We held two great events here yesterday. In the evening RSA Chairman, Luke Johnson, hosted a speech by Sir John Rose, CEO of Rolls-Royce, on the topic of creating a high value economy. The Great Room was also full to bursting at lunchtime for a conversation with Steven D. Levitt and Stephen J. Dubner about their book ‘Superfreakonomics'.
Having read the book it was obvious to me that among the most controversial issues was the authors’ critique of ‘evidence’ about inherent human altruism. Levitt and Dubnar were fascinated, as it turned out this point had hardly been raised with them amidst all the arguments they had had about issues like climate change and prostitution. Nevertheless they set about making their case with great gusto.
You need to read Chapter 3 of the book to get the whole argument but in essence, and relying heavily on the work of economist John List, the two Stev(ph)ens refute often cited evidence from the ultimatum and dictator games which purports to show that people do not simply maximise gains but instead put a price on an innate sense of fairness. This may work in the artificial setting of the research project where students want to show how great they are but the evidence disappears when you construct a similar experiment in the real world.
What is more, we are only as fair as we think we have to be to avoid looking mean. So when people are asked to divide a $10 gift between them and an anonymous other they might choose to give away $3 or $4. But if their options include being able to take money off the other person (so the range of options are from giving away the whole $10 to keeping the $10 and taking $5 dollars off the stranger) the subjects adjust their offer to zero. In other words if simply not stealing is made to feel like it is a benign choice, people use that to legitimise keeping 100% of their windfall gain.
For me the interesting question is what does this more traditional self interested account of what drives us mean for our policy inclinations. At the beginning of my recent Prospect piece I wrote:
“As a schoolboy socialist in a 1970s grammar school, the first political arguments I had were about human nature. My idea of the good society rested on a view of people as collaborative and benign, qualities hidden by the depredations of 'the system'. Working-class Tory mates mocked my naivety. To them we were self interested. Some succeeded by their efforts, others failed or cheated and would change only if incentivised or compelled “.
But it turns out the link between our view of man’s innate characteristics and our view of what government should and should not do are not as simple as this. Even if we think human beings are, in their interactions with strangers, overwhelmingly self interested this doesn’t mean we should be champions of laissez faire economics and a minimal state. The reverse could be true.
If we think pro-social behaviour is vital to the well-being of society but that people only behave in this way when incentivised, we might think it is more important to attend to the fabric of society (which generates the social norms that incentivise pro-sociality) and to how the state can encourage people to do the right thing.