By Shankar Vedantam
Monday, March 2, 2009
"I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions. I promise you, I get it. But I also know that in a time of crisis, we cannot afford to govern out of anger."
-- President Obama, in his address to Congress last week
William Neilson is mad at all the people who bought homes they could not afford and the bankers who enabled them in order to turn a fast buck. He is mad because he has always paid his mortgage on time and had the common sense not to borrow four times the value of his house. He is mad because, now that the economy is in a tailspin, the president wants honest taxpayers like him who did everything right to lend a hand to help out those who did everything wrong.
Obama's blueprint to lead the country out of recession faces many hurdles, but no challenge may be as great -- or embedded as deeply in the human psyche -- as the visceral distaste many Americans feel about propping up banks and Wall Street "masters of the universe."
In his address to Congress last week, Obama stressed that the point of pouring hundreds of billions of dollars into banks and other financial institutions is not to help bankers but to help ordinary people who depend on banks. If huge banks and other financial institutions collapse as Lehman Brothers did, many economists say, it could send the economy into an even deeper tailspin.
What Obama did not mention, however, is that saving banks and financial institutions has the unintended consequence of saving many bankers, CEOs and Wall Street tycoons from the consequences of their greed, and these are people that many Americans would like to see in stocks on the town square.
Obama is right in calling such anger unreasonable. But there is robust evidence that unreasonable anger against those who harm the common good is deeply embedded in human DNA -- and has probably played a salutary role in our economic, political and social history.
A wide body of experiments have recently put such anger in a new light: Seeking to punish those who harm the common good, especially when the punishment involves a high cost to ourselves, is really a form of altruism. As with giving to charity, "altruistic punishment" elevates emotional goals over purely rational -- and selfish -- goals. You see altruistic punishment on display anytime a person puts his life at risk to apprehend a criminal or spends her own time and money to bring wrongdoing to light.
Altruistic punishment has been found in every human society scientists have studied; it has even been found in other species. The anger many Americans who played by the rules now feel toward those who broke the rules and enriched themselves might well be hard-wired -- a mechanism that arose through evolution to punish freeloaders and to encourage cooperative behavior.
Economist Attila Ambrus at Harvard University guesses that 30 to 40 percent of people in most groups are willing to pay a personal price to punish those who endanger the common good.
Neilson is an especially instructive case study because he happens to be an economist, too, at the University of Tennessee. He agrees with Obama's rescue plan on an intellectual level but vehemently disagrees on an emotional level.
He drew an analogy between the current financial situation and a game economists have devised: Four people are given $5 apiece. They are then told to contribute one after the other to a common pot. If the amount in the pot totals $12, they are informed, each player will get a $6 bonus. In an ideal world, each player would give $3, collect the bonus and go home with $8. The temptation, however, is to free-ride -- to contribute less than your share and hope someone else gives more.
Experiments show that when players No. 1, 2 and 3 contribute only a total of $7 -- far less than their share -- No. 4 faces a dilemma: If the player puts in the whole $5, the common pot will reach $12. A purely rational, selfish player would pony up the $5 in order to get the bonus, because it is always better to go home with $6 than with $5.
But the experiments show that large numbers of people refuse to do the "rational" thing. Seeing that they are being played for suckers, they contribute nothing. They forgo the extra $1 in order to punish the selfish players who came before them.
As with altruism, people tend to be maximizers when it comes to altruistic punishment: If they can cause $10 worth of damage to someone who has done them wrong by incurring a cost of only $1, they are more likely to dole out punishment than if they can cause only $1 worth of pain -- in much the way people are more willing to contribute $40 to a charity if they know the money will be doubled by a matching grant.
An intriguing line of research has recently found another link between altruistic punishment and conventional notions of altruism. Political scientist Oleg Smirnov at Stony Brook University and his colleagues showed that the people most willing to pay a personal price to punish freeloaders are also those who are most likely to help those less fortunate than themselves -- altruistic punishment often springs from an underlying commitment to egalitarianism.
David Levine, an economist at Washington University in St. Louis, said it was useful to distinguish between altruistic punishment and schadenfreude. Taking pleasure in the discomfort of others is counterproductive, whereas targeting anger at people who violate the public trust can serve a strategic and useful purpose.
The problem with altruistic punishment, of course, is that it is driven by a feeling of uncontrollable anger. From an evolutionary perspective, this makes sense. Only a very strong drive could prompt individuals to put themselves at risk for the good of the group. But as a result, experiments show, there are people even willing to bring the entire house down if that is the only way to punish the fat cats who elevate narrow self-interest above the common good.
There is a middle way between cold rationalism and irrational, self-destructive anger: Pour taxpayer money into fixing broken institutions, but make sure those responsible for the catastrophe pay -- and pay publicly. As Levine put it, just because you don't want to throw the baby out with the bath water doesn't mean you don't throw out the bath water.