"Des waerelds doen en doolen, is maar een mallemoolen,"

"Des waerelds doen en doolen, is maar een mallemoolen," engraving from Het Groote Tafereel der Dwaasheid, 1720.

"The actions and designs of the world go round as if in a mill." South Sea bubble financial crisis.

Tuesday, November 8, 2011

It is NOT about inequality





















The mechanisms that make economies create value are not based on equality, but cooperation. These are nicely explained in E.D. Beinhocker's book. Cooperation is crucial to the functioning of institutions (N. Fergusson's killer apps). Yet researchs point that fairness is a necessary element of cooperation. If some players feel the game is rigged, they simply want to end the game. S.F. Brosnan and F.B.M. de Wall showed that capuchin monkeys react the same way too:
Monkeys refused to participate if they witnessed a conspecific obtain a more attractive reward for equal effort, an effect amplified if the partner received such a reward without any effort at all. These reactions support an early evolutionary origin of inequity aversion. [...] People judge fairness based both on the distribution of gains and on the possible alternatives to a given outcome. Capuchin monkeys, too, seem to measure reward in relative terms, comparing their own rewards with those available, and their own efforts with those of others. They respond negatively to previously acceptable rewards if a partner gets a better deal. Although our data cannot elucidate the precise motivations underlying these responses, one possibility is that monkeys, similarly to humans, are guided by social emotions. These emotions, known as ‘passions’ by econom- ists, guide human reactions to the efforts, gains, losses and attitudes of others. Clearly if these reactions evolved to promote long- term human cooperation, they may exist in other animals as well.

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