The Triumph of the Social Animal

By Chrystia Freeland
April 24, 2012

BERLIN — Does fairness matter? As France prepares to elect a president this spring and the United States gets ready to elect a president in the autumn, that old philosopher’s chestnut is gaining tremendous real-time political relevance.

Economics, by contrast, hasn’t traditionally been much concerned with fairness. Instead, economists have based their analysis on “Homo economicus,” a model human being who is perfectly rational and perfectly guided by self-interest.

The financial crisis of 2008 made it hard to believe in a world of perfectly rational actors, even when they earn million-dollar salaries and have advanced degrees. Now, a growing body of research is challenging the second part of the definition of Homo economicus — that he is guided purely by self-interest.

The alternate view was advanced by Armin Falk, a Bonn University economist, at a recent economics conference in Berlin organized by the Institute for New Economic Thinking. It emphasizes the importance of fairness and trust to human behavior. This approach takes as its starting point the idea that we are social animals, driven powerfully by how we fit into our community.

The social animal school may sound touchy-feely, but one of its favorite research tools is the M.R.I. That is the machine Dr. Falk and his colleagues used to try to figure out whether we care most about the absolute material reward we get for our work — as a rational Homo economicus should — or whether fairness matters, too.

In one experiment, subjects were paid 50 percent more, the same amount or 50 percent less than a peer for doing the same amount of work. Crucially, the absolute payment the research subject received in each case was identical.

But brain scans showed that fairness had a strong impact at a neurological level. Anyone who has ever held a job or has a sibling won’t be surprised to learn that the most powerful response was evoked when the research subject was underpaid, compared with his identically tasked peer. Interestingly, when researchers simulated low social status in their testers, unfair treatment mattered less. The meek may inherit the earth, but in the meantime they have been conditioned to accept less than their fair share.

In another experiment, Dr. Falk and Ernst Fehr, of the University of Zurich, investigated an issue that should be of great interest to the world’s human resources departments: Does our perception of fairness influence how hard we work? Their answer is yes — workers who are underpaid don’t work as hard.

The two professors’ conclusion was based on the responses of experimental subjects. In his Berlin talk, Dr. Falk also cited an American real-world example that points to the same conclusion. A bitter fight between workers and management at Bridgestone/Firestone’s plant in Decatur, Illinois, in the mid-1990s, including a long strike and the hiring of scabs, coincided with the production of poorer-quality tires.

“Looking before and after the strike and across plants, we find that labor strife at the Decatur plant closely coincided with lower product quality,” a paper on the subject by Alan B. Krueger, a Princeton economist who is now the head of the U.S. president’s Council of Economic Advisers, and Alexandre Mas, also of Princeton, reports. “Monthly data suggest that defects were particularly high around the time concessions were demanded and when large numbers of replacement workers and returning strikers worked side by side.”

Workers who feel they are being treated badly aren’t just unproductive; they can be downright dangerous.

An obvious response to this finding if you are in the H.R. department, particularly if your colleagues in finance are giving you a hard time, is to find ways to control your employees more strictly.

But another study by Dr. Falk, with Michael Kosfeld of Goethe University Frankfurt, suggests that keeping workers on a tight rein can be counterproductive. When our bosses closely monitor our work and restrict our opportunities to slack off, we feel we are not trusted. The counterintuitive result is that the more strictly we are controlled, the less hard we work. Another triumph for the social animal over Homo economicus.

Some of Dr. Falk’s most recent work takes the question of fairness back into the medical laboratory. He and a team of colleagues asked what the physical impact of unfair pay was, this time as measured by our heart rate rather than brain waves. Experimental subjects who felt they were being unfairly paid showed higher heart rate variability, an indicator of stress that has been shown to predict heart disease.

Faulty tires and failing hearts are the grim consequences of unfairness suggested by Dr. Falk’s talk. But the new vision he and like-minded researchers are developing of how human beings operate in the economy is actually rather uplifting. We aren’t driven solely by self-interest; fairness and decency matter, too. Kindness and justice turn out to be useful concepts not just at the pulpit or among philosophers, but also as essential tools in the workplace.

Many employers already know this intuitively. Smart ones will start to apply these findings more explicitly, too.

The next step is to adopt these discoveries about the social animal to our thinking about the broader political economy. In one way or another, this year’s pivotal elections will all be about the economy, stupid. But a sophisticated understanding of how the economy really works means thinking not just about gross domestic product, but about fairness and autonomy, too.

19 comments

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Crystia – Life is not fair. Have you ever heard of the bell curve? You skim over the implications of “identically tasked peers”. In the overwhelming majority of cases, the “1%” are not identically skilled, tasked, or remunerated as the “99%”…we are all born at our place on the bell curve. This Marxist garbage you present (yes, straight from Marx) was exposed as bunk in hindsight by Freud. I suggest you read Freud, then revise your ideas on “fairness” and “repression”.

Posted by sarkozyrocks | Report as abusive

To the extent that fairness is amongst the most (perhaps even the single most) subjective words in the language, then it cannot possibly matter. The _perception_ of fairness can indeed matter, but that perception itself is so irrational that sometimes it’s hard even to see how the slighted protester feels that he’s being slighted. (Which difficulty of perception, it would seem, is at the root of most industrial disputes.)

Most experiments, going right back to the classic “blue eyes good, brown eyes bad”, confirm that if people feel they are being badly, they get surly and unco-operative – in this you are correct. But in a society of special pleading such as we find ourselves in today, _everybody_ feels that they are being treated badly.

Even the Greeks feel outraged at the suggestion that they should be as productive as Germans. What could be fairer than that?

A more interesting theme is that (most) people seem inclined to fight far more violently to keep unearned (or possibly unaffordable) privileges than they do to keep more basic, “fairer” rights. (Which is the opposite of what you’d expect if the objective definition of fairness favoured by numerate scientists applied.) What goes for the French nobility or American slave-owners also seems to apply to British students rioting against the implacable fact that we simply can’t afford to give away for free worthless university degrees to 50% of the population. None of these privileges were “fair”, except to those about to lose them.

Perhaps a useful first stage in getting fairness into public life might be to teach people that “fair” does not mean “preserving the status quo”. But I doubt you’ll manage it.

Posted by Ian_Kemmish | Report as abusive

Fairness resides in our hearts while self-interest resides in our minds. It is extremely hard to reconcile and even more difficult to practice for many of us. A dichotomy of being human.

Posted by SeaWa | Report as abusive

Ms. Freeland:

Now that you have interviewed many of the top economic dogs of the world and sampled the Davos scene, I perceive a widening in range of your reporting. Without wanting to sound chauvinistic, I complement and thank you on this.

It is hard to see exactly why the free market capitalistic economic system, based on everybody for themselves, greed is good as its justification, can really be so wonderful. It is a convenient religion, self-justifying particularly for the billionaires. In the end, big bucks and zealots have pretty well taken over what purports to be our democracy.

Our world economic and environmental situation is becoming more critical by the day. Science cannot entirely rescue us from the dwindling resources problem. Collective (social) action is clearly going to be much more effective in dealing with the world than the random, purely capitalistic, everybody for himself, approach.

We are all in this world together, even the 0.01%, even if they don’t know it.

Posted by xcanada2 | Report as abusive

“Dr. Falk and his colleagues used to try to figure out whether we care most about the absolute material reward we get for our work — as a rational Homo economicus should — or whether fairness matters, too.”

The problem with trying to measure this in an individual at a moment in time is that it is relative. The ‘winner’ between fairness and self-interest is dependent upon what we perceive our needs to be at that moment. For example the more plentiful is food, then the more fair is the distribution. The more scarce is food, then the more self-interest is applied. At least our perception of its plentifulness. Then don’t forget, within each of us is a different balance. Some are driven by self-interest alone while others are not.

Posted by SeaWa | Report as abusive

How can employers make ‘pay’ fair without raising most salaries? Unless they plan on reducing the salaries of the highly compensated (which I favor) payroll costs will spiral out of control.

Posted by SeaWa | Report as abusive

Great article. One of your best columns yet.
Thanks.

Posted by AdamSmith | Report as abusive

Elections are not about the real-economy, stupid. It’s just about how much this capital-animal can influence the swing voter with his capital.

It’s proper confluence of technologies of current times that brings meaningful accounting for the self-serving-animal for correction toward fairness.

Posted by Mott | Report as abusive

One of the lectures in TED Talks series was on animal morality, One of experiments shown had monkey getting a piece of cucumber as pay which was ok until the one in next cage got a grape for the same thing. Then she through it back and had tantrum. The lecturer said the same thing happened with other mammals.

Equal treatment is a requirement for peace in mammals. Therefore there is a police cost of inequality.

Posted by SamuelReich | Report as abusive

In one experiment, subjects were paid 50 percent more, the same amount or 50 percent less than a peer for doing the same amount of work. Crucially, the absolute payment the research subject received in each case was identical.

Doesn’t this show people want to minimise their time at work and maximise leisure? This suggests we should allow people to choose the hours they work and be paid accordingly. With less people needing desk space at the office this should be easier to arrange than it was.

For what it’s worth I think we’re motivated not so much by feelings of fairness and decency for everyone. We’re motivate more by the feeling that we are valued and respected.

Posted by Alistair2 | Report as abusive

The problem lies simply in the fact that the legal definition of a Corporation as a “living entity” takes too much of the accountability off the shoulders of the individuals running a company. Additionally, since obviously a Corporation really isn’t human it doesn’t display human attributes such as empathy and trust. Corporations by their very design are psychopathic in nature grabbing profits at the expense of anyone or anything that gets in the way. The system needs to be redesigned and until it is expect nothing to change.

Posted by GLK | Report as abusive

Chrystia Freeland,
A very interesting article.
While economists should play a roll in all the spending issues, there must be a balance with Patriotism.
If it is all about self serving, and self interest, it little more than Socialism.
On the Battle Field it is about survival of the team, the patrol becomes secondary to survival. It is never only about oneself, if I survive and no one else does, could I call surviving, living, no, I would die of guilt.

Posted by VincentLawrence | Report as abusive

It is heartening to see that “Kindness and Fairness” are human traits becoming recognized in the media as important. Right now it appears, repulsively so, that greed and selfishness reigns throughout the world.

Perhaps these hard economic times make many in the masses feel more vulnerable and therefore more considerate towards others in the realization they themselves may need assistance someday. Perhaps many still invulnerable are driven toward considering fairness toward others by their own feelings of guilt and shame for their unexplainable abundance.

However, it is disheartening to see these positive traits (kindness and fairness) relegated to the chapter of social instinct. But, it must be true. One can feel it in their bones.

Posted by SeaWa | Report as abusive

Although your article is timely, I’m surprised that any economist or politician would discount ‘fairness’ as a major driver. In the US, much of the current debate about the economy revolves around the concept of fairness. Those who objected to TARP for example mainly saw it as unfair in terms of saving some and sacrificing others. The perception of the banker’s role in the recession is also based on the idea that they acted unfairly and were unfairly compensated. It seems beyond argument that the perception of unfairness is much more powerful, particularly across populations, than any paradigm of ‘pure rational self interest’.

Posted by steve778936 | Report as abusive

‘VOLUNTARY’ acts of kindness and justice are necessary concepts. Throw political economy into the mix and no longer is voluntary the modifier, rather ‘higher taxes.’

Posted by sahuntree | Report as abusive

““Monthly data suggest that defects were particularly high around the time concessions were demanded and when large numbers of replacement workers and returning strikers worked side by side.””

It takes research to discover things like this? There’s an ongoing labor dispute in my area, and locked-out employees often tout the lower productivity of replacement workers as “evidence” that the employer should submit to their demands. It’s hard for me to imagine a scenario in which a replacement worker stepping into a position they’ve never had before, (and doing so while the rest of the experienced workforce is locked-out as well….meaning that all of the replacement workers are working side-by-side with OTHER replacement workers having little or no experience), would be as productive or produce work that was of equal or better quality than the normal worker’s is.

Is this really surprising? Did “experts” need to be consulted in order to figure any of this out? Did the experts have any suggestions or advice to offer up? I’m just curious as to how a replacement worker, (or more accurately workFORCE), could be expected to perform at the same level as the experienced workers they’re temporarily replacing.

The concept of “fairness” is a funny thing. Some folks automatically make the assumption that management is/was acting “unfairly” during a contract negotiation and subsequent strike or lock-out, and yet those SAME individuals have no problem whatsoever pointing their fingers at a replacement worker and broadcasting their lower productivity to the world. Derogatory terms like “scab” are welcomed and deemed acceptable as well.

It’s all so confusing….

Posted by skaht | Report as abusive

An interesting, thoughtful article. The poster who refers to it as “marxist garbage” says far more about their limited intellectual knowledge and defensive narrow-mindedness than they do about the article. As other posters have pointed out, there is widespread evidence from elsewhere, such as in primate studies, that we need a much wider sense of what motivates human beings than a simple focus on the economic and material.

Some of the best capitalists have always understood this. One only has to look at the lives and views of major figures in the history of business such as -in the UK – Robert Owen, William Lever, the Cadbury brothers and Titus Salt to see this. One of my favourite modern exemplars is the thinking of Stephen Covey, which is a useful corrective to the sort of thinking exemplified by the first poster.

Posted by JimGoddard | Report as abusive

This research meshes well with the evolutionary history of human beings. As a class of animal, we are social, territorial predators. For 99% of our history, we lived in small bands, sharing resources with each other, paleolithic beings now occupying a modern world of our own invention.

If humans had acted the way classical economics posits, we would never have survived as a species. The glorification of the individual is a very recent construct in our development. The lone wolf, both human and canid, is seen as a romantic ideal but is actually a death sentence. Traditional societies used ostracism as a form of capital punishment.

Posted by fredschumacher | Report as abusive

1- During the pendulum swing it is important to realize that our social and economic system must meet the instinctual needs of both ‘self survival’ (a.k.a. capitalism/greed) and ‘communal survival’ (a.k.a. socialism/sharing). Both are part of our human instinct. Neither can be disregarded in a truly successful economic or social system. Granted, within that system, there may be subsystems that act as gyroscopes balancing the whole (e.g. religion, sports, politics, etc).

2 – I’ve really been enjoying Ms. Freeland’s articles lately. Sometimes I agree with her premise, sometimes disagree -vehemently. But her articles almost always introduce a new line of thought or a different perspective to me. The word ‘profoundly’ comes to mind, but I am to simple a person to muster ‘profound’.

Posted by SeaWa | Report as abusive