The visible hand in economics

The rational Chimpanzee

Posted on: October 10, 2007

So according to a recent study, Chimpanzees play the ultimatum game more ‘rationally’ than humans (hat tip Marginal Revolution).

For those who don’t know, the ultimatum game goes like this. There are two players, and a sum of money that can be split between them (say $1). The first player gives decides on how this dollar should be divided between the two of them. Given this division the second player decides whether to accept this division or reject it. If the second player accepts they divide the dollar, if the second player rejects the offer they both get nothing.

If both players only value the amount of money they get then the first player will set up the division so they give player two only an infinitesimally small amount. However, when humans play the game we find that they divide the dollar up quite evenly. Furthermore, we find that when people divide the dollar up very unevenly, the offer is rejected, even though that means player two misses out on some money.

When they say that Chimps play a more rational game than humans, they mean that chimps behave in the way closer to what we would expect if the agents involved only valued money. All this really tells us is that humans value concepts like fairness at a higher rate than chimps do. Hardly a surprising result.

However, this does make a good point for economists to take on board. Humans obviously do value fairness,. Part of this is instinct, and part of this is institutional. By institutional, I mean that it is a preference we have developed as a result of the society we live in. Although economists are happy to abstract from ideas like this, when we apply economic theory it is important not to forget about the social norms that people also value.

But more importantly, the social norms that are created through the application of economic ideas may eventually change the preferences of the individuals in society. Fairness is useful as it helps reinforce co-operation in situations where a prisoners dilemma occurs. If analysts introduce policy that undermines fairness, or in some way degrades the social norm of fairness, then the socially optimal co-operative result becomes more difficult to achieve. Even more fundamentally, how does the change in preferences influence the way individuals value things, could the loss of fairness as a social norm leave people feeling more upset ceteris paribus? I think this is what sociologists have been telling economists for a while.

Ultimately, I accept the idea that social norms are important in determining preferences, but academic economists have good reason for not looking at them. Academic economists want to focus on thing they feel that they can objectively measure, so that their work does not become value laden. Defining preferences is not value neutral, and so is steered away from in academic work (except maybe in Evolutionary game theory? Not that I would know 😉 ). However, economists that want to apply their ideas to reality must realise that societies affect on preferences is non-trival. This makes the questions of how a given policy will impact on preferences more difficult.

9 Responses to "The rational Chimpanzee"

I get it. Some people have such an abnormal concept of fairness that insists that no one should get more than anyone else, ever. So the rejection of the deal may take the form of taking from a system without adding anything (or ever planning to add anything) and not feeling guilty about it whatsoever.

Phil U explained.

Who? I know very little about the New Zealand blogsphere, I’m just an average man trying to make my way in the economics universe 😉

You raise a good point though. These concepts such as fairness are incredibly subjective. How does a person develop a sense of fairness, where does that come from? This is where we need a psychologist to give us a hand I think.

Who said anything about the blogosphere?

I would be surprised if the concept of fairness isnt, or hasnt been, the topic of many economic doctoral theses.

You also have to consider whether it is “worth it” – I don’t remember the proper economical term.

If you’re splitting $1 into 99%-1% then the second person is unlikely to care about the 1c.

If you’re splitting $1,000,000 then they will probably take the $10,000.

I’m assuming that they are doing this experiment on the chimps using food. I guess the comparison would be that if you cut the food up into a miniscule piece the chimps may not care either – if they can even see it!

I suspect part of it is that people are assuming the OTHER player isn’t rational.
IE: If i only offer this guy 5c out of this dollar, he’s probably gonna be pissed off and would value the enjoyment he would get from denying me the 95c more than the 5c he’s getting.

Owww definitely. My comment was aimed at the mentioning of Phil U. I have no idea who this is, so I was confused.

Most definitely a lot of intelligent people have discussed fairness. I’d like to hear what people have to say about it. It seems like its a structural issue to me, something that is the result of society or our genes, or both.

Hi Peter, worth it sounds like a fine way of putting it to me, as thats simply saying that the benefit must exceed the cost.

I agree that this decision changes with sums. After all, if we value punishing unfairness at X, then as long as someone offers us more than X we will accept. The larger the sum involved in the game, the smaller the proportion of that sum will be required to meet X.

I wouldn’t call getting value from punishing unfairness, or hurting someone else irrational. That is why I have the ‘ marks around rational. Punishing someone for being unfair is a consumption decision. If someone offers you 5 cents of $1 and you know rejecting will punish them for being pricks, then you are really spending that 5 cents in order to punish them, which you gain value from. Its just like buying an ice-cream, in a sense.

The issue of whether chimps were being offered an equivalent deal to humans is a very interesting one. Ultimately, we don’t know. In fact we can’t really say that the offer is equivalent between people, as the satisfaction people get from the sacrifice, and their expectations all differ. A dollar for one man is different than a dollar for another. Ultimately I suspect that Chimps play the game more like the ‘self-interested’ agent that we study in economics as they do not have the same social structure.

As we are in a sense bounded rational, the social norms we develop influence the payoff we receive from certain choices, which makes us play games differently even in situations that these social norms were not meant for.

[…] would have been the first economist (or maybe it was a different animal, after all we know that Chimps can play the prisoners dilemma game). Explore posts in the same categories: Economic […]

This experiment wasn’t reliable

Interesting, how was it not reliable?

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