TOPICS > Economy > Making Sen$e

In a game of wealth, fat cats who don’t share keep winning

October 8, 2015 at 6:20 PM EDT
An online game asks players to share some of their wealth on faith that the others will reciprocate. But each player has the option of choosing not to share, amassing more and more wealth. In designing a game to test human behaviors that fuel economic inequality, Yale University researchers are finding that the poor stay poor and the rich stay rich. Economics correspondent Paul Solman reports.
LISTENSEE PODCASTS

JUDY WOODRUFF: As we just heard from Ben Bernanke, one of the central concerns people bring up about the economy is inequality and the lack of social mobility.

Our economics correspondent, Paul Solman, has long been reporting on those issues. And, tonight, he explores the role of behavior in all of this.

It’s part of our weekly series Making Sense, which airs every Thursday on the NewsHour.

PAUL SOLMAN: So how does this game work?

AKIHIRO NISHI, Yale University: So in front of you now, you have a tablet.

PAUL SOLMAN: Right.

Akihiro Nishi is prepping me to play an economic inequality game at Yale University’s Human Nature Lab. In the game, each player is at the center of a small group within the larger community. And in each round of the game, without knowing what the others are doing, we choose either to cooperate, that is donate 50 units, which automatically double, to each of the others in our group, or to defect and not donate to anyone, just take from those who cooperate.

The game is designed to explore the human behaviors that fuel economic inequality, a hot political issue for several years now, which Senator Bernie Sanders has made the centerpiece of his presidential campaign.

As he told Judy Woodruff in May:

SEN. BERNIE SANDERS, Democratic Presidential Candidate: Ninety-nine percent of all new income is going to the top 1 percent. The top one-tenth of 1 percent owns almost as much wealth as the bottom 90 percent. That is immoral and unsustainable.

PAUL SOLMAN: Back in the Human Nature Lab, it was time to recruit players online.

AKIHIRO NISHI: If you will look behind you for a moment, you will see now the job is actually posted, and all these people are joining from all over the world.

PAUL SOLMAN: And so here I have 200.

AKIHIRO NISHI: Right.

PAUL SOLMAN: In the game.

We’d each been assigned a certain amount of wealth. The distribution mimicked the degree of inequality in the U.S.

And I have four other players with 200, and I have one player with 1,150. Where did this guy come from, Silicon Valley?

AKIHIRO NISHI: Maybe.

PAUL SOLMAN: So, round one, first decision, give each fellow player 50 of my units, so they get 100, and hope that they do the same for me, or defect, keep my cash and rake it in from any who chose to share.

So, I just go like that, right?

I cooperated.

There we go.

Risky, since, with five fellow players, 50 units apiece put me 250 in the hole.

So, did my neighbors cooperate?

Come on, guys.

AKIHIRO NISHI: Let’s see.

PAUL SOLMAN: Oh, look, so three of them came back, so I’m up to 250.

Somewhat subverting my faith in human kindness, however, two players had defected, including the fat cat who’d started out at 1,150 and now had 1,550. Thus, the gap between fat cat and the rest had grown, reflecting the trend outside this room that we have been covering for years now.

Laid-off middle manager Denise Barrant was losing her home in foreclosure, a case study in downward mobility.

DENISE BARRANT, Unemployed Middle Manager: The top 1 percent is living well, and they don’t get it. They don’t get what is happening to this country. And I feel like we’re creating a Third World country subculture within this country.

PAUL SOLMAN: At the Human Nature Lab, Nick Christakis studies inequality and the key questions it raises.

NICHOLAS CHRISTAKIS, Yale University: Does inequality retard economic growth? Does it affect whether we connect to other people?

PAUL SOLMAN: How happy we are.

NICHOLAS CHRISTAKIS: Or how happy we are or how healthy we are?

PAUL SOLMAN: And there’s plenty of evidence that extreme inequality affects all these things negatively.

As Berkeley psychologist Dacher Keltner told us:

DACHER KELTNER, University of California, Berkeley: No matter how you look at it, the effects of inequality are pernicious upon things like bullying on school playgrounds, the quality of your physical health, how you handle disease.

PAUL SOLMAN: That’s for those below.

Under Keltner’s aegis, post-doc fellow Paul Piff ran a rafter of peer-reviewed studies on those atop the economy. Turns out people with fancier cars were more likely to run crosswalks where pedestrians waited. The more money they had, the more people helped themselves to candy meant for children, cheated in a game of chance, even spent more time primping in a mirror.

PAUL PIFF, University of California, Irvine: I ran a study where I asked thousands of people to tell me, is It moral to step on another person to get ahead? My wealthiest participants were way more likely to believe that greed and self-interest is a moral and good thing.

PAUL SOLMAN: This guy, I’m definitely cutting him.

No wonder, then, that when given the choice at the end of each round whether to keep or cut ties with a few other players, I was eager to banish rich defectors. He’s got 3,600. And I am resentful of people who have a lot of money and aren’t willing to share. That’s for sure.

Meanwhile, I was sticking to my default strategy, in this game, as in life.

I’m going to say, yes, I cooperate again.

Cooperation, and, ever so encouragingly, winning converts to the high road.

Ah, look at that. I’m up to 750 now, and everybody is a cooperator.

PAUL SOLMAN: This is fantastic. Now we’re all getting wealthy. I’m actually one of the wealth — well no, not really.

AKIHIRO NISHI: No, still around the bottom.

PAUL SOLMAN: All right, you don’t have to — don’t rub it in, Akihiro.

But rub it in, he and Professor Christakis did, because the first major finding after running the game hundreds of times?

NICHOLAS CHRISTAKIS: The poor stayed poor and the rich stayed rich.

PAUL SOLMAN: But it’s not as if the game’s less-well-off aren’t, like I was, trying.

NICHOLAS CHRISTAKIS: The poor people are generally trying to cooperate and are trying to invest in their neighbors to acquire wealth themselves.

PAUL SOLMAN: And that’s as in the real world. That is, poorer people do give more as a percentage of their wealth to other people, right?

NICHOLAS CHRISTAKIS: Yes. That’s correct.

PAUL SOLMAN: Maybe because of a greater need for empathy, as documented by this Berkeley study gauging response to a sad hospital video.

CHILD: I’m 12 years old, and I have neuroblastoma, and I have been fighting it for seven years.

PAUL SOLMAN: Lower-income subjects not only reported more compassion. Their vital signs indicated they really meant it. Compassion and its corollary, cooperation, is a coping strategy, says psychologist Rudy Mendoza-Denton, because, without wealth, what can poor people count on?

RUDY MENDOZA-DENTON, Psychologist: Their friends, their family, their community.

PAUL SOLMAN: And back in the lab, my cooperation strategy seemed to be working wonders.

Oh, look, everybody’s…

(LAUGHTER)

PAUL SOLMAN: Everybody is cooperating with me. I’m up to 1,650.

AKIHIRO NISHI: OK.

PAUL SOLMAN: But, if you always cooperate, you’re liable to be a sitting duck.

Look at that.

AKIHIRO NISHI: What happened?

PAUL SOLMAN: Four of them defected. Moreover, I am noticing something disturbing, which is that the defectors all have more money than the cooperators.

AKIHIRO NISHI: Right, including you.

PAUL SOLMAN: And thus the experiment’s second major finding:

NICHOLAS CHRISTAKIS: It wasn’t inequality, per se, that was so bad for society, but the visibility that was a problem. Visibility encouraged the rich to take advantage of their neighbors and created a kind of exploitation scenario.

PAUL SOLMAN: But in some versions of this game, players didn’t know how much others had.

NICHOLAS CHRISTAKIS: In the societies in which we concealed individual wealth, those societies were wealthier in the end, more cooperative and more friendly.

PAUL SOLMAN: And so, if visibility of wealth makes the rich more aggressive, exacerbating inequality, the policy implications with regard to, say, executive pay, seem, in the end, pretty ironic.

NICHOLAS CHRISTAKIS: What it suggests is that in firms where everyone makes about the same amount of money, you should open it up and make pay very transparent. Increase visibility, that will increase cooperation between people, increase economic growth, our experiments would suggest, and increase social connections.

Conversely, if there’s high levels of inequality and the CEO makes five hundred times what a line worker…

PAUL SOLMAN: Hide it.

NICHOLAS CHRISTAKIS: Hide it.

(LAUGHTER)

NICHOLAS CHRISTAKIS: Because, if you make it visible, it has the opposite effect.

PAUL SOLMAN: This is economics correspondent Paul Solman, reporting, somewhat dejectedly, from New Haven, Connecticut.

SHARE VIA TEXT