An article whose lessons are re-hashed in the book
The irrational actor: What board games teach us about life by Jonathan Kay
- my peevish decision to reject John’s deal was out of character. What’s worse, it blurred the line between real-life personal pride and in-game strategizing. As a gamer, I pride myself on being a dispassionate analyst who knows how to play the odds. What was it about this situation that made me abandon the cut-and-dry tools of cost-benefit analysis?
- The implications of this question go beyond the world of games. Microeconomics is built around rational choice theory, which presumes that economic actors will consistently act in such a way as to maximize the value they receive in any transaction. But at that gaming moment, Rational Choice Theory left the building, even when John specifically appealed to its precepts.
- In a purely rational world, it would not matter how the proposer divided the gift — even if it is as lopsided as $99 for the proposer, and $1 for the receiver. But what researchers consistently find is that responders often will reject proposed splits that are significantly lopsided. Most responders are OK with splitting the money 60/40, and possibly even 70/30. But once the ratio becomes higher than that, responders often balk. What is more, proposers seem to anticipate this “irrational” behaviour among responders, as studies show that the average proposed split in Ultimatum Game trials is about 60/40. Ultimatum Game experiments conducted around the world show that this sort of behaviour is exhibited universally among men, women, poor, rich, young and old. It also transcends cultural differences.
- Ultimatum Game responders might be rejecting small payouts because accepting them might serve to diminish their dignity in front of the researchers conducting the experiment. But results from the Impunity Game suggest that Ultimatum Game responders who leave money on the table are motivated primarily by a desire to punish a proposer’s “unfair” offer — a reflex that some might classify as spite.
- Why are humans so eager to punish anonymous individuals for their perceived greed? Even if the proposer in an Ultimatum Game truly does learn a life lesson about equity and social justice from a responder’s decision to punish him for a lowball offer, how does that benefit the responder?
- The answer would seem to be rooted in evolutionary psychology. While most of us now live in cities full of strangers, our primate brains emerged in an ancestral environment where we existed almost exclusively in small, tight-knit kin groups. In such environments, where everyone knows everyone, community members tend to deal harshly with behaviour deemed disruptive or anti-social to help ensure that it does not happen again. The idea of punishment and retribution comes naturally to us and explains how mobs are so easily stirred to acts of vengeance following a shocking crime.
- none of us want to be viewed by our peers as a sucker who can be easily be exploited by others. As my own experience shows, such instincts are so indelibly marked on our brains that they flare up even when we are playing a game with no real-world consequences, easily blasting through the intellectual conceit that supposedly protects in-game Jonathan from the anxieties and hubris of real-life Jonathan.
- In the Ultimatum Game, every game is a one-off event. In real life, which is what has conditioned our brains over the millennia, we tend to deal with the same colleagues, friends and family members day in and day out. It is this reality that has programmed our evolutionarily engineered decision-making circuitry. By punishing proposers who offer unfair deals, we are exhibiting behaviour that, while irrational with regard to a one-off transaction with a stranger, may be rational as a long-run strategy to show onlookers that you will not let them enrich themselves by targeting you with predatory commercial behaviour.
- Jonathan continues in the book Your Move with this reasoning, this time using the game No Thanks!: I looked around the table at my four opponents. Did I feel comfortable predicting what John would do? Maybe. What Liam would do? Perhaps. What every- one would do? No. I looked down at the 35 card in front of me. There were a dozen chips on it. Send it around again and I would get a bunch more. Then more after that. With each progressive iteration, I knew, the sense of spite would grow more acute among my competitors. Moreover, the cheers-I knew there would be actual cheers-would grow louder for the player who came forward to thwart me. All it takes is one hothead to get fed up and grab the pot. "I may be going down," I imagined this as-yet-unknown nemesis saying to me, "but I'm taking you with me!" It struck me at that moment that this is not just the logic of No Thanks! and the Ultimatum game but also of social justice, of Marx, of Robin Hood, of revolution. Throughout history, has it not been this same pattern that has driven to reckless gestures of violent peasants and campus radicals alike. Protest as a means to strike fear into the hearts of upper classes? When the rich take a dozen chips, the sans-culottes will grumble. Keep bleating “let them eat cake” as you feast on their tokens and eventually, they will storm the palace. For each protestor who is cut down by the bayonets or thrown into prison, the cost of revolution surely exceeds the benefits. For the mob as a whole, well, that might be a different story. I took those twelve chips and ended the game. In doing so, I grimly noted the irony of the outcome. It had not been Liam or anyone else who had acted "irrationally." It was me, acting out of fear that they might act irrationally. Such are the complexities of real-life decision-making. Which is why economists, for all their formulae and data, will never fully succeed in modeling the way we all think.