9.18 Appendix 1: How Selfish Are People Really?
193
9.18 Appendix 1: How Selfish Are People Really?
Our daily experience tells us that many people do unpaid jobs for the benefit of
others. A lot of volunteers work for free and some organize themselves in non-profit
organizations. In addition, we often leave tips on the restaurant table, even if nobody
is watching and even if we’ll never return to the same place (and that’s also the case
in countries where tips are not as socially obligatory as in the USA). Furthermore,
billionaires, millionaires and normal people make donations to promote science,
education, and medical assistance, often in other continents. Some of them do it
even anonymously, meaning that they will never get anything in return, not even
recognition.
Indeed, this has puzzled economists for quite some time. To fix the classical
paradigm of rational choice based on selfish decision-making, they eventually
assumed that everyone would have an individual utility function, which reflects
their personal preferences. However, as long as there is no theory to predict personal
preferences, the concept of utility maximization does not explain much. If we are to
take rational choice theory seriously, we need to believe that people who help others
must derive utility from it, otherwise they wouldn’t do it. But this appears to be pretty
circular reasoning.
30
9.18.1 Ultimatum and Dictator Games
In order to test economic theories and understand personal preferences better, scientists have performed a large number of decision experiments with people in laboratories. The findings were quite surprising and totally overturned conventional economic
theory at the time.
31 In 1982, Werner Güth used the “Ultimatum Game” to study stylized negotiations. In these experiments, a person (the “proposer”) was given a sum
of money (say, $50) and asked to decide how much of this money he/she would offer
to a second person (the “responder”). If the responder accepted the amount offered
by the proposer, both got their respective share. If the responder rejected the offer,
however, both received nothing.
According to the concept of the self-regarding “homo economicus”, the proposer
should offer no more than $1 and the responder should accept any amount. After
all, surely it is better to get a little money rather than nothing! However, it turns out
that responders tend to reject small amounts, and proposers tend to offer about 40%
of the money on average. A further surprise is that, all over the world, proposers
tend to share with others. Similar experimental outcomes are found when playing
for amounts as high as a monthly salary. To reflect these findings, Ernst Fehr (*1956)
and his colleagues proposed that humans hold inherent principles of fairness and
30 Now, however, the model for the emergence of “homo socialis” presented in this chapter can be
used to understand the evolution and variation of individual preferences and utility functions.
31 Henrich et al. [21]
193
9.18 Appendix 1: How Selfish Are People Really?
Our daily experience tells us that many people do unpaid jobs for the benefit of
others. A lot of volunteers work for free and some organize themselves in non-profit
organizations. In addition, we often leave tips on the restaurant table, even if nobody
is watching and even if we’ll never return to the same place (and that’s also the case
in countries where tips are not as socially obligatory as in the USA). Furthermore,
billionaires, millionaires and normal people make donations to promote science,
education, and medical assistance, often in other continents. Some of them do it
even anonymously, meaning that they will never get anything in return, not even
recognition.
Indeed, this has puzzled economists for quite some time. To fix the classical
paradigm of rational choice based on selfish decision-making, they eventually
assumed that everyone would have an individual utility function, which reflects
their personal preferences. However, as long as there is no theory to predict personal
preferences, the concept of utility maximization does not explain much. If we are to
take rational choice theory seriously, we need to believe that people who help others
must derive utility from it, otherwise they wouldn’t do it. But this appears to be pretty
circular reasoning.
30
9.18.1 Ultimatum and Dictator Games
In order to test economic theories and understand personal preferences better, scientists have performed a large number of decision experiments with people in laboratories. The findings were quite surprising and totally overturned conventional economic
theory at the time.
31 In 1982, Werner Güth used the “Ultimatum Game” to study stylized negotiations. In these experiments, a person (the “proposer”) was given a sum
of money (say, $50) and asked to decide how much of this money he/she would offer
to a second person (the “responder”). If the responder accepted the amount offered
by the proposer, both got their respective share. If the responder rejected the offer,
however, both received nothing.
According to the concept of the self-regarding “homo economicus”, the proposer
should offer no more than $1 and the responder should accept any amount. After
all, surely it is better to get a little money rather than nothing! However, it turns out
that responders tend to reject small amounts, and proposers tend to offer about 40%
of the money on average. A further surprise is that, all over the world, proposers
tend to share with others. Similar experimental outcomes are found when playing
for amounts as high as a monthly salary. To reflect these findings, Ernst Fehr (*1956)
and his colleagues proposed that humans hold inherent principles of fairness and
30 Now, however, the model for the emergence of “homo socialis” presented in this chapter can be
used to understand the evolution and variation of individual preferences and utility functions.
31 Henrich et al. [21]