Economic Predispositions?

Predisposed: Liberals, Conservatives, and the Biology of Political Differences
John R. Hibbing, Kevin B. Smith, and John R. Alford
Kindle Locations 1295-1332

Classical economic theory has very precise predictions about what you will do with the money. In the dictator game you will not give the stranger anything. Why should you, since you will probably never see him or her again? The rational thing to do is to maximize your benefit and that means holding onto the fistful of dollar bills. You cannot be similarly Scrooge-like in the ultimatum game, though, because the stranger has a veto. Give the stranger nothing and you are likely to get nothing. The problem is how much to give. Economic theory predicts that you will give the least amount required to avoid a veto. If you are holding 20 one-dollar bills, that amounts to a measly dollar. Here’s the logic: Walking away with a dollar is better than walking away with nothing, so a dollar should be enough to prevent a rational stranger from exercising a veto.

These sorts of games have been repeated thousands of times in an amazing variety of contexts, and with an amazing variety of twists and minor modifications. The clear message from all this research— a message that is surprising only to economists— is that classical economic theory stinks at predicting how people will divide their 20 dollars. People are wildly more generous to strangers than they need to be. The average amount passed along in a dictator game is not zero but rather about $ 8 of the $ 20; in other words, pretty close to an even split and way more than rational maximizing behavior would suggest.

The results of ultimatum games are even more interesting. Remember, a rational person should accept any positive amount because one dollar is more than no dollars. In reality it is very common for small offers to be rejected. If you keep $ 19 and offer just $ 1, many strangers will exercise their veto and your 19 bucks will go poof. Splits of $ 18– $ 2, $ 17– $ 3, $ 16– $ 4 also are frequently turned down; even $ 15– $ 5 splits are occasionally nixed. What all this tells us is that people routinely deviate from rationality in order to be generous to a powerless stranger or to stick it to a greedy bastard. These findings probably are not big news to you but they create serious problems for the theory that humans are rational maximizing actors because, well, they don’t seem to act very rationally.

This basic message stays the same even when researchers tinker with the setting or format of the basic script. These games have been played in Siberia, in Western universities, and in hunter-gatherer societies. 3 The stakes of the games have been altered by taking them to regions of the world where $ 20 is the equivalent of several months’ wages. 4 The $ 20 has been described as a blind (an unseen resource) or a pot rather than as a fund belonging to the divider. 5 The physical attractiveness of the “stranger” has been altered. 6 And the “stranger” has been rendered less strange by altering the extent to which the players know each other. 7 These changes make a difference, driving non-maximizing behavior up or down, but none alters the basic conclusion that people are not the single-minded pursuers of profit that economic theory holds them out to be.

Just as Milgram’s results are presented as indicating that people are subservient to authority, the divide the dollar outcomes are presented as evidence that people are irrational; and just as the common interpretation of Milgram’s research is mistaken, so too is the common interpretation of the research on economic games. A closer look at the game results indicates tremendous individual variation in the decisions people make— even when the locale and experimental manipulations are the same . Some people are simply more generous than other people; some are more punitive; some are more strategic; some are more consistent; and some are more sensitive to the setting.

A significant minority of people— our best guess is around 20 percent— play economic games in a manner that is quite consistent with classic microeconomic theory in that they do not share unless they have to and they do not punish those who do not share with them . Others are relentlessly generous and the decisions of still others are variable and contingent upon context. The common conclusion growing out of the economic games research— that people are not rational maximizers— badly misses the point. Whether the topic is obeying authority figures or sharing resources with strangers, the real message of empirical research on human behavior is that people are fundamentally different. “People” are not lemmings in the face of authority— but some are. “People” are not rational maximizers —but some are.

Kindle Locations 1344-1361

Milgram’s focus on the situation as the key explanation of behavior and his abject indifference to behavioral variation within the same situation is disconcertingly typical of social science research. As an illustration of the value that could be added if this research tendency were altered, consider a fascinating study conducted some time ago by economist Kevin McCabe and colleagues. They had participants play a variant of divide the dollar games called a “trust” game while their brains were being imaged. The twist in this case was that players sometimes interacted with another human being and sometimes with a computer that was programmed to follow a preset sequence. McCabe found that people’s brain activation patterns are quite different in these two situations.

Told they are playing a computer, little activity registered in the emotional (or limbic) areas of the brain or in the prefrontal cortex of participants. In this situation the brain appears to be on autopilot, doing nothing more than calculating the way to get the most money (in other words, to be rational). Against a human being, in contrast, limbic areas such as the amygdala are activated, as is the prefrontal cortex, which presumably must resolve the conflict created by the rational desire to acquire more money and the emotional feelings that might accompany an exchange situation. 9

If it ended there, this research would be another example of the kind of approach that we are cautioning against: general statements that “people” display different brain activation patterns depending on the situation. This particular study, however , has a feature that illustrates the value of looking at individual differences. When the five most uncooperative individuals , as determined by the decisions they made in earlier economic games, were observed in the scanner, their brain activation patterns, unlike other participants, tended to be no different when they were playing against another human being than when they were playing against a computer. Thus, at least some people appear to be surprisingly devoid of the emotional responses that typically accompany human interaction. 10

Kindle Locations 1452-1467

Classical economic theory is in much the same boat. We have already noted this theory’s spectacularly inaccurate predictions with regard to various divide the dollar games. Classical microeconomic theory ends up in the same situational place as behaviorism and gets there much faster than evolutionary psychology. This is because it, too , is built on a worldview of presumed human universality, specifically humans as preference-maximizing machines. We might prefer beer and you might prefer wine, but the reasons we have different preferences is not of interest to most economists. They are more excited by the presumed universal process people employ to maximize those preferences in a given situation (rational utility maximization, as it’s called in the trade).

Classical economists rarely recognize the relevance of behavioral morphs. While psychologists study introverts and extroverts and political scientists study liberals and conservatives, economists have no parallel widely accepted terms that are indicative of fundamental economic types. 22 The situation determines what people need to do to maximize preferences so there is no need to worry about the fiddle-faddle of people having different preferences in the same situation. Preferences are taken as given (in other words, assumed away), and when deciding what to do, it is assumed that all humans crank through a universal cost-benefit calculation. The perceived pros and cons in that calculation are determined not by variation in personality, or neural architecture, or cognitive processing styles, but by the situation. As Dennis Mueller wisely notes, “homo economicus … bears a close resemblance to Skinner’s rat.” 23 The point is that broad swathes of the most prominent social science theories are based on the assumption that the human condition is monolithic and that any variations in human behavior are exclusively the product of the situation. The problem with this assertion is that it is simply not true.

Kindle Locations 3420-3422

At least among males , the more buff you are, the more likely you are to push strongly for positions that further your own economic interest (socialistic redistribution if you are poor; laissez-faire capitalism if you are rich). 44

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We believe that traits such as orientation toward out-groups, openness to new experiences, and a heightened negativity bias fit more naturally with social than economic issues, and we tend to agree with Congressman Weaver that economic positions are typically secondary. He points out that “ethnocentrics do not give a fig for individual rights” and sees the connection between conservatism and free market principles as a relatively recent development. Similarly , he does not view Marxism as connecting to the deeper forces shaping empathics and believes that accounts that do make this connection “totally ignore our biological origins.” 55 The deep forces that shape political predispositions likely do not act directly on controversies over the role of government in society (after all, for how long in evolutionary time has the size of government been an issue?) or, relatedly, on controversies over the glories of the free market relative to the social welfare state. But if the issue becomes whether or not to open up a country’s social welfare system to recent or future out-group members (that is, immigrants ), deeper forces quickly come into play. Economic issues are certainly crucial in modern politics—sometimes the most crucial— but this does not mean fault lines on these issues are as biologically rooted as social issues.


One thought on “Economic Predispositions?

  1. There is another aspect not brought up in the above passages from this book.

    The differences aren’t just individual, but also collective and involving differences of culture. People have different personalities. And, in a sense, entire communities and societies can have different ‘personalities’. On the individual and collective level, no one knows how much of this is caused by biological factors versus environmental conditions.

    Many of the assumptions Western scientists have made were based on their experience as Westerners. They tended to use Western subjects for their experiments and so tended to prove the very assumptions they were making. Once researchers did studies with other populations, they quickly found that assumed universals of human nature weren’t so universal after all.

    One example involved probably a Western anthropologist. I can’t recall if he was doing a formal or informal experiment.

    While visiting an indigenous tribal community, he set a bowl or pile of fruit under a tree. He told a group of children that the first to the tree would get all the fruit. The kids instantly took each other’s hands and ran to the tree together. Once there, they sat down in a circle with the fruit in the middle and shared it equally.

    He asked the children why they acted that way, since from his perspective it was against each child’s rational self-interest to share. This was indigenous ‘socialism’ that was self-enforced, no large central government authority needed. Such socialist behavior was assumed by many Westerners to be unnatural, a social artifact of an ideology and an oppressive social hierarchy.

    The kids knew nothing about socialism. All they knew were the traditional values they were raised in. The tribe came before the individual. They explained that they couldn’t enjoy the fruit if any of the kids was left hungry.

    This undermines the entire basis of Western capitalism as a human universal. This severely questions the assumption of Enlightenment individualism.

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