game with the same players. What do you think happens?
If people have learned that being selfish is the smart thing to do, then cooperation rates should remain low after the restart, but that is not what happened. Instead, in the first round of the new game, cooperation rates jumped back to the same level as the first round of the initial experiment. So repeated play of the Public Goods Game does not teach people to be jerks; rather it teaches them that they are playing with (some) jerks, and no one likes to play the role of the sucker.
Further research by Ernst Fehr and his colleagues has shown that, consistent with Andreoni’s finding, a large proportion of people can be categorized as conditional cooperators, meaning that they are willing to cooperate if enough others do. People start out these games willing to give their fellow players the benefit of the doubt, but if cooperation rates are low, these conditional cooperators turn into free riders. However, cooperation can be maintained even in repeated games if players are given the opportunity to punish those who do not cooperate. As illustrated by the Punishment Game, described earlier, people are willing to spend some of their own money to teach a lesson to those who behave unfairly, and this willingness to punish disciplines potential free riders and keeps robust cooperation rates stable.
A few years after my time with [Daniel Kahneman] in Vancouver, I wrote an article about cooperation with the psychologist Robyn Dawes. In the conclusion, we drew an analogy with the roadside stands one would often see in the rural areas around Ithaca. A farmer would put some produce for sale out on a table in front of his farm. There was a box with a small slot to insert the payment, so money could be put in but not taken out. The box was also nailed to the table. I thought then, and think now, that farmers who use this system have a pretty good model of human nature in mind. There are enough honest people out there (especially in a small town) to make it worthwhile for the farmer to put out some fresh corn or rhubarb to sell. But they also know that if the money were left in an open box where anyone could take all of it, someone eventually would.
Economists need to adopt as nuanced a view of human nature as the farmers. Not everyone will free ride all the time, but some people are ready to pick your pocket if you are not careful. I keep a photograph of one of those farm stands in my office for inspiration.
