The Moral Molecule Under The Microscope #2: On An Erroneous And Antiquated Economic View Of Human Behavior

Game theory is the study of mathematical models of conflict and cooperation between intelligent, rational decision-makers. Today, game theory applies to a wide range of behavioral relations and is now an umbrella term for the science of logical decision making in humans, animals, and computers. Behavioral game theory (BGT) came to existence to expand on the traditional understanding of game theory. BGT does not assume we are completely rational decision-makers. In other words, it tries to add other variables to the models, such as personality or emotions. BGT is used time and time again in the field of behavioral sciences in order to be able to create controlled scenarios and see how people react or interact in them. The study of behavior with BGT and not traditional game theory is somewhat new but very promising. Nevertheless erroneous perceptions on our behavior, established by older game theorists still prevail. Bear with me as I try to prove this to you.

In his book, "The Moral Molecule: How Trust Works", Paul J. Zak narrates how he used game theory for one of his experiments. The game he used is called "The Trust Game" (TTG). TTG consists in gathering a group of people and giving them an amount of money at the beginning. For the purpose of this example, let's say that the experiment is running in a computer and that in their "account", each one has been deposited 10 dollars. Then, participants are asked if they would like to transfer a portion of that money to another participant. If they do transfer money to someone else, when this money arrives at the other's account, it would be three times as much! Let's say you and I have our initial 10 dollars each. Then you decide to send me 2 dollars. After the transaction occurs, I would have 16 (10 + 3(2)), and you would have 8 (10 - 2). Up to now, it seems that this would benefit only the person receiving the money and not the one sending it. But the key is that after the transaction occurs, the receivers are asked if they want to send some back. Think of it as a thank you, or a tip, or however you want to. It is important to note two things. First, while they are enabled to reciprocate, in the strict sense of it, they do not have to. They could just be like: "Thanks for the extra bucks, kid!", and walk away. Second, the identities of each participant are masked from all the other participants.

Pixabay image source.

Then, the question rises: why would anyone, under no obligations, act in a trustworthy manner towards complete strangers? Identities are masked, so no one will ever know, so what is that problem with being a greedy bastard? Furthermore, according to traditional game theory, and economists, there is no rationality in acting in a trustworthy manner. The rational thing to do would be to be that selfish bastard! That's what you should do, at least according to the economic theory that held sway over most of the twentieth century. Zak argues that economists were lured towards this approach because if we assume that humans are rational and self-interested, then this makes the math in their models a lot simpler which in turn allows the creation of what seems beautiful formulas like the Nash Equilibrium.

The results from Zak's experiments showed that 90% of the people trusted sending money to someone else and, more surprisingly, 95% of the receivers decided to reciprocate and send money back. The experiment has been replicated in the United States with up to 1000 dollars, as well as in developing countries with up to three months' pay. The results have hold in all scenarios with participants behaving with more trust and trustworthiness than the traditional models of game theory can explain. This is why the expansion of behavioral game theory upon game theory is so important.

The problem is that this economic perspective on human behavior dominated academia for a significant period of time. The people who who were taught this are now in the ages where they are most likely to be in positions of power. These are the people who often set the standards for behavior on Wall Street, in government, and in the boardrooms of global corporations. I would even dare to go further and not just blame this pessimist perspective on the older generations, but say that it still prevails. As a mathematician myself, I was a preference utilitarian who believed in the whole rational an self-interested approach. It was not until I got involved in cognitive sciences that I changed my perspective. The trust game, among many more, shows that rational self-interest is bullshit when it comes to real people. Just like any other scientist, I think we need to share this knowledge and fight the current beliefs we have. What causes this trusting behavior though? An innate sense of what is right and wrong? Could it be a hormone that we have talked about, and we release when witnessing an act of trust?

What do you think? I'd like to hear your opinions.

If you want to check out other thoughts that this awesome book has evoked, click on these past posts:

• The Moral Molecule Under The Microscope #1: Witnessing An Act Of Trust Makes You Behave More Pro-Socially

Best,

@capatazche