Behavioral Economics on Fairness and Reciprocity
This post first appeared on enfoquederecho.com in Spanish.
– Why do we need Laws?
– We need Laws in order to ensure that citizens are treated equally and fairly.
At least, that could be a possible short and straight-forward answer to this question. But what defines what is fair or which actions are morally right?
If you ask different people, they would give you different answers on what fairness and equality is, especially when we take into account unpredictable and complex factors and external forces such as their own character, the society they live in or their religion.
The answer to the opening question might come from an upcoming but very promising science which has changed the basic assumptions of standard Economics on how rational humans behave when it comes to Decision Making. This science is called Behavioral Economics.
References
ANDREW T. STEPHEN AND MICHEL TUAN PHAM: On Feelings as a Heuristic for Making Offers in Ultimatum Negotiations. Columbia University https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1131083
DANIEL KAHNEMAN, JACK L. KNETSCH AND RICHARD H. THALER (1986): Fairness and the Assumptions of Economics. The Journal of Business. University of Chicago https://www.anderson.ucla.edu/faculty/keith.chen/negot.%20papers/KahnKnetThal_FairEcon86.pdf
HERBERT GINTIS (2006): Behavioral Game Theory and Sociology. https://www.umass.edu/preferen/gintis/behavi~1.pdf
ERNST FEHR AND KLAUS M. SCHMIDT (1999): A Theory of Fairness, Competition, and Cooperation. The Quarterly Journal of Economics. The MIT Press. https://pareto.uab.es/prey/Fehr&Schmidt1999.pdf
HERBERT GINTIS (2009): The Bounds of Reason Game Theory and the Unification of the Behavioral Sciences. Princeton University Press
ERNST FEHR AND SIMON GÄCHTER (2000): Fairness and retaliation: The economics of reciprocity.Journal of Economic Perspectives.
About the Author
Chronis Lalas
Chronis Lalas is an upcoming Behavioral Economist who is researching and publishing about the applications of Behavioral Economics in the real world. As a young economist, his vision is to inspire students and the young generation to have a better understanding of Decision Making.
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