Tuesday, March 28, 2006

Inbred fairness

There's a new branch of economics based on the study of human and animal behaviour. Research published recently suggests the upper primates are born with the capacity for sympathy, empathy and fairness, and that ethics is merely building on what nature has built in. The field is called neuroeconomics. The implications for micro and macro-economics are very interesting. Neuroeconomists are suggesting that excessive regulation can actually lead to worse behaviour than relying on people's sense of fairness.

Professor Paul Zak, from Claremont Graduate University in California, cites a fascinating study in which two daycare centres adopted different approaches with late parents. One centre merely reminded parents that turning up late inconvenienced the teacher, who had to stay behind. The other centre imposed a $3 fine. After several weeks, the “ penalty” centre was reporting more latecomers.
I'm not sure how far you can cast analogies based on this one experiment. But the mechanism here seems to be quite a simple one. One centre quantified the 'injustice'. Quantifying it has two effects.
1. You can make calculations based on penalty, so the cost/benefit analysis becomes easier for the offender. The penalty is not a big one, and if put against the incovenience of having to arrive earlier, will seem more than affordable.
2. The exchange becomes an impersonal one that can be concluded by handing over the cash. Compare this to the uncertainty of a person's (in this case, the teacher's) bad will, which is both incalculable and difficult to 'close'. The feelings of the offended person disappear from sight when the exchange is regulated by an amount of money.

The researcher's thesis is a satisfying one, even if there seems to be a lot more work to do on it.

(via Ninme)

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