Tuesday, July 20, 2010

The Ultimate Game

The Ultimate Game is a study performed in the 1970s by Werner Guth. The premise is of the game is simple. There are two players. Player One is given a sum of money and told he must give Player Two an open amount. Player Two can either keep the money and both players keep their sum or reject the offer and both players walk away with nothing.

Ofcourse, the only motivation for Player Two to reject the offer is to punish Player One. It is also in Player Two's best interest to accept whatever sum is offered him, knowing he will receive nothing if he does not. Surprisingly, most offers resulted in about half of them money with cooperation and mutual benefit being the outcome.

Now, what gets really interesting and should help you destroy any argument any Marxist can muster is the results where the game was played with fifteen varying tribal societies. The societies that were most closed off, less engaged in trade and more advanced economic systems were the least generous and rational about the outcome.

Machiguerna (slash and burn) farmers from the Amazon averaged just 15% give away. And nearly all would be recipients rejected the offer.1

Players most integrated in modern markets such as the Orma Nomads from Kenya or the Achuar subsistence gardeners of Ecuador offered up nearly half, similar to their western counter parts.

What can we take from this game? That self interest raises all boats. Trade and commerce based on mutual self interest results in more generosity and the more people have access to these ideas and their results, the more people will prosper and work in cooperation. Self interest was the motivating force in the cases were the people gave more, not altruism.

1. Matt Ridley, The Rational Optimist-How Prosperity Evolves (New York: Harper Collins, 2010) 87-88

1 comment:

  1. Thanks, this is indeed powerful evidence for why open and free economies work best, and opponents of such economics are misguided. Those interested in the Ridley book you cite might also wish to know about another one, THE CASE FOR RATIONAL OPTIMISM (Transaction Books, Rutgers University, 2009), which makes quite similar points and arguments, but develops the case for optimism over a rather broader range of subject areas. See http://www.fsrcoin.com/k.htm. Also my blog, The Rational Optimist, http://www.rationaloptimist.wordpress.com