The Ultimatum Game And Serendipity

There’s a game called the Ultimatum Game which you may have heard of. I’d heard of various similar things but something even stranger than the Liberals assertion that women don’t need quotas but Queensland Nationals do, occurred while I was reading yesterday.

As well as having a kindle on my iPad, I also read physical paper books. And I was reading a book called “Here Comes Everyone” by Clay Shirky. It’s a ten year old book and has some interesting thoughts about what the rise of social media means for the world. Of course, being ten years old, it gets some things badly wrong, as well as making some very accurate predictions. MySpace, for example, is given much more attention than Facebook… although, for all we know, when someone reads this in a ten years time, they may say, “What’s Facebook?”

Anyway, while reading this book, I came across a description of the Ultimatum Game and I wanted to remember to write about it, so I went and got a sticky note and place in the page with a comment.

I needn’t have bothered.

A few hours later, on my kindle, I was reading a book by Dan Ariely and Jeff Kreisler about behavioural economics, and serendipity: They spoke about the exact same game.

Now, if I were a strong believer in signs and fate, I’d see this something that was meant to be, but as I’m a rational person, I’m prepared to put it down to coincidence. Although I am now writing about it, so maybe I’m not as rational as someone like the American President, who is like, really smart, because, well, he went to the best colleges and he was an excellent student and he got to be president at his first go, if you don’t count the other one.

Anyway, as Ariely and Kreisler explain, the game goes like this:

“The basic set-up involves two participants –a sender and a receiver. The two players sit in different rooms. They don’t know each other and will never meet this way. They can act in any way they want without fearing retaliation from the other person. The sender is given some money –say, $ 10. He or she then decides how much of that cash to give to the receiver, while keeping the rest for him-or herself. The sender can give any amount –$ 5, $ 1, $ 3.26. If the receiver accepts the offered amount, they both get their allotted cash, the game is over and they each go home. If the receiver rejects the offered amount, neither participant gets anything and the money goes back to the experimenter. Nada. Zilch. Zero-point-zero.”

If you’re the receiver, then logically you should take whatever you’re offered. If you don’t, you’ll get nothing, and surely something is better than nothing. Interestingly, however, the studies showed that unless the split was at least 70/30, the receiver was likely to scotch the deal. In other words, if they were, for example, offered twenty percent they’d rather punish the sender, even if it meant getting nothing themselves.

With all the discussion lately about growing inequality and wages stagnation, I couldn’t help but wonder about the real world in terms of the Ultimatum Game. At what point do workers, rise up and say, hang on, this is unfair and we don’t care if we get nothing, you’re not getting away with this.

Of course, it’s slightly different when you’re relying on the money to feed, clothe and provide shelter for yourself and your family, but throughout history there have been revolutions and strikes, where workers have been prepared to accept deprivation and death to protest unfairness.

In the modern era, it’s a little bit easier on the worker. There are minimum wages and we have a welfare system designed to ensure that the unemployed worker doesn’t starve. Strikes are usually resolved without the need for either the overthrow of the government or the transportation of the strikers to the colonies. Hang on, we are the colonies… where would we send our Tolpuddle Martyrs?

Yep, in some ways, the modern era resembles the Ultimatum Game. You can walk away and simply say that it’s not good enough if you don’t like what you’re being offered, so there’s an obligation on the employer – the “sender” – to ensure that their offer isn’t too unfair. I guess that’s why there’s such a concentration on applying things like a work test on the dole. If people have an option to say no, then it’s exactly like the game and people won’t accept being offered an unfair split.

But relatively is a funny thing. We’re told we should be upset because the welfare bill is costing so many hours work a week, but the figure wasn’t broken down into it costs a nurse x number of hours work, while it costs a doctor y number of hours and it costs some businessmen ten minutes work every week. And, of course, it costs other businessmen nothing at all because they don’t pay any income tax. Yet the tone of the article was that welfare was something we should be outraged about. There was no attempt to analyse how much each of benefits from welfare in various forms.

Welfare was that thing we’re meant to see as a drain and to accept what that it’s bad without question. It’s just like when Malcolm Turnbull was being a guest commentator on the cricket the other day. While Mark Taylor would have been careful not to ruin his preselection chances for Bennelong by upsetting the PM, I was hoping that someone else would point out the obvious. While everyone was saying how great it was that the Pink Test had raised nearly $800,000 to that point, I was waiting for someone to say to Malcolm, “Hey! If you just donated half what you gave to the Liberals before the 2016 election, we could double that in the time you’re in the commentary box!”