Fairness in Economics

Fairness in Economics

The Triumph of the Social Animal
Does fairness matter? The answer is yes, according to a growing body of research that shows the importance of fairness and trust to human behavior, and its impact on the economy.
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8 Responses

  1. Modern economics has traditionally portrayed human beings as perfectly rational and self-centered individuals, so called “Homo economicus”. This notion, however, has been challenged by an increasing number of economists like Armin Falk from Bonn University who emphasize the importance of fairness and trust to human behavior. Falk, in his research, used an M.R.I. to measure the reactions of the brain when a person is underpaid compared to his/ her identically tasked peer. In a different study, Falk, together with economist Michael Kosfeld, measured the heart rate variability of the tested subjects to see the physical impact of this unfair pay. Both studies have shown that fairness truly matters to people. Supporting this claim is also a study by economist Alan Krueger who took a close look at the strike at Bridgestone/Firestone’s tire manufacturing plant in Illinois in the mid-1990s.

  2. As explained in the above article, “The Triumph of the Social Animal”, fairness does matter in the productivity and efficiency of a worker in comparison to a higher paid identical tasked colleague, however, this is not the norm in all possible analysis of the perfect “Homo economicus” being. In a research done by Eto K, Watanabe S, Kawabata H titled “Economic Profits Enhance Trust, Perceived Integrity and Memory of Fairness in Interpersonal Judgment.” Link – http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0051484. The authors were able to show that while people tend to trust those who treat them fairly, it is not always a reliable assumption. The main tenet of their research was based on the “affect ripple effect”. That is, people are more likely to trust others when there is a positive reward involved such as monetary gains.

  3. The Journal of Economic Behavior and Organization has an article that confronts inequality in the work place. The article “Gender selection discrimination: Evidence from a Trust game” focuses on how gender preferences effects and performance of employees in different scenarios. The University of Sydney conducted the experiment that did not give sure and conclusive evidence that confirms that performance is based on “taste or beliefs” about the opposite gender. The journal seems to suggest that there maybe some desire to actually have fairness in the work place. This is the consistent with the article “Fairness in Economics” from the NY Times. Along with this consistency, there is debate about whether performance is related to fairness.

    Link:
    http://www.scopus.com/record/display.url?eid=2-s2.0-77957331873&origin=resultslist&sort=plf-f&src=s&st1=Economics&nlo=&nlr=&nls=&sid=B76356037B87ED10125941A4BA3009A1.mw4ft95QGjz1tIFG9A1uw%3a190&sot=b&sdt=sisr&sl=24&s=TITLE-ABS-KEY%28Economics%29&ref=%28%28%28%28labor%29%29+AND+%28fairness%29%29+AND+%28human+behavior%29%29+AND+%28wage%29&relpos=31&relpos=11&searchTerm=%28TITLE-ABS-KEY%28Economics%29%29+AND+%28%28%28%28labor%29%29+AND+%28fairness%29%29+AND+%28human+behavior%29%29+AND+%28wage%29

  4. The first above article discusses the irrationality of humans in favor of fairness; the second theorizes that humans are most likely to trust one another when presented with the possibility of receiving a reward. A recent article, “’I had so much it didn’t seem fair’ Eight-year-olds Reject Two Forms of Inequality,” demonstrates humans’ willingness to sacrifice gains to prevent inequality in two scenarios: when their competitor is naturally disadvantaged, and when the subject receives more relative to the other.

    The experiment was conducted using children aged four through eight. The children “played a game” wherein they were offered a portion of candy in front of peers who were offered a lesser portion. Those who were seven years or younger were willing to accept the candy, whereas the eight-year-olds rejected it, displaying a difference in perceptions of inequality.

    http://www.sciencedirect.com/science/article/pii/S0010027711001247

  5. Even though these studies have shown that fairness truly matters, it seems to me that there is still a large amount of things that show differently. Today there are still jobs that discriminate against workers for not only their gender but also their race. There have been studies that have shown how certain people get paid abundantly less because of their race or gender. In a article that I found “Workplace racial composition, perceived discrimination, and organizational attachment”, it talks about how the workplace racial composition affects individuals’ experiences of racial discrimination or how these experiences impact workers’ organizational attachment.

    http://www.scopus.com/record/display.url?eid=2-s2.0-84858291877&origin=resultslist&sort=plf-f&src=s&st1=Race+Discrimination+workplace&sid=B6C0EC762EE0FE0F058D160E9A55D3C1.aXczxbyuHHiXgaIW6Ho7g%3a180&sot=q&sdt=b&sl=49&s=TITLE-ABS-KEY-AUTH%28Race+Discrimination+workplace%29&relpos=4&relpos=4&searchTerm=TITLE-ABS-KEY-AUTH%28Race+Discrimination+workplace%29

  6. “Pure” Research Topic:
    1. Topic: I am studying how gender inequality of wages in insurance corporations differ from insurance corporations with equality of wages.
    2. Question: because I want to understand what inefficiencies arise between the two different types of models.
    3. Significance: so management consulting firms can make models that are the best practices so growth and efficient production can take place.

  7. This research focuses on how low average income of the state employed teachers in the education system of Slovakia influences the quality of education provided by the teachers. I want to find out, based on the research about fairness conducted by Dr. Falk, whether fair treatment of employees matters not only within companies, but also on a large scale which in this case is the education system of Slovakia. My findings will provide Slovak government with important insights that could help it to design more accurate reforms in its education system.

  8. My research pertains to human rationality, or irrationality. Dr. Armin Falk has conducted research on the lack of rationality when fairness is involved, but I would like to observe overall human irrationality in general. Recognizing patterns of irrationality is vital for producers who must learn to adapt from a position of dealing with rational consumers to that of irrational consumers in various conditional situations.

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