The ultimatum game

The psychology experiment where people turn down money to punish someone else

17th August 2018

The people have spoken, the bastards.

— Dick Tuck, political strategist, prankster and loser of the 1966 California State Senate election

Politics is a chicanerous beast. Its whims and manifestations are difficult to predict because of democracy — itself an attempt to beat the opinions of thousands, and possibly millions, of individuals into one shape. When democracy works, it’s an admirable attempt at a fair representation of what people, the oddest and most mercurial of beings, want.

The ultimatum game is a simple economics experiment first put forward by Güth, Schmittberger and Schwarze. In the experiment, two participants are placed in separate rooms; they cannot see one another but they are able to communicate. One of the participants, the proposer, is given a sum of money — let us say £100 — and is told to split it between the participants however they like.

The second participant, the responder, may take the offer or reject it. If they take the offer, the money is split and both keep their share. However, if they reject the offer, both participants end up with nothing.

The classic economic theory goes that the responder would always accept any split, even accepting a measly £1. Anything is better than nothing. But, it doesn’t always go that way. When done with participants from a similar social status, fairness comes into play. The proposer will offer closer to 50/50 splits more regularly. Further, responders are more likely to reject less equal splits, ensuring neither participant receives any money.

There appear to be two reasons why the responder would not only voluntarily reject money, but ensure that the proposer does too. The first is that the responder wants to make sure that the proposer knows their behaviour is not fair and deter them from making uneven splits in the future. This is known as the altruist punishment theory.

The second account, the self-control theory, argues that the responder is simply frustrated with the inequality of the offer and will cut off their own nose to spite the proposer’s face.

Trump and the Leave camp represent a rejection of the offer. An attempt to say the current system is unfair and we’d sooner crash it

Michael Lewis, author of The Big Short, a bestseller about the US housing bubble in the 2000s, says this explains Trump supporters.

“Think about the psychology of the person who rejects the offer,” he adds, suggesting the ultimatum game’s results can and do carry over into real life.

Though, in the same interview, he says that you should be wary of anyone who claims to know something for certain — but it remains an interesting point.

This experiment demonstrates that humans have a sense of fairness and honour, and that we, occasionally, will act against our self-interested to express those concepts. Hillary Clinton in the US and the Remain campaign during the EU Referendum in the UK didn’t feel like solutions to society’s uneven split in opportunity and prosperity for many people. Voting either way in an election or referendum would change absolutely nothing for some people who don’t have much and don’t stand to gain anything, while other completely oblivious people continue to benefit from the EU or a Democrat government — so why not teach them a lesson?

Would you rather have this or the satisfaction of seeing some cheapskate, who never learned how to share, get absolutely nothing?

Trump — and to a lesser extent Bernie Sanders — as well as the Leave camp, represent a rejection of the offer. An attempt to say the current system is unfair and we’d sooner crash the system than have the system remain weighted in the favour of an elite.

How many people voted not out of a reaction Trump or UK independence, but with a view to shake up the status quo? That’s our altruist punishment theory

How many people during the election and the referendum voted not out of a reaction to Trump or UK Independence, but with a view to shake up the status quo? That’s our altruist punishment theory. It’s a way of telling centrists and lazy politicians that acting in the interest of the 1% and treating the average Joe as an afterthought is not good enough. Trickle down economics has been debunked as bullshit and we won’t accept it anymore. We’re punishing ourselves to tell a political class that they need to treat us better.

Racism and xenophobia, of course, played a role in both these political events. This is a self-control theory of a racist middle and lower class reacting to the perceived unfairness perpetuated by an elite political class of immigration and affirmative action.

Of course, it’s all appearances. Liberalism, or even progressive centrism, is mistakenly seen as victimising one group by giving a voice or economic stimulus to another. Of course, even if you are a racist, you can’t deny these things help bolster economies and, in turn, improve society — and are, therefore, still in your interest. But this racism is a reaction of outrage which should be aimed at a proposer who is taking more than their share and blaming the bogeyman.

The scientist staging the ultimatum game has no interest in the fairness of the game itself, only in observing its outcomes. Who is the arbiter of our democracies? Do we have one? And, are they paying attention to the outcomes?

There is no inherent fairness in the Ultimatum Game, but there are rules and controls. But, what if the proposer is then told they can lie?

So, what would happen in a second round of experiments with a new proposer and new responder who know what happened in the last experiment? Surely, the proposer, seeing that they need to be fair to benefit, will endeavour to do so?

There is no inherent fairness in the ultimatum game, only rules and controls with someone overseeing the experiment to make sure it is run correctly. But what if there’s nobody watching? What if the proposer can make any offer they like to the responder but then, once the offer is accepted, can split the money however they feel? What if they have no limitations, rules or controls?

If there is no grand overseer to make sure the proposer is honest, how would the offer be split? When they can walk away without punishment, what incentive would the proposer have to act in the interests of anyone but themselves? The responder would be relying on their own interest and the hope that the proposer is honest. But the proposer only has to appear honest. How can a responder make any kind of reasonable choice that can benefit them in this system?

That ultimatum game would favour the proposer. That game would be rigged. That’s politics.


17th August 2018