Saturday, July 17, 2010

"Hey mummy, what is fair? How come I have to share?"

As Ricky Lee Jones’ kid-inspired lyrics suggest, fairness is at least partly a learned quality. A young child doesn’t get fairness at all, and views of fairness change as children mature. I was amused to read a paper by a group of Norwegian economists who were trying to quantify this process.

A classic tool for looking at fairness in human interactions is “The Dictator Game.” The economist/sociologist/researcher gets two people, and gives one of them, the “dictator,” a sum of money. The dictator is then asked to divide up the money as he or she sees fit. Purely selfish people will keep it all, but (reassuringly) purely selfish people are rare. Most dictators give the other test subject some of the money. This is true across cultures and across ages.

But life is rarely as simple as the dictator game. Wealth is, alas, all too rarely bestowed by a rich uncle; it must be earned. But life is capricious—some have wealth due to luck, whether due to a rich uncle or a happy accident. And further complicating things, not everybody needs the same things, so a gift to some is worth far more than a gift to others—a factor the economists call “efficiency”. How does a person’s idea of fairness account for these factors of effort, luck, and efficiency? The Norwegians found that for most people, views of fairness change with age.

The Norwegians modified the dictator game so that the dictator divvied up wealth that was “earned,” in this case by the dictator and the partner sorting numbers on a computer screen for a while. Both dictator and partner were perfectly free to play video games, but most everybody “worked.” The researchers then modified the game—at random, one of the subjects of the game would be compensated for their “work” at a vastly higher rate. Since this was due to chance, the idea was that this would model “luck.” And finally, they modified the game by telling the dictator that every cent he or she kept would be worth one cent, but every cent he or she gave to the partner would be doubled, trebled, or quadrupled. It would be most “efficient,” and result in maximum benefit to society, for the dictator to give everything to the partner.

The Norwegians found that younger kids have, on average, a simple notion of fairness which they called “egalitarianism.” Regardless of effort, luck, or efficiency, the dictator divided things 50-50. As children aged, up to the end of high school, things changed. They steadily became more “meritocratic,” with dictators assigning wealth according to effort. Additionally, children paid more attention to efficiency, but this was a late development. Interestingly, boys (on average) discovered efficiency by age 13, while it took longer for it to be a factor for girls.

It’s not too surprising that most peoples’ views of fairness change as they grow up. A meritocratic view of fairness, accounting for efficiency, requires a certain level of cognitive development. But, as the authors note, this development must be in part driven by society. This study was not done in the United State, the world’s leading light of market-driven capitalism. This study was done in Norway, which is one of those awful European hell-holes that the champions of the invisible hand warn us about, and the toxin of Euro-socialism can’t help but warp impressionable young minds.

However, there is something here for the free-marketers. Besides the egalitarianism and the meritocracy, there is a third view of fairness manifested in this study. The authors call it “libertarianism, which justifies all inequalities in earnings.” Libertarian dictators give themselves all the wealth that is to be distributed. It appears, according to this study, that about a third of children are born libertarians, and since that number remains constant, it appears that the libertarians never grow up.

data from Almas et al 2010

Having interacted with a few libertarians, this is also not surprising.

Ingvild Almas, Alexander W. Cappelen, Erik O. Sorensen, and Bertil Tungodden (2010). Fairness and the Development of Inequality Acceptance. Science 328, pp. 1176 - 1178.

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