Wednesday, June 2, 2010

"Who has a deeper sense of fairness, a mortgage banker or a chimpanzee?"

From The Big Money:

In this corner, Pan trogolodytes, or the common chimpanzee. In the other, an American mortgage banker. Which has a more highly evolved sense of fairness? Thanks to a combination of psychological experimentation and economic happenstance, the truth can now be known.

In effect, both chimpanzees and bankers have been made to take to a test called the “Ultimatum Game.” Commonly conducted in behavioral economics research, the procedure involves giving the first of two players a certain sum of money to divide.

This person can keep as much of it as he wants and pass the rest along to the second player. The second player can either accept what the first player offers or cancel the whole deal, in which case neither player gets anything.

In strictly rational economic terms, the second player should be willing to accept any amount of money that the first player offers. Even one penny, after all, is better than zero. But human beings are not strictly rational. Millions of years of evolution as social animals have left us with deeply ingrained expectations of fairness. So most people react to an offer of one cent with indignation and reject the deal as unfair. Realizing this, most first players tend to offer splits that are at least moderately fair—60/40, say.

Neither bankers nor chimpanzees conform to this rule of thumb, however....MORE