The science of envy
Ars Technica has an interesting article, entitled: Irrational Markets: People reject free money out of anger. It is a quick and cursory overview of a very interesting topic, and well worth the 5 minutes it takes to read.
Essentially, it gives an overview of some new papers released this week on Game Theory. While that sounds like something that might be more applicable to your Wii than the US Economy as a whole, it really isn't. In fact, Game Theory is perhaps one of the best fields of research to pursue if you want to understand why human societies behave the way they do.
In short, the article gives an overview of the classic Ultimatum Game. You give one person a stack of cash and tell them to divide it however they wish between themselves and one other person. If the other person accepts the offer, they both get to keep the money. If the other person rejects the offer, neither of them do. Not surprisingly, "unfair" offers are almost always rejected, even though accepting ANY offer would result in both parties walking away with FREE MONEY.
Sounds simple, right? We have an intrinsic want for fairness, even if punishing perceived greed is self-defeating. But how do we evaluate that difference?
Let's take, for instance, a fast food worker in San Francisco. If you work in an Arby's in San Fran, you're making a city minimum wage of $9.79 per hour. Let's say (for sake of argument) that the President of that company is making $350,000 per year.
Is it fair that a clerk makes $19,580 per year, while the president of the same company makes $350,000?
Depending on your idealogical leanings, you may answer that question differently. But let's break the question down further...
Is it fair that a clerk makes $9.79 per hour, while the head cook makes $12.73? That's a 30% wage increase going from the newbie to a major player in that restaurant. Most people would probably say that's fair. Or how about if the manager of that restaurant makes $33,000 per year? Ok... maybe that's fair too? That is, after all, a 30% pay raise from the cook.
Then you have 30% more going to the owner of that restaurant ($43,000). Then you have 30% more going to the franchisee who owns lots of restaurants in that area ($55,922). Then 30% to the District Manager who's responsible for all of the restaurants in San Fran ($72,699). Then 30% to the Regional Manager who oversees all of California ($94k). Then 30% to the National Manager, and 30% to the VP of Operations, and 30% to the COO and 30% to the CFO, and then 30% to the CEO... which is $350,905.
If you were at any step in that chain, getting a major promotion to the next level, 30% would seem pretty fair. You're taking on a lot more work, you're traveling, you're dealing with problems at all levels below you in the company, etc... From inside the system, each and every step you claw up seems pretty reasonable and fair.
Yet, if you say that a CEO makes $351k in salary annually, while his poor starving front-line employees are below the poverty level at $19,500... well, that's sounds terribly unfair.
This is of course a massive over-simplification of both the scenario and the problem. But it does illustrate that there are frequently perfectly rational reasons behind circumstances that we perceive as being irreparably skewed. Most of the time, we never bother to find out... because even when we understand the micro-detail, we still make snap judgments based on our perceptions of "the big picture" when confronted with a decision point.
Game Theory is one way to help sort through all of that. To figure out how we perceive the world, and to craft explanations and scenarios that help people make rational decisions based on framing of the available information.
Unfortunately, such powers can also be used for evil. And it seems, lately, that is being done more often than the reverse. When you look at everything going on in our government today -- the discussions on global warming "cap and trade", the discussion of health care, the bail-out packages. All are textbook cases of information saturation and game theory. Dump 1,300 pages of dense text on the desk of a Congressman, extract bits of "big picture" information from the summary and fill the rest with placeholders to be determined later. They're forcing an Ultimatum Game by removing the opportunity for rational examination. You have 30 seconds to make a decision that seems "fair". If you guess right, we all win. If you guess wrong, we all lose. Go! Last week the House voted in a climate bill that contains more placeholders than details, and it's pretty safe to say that not a single seated member of that esteemed body would have even had enough hours in the day to read all 1300 pages. Yet they voted anyway because they "had" to.
Under such a scenario, the actual detail and rational logic become meaningless. Health Care? How much focus is paid to the 259,798,799 Americans who currently have health insurance, as opposed to the 47 million who do not? When we bailed out the auto makers, who was looking out for the approximately 138,000,000 people who paid that bill, and was it fair in the face of the estimated 377,000 people who would have been directly affected by their collapse? (A 500:1 ratio.)
As our understanding of human perception and tribal instinct improves, it's being leveraged by everyone from magicians to high-level politicians. In the same way that Penn and Teller can make 1.2 million people annually believe that they've caught a bullet in their teeth, a politician can make 120 million people believe that they're being treated unfairly. Everyone's too busy watching the people in white shirts toss a basketball around to notice the gorilla walking through the room.
Sadly, understanding human perception and decision making doesn't change it. No matter how clearly we understand that you can't win at a game of Ball and Cups, we'll still try to follow the ball as the streetcorner huckster slides them around the table. No matter how much better off we'd be to just take the free $50 with no strings attached, we'll rail against the unfairness of it all when we know that someone else is getting $100. There's a few million years of cognitive evolution backing up that decision process.
So the best we can do is learn to recognize the swindle. Recognize when we're focusing on the wrong thing, and try to view situations from a different perspective. Standing on the corner trying to follow the ball is a useless exercise no matter how much you want to do it. It's time to train ourselves to start looking under the table.
Essentially, it gives an overview of some new papers released this week on Game Theory. While that sounds like something that might be more applicable to your Wii than the US Economy as a whole, it really isn't. In fact, Game Theory is perhaps one of the best fields of research to pursue if you want to understand why human societies behave the way they do.
In short, the article gives an overview of the classic Ultimatum Game. You give one person a stack of cash and tell them to divide it however they wish between themselves and one other person. If the other person accepts the offer, they both get to keep the money. If the other person rejects the offer, neither of them do. Not surprisingly, "unfair" offers are almost always rejected, even though accepting ANY offer would result in both parties walking away with FREE MONEY.
Sounds simple, right? We have an intrinsic want for fairness, even if punishing perceived greed is self-defeating. But how do we evaluate that difference?
Let's take, for instance, a fast food worker in San Francisco. If you work in an Arby's in San Fran, you're making a city minimum wage of $9.79 per hour. Let's say (for sake of argument) that the President of that company is making $350,000 per year.
Is it fair that a clerk makes $19,580 per year, while the president of the same company makes $350,000?
Depending on your idealogical leanings, you may answer that question differently. But let's break the question down further...
Is it fair that a clerk makes $9.79 per hour, while the head cook makes $12.73? That's a 30% wage increase going from the newbie to a major player in that restaurant. Most people would probably say that's fair. Or how about if the manager of that restaurant makes $33,000 per year? Ok... maybe that's fair too? That is, after all, a 30% pay raise from the cook.
Then you have 30% more going to the owner of that restaurant ($43,000). Then you have 30% more going to the franchisee who owns lots of restaurants in that area ($55,922). Then 30% to the District Manager who's responsible for all of the restaurants in San Fran ($72,699). Then 30% to the Regional Manager who oversees all of California ($94k). Then 30% to the National Manager, and 30% to the VP of Operations, and 30% to the COO and 30% to the CFO, and then 30% to the CEO... which is $350,905.
If you were at any step in that chain, getting a major promotion to the next level, 30% would seem pretty fair. You're taking on a lot more work, you're traveling, you're dealing with problems at all levels below you in the company, etc... From inside the system, each and every step you claw up seems pretty reasonable and fair.
Yet, if you say that a CEO makes $351k in salary annually, while his poor starving front-line employees are below the poverty level at $19,500... well, that's sounds terribly unfair.
This is of course a massive over-simplification of both the scenario and the problem. But it does illustrate that there are frequently perfectly rational reasons behind circumstances that we perceive as being irreparably skewed. Most of the time, we never bother to find out... because even when we understand the micro-detail, we still make snap judgments based on our perceptions of "the big picture" when confronted with a decision point.
Game Theory is one way to help sort through all of that. To figure out how we perceive the world, and to craft explanations and scenarios that help people make rational decisions based on framing of the available information.
Unfortunately, such powers can also be used for evil. And it seems, lately, that is being done more often than the reverse. When you look at everything going on in our government today -- the discussions on global warming "cap and trade", the discussion of health care, the bail-out packages. All are textbook cases of information saturation and game theory. Dump 1,300 pages of dense text on the desk of a Congressman, extract bits of "big picture" information from the summary and fill the rest with placeholders to be determined later. They're forcing an Ultimatum Game by removing the opportunity for rational examination. You have 30 seconds to make a decision that seems "fair". If you guess right, we all win. If you guess wrong, we all lose. Go! Last week the House voted in a climate bill that contains more placeholders than details, and it's pretty safe to say that not a single seated member of that esteemed body would have even had enough hours in the day to read all 1300 pages. Yet they voted anyway because they "had" to.
Under such a scenario, the actual detail and rational logic become meaningless. Health Care? How much focus is paid to the 259,798,799 Americans who currently have health insurance, as opposed to the 47 million who do not? When we bailed out the auto makers, who was looking out for the approximately 138,000,000 people who paid that bill, and was it fair in the face of the estimated 377,000 people who would have been directly affected by their collapse? (A 500:1 ratio.)
As our understanding of human perception and tribal instinct improves, it's being leveraged by everyone from magicians to high-level politicians. In the same way that Penn and Teller can make 1.2 million people annually believe that they've caught a bullet in their teeth, a politician can make 120 million people believe that they're being treated unfairly. Everyone's too busy watching the people in white shirts toss a basketball around to notice the gorilla walking through the room.
Sadly, understanding human perception and decision making doesn't change it. No matter how clearly we understand that you can't win at a game of Ball and Cups, we'll still try to follow the ball as the streetcorner huckster slides them around the table. No matter how much better off we'd be to just take the free $50 with no strings attached, we'll rail against the unfairness of it all when we know that someone else is getting $100. There's a few million years of cognitive evolution backing up that decision process.
So the best we can do is learn to recognize the swindle. Recognize when we're focusing on the wrong thing, and try to view situations from a different perspective. Standing on the corner trying to follow the ball is a useless exercise no matter how much you want to do it. It's time to train ourselves to start looking under the table.