The Ultimatum Game

I was reading an article on economics when I made an amazing discovery.

Economists may have a firm grasp on economics, but they have almost no idea about human nature.

I'm talking about 'The Ultimatum Game' experiment. Here's how it goes.

You take two strangers and give one of them ten one-dollar bills. Then you tell Person A that they have to offer Person B (who is in another room and anonymous) some of that money. If Person B accepts the offer, they both keep the money however they divided it, but if Person B rejects the offer, both of them get nothing.

Now, the economists running the experiment expected the following outcome:

Person A would always offer Person B a single dollar, and Person B would accept. The thinking is that Person A would want to keep as much as possible for themselves, and Person B is being offered the choice between a dollar and no money at all, so should logically accept the dollar.

What they found was most people offered around three or four dollars, and if it was less than that, most of the time Person B would actually reject the offer. According to the article, this was totally mystifying to the economists. If someone is offering you two dollars, why would you turn it down?

Me, I'm not an economist, and because of that, the results were exactly what I expected.

Okay, let's imagine I'm Person A in this experiment. Yes, it's true, I want as much money for myself as possible. However, what over-rides that is the desire to not look like a selfish dick. Basically, appearing to be a 'good person' and not a selfish asshole is worth the three or four dollars I'm going to lose.

Now let's imagine I'm Person B. If the guy running the experiment comes through the door and says Person A has offered me the absolute minimum…sure, the choice is a single dollar or no dollar, but I have an instant dislike for Person A because, as I mentioned above, he's being a selfish asshole. From that point of view, it's not a case of one dollar or no dollars… it's a case of keeping a dollar, or spending it on the satisfaction of knowing that I'm depriving the selfish douche who just tried to screw me out of nine.

To be honest, after reading about this experiment, and how the economists who ran it were so mystified by the results…it doesn't surprise me the whole economy fell into the toilet. Apparently, these are people who see the world in profit and loss only. Maybe if they'd stopped for a moment and considered how the real world works instead of just trying to get numbers on screens as high as possible, the whole sub-prime mortgage debacle would never have happened.

Basically, I think the can be boiled down to the fact that these economists just don't understand wha motivates people outside of making the most amount of money. The main 'real world' motivation in the Ultimatum Game wasn't making the most possible (especially as it was such a relatively small amount of money), it was the motivation to not appear selfish and punish people who obviously were.

Another example of this was the daycare center who decided to try to discourage parents from picking their kids up late by charging a nominal fine (around five dollars) if parents were late collecting their kids.

Within days, the amount of parents arriving late had skyrocketed because, previously, parents made the effort to arrive exactly on time in orderto not put out the staff. By instituting the fine, it allowed parents to buy their way out of that guilt. It didn't matter that they were keeping the staff late, because they were paying them to do so.

Without wanting to tack on a heavy-handed moral point, it's these people who can't see these motivations and think everything works on making the most possible who run our economy. It's the reason we have people shorting stocks and making whole businesses go under in order to make a bundle just for themselves.

The economy crashed because people were only concerned with making the most money immediately, without considering how the real world works. Our economy is based on killing the geese that lay the golden eggs...then being honestly surprised when there are no geese left.