It's only fair

Feb
5
2010
by
Lynne McTaggart
/
32
Comments

In the past few weeks, I was fascinated to watch the spectacle of Goldman Sachs and the other of the big four banks thumbing their nose at the public and President Barack Obama by pledging billions in record bonuses at the same time that a stellar lineup of celebrities volunteered to man the phones during a telethon designed to entice ordinary working people to cough up donations for Haiti.
The contrast between the two scenarios particularly fascinated me because at the moment, I am immersed in studying fairness.
Fehr on fairness
The aptly named Swiss economist Ernst Fehr from the University of Zurich, now based at the Massachusetts Institute of Technology, has made his life’s work the study of the economics of fairness. Fehr has conducted the most well known studies demonstrating not only that that people are inherently fair and generous, but also have an inherent abhorrence of what he likes to call ‘inequity aversion’.
Fehr has exhaustively tested out his theory with the classic game- theory study called the Ultimatum Game. In this game, groups of volunteers are randomly paired although never allowed to meet. The pairs are then split off into ‘proposers’ and ‘responders’. The proposer is given a sum of money — say $10 — and allowed to offer the responder any amount of money, from $1 to $10, that he sees fit, while the responder’s job is simply to accept or reject the offer.
If he accepts it, he will receive the sum designated, while the proposer keeps the rest. If the responder rejects the offer, however, both leave empty-handed.
This is a one-time-only offer; both parties know there is no possibility of holding out for a better deal.
If human beings were innately selfish, it would make perfect sense for the proposer always to make the most derisory offer, and to keep the lion’s share, and it would also benefit the responder always to accept it, as something, no matter how little, is better than nothing.
Furthermore, there is no social pressure as they will never be given the other’s identity or interact again.
However, in practice, this almost never happens. Although about a quarter of people in total will act for self-interest, the most common offer is 50 per cent, and the overall average ranges between 43-48 per cent. Even though they stand to lose, the average person would rather share equally with people he hasn’t met and never will meet again.
Even more interesting, people tend to punish those who push the boundaries of unfairness. Those playing Ultimatum Game generally reject any offer below 20 per cent. If they’re playing with $10, any offers of $2 or below are rejected.
An impulse to punish
Social scientists call this impulse ‘altruistic punishment’ – our desire to punish unfairness, even at a cost to ourselves. This tends to suggest that we have a strongly honed sense of fair play, or what Fehr and his colleagues refer to as strong reciprocity — the will to cooperate with others and to punish those who violate the social contract of cooperation.
So strong is this impulse in human beings that we are willing to to cut off our own nose, so to speak. We would rather go home empty-handed than allow someone to take more than their fair share.
Save our parks
The domino effect of unfairness has been proved in game theory, with a game called the ‘Public Goods’, another standard in experimental economics. This game is designed to test how people behave when asked to contribute to something that could benefit the entire community but one in which they have no personal motivation to give.
It’s a bit like asking people to voluntarily pay taxes in order to maintain the parks in California. In this scenario, a number of participants are given tokens, which are redeemable at the end for money. They’re allowed to secretly decide how much of it to keep and how much to put into a common pot.
The experimenters will then award some percentage of the total, such as 40 per cent, in the pot to everyone playing.
The most strategic players will soon realize that the best you can do under any circumstance, regardless of what anyone else does is not to put anything into the pot, but to keep all your money yourself, lest you become victim to freeloaders.
However, this almost never happens among the wide number of experiments carried out by Fehr and other social psychologists; most people add something to the pot and the average is for people to give up half their tokens to the public good.
Punishing freeloaders
However, a very different scenario emerges during games run as a ‘repeat’ after 10 rounds. In that instance, as Fehr discovered. the enormous initial impulse to give rapidly fades so that by the final rounds, nearly three-quarters of all people contribute nothing and a large further batch, close to nothing.
When interviewed later, those participants who’d initially been generous grew increasingly furious at the freeloaders, who were contributing nothing and retaliated in the only mode of punishment they had: to stop contributing to the public fund.
This is a salutary lesson to the bankers as well as all the rest of us. Our entire society entirely rests upon a sense of fairness among the population. Take far more than your fair share and ultimately all of society’s cooperation falls apart.
The rich get poorer
That is evident in the research carried out by Richard Wilkinson and Kate Pickett in their book Spirit Level: Why More Equal Societies Always Do Better. After researching the social conditions of virtually every Western country, Wilkinson and Pickett discovered that in countries of the very rich with giant income disparity, everybody — both the most affluent and the very poorest — suffer from higher rates of ill health, higher crime rates, mental illness, environmental problems and violence.
The UK, the US and many countries in Europe, with their vast difference between rich and poor, are among the worse off in virtually every social indicator than countries like Sweden, with less wealth disparity in the population.
My husband Bryan came up with an ingenious idea that just might redeem the banks in the public eye and restore community spirit.
Here’s what you do, Goldman Sachs. Simply take half the bonus money you and the rest of the big four are planning to pay out in bonuses, pledge it to Haiti and you more than cover the $12 billion needed to rebuild the country.
A word to Julia Roberts; get off the phone with Joe Sixpack and have a word with GS’s Lloyd Blankfein. He hasn’t much time for Barack, but he might just listen to you.

Lynne McTaggart

Lynne McTaggart is an award-winning journalist and the author of seven books, including the worldwide international bestsellers The Power of Eight, The Field, The Intention Experiment and The Bond, all considered seminal books of the New Science and now translated into some 30 languages.

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32 comments on “It's only fair”

  1. In this connection, it's well to remember that retail stores couldn't stay open for a week if most people weren't basically honest. The concentration of news about people's dishonesty in the media suggests the opposite about people. But really business on any level simply couldn't be carried on if reciprocal honesty and fair play weren't the general practice.

  2. A question for Lynn MacTaggart: Your two-page summary of the New Paradigm states that Newtonians believe that the brain is separate from the body. But I would have thought that they believed that the brain is just an integral organ with the body. Of course they can't explain consciousness; describing it is not explaining it. But why would they believe that the brain is separate from the body, when it self evidently is not. Brain, mind, what did you mean?

  3. I am new to this. I have some understanding of both the English and Chinese Languages. I read the English version of this blog first and then I wondered what the Chinese version will look like. I went for it and I discovered it is "machine translated". Well, I suggest you take it off, because it is not only not serving its intended purposes; it will do more harm than good.
    I don't mean to be critical. I wish you well and readers will benefit from your blog. I mean it.

  4. I believe that the financial instruments that were involved in the crisis were de personalized by those that created them allowing for the game pieces to be just that,gamers tokens..How does one win the game ? By aquiring more pieces than the others...Remove the human element and there remain no consequences for losing. Except for the loss of face with your peers. Perhaps peer pressure amongst the moguls of finance would shame them into re thinking their game strategies.

  5. I would like to enjoy and be part of all the experiments you do but it seems that I do not have access. What can I do?

  6. Let me pose this re: fairness and Wall Street bonuses. I'm assuming based upon your suggestion that the bonuses being paid aren't "fair" that you may not realize that those bonuses are a part of the compensation agreement that the individuals accepted when they took the position. It's not just "fun money" that the company throws out, it is a significant portion of their compensation that is paid out based upon their individual performance for the year.
    Also realize that in the world of professional services a company like GS depends 100% upon the individuals on their team. Without them and their client relationships they have no business.
    So here's my "food for thought" = is it fair to not pay an employee what was promised to them when they have met the conditions required to earn that bonuses? And as a follow up, is it fair to the stockholders of the company to allow them to lose all of their key staff, their top revenue drivers, because the company didn't make good on their promise regardless of the reason?
    Let's face it - if you are I do a job and expect to be paid a certain amount and the money doesn't come most of us could care less if it went to Haiti or the president or anywhere else. Should we choose to donate our individual resources that's one thing, but it certainly isn't up to our employers or business partners to determine, after we've agreed upon a compensation arrangement, to change that arrangement.
    So, I think you've picked a very poor choice to illustrate unfairness. I'm not a fan of GS at all, in fact I hold them more responsible then any other entitiy for the current financial mess, but at the same time you can't say it's unfair for them to pay their staff as promised. Perhaps the compensation plan is unfair - that's a separate issue - but to suggest that GS et al making good on their word to their staff is unfair is unreasonably and, in fact, unfair to the individual team members as well as the stockholders of the company.

  7. I am also thinking that the financial circumstances of the individuals involved would have an influence in the fairness experiment - to me $10 is chump change, but to others it may mean lunch money for a couple of days.
    As for GS - the current US financial situation has been directly caused by machinations of certain large financial institutions and the so-called "Federal" Reserve. It looks to me like this is intentional on their part with the payoff being increased power and ultimately the introduction of the Amero - a proposed North American currency. (BTW it is estimated that about 6% of people are born genetic psychopaths - they lack the capacity for conscience. The failures of this group end up in prisons or institutions. The successes end up in government and heading up corporations, so I would not be too optimistic about altruism from that crowd.)

  8. I like your thoughts Jeff, I also think the compensation plan is unfair.
    I believe the political and economic systems are to blame, not necesseraly the people who manage to benefit from it.
    what is unfair? what is the difference between not helping people after natural disasters, and not helping the same people in 'normal times' in which they are actually starving or not able to feed themselves properly. (I believe a situation mainly caused by our western capitalistic way of life, a system we feed/stimulate every day we buy all those things we 'need').

  9. It appears to me that Lynne is dragging the intention project, which I think is very enlightening and positive, into the realm of politics. How can the energy of the human mind influence physical matter such as water and not be influencing all physical matter all the time. What I am pointing out is that the flow of money in the world is a direct result of consensus thinking. In other words, you get what you believe. What you believe is what you say, to yourself and others. If you say "other people are unfair and as a result I and other people suffer, then that is exactly the experience you will have in life. If you believe that people are basically good and fair then that is what you will experience. With regard to learning the truth of what I am saying people are on a sliding scale of understanding. The conversation is a good thing however because it is the most important conversation going.

  10. OK! I htought for a moment to be in a serious website that was talking about one scientific topic. Instead, I must admint, I find myself in the middle of the usual political discussion, where (with no surprise to be honest) I understand who is runnig this blog is OF COURSE a leftist in love with Obama, and doesn't miss one chance to blame the right, the rich, the people the got rich "unfailry". Next thing I will read here is something about global worming! Please tell me I am wrong, tell me I am totally wrong! I believe in the power of the mind, and I am 100% in agreement that we can do only good with it, not trying to win the lottery (LOL). So please, let's stick to the main topic and to the science, real sience.

  11. It is nothing to do with politics to be repulsed by unfettered greed especially at a time when our neighbours are in so much urgent need. It stinks! Ordinary people with moderate incomes are giving as much as they can and I prefer to focus on this.

  12. The subject of GS and all the "others" is one that is very complicated with the seeds planted in the early 20th century. We are seeing the fruits of these seeds and are responding to what is now. We need to go back to the core issue, "greed". The subject of fairness needs to be addressed. Somehow we have allowed the culture and the facade of free enterprise to allow for mass manipulations of the economy and survival of the fitness mentality to control our humanity.
    Everyone especially big biz screams we want no interference from government, we need no regulation from government. Alas they have proven that they cannot control the greed impulse and as a reaction to their actions, regulations are put into place. Unions were formed as a means for the little common man to overcome the "feudal lords" excessive demands. What has evolved is a constant power struggle between the two with an idealogy of, i need to get mine before he takes takes away.
    But big business didn't mind when the government became involved in the early 1900's and created the Federal Reserve with the help of J.Pl Morgan, J.D. Rockefeller, and a host of other big bankers. With the Federal Reserve Act, this vote by Congress conferred to a cartel of big bankers the right to inflate money and hold themselves free of the consequences of risky "banking". In short, it is a form of financial socialism that benefits the rich and powerful.
    So, in the end we have a "culture" that we need to examine and determine what kind of culture is our country, our society going to be?

  13. Thanks for that information. Narccissistic persoanlity disordered people lack the "fairness" quality. It's so good to know why they rub us the wrong way so intensely. I've set my intention to be "kind" rather than contintue to react to the "unfairness of it all" of living with such a person. LOL Whatever works!

  14. Many of the people at the top of large corporations get in those positions by being cold, heartless, emotionless humans who couldn't care less about how they are perceived or how their actions harm others. Appeals to their basic humanity are useless because they have no connection to the rest of humanity. They will not change no matter what any of us say or do. I have worked around these type of people for years, and I've seen just how cold and heartless they are. The solution is not to try to change these type of people (that will never work), but rather to change the system that allows these type of people to get into positions of power to begin with.

  15. I don't know much about how banking bonuses work, but let's assume that Jeff is right, and the banks are playing fair in terms of their contractual obligations. This would then be a good example of how what we could call micro-fairness does not always contribute to fairness at a national or global level. Libertarian philosophers like Nozick argue that if every individual transaction is fair, we should not complain that the eventual result is unfair, but that is counter-intuitive, to put it mildly.

  16. I agree with Michael- It is the system that needs to be changed first. Most of those people that are in those positions are blinded by greed and materialism.

  17. One of the problems with G$ and the others is that they do not think of this money as "bonuses" but as delayed salary paid to them after they tally their "profits". These arrangements are made when they get employed and they can sue if they are not paid what they were promised by G$ or any other firm.
    Everyone at G$ shares in them(bonus) from CEO Blakenfein who gets the most on down. Someone once pointed out that it's now more about Ego than money for some of the partners (of G$)who have more money than they could ever spend which makes this whole banking culture even more disgusting!
    It's interesting to note that CEO Blakenfein grew up poor in the South Bronx. (He would be a psychiatrist field day.)
    Getting Wall St. to roll back on this culture of greed will be almost impossible. Fear keeps them from making any changes because they are afraid they will loose their employees to Europe--where the same culture thrives. The genie is out of the box. It's well known the best employees follow the money.
    This finance game is not between us and them, it's between them and others like them. We are just like gnats to them and they are not afraid of Main Street at all.
    It's my belief that they live in such a strong bubble that there is no real remedy to change their culture because everyone from our Congress on down responds more favorably to more money than no money.
    G$ gave only 1-mil for Haiti relief. Considering in the 3rd quarter they earned 3.2 billion and they have 167 billion in cash that 1-mil donation is a joke.
    Even an earthquake with pictures of those sad children are not enough to warm the hearts or open the wallets of that cold, cold, money machine called G$!
    I doubt that beaturiful Julia Roberts if she offered to do lap dances for those G$ guys could pry more money out of them at this point. Seriously, these guys are stone cold-hearted and only Money turns them on.

  18. As regards KATLEEN'S idea that the " ufairness"is somehow rooted in our ( the US's ) so called capatilist system is absurd this is an economy of that at best is neo fascist IE: an economy where the means of production are privatly owned but the government controls the output of that production. We seem to have invented another teir to the scheme where government is bought buy various "insiders " to allow them to pass laws to restrain their competitors output. Ayn Rand has been taking quite a few hits recently as the queen of capatilist beleif , but if you read the speech in ATLAS SHRUGGED where John Galt ( the central charecter) states explictly that a mans first duty is to the truth no matter what . Do you really think the first duty or moral obligation of the bastards that run these institutions is to morality of any sort? No and that is what will eventualy lead to there downfall like Ken Lay , Bernie Maddof ect. And just to finish this rant we are wrong to imprison these people? in country club prisons . They should be stripped of everything they own right down to cusin Ed's Lambo given public housing and be forced to work at Walmart /Mc donalds or any other meaneal job you care to think of for the rest of thier days with 50% of the money they earn going back into the pool to pay back their victims. And please Kate do not desacrate the US Dollar by tying it to anything so ignoble as Goldman Sachs,there was a time when " sound as a dollar " meant something I hope we can bring that time back. I also agree that we should stay out of politics and fiance on this site and focus on intention and its uses to improve this world .

  19. Have any of you complaining about unfairness in the business world read " The Field", Lynne's book? If so can you see the implications that this work is pointing to. I can't believe you wouldn't be questioning your position on this.

  20. If we are basically autruistic or fair-minded; and through the ages our ultimate paradigms have been love (agapay) mercy or compassion, then should we start creating our reality (Laws) to answer this one question : when you did/do this action who were (where are we) showing love to? eg. if we are to show love/fainess to our neighbour, the Earth, our family, our employees (and, perhaps, keep in mind the narcissistic 6 percent).
    Is this too fanciful a basic guide do you think?

  21. The likes of Goldman & Sachs don't seem to be willing to learn the lessons of their mistakes which will ultimately lead to self destruction.
    May I humbly suggest to all the financial institutions in the world to put the following Cree proverb on their boardroom walls:
    Only when the last tree has died, the last river has been poisoned and the last fish has been caught will we realize that we cannot eat money.

  22. Hello, I wish you well.
    The more this site works to help us learn how to come together through our subjective, peaceful intentions, the more unique value it has to the Universe.
    K.C. Blair

  23. this is not a blog note. I had problems logging in for the intention experiment. I don't remember my password. what to do?

  24. Hallo, for some days ago i was illuminated by the noetic science - in the new Dan Brow book. Noetic science was a term which i never had heart about before, but it reminds me in many ways about the great philosopher Plotin interpretation of Platon´s doings.
    I hope someone out theire is very to start a debate and give me some feedback on this

  25. [...] researching came that people generally have a build in sense of fairness. (Read the whole article here.)   I remember some time ago reading of research about people generally being and doing good and [...]

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