WEEKEND READ: 'Unfair' politicians getting punished by voters
CRISPIN HULL
THE principle that humans will act “rationally” was part of the bedrock of economics, at least until the 1980s when behavioural psychology started to infiltrate the dismal science.
Behavioural psychology’s The Ultimatum Game demolished the idea that humans will act in rational self-interest. In the game, a Proposer divides $100 between the Proposer and a Responder – anywhere between $50-$50 to $99-$1.
The Responder gets to either accept the division or reject it. If the Responder rejects it, neither party gets any money.
The rational, self-interested economist as a Responder would accept any offer, even just $1.
But human psychology is not like that. Experiments show very few Responders accept anything less than about $30. Many Responders reject anything less than $50.
However, further research suggests that it may not be entirely against a Responder’s self-interest to reject “unfair” offers. To accept such an offer would be belittling. The feeling of accepting unfairness and belittling conduct, is not worth the money to many Responders. To them, fairness is more important than money.
Further, many Responders would get satisfaction from punishing unfairness and from the feeling they might prevent such poor behaviour by the Proposer in the future.
Interestingly, the closer the Proposer and Responder are, the more likely the Responder is to reject an unfair offer. Among siblings, anything under $50 is routinely rejected. But when the players are strangers, offers under $50 are more likely to be accepted, and even more likely if the players are from different cultures and never likely to have any interaction in the future.
The Ultimatum Games appears now to have taken on in politics.
You lot in London are not giving us a fair share of benefits of the EU, so we are going to reject what you have got on offer, even if it hurts us.
You in Washington have not given us a fair share of the benefits of free trade, so we will reject you even if we hurt ourselves by electing a high-risk candidate.
Prime Minister in Canberra, you are proposing an unfair 2014 Budget so we are going to reject you so vigorously in the opinion polls that you will lose your job and the Budget will go unrepaired to the detriment of us all.
Prime Minister in Canberra you are proposing a cut to company tax and a tax cut for people earning more than $80,000. We came very close to rejecting that, even at the risk of a hung Parliament or having the other lot back. In any event we got our revenge in the Senate.
We reject you complacent lot in the National Party who have held the seat of Orange for 70 years because you unfairly favour big corporations over small businesses, farmers and people in the bush.
It is not about the economy, stupid. It’s about fairness.
Perhaps one of the reasons politicians do not see this is because “fairness” is not measured. And nor is well-being.
Instead, the “key performance indicators” politicians set themselves are the very misleading GDP and unemployment figures.
It is all very well for our leaders to point to 25 years of continuous growth in GDP. But that is not a measure of income per head. If the population goes up, income per head can fall or stagnate even if the headline GDP figure looks good.
During those 25 years, income per head fell or leveled in some quarters.
Further, rising GDP has provided higher incomes on average, but median income (the income of the person in the middle of the population) has stagnated because so much of the increase in GDP has gone to higher incomes. Inequality has increased.
Figures issued this week, for example, show wages growth is slower that GDP growth. That has been happening often. In short, wage earners are not getting the benefits of economic growth.
CEO pay balloons as a multiple of median pay – up to 100 times for some companies. Some stricter reporting requirements might curb the trend.
The unemployment figures are utterly misleading because the Australian Bureau of Statistics is constrained by international reporting requirements which define anyone who does paid work for more than just one hour as “employed”.
Our figures disguise the underemployed (those seeking more hours) and those who have just given up looking. Part-time jobs and contracting are becoming the new norm.
This all adds to a sense of unfairness compounded by insecurity.
Then there is intergenerational unfairness. Negative gearing and capital-gains tax concessions are honey to investors who are shutting youngsters out of the market. The problem is further compounded by high immigration.
Moreover, high immigration and high population growth adds to unfairness more generally as it benefits big retailers and land developers while stretching the infrastructure that ordinary people use like public schools, hospitals and transport.
But our politicians continue in their smug reliance on misleading economic statistics.
As it happens, in 2002 the Australian Bureau of Statistics set out to measure Australia’s progress beyond the economic realm. It included things like fairness, equality, access to health and education and so on.
It could have saved our politicians from economics-induced blindness, but the measure was axed in public-sector cuts in, ironically enough, 2014.
There is an obvious lesson from Brexit, the US election and the rise of One Nation in Australia.
If mainstream political parties refuse to provide more fairness, it will drive voters to socially destructive opportunists.
When offered unfairness, people will reject it, even if the rejection offers no solution or even hurts those doing the rejection. Voters are now playing the Ultimatum Game. But it is not really a game.
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