Value Competition

Values for and against Cooperating with Out-groups

Although today's Paduano seminar presentation by NYU psychologist Liz Phelps wound up with the auction studies I posted on yesterday, she devoted more time to discussing a number of studies related to the Implicit Association Test https://implicit.harvard.edu/implicit/, which take off in one way or another from the central IAT finding that people tend to be quicker in associating positive terms with a picture of an in-group member compared to a picture of an out-group member, with an especially strong effect in the U.S. for whites viewing pictures of blacks (U.S. blacks show some tendency toward pro-black responses, but less strongly and consistently so than U.S. whites'  tendency toward pro-white responses).

It strikes me that there's a parallel here with the Fehr public good studies discussed by Ian Maitland in his presentation last week.  In-group favorers, like the defectors in the Fehr studies, are naturally characterized in negative terms, with the twist that in-group bias in the IAT is implicit rather than expressed in actual lack of cooperation with out-group members.  That leads to a value competition reaction: Just as there is value all else equal in having both pro-cooperation values and anti-cooperation values (because cooperative values give pro-cooperation partisans an incentive to work harder to identify value-enhancing cooperation and anti-cooperative values give anti-cooperative partisans parallel incentives to work harder to identify value-reducing, detrimental cooperation), there is arguably value in the course of human evolution and possibly in the present in having another set of competing pro-cooperation and anti-cooperation values associated specifically with out-groups.  Those values can lead to unfortunate outcomes, especially on the anti-cooperation side, given the sharper, more acute downside of detrimental non-cooperative interactions compared to detrimental cooperative interactions.  But they also usefully energize the search for value enhancing forms of both cooperation and non-cooperation with out-groups, such as the people of other nations. 

Liz Phelps

Tomorrow Liz Phelps of NYU will be presenting at the Paduano business ethics seminar series.  Per her website http://www.psych.nyu.edu/phelpslab/ her research program spans an impressive range.  Given my greater interest in efficiency modeling than in neuroscience, I read a paper of hers in Science on neural correlates of overbidding in auctions, coathored with Mauricio Delgado of Rutgers, Andrew Schotter of NYU, and Erkut Ozbay of Maryland.

The initial empirical result is that among losers (but not winners) in auctions as opposed to lotteries, brain response of a certain kind (BOLD or blood oxygen level-dependent response) increased with overbidding.  The suggested explanation is that concern about losing a competition, more than expected joy of winning or loss aversion (there were no actual monetary losses in the experiments), is a plausible driver of overbidding.  To test that explanation, auctions were conducted under standard rules and under nonstandard rules in which all participants either had $15 to start that auction losers would lose (the loss condition) or in which winners would be given $15 for winning the auction (the gain condition).  The prediction, which the results of the experiment supported, was that more overbidding would be observed in the loss condition than the gain condition despite the identical payoffs in the two conditions; the suggested real-world payoff is that this tendency can be drawn upon to design revenue-maximizing auctions.

On the particular real-world payoff suggested in the article, I'm doubtful.  Giving people money to start in an auction that gets taken away upon loss of the auction strikes me as likely in real-life business/government situations as opposed to lab situations to create a sense among the bidders that they are being manipulated for no good reason, with a concomitant doubt about the actual value of the goods offered and a reduced willingness to bid high.  The potential real-world payoffs of the paper, on the other hand, strike me as high, especially if analyses of the auctioneer's maximization strategy are integrated with an analyses of social welfare maximization.  On the face of it, a tendency of human beings to invest too many resources in competitive situations can be functional in social welfare terms to the extent that doing so has non-zero sum benefits, despite the irrationality from the point of view of society as well as of the individual of individual overinvestment in the zero-sum context.  I would be highly interested in the results of research that compares overinvestment in zero-sum and non-zero sum contexts, and would expect considerably greater overinvestment in the latter situations, much as all kinds of framing effects would likely be operative.

To turn the efficency analysis in a VC direction involves considering the utility of contrasting or opposing approaches to investing resources in competitive and noncompetitive situations.  To refer to a post a little while back that reacted to a recent Paduano seminar presentation by Ian Maitland: There is, I suspect, utility for firms and society more generally in having people with "market values" that include a tendency to overinvest in relation to competitive rewards, especially those associated with merit (thus an expectation of even more overbidding by some in merit-based than in auction competitions), and also in having people with "equality values" that include an aversion to competitive reward and a tendency to underbid in merit-based situations.  Further, there is, I suspect, value in having a combination of market values and equality values present and competing within a given individual.  One would then expect individuals to be comparatively responsive to competitive incentives in some parts of their lives and comparatively unresponsive in other parts; market man on the tennis court may be equality man in the office, while his doubles partner may be equality man on the court and market man at work.

Why not a Single Good Type of Character?

In Ian Maitland's NYU presentation today on cooperation and public goods, the topic of an equilibrium level of uncooperative behavior came up.  If people become cooperative enough, controls diminish, and defection becomes especially rewarding...and the story goes on.  In raising the topic, Ian suggested that it all sometimes makes him wonder whether teaching business ethics is an exercise in futility.

I tried to give a cheerful take on the issue: Instead of looking at my ethics classes and thinking, "I've got 20-30% of my students who will be sleazy defectors in public goods experiments rather than decent conditional cooperators or saintly if easily duped unconditional cooperators," I'd rather think that the defectors are quite possibly the people who will do the right thing by not pitching in in "public bads" situations in which the common good is an undesirable one--e.g., organizational busy work that doesn't help the collective, or does so minimally compared to its costs.  The next step, which I didn't get out in the forum, goes like this: The point for education and management is to use reluctance to contribute to public goods and bads as part of a process of trying to distinguish which is which, in which the reluctants serve a useful role just as the comparatively avid cooperators do.

The related, broader value competition claim: We wind up with different character types with strengths and weaknesses in different situations, rather than a single good type and an opposing bad type.  From a VC point of view, the idea of a single good type doesn't work (though it can from other perspectives that may have as much or more of the world in their purview as VC) as long as information is imperfect, as it generally is.  How come?  Consider the conditional or absolute cooperator in public goods/bads experiments.  That character trait is only good across-the-board to the degree that the cooperator can discern the difference between public goods and bads, and avoid cooperating in the production of the latter.  Assuming such powers of discernment are not of this world, what we instead want per VC is a combination of cooperators with reluctants, with the combination spurring useful work that differentiates public bads from public goods.

Ian Maitland on Economic and Sociological Models of Human Nature and Governance

I just finished reading Ian Maitland's paper for tomorrow's Paduano seminar at NYU.  The argument, which I found persuasive given its premise, goes like this: If (as lab experiments on willingness to contribute to public goods suggest), most people are conditional cooperators whose willingness to cooperate goes away if the selfish are not punished, then hierarchy and other control mechanisms in the firm have significant value.  Maitland concludes that economists are therefore right in their governance conclusions even if they are wrong in their model of man, and sociologists who wish to dispense with control in the firm are wrong in their conclusions even if their model of human willingness to cooperate is correct for most people. 

Some value competition thoughts provoked by the paper: Instead of or in addition to focusing on the division between good and bad--between conditional cooperators and the anti-social--one can focus on the division between two groups that both have their good and bad features, and in whom egoistic values of a kind as well as altruistic values can be desirable.  Let's call the groups "market people" and "equality people."  In the collective public goods experiments of Fehr, et al that Maitland focuses on, it's a reasonable guess that the market people are considerably more likely to do the socially undesirable thing by defecting.  In a different sort of experiment--a "rights game"--that involves whether people are willing to resist being treated unfairly, contrary to their immediate interests in having an easy life but also benefically to the firm and society, I would also bet that market people are less likely to do the socially desirable thing.  Equality people in sticking up for their rights would be acting based on what in VC parlance are called egoistic values, in that their actions are not economically rational (given that self-interest includes living an easy life), but do aim at enhancing their welfare.

But there are also plausible experiments that relate to plausible real life circumstances in which my intuition is that market people would show more desirable values of both the altruistic and the egoistic sort.  In a "competition game" that examines subjects' willingness to engage in socially useful work that is rewarded by performance incentives such as dollars, my guess is that market people will be considerably better than equality people at overcoming their self-interest in an easy life by means of egoistic values, in this case commitment to individual reward and achievement.  Finally, in an "envy game" that examines subjects' willingness to take from or give to the productive, my intuition is that market people will be better than equality people in showing socially desirable altruism.

The case for market people and equality people being both useful and destructive depending on circumstances is enhanced by the realization that the payoffs in any of the four classes of experiments can be flipped around so that the games have the opposite ethical valence.  Instead of a public goods game, one can have a "public bads" game in which the noncontributing market person is the benefactor of society.  Instead of a competition game with a growing pie, one can have a competition game with a fixed total output in which the mellower equality person intead of the toiling market person benefits society.  Instead of a rights game, one can have a "resentment game" in which the acquiescent market person rather than the indignant equality person is socially helpful.  Instead of an envy game, one can have an "equal opportunity game" in which the more equal distribution advanced by the equality people helps society.

While most of these VC thoughts are orthogonal to the paper, I believe they have some relevance to Maitland's argument, and more relevance to the broader pro-market, libertarian perspective that informs his work.  In one sense, the VC points are supportive of a market-oriented perspective, in that they can be used to counter the common, simplistic link drawn between market-orientation and anti-social selfishness or lack of values, and on the other hand between market-aversion and pro-social values.  In another sense, the VC points given here are less supportive, since I have postulated a moral parallelism--one might call it equivalence--between "equality people" and "market people" that I suspect is unsatisfactory from a libertarian perspective, as well as from an egalitarian one.

Joshua Greene

A Paduano seminar this fall that I was very sorry to miss featured Joshua Greene, a psychologist at Harvard http://www.wjh.harvard.edu/~jgreene/ whose research program includes studies of brain activity in people answering problems in which there are choices between options correct by utilitarian lights but repugnant by certain other lights (e.g., push one person off a bridge to save five people), as well as between options correct per utilitarianism and not so viscerally repugnant (e.g., press a button that diverts a train so it kills one person instead of five people).  In a nutshell, the results obtained by Greene and his co-authors are that a part of the brain associated with higher cognitive functions is more strongly activated when utilitarian choices are made: "Cognitive Load Selectively Interferes with Utilitarian Moral Judgments," published in 2008 in Cognition 107(3), 1144-1154 and co-authored with Sylvia A. Morelli, Kelly Lowenberg, Leigh E. Nystrom, and Jonathan D. Cohen (available at Greene's webpage) is a good recent example of the work.

From a value competition perspective, Greene's work is highly relevant to the extent it provides some support for relating physical structures of the brain to modes of reasoning.  I'd love to see Greene and other psychologists do a "reverse trolley" experiment in which the cognitively difficult choice is not utilitarianism but some version of deontology, with the utilitarian choice being the gut-level preference.  The famous Kantian scenario of a murderer demanding to know someone's whereabouts is one possibility, with variants on the basic scenario in which the deontological arguments to be considered are more cognitively intricate than "never lie." (For example, the murderer is someone you know who has previously agreed with you before his descent into pathology that you should not tell him the truth if doing so would abet his madness.)  Another idea is a scenario with variants in which the utilitarian choice is an "I want it" choice of getting a desired, apparently morally fine item, and the deontological considerations are subtle or arguable (e.g., the experimenter has not offered the same options offered to you to another subject).

The relevance of the additional experiments to VC?   My intuition is that professional or practitioner's expertise in fields like management and law has a great deal to do with cultivating deontological reason as well as utilitarian reason.  With that in mind, I'd love to see whether it's true that the same--or a different--part of the brain associated with cognition lights up on the fMRI when the subjects are making deontological choices in "reverse trolley" problems in which the deontological choice is the cognitively complex one.

Moral Progress (2)

My former Rutgers Business School colleague Ed Hartman presented on Thursday at NYU's Paduano seminar on Aristotle, virtue ethics, character, and business ethics.  A fair amount of the discussion focused on a decision made in 1977 by a boss of Ed's at a management consulting firm to send him to London rather than a female colleague with stronger qualifications because "the Brits won't work with a woman."  The decision was reversed by a senior partner with more backbone, and/or better judgment; the woman was sent instead of Ed and did very well. 

A value competition take on why the once-controversial idea of treating women equally in business has become an accepted principle in the US, the UK, and certain other parts of the world involves the idea of competing value systems reaching consensus.  As a general proposition, left-of-center economic egalitarianism on behalf of less well-paid groups such as women has not won assent from conservatives.  (Similarly, right-of-center belief in the moral rightness of paying and treating people according to their market value has not won general assent from liberals.)  But on the particular issue of an equally qualified and productive woman receiving equal treatment and equal pay, the way in which a position originally identified as liberal also resonates in terms of conservative pro-market values has fostered a moral consensus.

Symmetry between Altruistic and Egoistic Values in Lab Experiments

A basic value competition proposition is that there are advantages for agents in having equal and opposite altruistic and egoistic values within themselves.  That proposition is one way to explain lab results in which a substantial proportion of subjects (generally closer to half than to all or none) deviates from maximization in favor of altruism by playing dominated strategies in one-shot prisoner's dilemmas and giving generous offers in dictator games. 

If VC is right, it should be possible to find evidence of comparable egoistic values that lead people to deviate from maximization in a game not out of regard for the other and the other's payoffs but out of regard for self-advancement, viewed broadly rather than in terms of an immediate payoff.  Some lab results can indeed be interpreted thusly.  The willingness of a substantial proportion of subjects to deviate from maximization to punish opportunism can be understood in terms of self-advancement values broadly understood, as well as or instead of fairness values.  The intriguing work of Jason Dana, Daylian Cain, and Robyn Dawes, who have shown that many subjects prefer not to know the other player's payoffs in a dictator game http://papers.ssrn.com/sol3/papers.cfm?abstract_id=494422 can likewise be understood in terms of self-advancement values, in the form of a willingness to pay for the ability to view a situation as one in which egoism rather than altruism is appropriate.

An assignment coupled with a prediction: We need lab experiments focused on the degree to which subjects deviate from maximization by being willing to pay to gain information that is useful for purposes of egoistic advancement, though not for the subject himself/herself.  If the basic VC framework applies, such experiments will show a substantial proportion of subjects paying for information even though it doesn't maximize; the subsidiary prediction is that the proportion will be quite comparable to the proportion deviating from maximization in the direction of altruism.

Jeffrey Moriarty

...a philosopher at Bowling Green SU, presented a work-in-progress at Bruce Buchanan and Ed Hartman's Stern School seminar arguing that CEOs have a moral duty as fiduciaries of the firm to refuse compensation in excess of the minimum amount that would induce fully effective effort from them. 

His presentation raised two VC issues for me: first, the value of being unaware of one's intrinsic motivation to work as distinct from one's extrinsic motivation to work; and second, how to informally model certain managerial ideologies as ways of cross-cutting rather than simply reinforcing individuals' underlying intrinsic and extrinsic motivations to work.

Absent a more nuanced model of  repression than I now have, I don't much to note on the first point beyond the general observation that in order to reduce strategic behavior and enhance accountability of the self, it is often important that different elements within the self not be transparent, or at least not completely so. 

On the second point: I think that a "Charlie Wilson"--"What's good for the United States is good for General Motors"--stewardship approach and a "Michael Jensen"--"what's good for shareholders is what's good for society" agency theory approach both do credibly at blending intrinsic and extrinsic motivation (or if one prefers, altruistic and egoistic motivation) rather than just reinforcing one side.  The stewardship approach, along with its altruistic "don't go for the bucks" line, caters to extrinsic/egoistic motivation in the form of motivations like "command the biggest army/company" and "be respected by your workers and your community."  The Jensenite approach, along with its extrinsic/egoistic "align managers' economic incentives" line supports intrinsic motivation and altruism with its "don't manage to be popular" line.

Michael Jensen

For a while now, Michael Jensen has been thinking about internal conflicts within the mind/brain as a source of agency costs: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=5566 is one of his 1990s takes on the problem.   This Thursday at Bruce Buchanan's and Ed Hartman's Paduano business ethics seminar at NYU (http://w4.stern.nyu.edu/news/news.cfm?doc_id=7917), Jensen presented his current, as yet unposted, paper on the matter.

Jensen conceptualizes his current work as an ontological model of integrity, but it can also be expressed as a normative economic model.  He argues that major productivity gains in families, organizations, and other settings can be achieved through instituting processes for honoring (not necessarily keeping) one's word.  These processes include clear disclosure of failures to keep one's word, along with statements by the commitment-breaker of what will be done to make amends for that failure.

Although Jensen refers to a substrate of internal conflict, the model as presented did not logicize that conflict.   How it might be done in value competition terms: The suggested processes for honoring one's word trigger a more intense competition between a "follow the rules, keep your word" Kantian internal agent in the brain and a "do what works best, honor your word" Benthamite internal agent to come up with policies that win a hypothetical brain election between the sides.

If the Kantian and Benthamite values cross-cut rather than reinforce conflicting preferences within the brain, the heightening of value intensity associated with Jensen's integrity processes will help to align the policies of the competing agents with the person's overall interests and produce higher productivity.  On the other hand, if the heightened value intensity from the processes reinforces other internal conflicts in the brain--think, for example, of a guilty slacker in whom heightened Kantianism simply accentuates his guilty side and heightened Benthamism simply accentuates his slacker side--the competing agents will not have optimal incentives and the integrity processes will not necessarily help and may hurt productivity.