Photo: Wikimedia Commons
Like most of America, Art Cashin has been following the Presidential campaign pretty closely. But he’s concerned about candidates are polarising America.”The on-going Presidential campaign seems to be fanning the flames of the corrosive “Us vs. Them” theme that has infected much of what pass for dialogue since the crisis began in late 2007,” writes Cashin in today’s Cashin’s Comments.
All of this reminded Cashin of a New Yorker article that was published around the time Dick Grasso received his monster pay package from the NYSE. It featured a fascinating study involving capuchin monkeys.
An excerpt from Cashin’s Comments:
The article had a very interesting example of fairness and how people and even primates react to it. Here’s a bit:
It so happened that, on the very day Grasso resigned, 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; 40 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; 80 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.
Surowiecki also notes a human experiment to point to certain irrational aspects of the fairness reflex. In pondering why the Grasso pay flap got such national attention, he advanced a thesis:
The answer might have something to do with the “ultimatum game,” a well-known experiment in behavioural economics. The game is simple enough. Take two people. Give them a hundred dollars to split. One person (the proposer) decides, on his own, what the split should be (50-50, 70-30, or whatever) and makes the other person a take-it-or-leave-it offer. If he accepts the deal, both players get their share of the money. If he rejects it, both players walk away empty-handed.
The rational thing for the second person to do is to accept the offer, whatever it is, since even one dollar is better than nothing. But in practice this rarely happens. Instead, lowball offers are almost always rejected. Apparently, people would rather throw away money than let someone else walk away with too much. Other experiments illustrate the same idea. Essentially, people are willing to pay to punish those they think are free-riding or acting unfairly, even when doing so brings them no material benefits. The economists Samuel Bowles and Herbert Gintis call this the principle of “strong reciprocity.” Strong reciprocity works; it makes the whole system fairer. In the ultimatum game, for instance, the proposer usually ends up offering a relatively equitable split (say, 60-40) to insure that the other person accepts.
There are other examples of the influence of “perceived merit” on the fairness perception. (If one contestant did better on a questionnaire before an unrelated distribution, participants accepted more readily a larger share for the “smarter” player.)
Fairness is an important concept but it can be manipulated by the unscrupulous. Watch out for demagogues.