A while back I wrote on the Ultimatum Game, an experiment in the psychology of behavior in the marketplace which showed that people rarely act purely in their material self-interest. More often, they balance the possibility of material gain against the other, less tangible or intangible factors, such as self-esteem and pride.
The premise of the game is that two people are put into the situation where they stand to both benefit materially by splitting a sum of money between them. The catch is that the details of the split can’t be negotiated. One person is granted the authority to propose a split (e.g. 50-50, 90-10, etc.) and the other is granted the authority to either accept or reject the proposal. Acceptance nets both parties the agreed-upon sums. Rejection makes both parties walk away empty-handed. Classical economic theory predicts that the deal is accepted in all cases where the second party stands to receive something in the way of a split – that is to say when the split is anything other than 100-0. Real experiments with real people suggest that splits far from equitable (i.e., 50-50) have little chance of succeeding despite the fact that the second person stands to walk away with a material gain.
One of the criticisms leveled against the outcome and analysis of the Ultimatum Game is that the stakes may be too low to really make a difference. After all, the argument goes, most of the real world experiments are done with sums like $100, which is, relatively-speaking, chump-change. Economists and psychologists have attempted to address this critique by normalizing the results by offering the same sums in different economic scenarios, like the third world, where $100 has significantly more buying power than in the US. Nonetheless, the critique that the game hasn’t really been played for high stakes is a valid concern. Perhaps there is a mind-bogglingly large sum for which even a 90-10 split will be always accepted.
Well, Shankar Vedantam, of NPR, ties the Ultimatum Game to one of the biggest stakes out there – the negotiations on climate change. The report, entitled The Psychological Dimension Behind Climate Negotiations, aired on NPR the week of Nov. 24, 2015. In it, Vedantam argues that the same psychology seen in the Ultimatum Game explains why countries with the most to lose by adverse climate change may actually walk away from a deal that benefits them.
To back up this claim, Vedantam called upon the expert testimony of David Victor, a professor in the School of Global Policy and Strategy at UC San Diego and the director of the UCSD Laboratory on International Law and Regulation. Victor, who has published extensively on the politics of climate change, had this to say about the interplay of gain and fairness
In other words, despite the fact that each of these negotiators represents millions of people, and that they are, ostensibly, rational professionals, they are still human beings who value fairness over material rationality. In fact, according to studies cited in the report, professionals may actually value fairness more, especially when negotiating with other professionals.
That may be true, but I suspect that the answer is closer to a point touched upon by Vedantam himself later in his report, although he muddled up the thinking. Said he, when asked about the fairness component of the climate-change negotiations
A careful reading of the above quote can actually lead to a different interpretation. Perhaps the ‘poor countries’ (developing countries) recognize a greater rational self-interest in continuing to industrialize than in limiting their growth in order to limit their carbon emissions. Unlike the Ultimatum Game, where the outcome is clear cut – walk away with some cash or no cash – the situation in climate negotiations is quite different. The developing countries must decide between two options, each with both a gain and a loss. So it is entirely possible that they have a rational reason for refusing a deal that benefits them in one sphere but harms them in another.