|Little Brown Monkeys revisited...|
It seems that they are even more like us than we thought (see 'Fairness amongst little brown monkeys'). In the latest experiments with capuchin monkeys they were given silver coloured tokens which they could exchange for food.
They soon got the hang of the system and happily brought tokens to the experimenters. Not only that, they started to try to commit fraud. They brought things which they thought might be mistaken for the tokens - slices of cucumber - and tried to exchange them instead, hiding their own stash of discs. This suggests that they thought that the discs had intrinsic worth.
They are also averse to loss. In another experiment, using the silver discs for payment, they could choose either to have one grape for certain and the prospect of winning another grape, based on the toss of a coin or they could start with two grapes on show and have the prospect of losing one on the toss of a coin. In either event, the likely outcome is the same. You end up with one grape and a 50/50 chance of having or keeping another one. But they don't think like that. They chose the first option 75% of the time. They did not like the prospect of having two grapes laid out with the possibility of losing one. Better never to see the second grape until it was definitely in the bag. They are averse to loss.
So what? Well, research into human behaviour shows us to be much the same. If we have, say, a mug, we will always ask more for it than we would be willing to pay to buy it from someone else. This indicates that the pain assoicated with loss tends to outweigh the pleasure associated with gain. This may also explain why we hoard things.
And this may have significance when looking at long term investment. We are asked to give up the use of funds now in order to have a benefit some time in the remote future and we don't like it. Looked at on any rational basis, we always under-invest.
Fairness in humans has also been the subject of extensive research. The Ultimatum Game' illustrates our views very well. In this, one person (A') is offered say £100 on condition that he shares it with the second person (B'). whom he never meets and with whom there is no other communication. So then A must therefore offer B a proportion of the £100. A can only make one offer. Self-interest says that A should obviously offer the minimum amount that B will accept. But how much will that be? If B does not accept the amount offered, neither gets anything. Self-interest again says, therefore, that B should accept anything offered.
In practise neither of these things happen. A tends to offer B around 50%. If B is offered less than 20%, then normally it is refused. Why? Because of our inbuilt concept of fairness.
We already know that capuchin monkeys have a concept of fairness, by refusing for example to accept rewards that they have worked for when another one gets it for free (1).
Classical economic theory works on the basis of pure selfishness, which is probably why it doesn't work very well or predictably considering that we don't actually conform to its fundamental tenet.