Duke University Professor of Economics Rachel Kranton spoke yesterday about the ways in which people act on their self-interests in group contexts when making economic decisions.
During her lecture, which was part of the Tufts Department of Economics Wellington Burnham Lecture Series, Kranton addressed a recent psychological experiment conducted by Dukes Center for Cognitive Neuroscience.
What Im painting for you here is that this picture that people arent just selfish, they might actually be fair, is very contingent on the social context, she said. In situations of group conflicts, where there are different interests involved, people may not be interested in being so fair. It is all contingent on identity — who I am, who you are, and the situation of the groups to which we belong.
The experiment was conducted on a number of Duke University students who were grouped together and presented with a variety of economic scenarios, such as whether they would pay money in order to have another member of their group lose or earn money. She said that the participants responses served as an indication of their particular social preferences.
The term social preferences in economics means how much an individual cares not only about their own income, but about another persons income, she said.
Kranton explained that many of the participants chose not to select options that would have caused others to be paid less. This led to the conclusion that people are not only self-interested, but also care about fairness and social welfare maximization. However, the unique design of the experiment revealed that not every participant was so altruistic.
The experimental design of previous tests … didnt test for social context and only looked at average behavior, not individual behavior, she said. On average, people look fair. But when we start looking at it person-by-person, we see that only about 30 to 35 percent of people are fair.
Kranton said that the participants in the experiment were grouped together based on their political affiliations. One group was arbitrarily assembled, for purposes of comparison, while others were classified as Strong Democrats, Moderate Democrats, Republican-Leaning Independents, and so on.
Dividing participants based on their political preferences did not influence the results of the experiment as much as had been expected according to Kranton. She said that this result suggested that peoples views concerning money are generally self-achieved, rather than being part of any one particular political attitude.
Individuals do have systematically different behavior, she said. Twenty percent of people are actually selfish all the time– across all conditions, regardless of social context– even when giving to people in their own groups.
Kranton saidthat she did not believe that much could be done to alter any individuals social preferences, other than to search for the origins of those preferences.
Our main message is that people are not intrinsically fair, she said. Identity matters, behavior depends on social contexts and group divisions, and individuals react differently in settings of group conflict.
Going forward, Kranton explained that the uses of the experiments data remain unclear.
Of course, this leads to a really big question: what is the source of all these differences? she asked. This is a huge question, and Im not going to claim to have an answer. Right now, theres not much we can say about that. However, there could be a possible interaction between genetic endowment and the way a particular person has been brought up.