The ultimatum and dictator games were developed to help identify the fundamental motivators of human behavior, typically by asking participants to share windfall endowments with other persons

If you've earned it, you deserve it: ultimatums, with Lego. Adam Oliver. Behavioural Public Policy, September 9 2021. https://www.cambridge.org/core/journals/behavioural-public-policy/article/if-youve-earned-it-you-deserve-it-ultimatums-with-lego/EB5907A941220FB244234AC8C355DBA5

Abstract: The ultimatum and dictator games were developed to help identify the fundamental motivators of human behavior, typically by asking participants to share windfall endowments with other persons. In the ultimatum game, a common observation is that proposers offer, and responders refuse to accept, a much larger share of the endowment than is predicted by rational choice theory. However, in the real world, windfalls are rare: money is usually earned. I report here a small study aimed at testing how participants react to an ultimatum game after they have earned their endowments by either building a Lego model or spending some time sorting out screws by their length. I find that the shares that proposers offer and responders accept are significantly lower than that typically observed with windfall money, an observation that is intensified when the task undertaken to earn the endowment is generally less enjoyable and thus perhaps more effortful (i.e., screw sorting compared to Lego building). I suggest, therefore, that considerations of effort-based desert are often important drivers behind individual decision-making, and that laboratory experiments, if intended to inform public policy design and implementation, ought to mirror the broad characteristics of the realities that people face.

The policy relevance

My small study of course has many limitations, several of which have already been acknowledged. The participants, for example, were chosen for their convenience, and are hardly representative of the general population. Moreover, to reiterate, some of the questions were not financially incentivized – sometimes, it is argued, after considering the merits and demerits of different methods, but nonetheless the potential problems with the approach adopted are fully appreciated.

Limitations aside, I contend that the results suggest that effort-based desert matters to people, and that if, rather than receiving windfalls, they have to earn their endowments, then, if asked, they will be willing to share, and be expected to share, a lower proportion of their endowments with others. This general conclusion applies not only to windfall versus earned endowments but also across different earnings-related tasks. For example, a task (or indeed a job) that is perceived to be generally more effortful (or less enjoyable) may provoke lower levels of generosity and less punishment for an apparent lack of generosity than those that generally require less effort. Or at least this will be the observation at face value, for if the different levels of effort are controlled for, we may find that generosity and punishment remain quite stable.

The recognition of the importance of effort-based desert leads me to propose that rewarding people for their effort sustains their effort. This was reflected in Akerlof's (1982) contention that a wage higher than the minimum necessary is met by employee effort that is higher than egoism dictates, because employees now think that employers deserve a fair return. In real work scenarios, there is a general acceptance of desert-based rewards that results in unequal distributions (Starmans et al., 2017), but, as noted above, the voluminous literature on the dictator and ultimatum games that uses windfall endowments fails to acknowledge the importance of desert. That being the case, this body of research lacks real-world policy relevance in relation to peoples’ propensities to share their resources with others or, in the case of the ultimatum game, propensities to punish others for perceived insufficiencies in sharing, at least beyond the limited circumstances where one might experience windfalls. At most, this research offers only very general conclusions that might be relevant to policy design, principally that people often appear to be strategically self-interested when they are aware that they may be punished for blatant acts of selfishness, but, at the same time, many people like to see an element of distributional fairness over final outcomes if no party can claim property rights over an endowment.

In short, the research using windfall endowments decontextualises decision-making too much, which is a little ironic if one is interested in real-world implications, given that the essence of behavioral public policy is that context matters. Of course, the research that uses earned outcomes also in many ways departs from the circumstances that people actually face – in terms of the small study reported in this article, for instance, there are very few people who earn an income from constructing Lego models. (NB. Sorting screws might be different – quite a few participants asked me if I was paying them to tidy up my garage.) But by requiring participants to at least do something to earn their endowments the study – like those principally focussed on the dictator game summarized in Table 1 – took them one step closer to reality. The policy lesson emerging from this body of work is that people respect property rights and that there is broad recognition and acceptance of effort-based desert. Consequently, when considering an endowment that one party to an exchange has earned, the willingness of that party to share, and the tendency for other parties to punish a perceived lack of generosity by that person, are much closer to the predictions of rational choice theory than the evidence using windfall endowments, where close to no effort is expended by participants, typically implies.

More generally, for laboratory studies of human motivations to hold relevance for policy design and implementation the context of the study ought to match, as far as possible, the circumstances that people actually face. I fear that insufficient attention is sometimes paid to this basic premise. For instance, in the real world, some people suffer extreme shortages, others face moderate scarcity, and still others enjoy abundance, and different motivational forces will come to the fore to facilitate flourishing, or even survival, in these different circumstances. Behavioral experiments ought to aim to reflect these (and other) circumstances to enable their results to offer better insights into what drives people as they navigate their way through life.