Fairness, Reciprocity, and Care

As a core tenet of economic theory, the pursuit of individual self-interest has typically been assumed rather than proved. Since individual utility cannot be directly observed, the presumption that individuals always try to maximize can take a circular form.

A growing body of research suggests that individuals behave less selfishly than has traditionally been supposed. Social norms of fairness and reci­procity appear to have a significant impact on individual decisions.⁵⁰ An experiment dubbed the Ultimatum Game provides a particularly vivid example. Subjects are divided into pairs. One member of the pair, Player A, is provided an easily divisible sum of money (such as ten U.S. dimes), and instructed to make a take-it-or-leave-it offer to share part of this sum with Player B. If Player B accepts the offer, both players can retain the agreed upon shares. If Player B rejects the offer, however, all the money must be returned to the experimenter and neither Player A nor Player B enjoys any benefit.

The predictions of standard economic theory are clear: Player A should make the smallest possible offer to Player B (out of ten dimes, only one). Player B should accept this offer, because otherwise he or she will receive absolutely nothing. Most players defy these predictions. In a variety of different settings, with different experimental subjects, with sums of money large and small, Players A and B seem influenced by an egalitarian sharing norm that comes into play when people enjoy a windfall gain. The most common response from Player A is to offer an even split of the money with Player B. If Player A offers a less than even split, a substantial percent­age of Player Bs will turn it down, even at considerable cost to themselves.

Few situations in the real world conform to such simple conditions. For the most part, people receive money that they have earned, and, as a result, are much less disposed to share. But the Ultimatum Game calls attention to the impact of social norms of fairness and reciprocity, which are likely to be affected by definitions of productive work. Disapproval of idle slackers helps explain widespread disapproval of public assistance to the non-working poor in the United States. Those who ignore the contributions of family work outside of paid employment are not likely to count mothers raising children on their own among the deserving poor.52

While many researchers have documented the positive impact of norms of trust and reciprocity on economic outcomes, few have examined the impact of norms of care and obligation—norms more likely to affect the well-being of dependents. Some experiments do, however, reveal significant differences in men's and women’s behavior that seem related to responsibilities for care. Women tend to avoid competitive pay schemes, even when their perform­ance suggests that they would benefit from them.5³ Competition seems to enhance the performance of men more than women. When paid according to a piece rate, men and women perform about equally. In a mixed tourna­ment, however, in which only the winner is paid, the variance in women’s performance is much greater and overall, they perform worse than men.5⁴

Such gender differences might work to the advantage of women in educational settings, where grades are based on successful completion of tasks similar to a piece rate. But women’s predispositions may disadvantage them in competitive work environments or job searches where contenders are ranked against one another. Men tend to be more enthusiastic than women about the positive effects of competitive pressure as a stimulus to effort, but the optimal level of competition may vary among different types of work and different types of workers. These results highlight the import­ance of institutional design: we should develop work environments and incentive systems that bring out the best in everyone.