Just Luck: An Experimental Study of Risk Taking and Fairness

    Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risk-taking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and spectators.

 

Fair Air: Distributive Justice and Environmental Economics

    Are fairness concerns of relevance to environmental economics and, if so, are they sufficiently structured to improve analysis in this field? On both of these questions, we answer in the affirmative, arguing that people’s fairness views are based on both general rules and the context, where context refers to the set of variables and persons employed to interpret and apply the principles. The fairness rules analyzed are accountability (i.e., rewards that are proportional to contributions individuals control), efficiency, need and equality. We conclude that stakeholders typically exhibit a “fairness bias,” i.e., they tend, consciously or not, to interpret and apply fairness principles in a self-serving manner, whereas the views of spectators, or impartial third parties, tend to converge significantly more. Further, we argue that fairness considerations are relevant to both descriptive and prescriptive analysis in environmental economics. These fairness concerns are reflected in the behavior of private and public decision-makers and have potentially important policy implications through the overall social objective function.

Adam Smith and the Modern Science of Ethics

    Third party decision-makers, or spectators, have emerged as a useful empirical tool in modern social science research on moral motivation. Spectators of a sort also serve a central role in Adam Smith’s moral theory. This paper compares these two types of spectatorship with respect to their goals, methodologies, visions of human nature, and emphasis on moral rules. I find important similarities and differences and conclude that this comparison suggests important opportunities for philosophical ethics to inform empirical research and vice versa.

 

Morals and Mores? Experimental Evidence on Equity and Equality

    What rule is fair? This experimental study considers equality and equity (i.e., allocations that are proportional to individual contributions). Impersonal third parties, or spectators, favor equity. Distributive preferences move progressively toward equality, however, with the introduction of personal factors, such as sharing stakes with another (i.e., being a stakeholder) and lifting anonymity conditions. These findings are remarkably robust with respect to a wide range of non-ethics variables that almost never matter, including nationality, culture, race, income, and gender, and have important implications for the need to distinguish social preferences in descriptive analysis from those in prescriptive research and policy.

 

The Moral High Ground: An Experimental Study of Spectator Impartiality

    This paper proposes and tests an empirical model of impartiality, inspired by Adam Smith (1759), that is based on the moral judgments of informed third parties (or spectators). The model predicts that spectatorship produces properties widely considered desirable in both the normative and descriptive literature of philosophy and the social sciences, namely, unbiasedness and consensus. This informs a vignette experiment that elicits moral judgments about real world policy issues while varying the information conditions (relevant and irrelevant information) and roles (spectator and stakeholder) of respondents across treatments. The results indicate that spectator views are unbiased, and that relevant information reduces stakeholder bias to insignificance, whereas irrelevant information reduces bias but does not eliminate it. Relevant information promotes a kind of consensus among both spectators and stakeholders. I argue that this model can inform descriptive and prescriptive political analysis and that it complements empirical work on deliberation and public opinion.


















Social Preferences and Moral Biases

    A consensus seems to be emerging in economics that at least three motives are at work in many strategic decisions: distributive preferences, reciprocal preferences and self-interest. An important obstacle to this research, however, has been moral biases, i.e., the distortions created by self-interest that can obscure our measures of social preferences. Among other things, this has led to disagreement about the relative importance of self-interest, distributive and reciprocal preferences. This paper describes a simple experiment that decomposes behavior into these three forces. We compare the decisions of implicated “stakeholders” with those of impartial “spectators,” who have no stake. Several surprising and interesting results emerge. For example, stakeholders are less inclined to respond to the generosity of others than are spectators acting on their behalf. This experiment also helps clarify a result in previous research (e.g., Offerman, 2002) that stakeholders tend to punish unkindness more than they reward kindness. We find that this asymmetry in reciprocity has two sources: there is an asymmetry in the underlying preference that even impartial spectators display, but, in addition, stakeholders exhibit a moral bias, i.e., they punish more and reward less than spectators. In sum, we find that all three motives have important and significant effects on final allocations.


















Mixed Feelings: Theories of and Evidence on Giving

    This paper examines possible motives and institutional factors that impact giving. Specifically, I consider alternative theories parallel to dictator experiments that generate evidence on both allocation decisions and their effect on feelings. A number of new empirical findings as well as new interpretations for previously reported findings result. A novel test distinguishes warm glow from impure altruism and rules out the former as the sole motive for giving. Very generous donations to charities that aid the needy (with modal gifts of the entire dictator’s stakes) cannot be attributed to familiarity with the charities. A charity that offers a matching grant increases its revenues by drawing donors and donations away from one that does not, although aggregate charitable donations do not rise. Additional results on emotions paint a picture of “mixed feelings:” generosity creates good feelings when the recipients are charities and bad feelings when they are fellow students. No group of dictators, however, feels better, on average, than a control group that is given no opportunity to donate. I propose a simple model that accounts for these results on allocation behavior and feelings by incorporating elements of two approaches, unconditional altruism and social preference theories, that to date have mostly evolved independently. A critical feature of this model is the social norm, and the results of the experiments corroborate the theory in the context of two norms of distributive justice that are important to real world giving: equity and need.




















Blind Spots: The Effects of Information and Stakes on Fairness Bias and Dispersion

    Mounting empirical research provides evidence of fairness bias and its economic and social effects. A far less appreciated issue is dispersion of fairness views and claims, which is also important for its effects on disagreements, empirical analysis and philosophical theories. This study undertakes a systematic analysis of the effects on fairness bias and dispersion of two variables: stakes and information. Most philosophical and social science analyses related to justice and bias associate heightened bias with increased information and, conversely, impartiality with the elimination of certain information. Less attention has been paid to the opposing impact of information, which is to supply the facts needed to achieve justice more reliably. An important open question is whether, on balance, increased information helps agents to achieve fairer outcomes or whether biased use of such information contributes to less fair outcomes. This study focuses on a set of previously reported experiments that share certain features and subjects them to a new analysis. The results of this analysis suggest that, although information is often used in a self-serving way, increased information can, under certain conditions, contribute to fairness claims to becoming less biased and less dispersed, both for stakeholders as well as impartial spectators.





















Which is the Fairest One of All: A Positive Analysis of Justice Theories

    This paper evaluates numerous positive and normative theories of justice in positive terms, i.e., in terms of how accurately they describe the impartial fairness preferences of real people. In addition, the paper proposes and defends an integrated justice theory based on preferences over four distinct and sometimes conflicting forces. These forces frame the analysis of the individual theories and inspire four corresponding theoretical classes: equality and need, utilitarianism and welfare economics, equity and desert, and context. This synthesis enables one to treat justice rigorously and to reconcile results that often appear contradictory or at odds with alternative theories.


















The Hedonistic Paradox: Is Homo Economicus Happier?

   The “Hedonistic Paradox” states that homo economicus, or someone who seeks happiness for him- or herself, will not find it, but the person who helps others will. This study examines two questions in connection with happiness and generosity. First, do more generous people, as identified in dictator experiments, report on average greater happiness, or subjective well-being, as measured by responses to various questionnaires? Second, if the answer is affirmative, what is the causal relationship between generosity and happiness? We find a favorable correlation between generosity and several measures of happiness and examine various possible explanations, including that material well-being causes both happiness and generosity. The evidence from this experiment, however, indicates that a tertiary personality variable, sometimes called psychological well-being, is the primary cause of both happiness and greater generosity. In contrast to field studies, the experimental method of this inquiry permits anonymity measures designed to minimize subject misrepresentation of intrinsic generosity (e.g., due to social approval motives) and of actual happiness (e.g., because of social desirability biases) and produces a rich data set with multiple measures of subjective, psychological and material well-being. The results of this and other studies raise the question of whether greater attention should be paid to the potential benefits (beyond solely the material ones) of policies that promote charitable donations, volunteerism, service education, and, more generally, community involvement, political action, and social institutions that foster psychological well-being.





















Fair and Square: The Four Sides of Distributive Justice

    Recent theoretical progress on inequity has left unresolved the crucial question of what constitutes equity. This paper proposes a positive theory of distributive justice, in a framework of inequity aversion, that depends on three general justice principles and context. The current study challenges the view of many previous inquiries that justice is context-specific and instead advances a theory in which justice is context-dependent: context matters, not because of the lack of general principles of justice, but due to its effect on the interpretation of those principles. Results from telephone interviews and written questionnaires are presented in support of the theory.





















Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions

   A theory of allocative decision-making is proposed that incorporates fairness, self-interest and self-deception. The conflict between fairness and the self-interested desire to secure more than the fair amount results in “cognitive dissonance,” that is, an unpleasant tension. The agent is motivated to reduce this, here by reducing self-interested behavior and/or by engaging in self-deception, i.e., by believing that it is fair to take more than the fair amount. Evidence is provided from dictator game experiments that corroborate predictions of the theory and suggest that a substantial fraction of “unfair” behavior may be attributed to self-deception as opposed to unadulterated self-interest.




















A Positive Theory of Economic Fairness

   This paper presents a positive theory of economic fairness that strives for generality by characterizing the fairness values people share across differing contexts. The study attempts to isolate these underlying values from the more situation-specific perceptual effects (e.g., framing effects) that  may have an impact on reported fairness. Central to the proposed theory is the Accountability Principle, which, roughly speaking, requires that a person's fair allocation (e.g., of income) vary in proportion to the relevant variables he can influence (e.g., work effort) but not according to those he cannot reasonably influence (e.g., a physical handicap). The results of telephone interviews and written questionnaires are presented in support of the theory.

















Is Fairness in the Eye of the Beholder? An Impartial Spectator Analysis of Justice

   A popular sentiment is that fairness is inexorably subjective and incapable of being determined by objective standards. This study, on the other hand, seeks to establish evidence on unbiased justice and to propose and demonstrate a general approach for measuring impartial views empirically. Most normative justice theories associate impartiality with limited information and consensus. In both the normative and positive literature, information is usually seen as the raw material for self-serving bias and disagreement. In contrast, this paper proposes a type of impartiality that is associated with a high level of information and that results in consensus. The crucial distinction is the emphasis here on the views of impartial spectators, rather than implicated stakeholders. I describe the quasi-spectator method, i.e., an empirical means to approximate the views of impartial spectators. Results of a questionnaire provide evidence on quasi-spectator views and support this approach as a means to elicit moral preferences. By establishing a relationship between consensus and impartiality, this paper helps lay an empirical foundation for welfare analysis, social choice theory and practical policy applications.
















Cooperation Is Relative: Income and Framing Effects with Public Goods

   In social dilemmas, there is tension between cooperation that promotes the common good and the pursuit of individual interests. International climate change negotiations provide one example: although abatement costs are borne by individual countries, the benefits are shared globally. We study a multi-period, threshold public goods game with unequally endowed participants and communication in which the decision variable is framed in three seemingly inconsequential ways: as absolute contributions, contributions relative to endowments and in terms of the effects of contributions on final payoffs. We find considerable agreement that “rich” (or high endowed) persons contribute more than “poor” (or low endowed) individuals at levels that are invariant across frames. Frames do, however, significantly affect both preferred and actual contributions for the poor: they contribute significantly less when the decision variable makes the effects on final payoffs salient than when it is framed in terms of absolute contributions. Contributions are explained mostly by self-interest, justice preferences, and experiencing failed negotiations, but we find no effects of reciprocity toward individuals or of the suggestions of others about what one should contribute.