"How Much Inequity Can You Take in a System?"
Money motivates -- especially when your colleague gets less, EurekAlert: The feelings an individual has on receiving his pay cheque depend critically on how much his colleague earns. Hard evidence for this comes from an experiment conducted by economists and brain scientists at the University of Bonn. They tested male subjects in pairs, asking them to perform a simple task and promising payment for success. ... Participants who got more money than their co-players showed much stronger activation in the brain's "reward centre" than occurred when both players received the same amount. Details of the study are ... in the renowned academic journal "Science". ...
In the experiment ... the participants had to lie down next to each other in parallel brain scanners. They were asked to perform the same task simultaneously. Dots appeared on a screen and they had to estimate the number being displayed. They were then told whether their answer was correct. If they had solved the task correctly, they received a financial reward, which might range from 30 to 120 euros. Each participant also learnt how his partner in the game had performed and how much he would pocket in return.
Throughout this procedure the tomograph monitored the changes in blood circulation in the different regions of the subject's brain. ... A total of 38 men took part in the experiment. "We registered enhanced activity in various parts of their brains during the test," explains the Bonn neuroscientist Dr. Bernd Weber. "One area in particular, the ventral striatum, is the region where part of what we call the 'reward system' is located."
The reward system is activated when an individual has an experience he considers worth aspiring to. "In this area we observed an activation when the player completed his task correctly," says Bernd Weber... By contrast, when the subject got his estimate wrong, activity in his ventral striatum would subside. For us, however, the exciting finding here was the role played by another factor: the performance of the player in the other scanner. Weber's colleague Dr. Klaus Fliessbach sums up the outcome, "Activation was at its highest for those players who got the right answer while their co-player got it wrong."
The researchers then took a closer look at those cases in which both players estimated the number of points correctly. If the participants received the same payment there was relatively moderate activation of the reward centre. But if player one was given, say, 120 euros, while his partner received only 60, the activation turned out to be much stronger for player one. For player two, on the other hand, the blood flow into the ventral striatum actually decreased - even though he had performed the task successfully and had been rewarded for his efforts.
"This result clearly contradicts traditional economic theory," explains Bonn-based economist Professor Dr. Armin Falk. "The theory assumes that the only important factor is the absolute size of the reward. The comparison with other people's rewards shouldn't really play any role in economic motivation." It is the first time that this hypothesis has been challenged using such an experimental approach. It does not mean, of course, that the absolute size of the reward has no impact on the "reward centre": more excitement was registered in response to 60 euros than 30. "But the interesting point to emerge from our study is that the relative size of one's earnings plays such a major role," Armin Falk insists. ...
Monkeys Have Sense of Fairness, Study Finds, by Susan McMillan, Emory Wheel: Two researchers at the Yerkes National Primate Research Center have found that brown capuchin monkeys have a sense of fairness and will reject inequitable rewards, much as humans do.
Frans de Waal, C.H. Candler ... said his work with Georgia State University professor Sarah Brosnan was based on a study they did in 2003. In that experiment, monkeys responded negatively when a partner received a superior reward for completing the same task, retrieving a pebble and placing it the researcher’s hand.
“As soon as the partner’s getting something better, like grapes, they don’t want to do it any more,” de Waal said. “They throw the food out of the cage sometimes.”
Brosnan and de Waal conducted a follow-up study to rule out alternative explanations for why monkeys would reject slices of cucumber, a previously acceptable reward.
“The most important one was you could argue that the monkeys reject the cucumber pieces because they see grapes and they want grapes,” de Waal said. “We would show them grapes, but we would put them away, and showing them the grapes didn’t make a difference in our test. It had to do with what partner was getting.”
Brosnan and de Waal also varied the amount of effort required to complete the task to see its effect on the monkeys’ reactions.
They found that when monkeys had to expend more effort, they were more sensitive to inequity and less likely to accept cucumber slices when partners had received grapes for equal or less work. But both would accept grapes even if they completed tasks at different levels of difficulty, de Waal said.
“If you gave them grapes, they were not sensitive to effort,” he said. “The grape is such a good reward that they would do whatever to get the grape.” ...
According to de Waal, the research illustrates inequity aversion, a concept from the field of behavioral economics, which applies behavioral psychology to economic interactions. Like the monkeys in de Waal’s study, humans do not always act as rational profit maximizers and sometimes turn down good offers if someone else is getting a better deal.
“For a monkey to refuse a perfectly fine food like cucumber just because somebody else is getting something better is an irrational reaction,” de Waal said. “Profit maximizing requires that whenever you can get something you take it.”
Some scholars, however, argue that reactions like the monkeys’ make sense in a social context. The capuchins’ sense of fairness has “evolved within the context of cooperation,” de Waal said, because capuchins live in groups and sometimes hunt squirrels together.
“If you don’t get in accordance to your effort, you should be sensitive to that, or everyone will take advantage of you,” he said. “It’s actually a rational response to make sure you get the right rewards for the right amount of work.”
De Waal said reactions to inequity are important for researchers to study because of widening gaps between haves and have-nots.
“How much inequity can you take in a system?” he said.
Posted by Mark Thoma on Thursday, November 22, 2007 at 03:15 PM in Economics, Income Distribution, Science |
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