6 out of 7 People are Good

Back in 2014, an interesting study (1) on people was carried out using two games from game theory: Ultimatum game and Dictator Game.

Ultimatum Game

In Ultimatum, two people play (a "Proposer" and a "Responder") and an endowment of real money (money is actually given to people) is given to the Proposer who then decides how to split the pie between herself and the Responder--the other party playing the game.

If the Responder rejects the offer, both get nothing, so there is a financial incentive to make positive (non-zero) offers which you would predict would get accepted by the other party in the game. People often offer 40% of the pie to the other party in the game and this offer is often accepted.

Dictator Game

The Dictator game is just like Ultimatum except the "responder" does not get a chance to reject the offer--they have to take whatever is given. "Offers" are usually a little lower in the Dictator game, because there is no chance they will get rejected (so that the "proposer" would end up with nothing as well).

"Dictators" who are fully stingy offer zero to the other party. They "stiff you" when they can get away with it.

Contrasting the Results of these Games

When people play both games, and you contrast the results, you can see if they are acting to be "fair" or not in Ultimatum, depending on whether they stiff you in the Dictator game (regardless of whether they always propose and/or accept only fair offers in Ultimatum). You can uncover their hidden motives.

In the study (754 participants), about 15% of everyone who was willing to pay the price of walking away with nothing--in order to enforce the fairness principle (by rejecting low offers in Ultimatum)--was also willing to stiff you in the Dictator game; offering you nothing and keeping it all to themselves.

In other words, they demanded "fairness" from you, even at a cost to themselves, giving the impression that they were being fair-minded. But they would not grant the same principled "fairness" to you in an opportunity where they could have.

In short, their actions appeared opportunistic and unprincipled (exploitive).

The Bright Side

The bright side is that 6 out of 7 were not opportunistic and unprincipled to the point where they would argue "from principle" when you had something to lose, but then turn around and be completely stingy when they had something to lose.

A rejection in Ultimatum can be seen as a personal sacrifice (walking away with nothing) in order to enforce a moral norm of equitable outcomes.

The Dark Side

However, when contrasted against opportunistic exploitation displayed in the Dictator game, the same rejection can be seen as spiteful punishment (caring more about harming others than you do about helping yourself).

The good news is that most people care more about helping themselves than about harming others. The bad news is that 1 in 7 people will engage in costly behavior (harming others, at a cost to themselves) out of sheer spite.

Putting it all Together

This means that objective systems of justice should be set up for human beings (minarchy), so that they are not left to carry out individual punishments themselves (anarchy)--because somewhere around 10% of us won't (ever?) "play fair" or resign themselves to be constrained to the principled behavior required for markets to function well.

Attempting to live under anarchy would involve somehow dealing with those people (about 1 in 7) who may become more interested in punishing you than in even helping themselves ("miscreant vigilantes").

The power of markets to create new wealth does not interest them (enough). They do not alter their behavior under usual market incentives. They refuse to look for their own best interests, too focused on spitefully competing with others, instead. Their motto may be something like:

"Whatever advantages me; at any cost to myself, to others, or to society itself."

This would lead to an increase in the proportion of all conflict resolution which ends up resulting in violence--leading to a breakdown of trust in society, and to a loss of the productive efficiency of human action (i.e., to widespread poverty and strife).

Reward and punishment are important, but reward and punishment for the wrong reasons--something unavoidable under a system of anarchy--will lead to escalation of violence and eradication of mutual trust, respect, and wealth.

Reference

(1) Brañas-Garza, P., Espín, A. M., Exadaktylos, F., & Herrmann, B. (2014). Fair and unfair punishers coexist in the Ultimatum Game. Scientific reports, 4, 6025. doi:10.1038/srep06025 [abstract]

Attribution for top image:

1997 [Public domain]

https://commons.wikimedia.org/wiki/File:Chess_table_escacs.JPG