Monday, July 12, 2010
Rationality v. Money-Maximising Self-Interest
Anyway, I feel the need to bring this up because far too many people talk about rationality and self-interest interchangeably when they are not. One of the problems we encounter, for example is that you could hypothetically have irrational individuals, some of whom are otherwise self-interested and some of whom are other-regarding. We might not be able to differentiate between these individuals if their irrationality is such that they behave in ways that do not maximise what we perceive to be their preferences. But we may still have rational actors who are self-interested (also called self-regarding), other-regarding or bits of both. So when Ariely says that trust and punishment (vengeance) are irrational he is not actually defining the problem properly, or he's assuming that the preferences of being are in fact the preferences of someone who is an entirely self-interested money-maximising individual. I believe that the evidence indicates that most people are not wholly money-maximising and only self-interested - their preferences are structured differently. Consequently his rumpus about rationality is a poorly constructed problem about preferences and not a problem about rationality.
Later he is asked about companies and irrationality. He then talks about something 'making sense'. Logic and rationality are not the same thing. This is a sophomoric error. He talks about focus groups being less useful than we think they are. If this were irrational then it would mean that they do not help companies to make profit, because rational companies go about maximising profits (or maximising share prices or some other goal).
Ariely finally nods his head to other-regarding or social preferences toward the end of the interview when he talks about 'society' and social norms, but places nowhere near enough emphasis on it given the power he attributes to 'irrationality' and the time, content and rhetoric he dedicates to 'irrationality'. Oh well...
Otherwise, his commentary on reward-substitution, differences in time preferences and other phenomena is interesting and apposite. I recommend that you take a look at the video and see what Ariely has to say, but make sure that you realise he's trying to package the talk more accessibly.
Tuesday, April 13, 2010
The Parochial and the Cosmopolitan - Globalization helps cooperation
Continuing my trend of reporting on papers about cooperation, I thought I'd comment on a recent paper by Nancy Buchan and co-authors about human cooperation and globalization. I've argued previously about the role of parochialism in punishment and in theories about the evolution of war and cooperation, today, though, the theme is the extent to which more cosmopolitan countries tend to foster individuals who are more willing to cooperate globally. Sounds intuitive, but how does it work experimentally?
Consider a prisoner's dilemma in the form of a multi-layer public goods game (PGG). A basic PGG works as follows: each player is given some money to contribute to a communal pot, that amount is multiplied by some factor (rate of return), but everyone gets a share of the total minus what they initially contributed. Therefore, I do my 'best' if everyone cooperates fully and contributes all their money, while I free ride and contribute nothing. It's a prisoner's dilemma in action - everyone sees this and they shouldn't cooperate. Consider a similar game, but with two communal pots: one 'local' where only people from my area can contribute to, the amount of which is then doubled and of which I receive 1/4 (3 other people in my group can contribute to it), and one 'global' or 'world' account that I and others can contribute to, the total amount of which is tripled, and of which I receive 1/12 (11 other people can contribute to it) . The tension is the following: the direct return is 0.5 from the local account and 0.25 from the world account. But if everyone contributes a maximal amount to the world account, then we all make off with the most money rather than if we had all defected and not made any contributions. This is also a prisoner's dilemma, but with more layers of complexity.
Buchan et al ran this experiment in 6 countries: the US, Italy, Russia, Argentina, South Africa and Iran, looking specifically at large cities in each of the countries. They made two hypotheses. First, globalization could lead to greater parochialism by emphasizing ethnic, local or national groupings. Conversely, globalization could have a palliative effect on parochialism and perhaps enable and sustain greater tolerance. They indexed a country level globalization index (CGI), an index produced by the University of Warwick. They also constructed an individual level globalization index (IGI) based on questions that each subject answered. The authors used quota sampling methods for gender, age and socioeconomic status (though not for rural-urban, which I comment on later).
Now we come to the reason I'm interested in the research. When the authors ran the experiments, they showed that South Africans ranked 5th out of the 6 countries in the CGI: above Iran, but below Argentina. Considering the experimental results, South Africa also ranked 4th or 5th below Italy, Russia and the United States, but almost exactly equal to Argentina in terms of probability of allocating resources to a global account. Iran came in lowest . Globalization at the individual and country seemed a good predictor of international cooperation. If you're sceptical of the globalization result, the authors also point out that:
"analysis of the CGI along with a host of macroindicators such as the rule of law, generalized trust, per capita income, and norms of civic cooperation shows that the CGI is the only macrovariable that is significantly correlated with mean cooperation rates at the world level." (4140)So, it seems as though the second hypothesis is supported by the authors results: globalization may make people less parochial and more cosmopolitan. But one problem emerges, as the authors chose to do the experiments in large cities, it is possible that they have a biased sample. There may be an underlying correlation between a person's choice to live in a big city and a person's cosmopolitanness - more cosmopolitan people may choose to live in big cities, less cosmopolitan people may choose to live outside of cities. Consequently, in the paper we may be observing an upper bound on a nation's tendency to cooperativeness because the subjects are drawn from inherently more cosmopolitan (and maybe more internationally cooperative) people. I'd like to see this research replicated with rural and urban samples to see what the differences might be. I'd suspect that rural individuals would be more likely to cooperate locally, whereas urban individuals would be more likely to cooperate globally. Thus, globalization might predict urban 'world' cooperation, but not rural as there might be differences across countries over rural behaviour. Apart from potential rural-urban differences that might exist among countries, I could not fault the experiment's design. Moreover, the fascinating research exemplified by this paper tends to make me slightly more optimistic about multilateralism and the benefits of globalization in the 21st century, though that could just be confirmation bias.
References
Buchan, N., Grimalda, G., Wilson, R., Brewer, M., Fatas, E., & Foddy, M. (2009). Globalization and human cooperation Proceedings of the National Academy of Sciences, 106 (11), 4138-4142 DOI: 10.1073/pnas.0809522106
Thursday, February 25, 2010
Neural evidence for inequality aversion when giving away other peoples' money
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.
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.
Wednesday, February 03, 2010
Harford on Probabilities and Clustering
Tuesday, December 08, 2009
Deception in Experiments - Not Cool
A recent Slate article comments on work in Psychological Science in which people are used for an experiment (the 'people' are probably university students) on moral behaviour and 'buying green'. The subjects are asked 'What do you want to buy from Online Store X' (the experimenters manipulate the store's stocks), which is all good and fits with experimental protocols (oh yes, though it's imaginary, and they aren't spending money, so hey?). What is not cool, not cool at all, is that the experimenters then set up a dictator game telling the players they were paired with someone, when they weren't. The money they were 'giving' to someone else, didn't get given to anyone. The experimenters deceived their subjects. Not cool. Fantastic that they are doing experimental work, and using economicky experiments to do it, but not cool that they deceive their subjects. Why? Experimenter legitimacy! One of the big battles as an experimentalist is having your subjects BELIEVE that what you say you will do, you ACTUALLY will do. If word of this kind of deception (almost always by psychologists) gets out, then more and more experimental subjects won't believe experimenters and therefore won't behave in ways consistent with how they would outside of the laboratory or experiment. This is why economics experimenters have such a strong code of ethics about not deceiving and doing what you say you will do.
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