Suppose I give you five bucks.

You’d probably be pretty happy — maybe not ecstatic, but it’d leave you with a bit of a smile on your face.  Five bucks is a pint of decent beer on tap — or maybe a bottle of Ruination IPA, depending on where you find it.  It’s the better part of a truly good cheeseburger.  It’s worth fifteen minutes of browsing the stacks in a well-stocked used book store.  It is — at the moment — five and a half litres of gasoline in suburban Vancouver, or about one and a half shares of General Motors stock.  Five bucks may not be a lot of money, but out of the blue it’s nothing to sneeze at.

Let’s change the game a little.  I’m still giving you five bucks, only this time you know that someone — God, say, or my Fairy Godmother, or Helicopter Ben — gave me fifty bucks just a few minutes ago… for about the same ineffable reason I’m giving you five.  Now you’re likely to be less sanguine about the whole deal.  Who am I that I’m getting fifty bucks out of nowhere, and who do I think I am that I’m giving you only five? Why not ten?  Why not twenty-five — wouldn’t that be more fair?  How is it at all fair that I get fifty — well forty-five, but still — bucks through the whimsy of fate, and you only get five?

I mean, shit, this is starting to suck.  Fifty bucks — okay, forty-five, shut up! — is a nice meal out, or a bottle of Laphroaig 10-year*, or a case of beer.  It’s more than enough to get you free shipping on Amazon, which means three or four of the books on your wish list.  It’s a tank of gas with money left over.  It’s a hell of a lot better than five bucks.

Why should I get all that when you can’t even find a Terry Pratchett novel in your local used book store?  Five bucks is starting to seem trivial — insulting, even, like I’m rubbing my good fortune in your face.

Let’s change the game again.  This time, Helicopter Ben’s watching over my shoulder.  I’m offering you five bucks — but as I proffer the bill, Ben grabs my wrist and tells you that you can take it or leave it.  If you leave it, he continues, neither of us gets any money: Ben’s going to take his fifty bucks and go flush it down the toilet give it to General Motors or something.

Oho!  Now you have power.  Now you can punish me for making a contemptuous, condescending, unfair offer of five dollars.  Maybe you’d change your mind if I gave you ten — or twenty-five.  Hey, fuck all that, you have the power now: maybe you want forty-five dollars; how would I like it if you could afford the single malt and I had to settle for beer?  That’ll show me! I should’ve offered you more free money; now you’ll punish me for my insolence.

The one thing that stays constant in each scenario is that I’m giving you five bucks.  The biggest thing that changes across each scenario is your perception of how “fair” that offer is… assuming this guy’s research is anything to go by.

• Fair’s fair (Bart Wilson)

(Hat tip: Cafe Hayek)

See, the “here’s five bucks — oh wait, I got fifty” scenario is a thinly-disguised version of the ultimatum game.  It works pretty much as per my third description, except the dollar values are smaller and instead of Helicopter Ben you get a computer program (or perhaps a bored Econ grad student).  It’s interesting in that computer simulations of what ought to produce the best result — the sort of thing that works reasonably well for the prisoner’s dilemma game — are vastly at odds with what tends to happen in studies with squishy fleshling bipeds like us.

Simulated rational agents don’t give two digital shits about “fairness” — they operate on the output of utility functions.  The utility-functional version of the ultimatum game is pretty simple: if the other guy offers $x and I accept, I get $x; if I reject, I get $sweet-fuck-all.  Doesn’t matter what x might be, if I’m a rational simulated agent I’m always going to accept.

Humans, fuck us all sideways, don’t think that way.  We tend to get trapped in this sort of circular logic (from the article):

“Why did the proposer offer $5 to the responder?”
“Because that’s fair.”
“What is a fair outcome in the ultimatum game?”
“The proposer offers $5 to the responder.”

But “fair” is a maddeningly slippery word.  A “fair coin” is one that’s perfectly random — definitely not what we’re after!**  A “fair complexion” is — well, politically incorrect in this context; maybe that’s what Jesse Jackson’s after, but the rest of us want to get some work done.  A “fair tax” depends entirely upon your audience.  English-language precedent isn’t going to help much.

Neither is any other language.  From the article:

Did you know that fair is one-to-one untranslatable into any other language–that it is distinctly Anglo in origin? And a relatively new word at that? (Late 18th century, actually–the industrial revolution apparently also vastly enhanced our capacity to complain.) But the twisted history of “fair” is even more interesting than that. For the original antonym of fair is not, as most modern Americans would probably expect, unfair. If you want to understand the roots of fairness, look not to ethicists, but to baseball, which still uses the original dichotomy.  If a ball is hit outside the bounds of fair play, it’s not unfair–it’s foul. That’s an important clue.  As Columbia law professor George Fletcher had noted in his 1996 book Basic Concepts of Legal Thought, the Anglo-American notion of fairness is firmly rooted in the rules of a game.

Okay, see, you got these two white lines….

No, we can do better than that.

Wierzbicka’s research indicated that there are two key contextual elements that make fair precisely the right word for the situation. First, the circumstances entail a tradeoff in welfare between individuals:  some action benefits one person at the expense of another. The second element is that other people in the community think that there are limits to how much people are allowed to cost others in order to benefit themselves.

Okay, pay attention to that first element.  In the ultimatum game, we have a fixed quantity of wealth: fifty bucks in my hypothetical example, ten bucks in the grant-funded studies experimental economists perform.  This is, as I’ve mentioned, how people have evolved to think about wealth.  But modern commerce doesn’t work that way, and it hasn’t — to varying degrees — since we began to recognize property rights.  This is where the second element comes in: no matter what I offer you in the ultimatum game, I’m not actually costing you anything.  If I offer you nothing at all… well, you might as well accept anyway: you don’t lose out, and you might gain some of my goodwill.

Back to the article:

How does this free us from that circular reasoning we saw in the ultimatum game? Instead of looking inwards for some inherent sense of the word, we look outward, towards the community standards that externally ground the interaction. When two subjects are randomly assigned to the roles of proposer and responder, it is not some pure platonic ideal of fairness that causes a proposer to offer $5. Rather,  the proposer knows that other people would think offering less than $5 is below the socially acceptable limit in this situation, and so the proposer obeys those tacit rules.

Ah.  Now we notice another word here: random.  Here’s where the cruel twist of fate from my first set of scenarios moves into the foreground.  If you’re convinced that I was arbitrarily chosen to receive $50, you’ll be pissed if I offer you only $5.  After all, it could just as easily have been you, right?  (See a Just World Hypothesis in here?  I do, albeit a back-handed one: since you’re likely not convinced that I’m any better than you are, you’re also likely to be convinced that we deserve an equal share of this windfall.  If I take $45 and offer you $5, it’s an indication that I really am better than you… but only if you accept it.)

Things, as you’d expect, change when I’m known to have earned my fifty bucks:

[P]roposers who have earned the right be the proposer, say by doing well on a quiz, offer much less to responders than those who are randomly chosen. What is truly amazing is how accurately proposers ascertain the limits of what they can offer. The rate at which their responders reject their offers doesn’t change when proposers who have earned their position offer them a smaller portion of the pie.  We (most of us) implicitly agree that earning an advantaged position calls for the application of different rules than does randomly endowing someone with a windfall. Moreover, we all have a pretty good sense of what those rules are; most offers are accepted.

At this point, some of you may be wondering just how universal these “fairness” traits are — crudely put, are they “nature” or “nurture”?  Well, if I spoil everything you won’t have to read the article, so I’ll leave that question to the original author.  What I will say is that this isn’t purely an invention of human introspective storytelling consciousness: dogs are known to behave similarly (which is a “researchers discover that sky can be blue during daylight hours” moment for all of you who’ve met a dog).

In any case, this sort of economics research sheds some light on why we react the way we do to things that are “unfair”.  Actual insight into the way those other guys think sure beats hell out of Presidential declamation for resolving “petty grievances”, doesn’t it?

——

* Not in Vancouver, of course; I’m thinking of places with less-inflated Scotch prices

** You might complain that a “fair coin” is simply one that gives equal weight to both sides — but that’s only true in the limit, after an infinite number of flips.  A fair coin is just as likely to flip heads ten times as it is to flip any other ten-element sequence, and the ultimatum game is about a single trial rather than limit behaviour.  Don’t make me break out the calculus.