CME Slides Forum

A joint Congress by ERA-EDTA and ISN

FAIRNESS (AND ITS LIMITS) IN HUMANS

Ernst Fehr, Zurich, Switzerland

Chair: Francesco Locatelli, Lecco, Italy

Gérard London, Paris, France

Eberhard Ritz, Heidelberg, Germany

fehr

Prof. E. Fehr
Institute for Empirical Research in Economics
University of Zurich
Zurich, Switzerland

Ladies and Gentlemen it is a great honor and a pleasure to be able to speak to you this afternoon at the World Congress of Nephrology. I’m an economist by training, a psychologist by passion and recently entered into neuroscience, so my research is highly interdisciplinary and I hope I can persuade you that the social sciences are no longer a soft science but a science like the life sciences in which experiments play an important role and rigorous empirical work paves the way for new insights.
My topic today is fairness and its limits in humans. I have been dealing with this question for about 20 years and the topic was initially not popular among economists whose models were populated by selfish individuals that do not care about fairness. But the situation has changed in the meantime because convincing empirical evidence cannot be neglected.

So let me start with a motivating example that may also be of interest to you. In 1981 Johannes Ideus, a German citizen donated his kidney to his pregnant sister who was desperately in need of one. His sister survived and gave birth to a healthy child. 11 years later Johannes Ideus suffered from a kidney tumor, he was himself in need of a healthy kidney.

However, the doctors refused to put Johannes on a waiting list while others who had not donated an organ previously or had not indicated their willingness to do so in case of death were put on the waiting list. Without a functioning kidney Johannes died in 1997 and left a severely traumatized sister, her child and his wife.

Now, what is interesting in this example? Well, the example raises intriguing questions I think. Everything else equal, should Johannes have been given priority over others on the waiting list who had been unwilling to donate their kidney?
Should his willingness to sacrifice his own kidney be reciprocated when he himself needed one?
More generally, should we apply the principle of reciprocal fairness to the allocation of scarce organs that are suitable for organ transplantations?
My guess is that many in this room will answer this in the affirmative way though not all of you.

This brings me to my topic. My topic today will be to explore the prevalence and the consequences of reciprocal fairness. I will start by making first a few remarks on what I call the self-interest hypothesis, then I will show to you that fairness concerns can be studied scientifically. I will talk about the questions: How do we measure concerns for fairness? What’s the nature of these concerns? I will discuss the role of reciprocal fairness in issues of cooperation and collective action, bargaining behaviour and as you will see, it’s also related to the evolutionary origins of human altruism. Finally, I will come back to my initial example and then I’ll summarize.

Now, let me make a historical remark because the self-interest hypothesis has been so dominant in almost all of the behavioral sciences. I have here a quote form a Noble Prize winner in Economics from the Chicago University, George Stigler who writes that when “self-interest and ethical values with wide verbal allegiance are in conflict, much of the time, most of the time in fact, self-interest theory will win”.
Another economist whom I predict to be among the Nobel Prize winners within the next 10 years, Oliver Williamson, believes that humans are “self-interest seeking with guile (which) includes more blatant forms such a lying, stealing and cheating but more often involves subtle forms of deceit”.

Now, if you go on to biologists for example, Richard Dawkins, a famous evolutionary thinker, writes “we are survival machines, robot vehicles blindly programmed to preserve the selfish molecules known as genes. This gene selfishness will usually give rise to selfishness in individual behaviour.” And Ghiselin, also a biologist, wrote “Scratch an altruist and make a hypocrite bleed”: I could go on and on and on with examples like this. The dominant tradition in all the behavioral sciences has been based on the assumption that self-interest is the dominant motive in almost all human behaviors.

However, I’ll try to convince you today and I will show a bit of evidence that this presumption is wrong. There is now a large body of evidence indicating that a substantial share of the population, though not all of us exhibit concerns for fairness for example.

My research has been devoted over the last two decades to showing that if you neglect these concerns, you make serious errors. In particular, you are not able to understand crucial determinants of cooperation and collective action which are a prerequisite for success almost everywhere. Every scientific laboratory needs cooperation. Every society needs it, every village, every family. But you are also not able to understand the functioning of markets and organizations or political processes or the impact of regulation and laws. Finally, your political advice may result in an ineffective or even counterproductive policy advice. I will not have time to argue all these points at length. Those who are interested may want to visit my website where they’ll find many papers in which I deal with these questions.

Now, let me come to the issue of how we measure fairness concerns? Well, one possibility is to observe people’s choices in their natural environment but this is a problem because there is a host of confounding factors which makes inferences difficult.
Another possibility is to ask people, however asking people whether they are fair is not the way to get honest answers. So what economists started doing is to make people pay for fairness. So if you are really fair minded, if you have a concern for fairness or altruism, you only can show this is if you are willing to give up valuable resources. Only in that case you really document that you have a concern for fairness. That’s what we do in our laboratory experiments where we typically have real subjects, but often university students, who earn real money by making decisions in a controlled environment and in the case of fairness concerns they have to pay if they want to show their concern for fairness. The stakes are sometimes very high. They can go up to several months’ income. So it’s not a little money that’s at stake here in these experiments.

What is the nature of fairness concerns? What have we detected? What have we discovered over the last 20 years? Well, many people seem to show a preference for reciprocal fairness. What is this? Well, it is the motive to be kind to those who have been kind to us (we call this positive reciprocity) or to hurt those who hurt us (we call this negative reciprocity). Now the important caveat comes: even if this is costly for us and yields no material benefits, people do this. They do it out of an impulse.
Another concern for fairness is the preference for fair outcomes. We also call it inequity aversion. People are averse to inequitable outcomes or for helping the least well off. Finally, there are also issues of procedural fairness. I should add however, that not all people are like that. There is large individual variation. We don’t really fully understand where this individual variation comes from. Currently there are lots of research projects ongoing that are trying to uncover this mystery why some people are very fair minded and others not. Is it biological? Is it genetic? What are the environmental factors? We don’t yet really know. But we know that many people do have fairness concerns.

Now let me go into more depth in one of the experiments we ran in our laboratory in Zurich. It’s a prototypical experiment that has probably been run tens of thousands of times around the world. It’s a so-called public goods or cooperation experiment. Imagine a group of 4 people, each receives 20 Swiss Francs or 20 Euros and each participant can keep the 20 Swiss Francs for him or herself or contribute to a group project. The experimenter doubles each franc contributed to the group project and then the total amount of money is equally distributed among all participants. So make a short thought experiment. You contribute 1 Swiss Franc, the experimenter doubles it making it 2 Swiss Francs, it’s divided up by 4 and each of the 4 people from the group gets 50 centimes.
So what does that mean? I invested 1 franc and get back just half of one. So this is a loss making enterprise. If I’m a selfish person, I should never invest. However, if nobody invests, there are mutual gains from cooperation left unexploited. Why? Because if we all invest into the public goods, we would all be better off. Why? Well, if we invest our money into the group project, it’s doubled, it’s distributed to all the people, in the end we go home with twice the amount of money that we had initially. However, there is this issue of free-riding because there is this strong incentive to free-ride for selfish people and therefore the question is what people do then when they face these incentives.

Now, which situation does this experiment mimic? Well, for example, the reputation of a laboratory. The reputation of a laboratory is public goods for all the people in the laboratory because all the people in the laboratory benefit from that reputation. When the reputation is good, they have better prospects on the job market. So a good reputation is a classic public goods. But there are many other examples.
For instance team salary schemes. If the team works hard and gets a team bonus that is distributed to all the people, you have the same incentive structure. Basically all environmental goods have this characteristic; clean air, a clean sea these are all public goods. Honesty in taxation. If I pay my taxes honestly but others don’t, I pay for the streets and the other stones, so I contribute to the public goods. Or the control of the management in large publically owned cooperations.
One of the big unsolved problems in current society is that we have not solved that problem. How do we control the CEOs in large publically owned enterprises whose salaries are sky rocketing at the expense of other people? We have not solved that problem. Why have we not solved that problem? Because cooperate control is a public good. If I contribute to a better functioning of the enterprise, all the equity owners benefit who have a stake in that enterprise, but I have the cost of control. So it’s like in the experiment I have just described which mimics a ubiquity of social situations. Countless social situations are characterized by such an incentive structure.

Now, what do people do in this experiment? How do they behave? Well, if they were all self-interested, nobody would contribute to the public goods. Now what we in fact, observe is they do contribute, they contribute 50% of their endowment on average at the beginning. Now imagine the experiment is repeated over time, there is a stable group composition, you contribute to the public goods, you get some feedback about what others do in the group and then in the next period you can again contribute or not. So it goes on for 10 periods. So this looks very nice what we see here. The question is does cooperation go up or does it go down over time?

Now what we regularly observe is this. Cooperation basically breaks down over time, people are not able to sustain their cooperation in the long-term. This raises the question why does this happen? Some people say, oh look in the end everybody is self-interested because nobody contributes here others say but look at this here, here people contribute something. So what does this tell us?

Well the story is this. Many people seem to be willing to contribute if they know that others contribute as well. However, once they realise that others don’t, that others exploit them by not contributing to the public goods they also stop cooperating. In fact, what we observe across many cultures is something like roughly 50% of the people are among these conditional co-operators.

They basically apply the principle of reciprocal fairness. They say if others are willing to bear their share, I’m willing to bear mine and I contribute as well. But we also regularly observe about 30% or 40% of the people who never contribute anything if contribution is solely based on a voluntary basis. So there are these two big groups. The people who live up to a principle of reciprocal fairness and the people who never cooperate. The free-riders ultimately bring down the cooperation in the group and in the end nobody cooperates.

So here is a cartoon that illustrates this. The guy in the front says we can do without free-riders. Well, probably he’ll also stop cooperating after some time because he has to bear the whole burden here.

So what is the practical meaning of conditional cooperation? For example, it applies to welfare state problems. The wider the belief that welfare benefits are drawn illegitimately, the greater is the individual readiness to do so as well. Tax evasion, the wider the belief that taxes are evaded, the greater is the individual readiness to do so as well. So it was a disaster when Berlusconi basically endorsed tax evasion. That’s exactly not what somebody who manages cooperation should do. You should do the opposite. If you want to sustain cooperation, you have to make people believe that others cooperate because they themselves will trade some cooperations, it’s like a self-fulfilling prophecy. You have to basically induce optimistic beliefs. It also applies to organ donations. The more other people are willing to donate their organs once dead, the stronger will be the general willingness to donate. It applies to corruption. The higher the aggregate level of corruption, the more corrupt each individual will be inclined to be.
It applies to criminality as well. The more widespread crime is, the more each individual is willing to engage in some criminal acts. We are all no saints and the more widespread criminality is, the more we might ourselves be inclined to do this.
So you can’t exaggerate the importance of this principle of reciprocal fairness or put differently, of cooperation conditional on the belief that others cooperate.

How can we then solve the problem of cooperation? We have shown the decay of cooperation has been replicated hundreds or thousands of times. It occurs over and over again, it occurs across cultures. I have not seen any culture so far in which it does not occur. So it’s a very robust phenomenon. How can we solve this problem? How can we sustain cooperation? Well, one is sanctioning non-co-operators. How do we do this? Well, we implement the rule of law, we implement democracy, we have an independent police, we have justice, courts, we have contract law, we have taxation obligations for the provision of public goods. But these are achievements of the last 2-3 hundred years. Humans had to live for tens of thousands of years without these institutions and still managed to cooperate. Put differently, these institutions that I describe here, they are themselves public goods and they had to be created. So what explains the cooperation that occurred before the last 200-300 years?

This brings me to my next topic which is voluntary cooperation and voluntary sanctions. I have shown you the previous experiment which I now change a little bit. We did the following. At the end of each period any group member can sanction any other group member and the sanctioning technology is 1:3. So I invest a Swiss franc to target my punishment on some other group member and that group member then loses 3 Swiss francs. What does the self-interest hypothesis say here? Well, it says nobody should ever punish here, nobody should ever sanction because it’s costly. But if nobody sanctions, then nobody should cooperate. So adding the sanctioning opportunity should not change anything. It should not generate more cooperation. Now let’s see what happens.

You have seen this graph. Cooperation unravels, in period 10 almost nobody cooperates. Now we introduce the voluntary sanctioning technology. They are the same people, but they are given new instructions and are told that they can assign points to the other people in every period.

When they can sanction, we see this. So basically we achieve full cooperation once people have the opportunity to sanction each other. Remember, they are the very same people. In this situation we had groups of people where literally nobody contributed a dime to the public goods and here, with the very same four people, everybody contributed 100% to the public goods. So voluntary cooperation plus voluntary sanctioning seems to solve the problem.

Now why does it solve the problem? Well, what we, in fact, see is that many of those who cooperate punish those who free-ride. So it’s a principle of unfairness - just negative reciprocity. Remember what negative reciprocity is? Negative reciprocity is: you hurt back if you have been hurt and what they do here is: they cooperated, then they experienced that some people exploited their cooperation by free-riding and now they target their punishment on the free-riders. I don’t advocate this for a civilized society. I don’t advocate this, I’m a social scientist who just studies these processes. But what I document here is the raw material for all the cooperative institutions that we see around the world that had to be established, once no such cooperative institutions were yet in place. That is the revolutionary pathway that humans faced in their evolutionary history.

So then the next question we asked was what are the neurobiological forces? Or what are the neurobiological determinants of the willingness to punish, for example, or the willingness to care for fairness? What has been shown in some neuroimaging studies is that once people process unfair outcomes, their dorsolateral prefrontal cortex (look at me; that’s here and here in the front, this part of the brain) seems to be active.

Now what we then did is the following. We set up experiments similar to the ones I have described to you and we decreased the neural activity of these brain regions with non-invasive transcranial magnetic stimulation. So what does that mean? There are weak magnetic impulses either going to the right part of the dorsolateral prefrontal cortex or to the left part and it’s known that if you do this for 15 minutes with a particular stimulation protocol, people are less able to recruit this brain area once it is needed.

Before I tell you what we can show let me give you another fact. Experiments have been run with chimpanzees. There is a very ingenious group at the Max Plank Institute in Leipzig that runs experiments with chimpanzees and they studied the question: Do chimps show concerns for fairness? The answer is: no they don’t. So basically chimps don’t care for fairness, they don’t punish others, they just behave selfishly.

Now, metaphorically speaking we can ask the question: Can we turn humans into chimps by non-invasively, very weakly decreasing neural activity in the right or left prefrontal cortex? The answer is yes, we can. In fact what the evidence shows is that if we decrease neural activity in the right dorsolateral prefrontal cortex, the willingness to pay for sanctioning other people decreases a lot and what’s even more surprising is, that if you let people make a fairness judgement, a fairness assessment of a given situation, they tell you this is very unfair. So you don’t disrupt their ability to judge the outcome as unfair or the situation as unfair but you disrupt the ability to behave according to their judgement.
So what you observe is basically a neural dissociation between the ability to judge, to assess the social significance of outcomes, the fairness of outcomes and behave according to that judgement. In fact, we now have evidence that it goes even further. When you apply transcranial magnetic stimulation to these brain regions, you basically are able to turn people into non-violators. They are still able to see what the social norm is, they know exactly what the social norm is, they know what the right thing to do is, but they are no longer able to behave according to this principle. So there is interesting research going on here at the neurobiological level. By the way this is here dorsolateral prefrontal cortex where we stimulated. There is neurobiological research going on that gives us deeper insights into the forces and neural forces or neural determinants of fairness concerns.

Now let me come back to the scarcity of organ donations. Let me go the full circle. We all know that there is great scarcity, for example, in kidney donations. I provide you here with a graph. This graph shows the total number of persons on the waiting list in the US over time. This graph shows you the total number of transplants. This graph shows you the living transplants. So you see this ever growing gap between those who are in need of a kidney and those who are willing to donate one.

Now this raises the question why is there such a scarcity? Well, my view is that because organ supply is largely based on unconditional altruism of donors in many countries, like Switzerland or the US. What does that mean? Well, we need the explicit consent by the potential donor or the next of kin in order to make the donation in countries such as the US and Switzerland. But we know, our research shows, that unconditional altruism is a very weak force. Whereas for example, reciprocal fairness is a much stronger motivational force.

So then the question comes up, how can we increase organ supply? Well, one possible solution mainly proposed by economists and their allies is to allow a market for organ exchange. There’s no doubt that this market would partially at least solve the problem but it’s viewed as ethically repugnant by many people and I can understand that.
The other solution replaces the explicit consent principle by the presumed consent principle. What is presumed consent? If a person did not explicitly state that he or she is not willing to donate, it is assumed that he or she is willing to donate that is the presumed consent principle.

Now what does the presumed consent principle deliver here? Well there is a nice paper by Johnson and Goldstein in Science 2003. They estimated the share of people in countries where you have to opt in, because the explicit consent is principally in practice. These are countries like Switzerland or Germany. Then they also estimated the share of people who do not opt out under the presumed consent principle. So notice: those who opt in were those who do not opt out, they are the people who are in principle available for organ donation. If I show you this graph, you see that you can expect something from this because these are the countries with the explicit consent principle. The effective consent rate for organ donations is much, much lower than in countries where you have the presumed consent principle. So that would be a potential solution and I think there are good arguments to be in favour of the presumed consent principle. However, some people still view this principle as too invasive, too intrusive into the private sphere of the people. So therefore, we might also exploit the human willingness for reciprocal fairness. We might apply the reciprocity principle to organ donations.

What would that mean? Well, it would mean that those who have declared their willingness to donate their organs in case of their death receive priority when in need of an organ. There is a priority in some way or with those who are not willing to donate.
Now what are the advantages of the reciprocity principle? Well, it establishes reciprocal fairness, we know that reciprocal fairness is widely viewed as morally acceptable. Go back to the case of Johannes Ideus. I think many in the room think that this was not a fair situation. He donated but he was deprived of an organ when he was in need of one. This moral intuition that many of us share can be used when you apply the reciprocity principle and of course, it provides incentive to register as an organ donor and people are more unlikely to think about the issue at all because under the explicit consent principle I guess most people during the whole of their lives almost never think about the issue while if you have a reciprocity principle in place you are basically forced to think about it and then that might change things as well.

Now, the reciprocity principle can take many different forms. We can distinguish a strong reciprocity principle from an intermediate one and from a weak one. What’s a strong reciprocity principle? It means that those who declare their willingness to donate have priority over those who do not, without the possibility of making trade-offs. Now it’s easy to see that this could lead to undesirable consequences, for example, imagine the case of an 85-year old man who has an expectation for a further 5 years to live and compare this with a 20 or 18-year old boy who has not yet had the chance to say I want to donate my organs.
So, basically then if you implied a strong reciprocity principle without any possibility of trading off other issues bringing to bear other issues to this decision, it can lead to undesirable consequences. Therefore, an intermediate reciprocity principle might be more desirable and you could formulate this as follows. Those who declare their willingness to donate receive extra points that increase their chances to receive an organ.
Now you think you receive points depending on different considerations and one issue is receive extra points if you have been willing, so you increase your chances but this is not the only thing that counts. So here you can make tradeoffs and finally you could imagine the weak reciprocity principle which says that everything else is equal. So imagine two people are equal in every regard, almost every regard for practical purposes - but one of them has been willing to donate and the other hasn’t. In that case this reciprocity principle would say: give priority to the guy or to the person who has been willing to give. I think many people would subscribe to the weak reciprocity principle because it’s not very intrusive and it’s clearly in line with moral intuitions many of us share.

So this brings me to the end of my presentation.
For too long the dominant tradition in the behavioral sciences has relied on the self-interest hypothesis. However research in the past 10-20 years shows the power of reciprocal fairness motives. They are likely to play an important role in the human ability to establish cooperation throughout evolution. They shape human bargaining behavior, I’ll skip this for the interest of time. We are also able to show that the right dorsolateral prefrontal cortex seems to play a causal role in the ability to implement these motives which gives rise to a neural dissociation that is quite important because imagine the following thing I think this has deep implications for our legal practices in the future. If it really is the case that people can understand, have the social knowledge of what is the right thing to do but they are not able to implement what is the right thing to do because of a dysfunctional dorsolateral prefrontal cortex, then we have to rethink what to do with these people.

You cannot make these people responsible because they have this function of the dorsolateral prefrontal cortex and you can show in the laboratory that if you don’t have a functioning prefrontal cortex, you are not able to implement the right thing to do. So for better or for worse I don’t know how we deal with these people, I haven’t thought enough about it but we have to think about it and it might lead to a revision of our legal practices.
Finally, reciprocal fairness motives may also have shaped your intuitive and emotional response to my introductory example because it illustrates a violation of the reciprocity principle.
To conclude: The human instinct for reciprocal fairness could therefore also be used to increase voluntary donations of organs.Thus I hope you have found my talk somewhat interesting and I thank you for your attention.