Building on my post last week that highlighted how compromise becomes difficult when people think there’s more distance between them and the other side than there actually is, I wanted to pass along a recent column by James Surowiecki on the “fairness trap”.
As a principle, fairness is very important. It matters a lot to people, both liberals and conservatives. Children start caring about it before they turn two and even monkeys and chimps care about fairness. But sometimes insisting on fairness can lead to problems. Sometimes, in the pursuit of fairness, we make everyone worse off. Worse still, often the vision of fairness we believe in and fight for is an illusion.
Take the problems in the Eurozone where Greece’s newly elected government wants to renegotiate the terms of their bailout while Germany is standing firm, as described recently by Surowiecki in The New Yorker:
Rationally, then, this standoff should end with a compromise—relaxing some austerity measures, and giving Greece a little more aid and time to reform. And we may still end up there. But the catch is that Europe isn’t arguing just about what the most sensible economic policy is. It’s arguing about what is fair. German voters and politicians think it’s unfair to ask Germany to continue to foot the bill for countries that lived beyond their means and piled up huge debts they can’t repay. They think it’s unfair to expect Germany to make an open-ended commitment to support these countries in the absence of meaningful reform. But Greek voters are equally certain that it’s unfair for them to suffer years of slim government budgets and high unemployment in order to repay foreign banks and richer northern neighbors, which have reaped outsized benefits from closer European integration. The grievances aren’t unreasonable, on either side, but the focus on fairness, by making it harder to reach any kind of agreement at all, could prove disastrous.
Both sides believe they are standing on principle, committed to what they see as a fair outcome. They’re even willing to make economic sacrifices for the sake of fairness. The problem is that there is very little overlap between what the two sides think is fair, so compromise becomes impossible and everyone loses.
The Eurozone dilemma illustrates how difficult compromise can sometimes be, particularly when both sides firmly believe their position rests on important principles. It’s difficult to know when it is reasonable to stray from our principles for the sake of compromise and when it’s important that we stick to our convictions despite the costs. Therefore, it’s critical to be able to recognize when the things we think of as our fundamental moral principles aren’t really fundamental at all.
All too often, our principles are based not on deep-seated convictions of what’s right, but cobbled together based on what we want right now. We usually fail to realize it, but what we consider fair in a particular situation is sometimes largely a consequence on what serves our self-interest.
A study (PDF) published in The American Economic Review by Linda Babcock and her colleagues makes this point beautifully. In their study people are asked to negotiate with one another to settle a case out of court. The case, an abridged version of a real case in Texas, involves a motorcyclist suing an automobile driver for $100,000 in damages for injuries he sustained in an accident. Half the participants take the role of the motorcyclist and the other half take the role of the driver, and the stakes are real – participants get to keep part of the money from the settlement (they get $1 for every $10,000 they get from the settlement). Both sides have an incentive to come to an agreement because if they don’t settle out of court they forfeit court costs, and the longer they take to reach an agreement the more money comes out of their pockets in legal fees.
So what happens? Well, despite the fact that both sides are given identical information, they come to very different conclusions about what a fair settlement would look like. On average, the two sides are almost $20,000 apart in their estimates of what a fair settlement should be. It also takes them a long time to settle, and over a quarter of the pairs never reach a settlement at all. Just like the Greeks and the Germans, they found it difficult to compromise because they wanted to get a fair outcome even though it ended it up costing them in the end. But it didn’t have to be that way – their idea of what was fair was based on the role they had, not on fundamental principles.
Another group of participants went through the exact same experiment, only this time they read the facts of the case without knowing whether they would be playing the part of the motorcyclist or the automobile driver. Without knowing which side they were on, that knowledge couldn’t bias them. Now, the $20,000 gap in the two sides beliefs disappeared, and when they were given their roles and it came time to settle they not only did so faster, but 92% of pairs reached a settlement. Because they weren’t caught up in false notions of fairness they were able to compromise and both sides walked away with more money.
Of course there’s still the problem that in the real world people know which side they’re on – the Greeks know they’re Greek and the Germans know they’re German. This is the problem John Rawls struggles with in his classic, A Theory of Justice: we should be deciding what’s fair before we know what our role will be, or as he calls it, from behind the veil of ignorance, but that’s easier said than done. There are some strategies that can help us reduce our biases, like taking the time to think about the weaknesses in our case, or trying to imagine what we would think if we were on the other side.
Most importantly, though, we need to recognize that this bias exists in the first place. Sometimes what we believe to be strongly held principles of fairness turn out to be nothing more than thinly veiled self-interest. And these principles are not just flimsy, they can be costly as well.