Thursday, September 8, 2011


The Swiss philosopher, Jean-Jacques Rousseau said that individually, four hunters can each only get a rabbit. But together, he said, they could bring down a deer if they collaborated. Yet we continue to hunt for rabbits. Why?

People come into conflict mostly due to the beliefs they hold dear. Such conflicts result in anything from awkward situations to wholesale murder. Resolution of conflicts involves sorting out issues with give and take. I will try to give two clear-cut examples: one on a more personal level of ethics and the other on a national level.

Individual-level Example

Vernon L. Smith, a 2002 Nobel Laureate in Economics devised what is called the Ultimatum Game.

Version 1

You give Ram $100 and tell him to share it with Radha. Radha has to say beforehand how much she is going to give Ram. If Ram refuses the offer, no one gets anything.

The rational offer would be to offer Ram $1. Ram should accept it because he comes out ahead. But people who are offered a low amount in these games do not accept the offer. It makes them mad and the punishment they dole out is to refuse it. Both sides lose. Most people who play the ultimatum game offer $50. This would make you think that fairness is what is going on.

Version 2

Let’s twist the game a bit. Radha now has to earn her position by scoring in the top half of the class on a general knowledge test. And Ram has to accept whatever he is offered. This is now known as the dictator game. Behaviors change. Radha becomes less generous. She no longer offers half, as she had in Version 1. If Radha thinks her identity is not known to Ram, she is again less generous. If Radha thinks the experimenter doesn’t know her identity, she is most likely not to offer any money to Ram.

These results led Vernon Smith to conclude that fairness is obviously not the motivation in these games, whereas opportunity is. Smith argues that the reason Radha acts fairly in Version1 of the ultimatum game is that she wants to maintain her personal reputation. But when her identity is not known or she has a higher status, fairness is not the issue. This goes on to prove that conflicts require people to meet head on and resolve matters with give and take, rather than tit for tat.

A Broader Example

Two nations --or let us assume neighbors-- very well know that exports will hurt each other. So each country erects trade barriers and the easiest way to do that is to impose a tariff on such imports. These tariffs will add to the cost of imported goods and thereby makes their entry into a country cumbersome. But having a free trade is mutually beneficial. Both countries will be better off if these barriers were eliminated.

But if either country were to unilaterally erase the barriers, their economies will be hurt. In fact whatever one country does, the other country is better off retaining its own trade barriers.

So, the problem is that each country has an incentive to retain trade barriers. This will lead to a worse outcome than would have been possible had both countries cooperated with each other. A country which only considers self-interest leads to a poor outcome for all.

Such conflicts of self-interest among countries cry for cooperation. But what is the way out. History may teach us some lessons.

Between the 1830s and the 1940s, Europe reigned supreme over world trade. In response to tough competition from Europe, the United States developed its industries behind literally the world’s highest tariff wall: 35-55%. This means that a European product will cost nearly 50% more in America.

But why did America do that? US pitted what is called the ‘infant industry’ argument: producers in relatively backward economies needed to be protected and nurtured through tariffs. So that they can nicely mature and can compete with producers from more economically developed countries. Later, as the US economy matured, foreign products gained more acceptance – for example, Toyota cars in 1970s and China-made products after 1990s. Again, recently due to financial crisis, the Made-in-America argument has regained ground.

Industries and factories, hard-hit by cheap Chinese goods, are being asked to revive through freshly training their workers and re-tooling their machines. This gives some amount of protection to their products in American markets. Industries that have no future are being given strictly temporary protection so that they can break up phase by phase and get liquidated.

The point in talking about all this history is this. Conflicts of national interest involve the wisdom of knowing when to hold on and when to let go. Giving in to the opponent so as to win peace always is not how conflicts are resolved nor is to hold on to your position forever. No single one-size-fits-all strategy can be applied to all conflicts.

Another Example

Joshua Greene, a neuroscientist at Harvard, conducted an extremely interesting and simple experiment.

Version 1

You are the driver of a runaway trolley, whose brakes have failed. The trolley will run over five workers who are fixing the track. But you change the course of the train by switching and turning the wheel onto a track where there is one worker. What do you do?

In this hypothetical case, about 90% of people agree that it is morally permissible to turn the trolley. The decision is just simple arithmetic: it’s better to kill fewer people.

Version 2

You are standing on a footbridge over the trolley track. You see a trolley racing out of control, speeding towards five workmen who are fixing the track. All five men will die unless the trolley can be stopped. Standing next to you on the footbridge is a very large man. He is leaning over the railing, watching the trolley hurtle towards the men. If you sneak up on the man and give him a little push, this big man will fall on the track and will stop the trolley from killing the workers. Will you push the man off the footbridge? Or do you allow five men to die?

The brute facts, of course, remain the same: one man must die in order for five men to live. If our ethical decisions were perfectly rational, then we would act identically in both situations, and we’d be as willing to push the man as we are to turn the trolley. And yet, almost nobody is willing to actively throw another person onto the train tracks. The decisions lead to the same basic outcome, yet one is moral and one is murder.

In Version 1, it seems we make a rational decision and in Version 2, we are worried about what others think about us. You can imagine many decisions in the workplace to pose such dilemmas. Not that we will kill someone at our workplace. But such dilemmas are everyday office affairs. For instance, an employee who has to stay back in office on his first marriage anniversary; or a manager who has to sacrifice an experienced team member to give a chance for new members.

All this is not to say that we are incurably bad but our innate goodness is fragile. It is not that we are good but have to remain good.

No comments: