Economics, Literature and Scepticism

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I am a PhD student in Economics. I am originally from South Africa and plan to return there after my PhD. I completed my M. Comm in Economics and my MA In Creative Writing (Poetry) at the University of Cape Town, where I worked as a lecturer before starting my PhD.

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Thursday, February 25, 2010

Neural evidence for inequality aversion when giving away other peoples' money

Posted by Simon Halliday | Thursday, February 25, 2010 | Category: , , , |

This week's Nature has a paper by Elizabeth Tricomi, Antonio Rangel, Colin F. Camerer & John P. O’Doherty, reporting on 'Neural evidence for inequality averse social preferences'. Eurekalert reported on it here. I would have read the paper anyway, but a quotation from one of the researchers, John O'Doherty in the Eurekalert article pricked my ears up, "[We can] try to understand how these changes in valuation actually translate into changes in behavior. For example, the person who finds out they're being paid less than someone else for doing the same job might end up working less hard and being less motivated as a consequence. It will be interesting to try to understand the brain mechanisms that underlie such changes." Now this interpretation would be great, if that's what the experiment had examined. But it didn't. I suspect that O'Doherty was led on by the journalist to say something 'print-worthy'. I comment briefly on the paper, and examine what we need to do to make more claims like O'Doherty's above.

Here's the description of the method from the article:

Twenty pairs of healthy, previously unacquainted male participants participated in the experiment. They were each paid a base $30 fee; each then drew a ball from a hat, labelled ‘rich’ or ‘poor’. The ‘rich’ (high-pay) subject received an immediate payment of $50, whereas the ‘poor’ (low-pay) player received no bonus payment. They then performed an identical task in consecutive fMRI scanning sessions. In each trial subjects viewed possible monetary transfers from the experimenter to themselves and to the other player, ranging from $0 to $50 (Fig. 1). Participants rated how appealing they found the possible transfers on a scale of -5 (very unappealing) to 5 (very appealing). After both players’ scans, a single trial was randomly picked from the set, and the transfers for that trial were paid out.
They're basically simulating a dictator game between the experimenter and themselves where all the money is 'windfall', that is unearned money. That leads to the first problem. As I've argued previously and will continue to argue people treat windfall money differently to how they treat earned money. Secondly, when people see that all your options involve only 'giving' to others and not 'taking away' from them then that immediately frames the experiment as something to do with generosity or giving money [see comments on Bardsley paper on this here]. When I know that I could be given something, and someone else could be too, I will react differently than to a situation in which I could have stuff taken away from me while someone else is given something, he could have something taken away while I get something, both of us could have something taken away, or both of us could be given something. I do not know what the ventromedial prefrontal cortex will do in these situations and I think that Tricomi et al should investigate this to see what happens to their results.

So when they say, "Our results provide direct neurobiological evidence in support of the existence of inequality-averse social preferences in the human brain" our focus must be on 'existence'. Yes, there is evidence for such preferences in artificial circumstances, but these circumstances are unlike most interactions and definitely unlike the situation that O'Doherty outlined. Also, and on a similar topic to the research I outlined, I suspect that most people regard CEO bonuses as unearned, windfall bonuses and feel that they are unjustified. I'd be fascinated to see what people would do if they earned their money and others didn't, and then the person who didn't got an additional bonus. What would the VMPFC do then?

Aside: I really appreciate Colin Camerer's work. I draw on it heavily for my dissertation research and I marvel at his output. But I worry about how the work in this paper might be interpreted in the press and by the general Nature readership who may not understand some of the nuances.

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