Rationality in Social Science: Foundations, Norms, and Prosociality 3658335351, 9783658335359

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Ivar Krumpal · Werner Raub · Andreas Tutić   Editors

Rationality in Social Science Foundations, Norms, and Prosociality

Rationality in Social Science

Ivar Krumpal · Werner Raub · Andreas Tuti´c Editors

Rationality in Social Science Foundations, Norms, and Prosociality

Editors Ivar Krumpal Universität Leipzig Leipzig, Germany

Werner Raub Utrecht University Utrecht, The Netherlands

Andreas Tuti´c Universität Leipzig Leipzig, Germany

ISBN 978-3-658-33535-9 ISBN 978-3-658-33536-6 (eBook) https://doi.org/10.1007/978-3-658-33536-6 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Responsible Editor: Cori Antonia Mackrodt This Springer VS imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Für Thomas Voss

Contents

Rationality in Social Science: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . Ivar Krumpal, Werner Raub, and Andreas Tuti´c

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Foundations From Pascal to Ellsberg: Paradoxes of Rationality Stimulate the Progress of Decision Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Andreas Diekmann Rationology, Rationality and Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hartmut Kliemt “Das Modell ist dafür nicht geeignet!” (“The Model is not Suitable for This!”): The Model of Frame Selection and a Corrective Replication of the Findings in the Fehr-Gächter Experiments on the Development of Cooperation in Public Good Situations . . . . . . . . Hartmut Esser Sociology in Times of Pandemic: Metatheoretical Considerations and the Example of the Covid-19 Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Roger Berger and Ivar Krumpal

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Norms When Do People Follow the Behavior of Others? The Effects of Descriptive and Injunctive Norms, and the Werther Effect . . . . . . . . . Karl-Dieter Opp

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Revenge and Gratitude in Trust-Based Encounters. Experimental Evidence on Process-Based Reciprocity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manuela Vieth How More Severe Punishment Generates Less Norm Enforcement. Further Evidence of Paradoxical Effects of Norm Enforcement in Inspection Games . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Heiko Rauhut and Fabian Winter Balancedness. Emerson’s Theory in the Upanishads, in Cooperative Game Theory, and Beyond . . . . . . . . . . . . . . . . . . . . . . . . . . Harald Wiese

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Prosociality Endogenizing Conditions for Cooperation of Rational Egoists . . . . . . . . Werner Raub

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Opposing Effects of Objective and Subjective Social Status on Prosociality: Theory and Quasi-Experiment . . . . . . . . . . . . . . . . . . . . . . Andreas Tuti´c and Ulf Liebe

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Green Homeowners? An Empirical Application of Fischel’s Homevoter Hypothesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peter Preisendörfer

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How Can Employers Signal Trustworthiness to Job Seekers? Determinants of Employer Reputation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Martin Abraham, Jan Gniza, and Kerstin Ostermann

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Editors and Contributors

Editors Ivar Krumpal, PD Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: quantitative research methods, survey methodology, economic sociology, norms and social desirability. Werner Raub, Prof. (em.) Dr., Utrecht University, Department of Sociology/ICS, Padualaan 14, 3584 CH Utrecht; [email protected]; current research interests: theoretical sociology, formal models, experimental sociology. Andreas Tuti´c, PD Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: theoretical sociology, cognitive sociology, action theory, decision and game theory, experimental social science.

Contributors Martin Abraham, Prof. Dr., Friedrich-Alexander-Universität Erlangen-Nürnberg, Fachbereich Wirtschafts- und Sozialwissenschaften, Findelgasse 7/9, 90402 Nürnberg; [email protected]; current research interests: labor markets, organizations, economic sociology, households. Roger Berger, Prof. Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests:

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methodology and methods of empirical social research, foundations of human cooperation. Andreas Diekmann, Prof. Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: analysis of the environmental burden of metropolitan areas with geo-referenced panel data, experimental research on social dilemma games. Hartmut Esser, Prof. (em.) Dr., Universität Mannheim, Fakultät für Sozialwissenschaften, A 5, 6 Gebäudeteil A, 68159 Mannheim; [email protected]; current research interests: methodology of the social sciences, sociological theory, interdisciplinary action theory, migration and integration, sociology of the family, sociology of education. Jan Gniza, M.Sc., Friedrich-Alexander-Universität Erlangen-Nürnberg, Fachbereich Wirtschafts- und Sozialwissenschaften, Findelgasse 7/9, 90402 Nürnberg; [email protected]; current research interests: regional inequalities, acceptance of redistribution, reputation. Hartmut Kliemt, Prof. Dr., Justus-Liebig-Universität Gießen, Fachbereich 02: Wirtschaftswissenschaften, Licher Str. 70, 35394 Gießen; [email protected]; current research interests: Philosophy, Politics and Economics (PPE), methodology and ethics of law, management and medicine as practical disciplines, exchange. Ivar Krumpal, PD Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: quantitative research methods, survey methodology, economic sociology, norms and social desirability. Ulf Liebe, Prof. Dr., University of Warwick, Department of Sociology, Coventry, CV4 7AL; [email protected]; current research interests: discrimination, environmental behavior, experimental methods, prosociality, sustainability. Karl-Dieter Opp, Prof. (em.) Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: sociological theory, norms and institutions, political participation, philosophy of social science, deviant behavior and crime. Kerstin Ostermann, M.Sc., Institut für Arbeitsmarkt- und Berufsforschung, Regensburger Str. 104, 90478 Nürnberg; [email protected]; current research interests: quantitative sociology, neighborhoods, regional mobility.

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Peter Preisendörfer, Prof. (em.) Dr., Johannes Gutenberg-Universität Mainz, Institut für Soziologie, Jakob-Welder-Weg 12, 55128 Mainz; [email protected]; current research interests: organization research, entrepreneurship, environmental sociology, quantitative research methods. Werner Raub, Prof. (em.) Dr., Utrecht University, Department of Sociology/ICS, Padualaan 14, 3584 CH Utrecht; [email protected]; current research interests: theoretical sociology, formal models, experimental sociology. Heiko Rauhut, Prof. Dr., Universität Zürich, Soziologisches Institut, Andreasstr. 15, 8050 Zürich; [email protected]; current research interests: social theory, analytical sociology, game theory, quantitative methods, experimental sociology, social norms and cooperation, sociology of science. Andreas Tuti´c, PD Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: theoretical sociology, cognitive sociology, action theory, decision and game theory, experimental social science. Manuela Vieth, Dr., Universität Paderborn, Institut für Ernährung, Konsum und Gesundheit, Warburger Str. 100, 33098 Paderborn; [email protected]; current research interests: action theory and game theory, social norms and action motivations, experimental social research. Harald Wiese, Prof. Dr., Universität Leipzig, Institut für Theoretische Volkswirtschaftslehre, Grimmaische Str. 12, 04109 Leipzig; [email protected]; current research interests: cooperative game theory, applications of microeconomics to old Indian texts. Fabian Winter, Dr., Max-Planck-Institut zur Erforschung von Gemeinschaftsgütern, Kurt-Schumacher-Str. 10, 53115 Bonn; [email protected]; current research interests: social norms, analytical sociology, migration, field- and labexperiments, social norms of the internet.

Rationality in Social Science: Introduction Ivar Krumpal, Werner Raub, and Andreas Tuti´c

This book is on rationality in social science. The chapters are organized in three parts, covering key topics related to the book’s theme. ‘Foundations’ includes chapters on basic assumptions on which theories of rational choice build as well as criticism of and alternatives for such assumptions. These chapters likewise discuss how theories of rational choice can be applied in social science explanations and highlight problems of explanations relying on rational choice assumptions. The part on ‘norms’ offers chapters on when and how norms affect behavior as well as on how various features of norms, for example, their ‘enforcement’, can themselves be explained. Each of these chapters addresses in one way or another the role of rationality assumptions in scientific inquiry on norms, their emergence and dynamics, and their effects. Finally, chapters in the third part are on ‘prosociality’ in the sense of behaviors that benefit others and the consequences, including macro-consequences, of these behaviors. Note that prosocial behavior in this broad sense includes, but is not restricted to, contributions to collective goods and cooperative behavior in ‘social dilemmas’. Chapters in this part contribute to exploring prosociality as a result of rational choice and to exploring the problems of conceiving prosociality as a result of rational choice. Finally, ‘rationality in I. Krumpal (B) Universität Leipzig, Leipzig, Deutschland E-Mail: [email protected] W. Raub Utrecht University, Utrecht, Netherlands E-Mail: [email protected] A. Tuti´c Universität Leipzig, Leipzig, Deutschland E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_1

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social science’ may also refer to how social science research and teaching can be itself conducted rationally so that scientific progress is facilitated. Questions regarding this issue are likewise discussed in this book, sometimes explicitly and more implicitly in other chapters. The book is designed as contributing to core research problems of social science, while also honoring Thomas Voss. Over a period of four decades, his research and teaching has focused on rationality in social science and more specifically on the key topics addressed in this book. The authors of chapters include colleagues and friends of Thomas: co-authors, a mentor and teacher, a classmate, and former students. His early student days in the 1970s have been influential for his later work. His teachers included sociologists such as Hartmut Esser and Hans J. Hummell, both trained in the ‘Cologne School’ of sociology in Germany. Thus, not surprisingly, Voss’ training, from the start, emphasized problem- and theory-guided sociology, with a focus on systematic theory building as well as rigorous empirical research and a close connection between theory and empirical research. Philosophy of science was a key interest from the beginning. Critical rationalism à la Karl Popper, Imre Lakatos, and Hans Albert provided important arguments and examples, as did analytical philosophy of science à la Carl G. Hempel, Ernest Nagel, and many others, admirably represented in Wolfgang Stegmüller’s thorough multi-volume Probleme und Resultate der Wissenschaftstheorie und Analytischen Philosophie. For a year, he trained in mathematics. It was a period when European sociologists such as Raymond Boudon, Siegwart Lindenberg, Karl-Dieter Opp, Viktor Vanberg, Reinhard Wippler, and Rolf Ziegler initiated seminal research programs that became soon known as, for example, structural individualism and explanatory sociology, including applications of rational choice theory in sociology. Hummell and Ziegler also emphasized formal theoretical modeling and their work provided model examples for how to do this. Robert K. Merton, George C. Homans, Peter M. Blau, and James Coleman became important authors for Thomas Voss from sociology in the US. This is, roughly, the intellectual context in the formative years of Thomas Voss’ academic career. Another important influence, still in an early phase of his academic career, should not be overlooked, namely, his experience at leading academic institutions in the US. This includes his visiting scholarship at James Buchanan’s Center for Study of Public Choice in Fairfax, VA., in 1986. Not much later, in 1990, he was a visiting assistant professor of quantitative methods at the University of Chicago’s Department of Sociology, interacting with James Coleman, who had arranged the invitation and funding, Gary Becker, and others (not to forget the treasures of the Co-Op Bookstore).

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Throughout his academic career, early on in Ziegler’s group at LMU Munich, then since 1992 as a full professor and chair at Leipzig University, Thomas Voss contributed to the foundations of rationality in social science. This includes his early (Raub and Voss 1981) and later (Voss 2017; Raub and Voss 2017) work on how to use micro-level assumptions of rational choice theory to explain not only micro- but also, and in particular, macro-level phenomena. It also includes his pioneering work on applications of game theory in sociology (see below), on bounded rationality (for example, Voss 1990), and on institutional design and what he labeled the rational egoism (RE) model (for example, Voss 2020). Norms have been a long-standing key research area of Thomas Voss. A particularly influential paper has been Voss (2001; see also Diekmann and Voss 2008). His work in this field also includes experimental research in behavioral game theory (Voss and Vieth 2015). Thomas Voss (1982, 1985) is likely the first sociologist who clearly recognized the importance of the theory of repeated games for research on the problem of social order (see also Raub and Voss 1986a, b; Voss 1990). This work on conditional cooperation of rational and purely self-interested actors in repeated interactions is his major contribution to analyzing prosociality as conceived in this volume. More generally, this strand of his work has been important for establishing game theory as a crucial tool of sociology for inquiry into social situations with interdependence between actors – and Max Weber (‘soziales Handeln’) argued that sociology is precisely about these kinds of situations. Of course, this is not more than a sample of Voss’ contributions. His work is broader than the focus of this book. It includes, among others, contributions to organization studies as well labor market research and, last but not least, fine overviews of the development of the rational choice approach throughout the history of social science and of applications of the approach in modern theoretical and empirical research in sociology – but that’s for another occasion… One feature, though, does deserve a further remark here. We already mentioned that ‘rationality in social science’ can – and should – also be read as referring to how social science can be itself conducted rationally so that scientific progress is facilitated. For Thomas, this has always implied that pretentious but vague language can better be avoided, certainly for claims that, under careful reconstruction, more often than not turn out to be either analytically true or false or at best empirically rather trivial – assuming that reconstruction is at all feasible. To mention another example, rationality in social science implied as well for him that David Hume’s and Weber’s elementary distinction between value judgments and empirical propositions has to be carefully maintained. One doesn’t make only friends by being frank on these issues. Every now and then, some members of the sociology profession, some students, and perhaps some university administrators

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have been less than delighted by Thomas never shying away from being frank on this. But, at least, some others have been delighted and are confident that his scholarly stance is for the better of the discipline. The foundations chapters of this volume comprise methodological discussions, theoretical and empirical contributions. Andreas Diekmann (Chapter 1) argues that paradoxes and anomalies of the classical theory of rationality are an important motor of scientific progress. He discusses the famous Ellsberg paradox which is considered a serious challenge to the orthodox decision theory because it demonstrates a systematic violation of the Sure Thing Principle. However, these anomalies are an important impetus of theory revision and modification from a normative rationality ideal toward more psychologically realistic models of bounded rationality describing and explaining actual behavior. Diekmann argues that scientific progress takes place in exactly this field of tension between normative and descriptive theory, between simplicity and elegance versus complexity and realism, and that systematic deviations between normative rationality assumptions and empirically observable actions should be seen as an opportunity for learning about human nature and decisions. Hartmut Kliemt (Chapter 2) discusses the status of rational choice theory (RCT) in regards to explaining human choice behavior. Focusing on the folk theorem of game theory as a proposed solution for the Hobbesian problem of social order, the question is raised whether RCT should be interpreted as a formal theory that explores the implications of pure rationality with a methodological status similar to that of logic (so-called rationology) or as a descriptive and explanatory theory of real human behavior. Different fundamental views and interpretations of the RCT are contrasted and critically discussed. In his contribution, Hartmut Esser (Chapter 3) advocates to modify classical RCT and in particular its decision-theoretic foundation by incorporating insights from psychological and sociological action theories. His preferred alternative, the model of frame selection (MFS), rests upon a richer framework of concepts to describe the mental life of actors. In particular, it allows to model the influence of the subjective interpretation of situations on part of the actors on their actions. This way, the MFS is capable of explaining one of the most precarious anomalies of classical RCT – framing effects. Replicating as well as extending a Fehr-Gätcher public good game experiment, Esser argues that various phenomena such as re-start effects lend themselves to an explanation along the lines of the MFS while posing a tough nut to crack for RCT. Roger Berger and Ivar Krumpal (Chapter 4) discuss metatheoretical foundations of the explanatory sociology approach and demonstrate their relevance in times of a severe social crisis. They argue that the paradigm of realism and the guiding principles of

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causality and methodological individualism constitute a reasonable epistemological basis for sociology, enabling explanation of various social phenomena as well as prediction of unintended consequences of social interventions in the Covid-19 pandemic. After discussing the foundations and basic assumptions of RCTs and the explanatory sociology approach, the part on norms continues with chapters demonstrating the role of rationality assumptions in explaining how social norms emerge, under which conditions they are enforced, and how they influence individual behavior and social outcomes. Karl-Dieter Opp (Chapter 5) examines the theoretical importance and hypothesized effects of descriptive and injunctive norms on imitating the behavior of others in low-cost versus high-cost situations. Different theories explaining social imitation behavior are compared. It is argued that social psychological value expectancy theory (VET), which can be interpreted as a variant of RCT, can overcome some shortcomings of the focus theory of normative conduct (FTN) by Cialdini. It is shown how FTN must be modified to capture the conditions under which the behavior of others is imitated and it is illustrated how this modification of the FTN can be applied to study the Werther effect, an extreme situation in which a suicide triggers suicide of others. The study of Manuela Vieth (Chapter 6) presents further empirical evidence that norms of reciprocity are a fundamental force of human cooperation in trust situations. Results of an experimental laboratory study indicate that costly rewarding and sanctioning decisions of trustors are strongly influenced by their preceding behavior as well as by decisions of trustees to keep or break promises. It is argued that the motivation to enforce reciprocity norms is based on obligation and indignation feelings and on a desire for self-consistency of the sanctioning actors. The problem of norm enforcement is also at the heart of the contribution by Heiko Rauhut and Fabian Winter (Chapter 7). They study a situation where norm violators are unknown and detection and punishment is enforced by third parties. They present an extended version of the inspection game and empirically test the counter-intuitive prediction that more severe punishment leads to less norm enforcement, while not affecting the extent of norm violations. The evidence of a laboratory experiment is mixed, indicating that if punishment is more severe, there is both less enforcement and less norm violations. Harald Wiese (Chapter 8) explores the implication of a particular distributive norm, so-called balancedness, which can be derived from both Emerson’s theory of power-dependence relations and the Shapley value from cooperative game theory. He shows that different ‘power-over’ definitions are necessarily value-laden and that the introduction of the Shapley value to the analysis of power-dependence relations allows for a more stringent analysis compared to the classical sociological approach. Finally, he

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explores the implications of balancedness in bilateral exchange (Edgeworth box) as well as bargaining (alternating offers model). Chapters in the third part on prosociality deal with micro- and macro-level causes, manifestations and consequences of prosocial behavior. Prosociality and cooperative behavior in social dilemma situations could be a result of unconditional morality and altruistic motives as well as a result of conditional cooperation among rational egoists. Werner Raub (Chapter 9) analyzes conditions for cooperation of rational egoists in a broad class of social dilemma games. Two aspects are considered simultaneously. First, how social organization affects cooperation of rational actors and second, how this social organization can result endogenously from rational behavior. Focusing on repeated interactions, it is argued that rational egoists have an incentive to invest in dyadic embeddedness and subsequently cooperate. Propositions on investments in dyadic embeddedness are specified. The study of Andreas Tuti´c and Ulf Liebe (Chapter 10) deals with the relationship between social status and prosociality. They propose a formal theoretical model predicting opposing effects of objective and subjective social status on altruistic giving in the dictator game. Empirical evidence supports their hypotheses indicating a self-enhancing bias in subjective social status. Peter Preisendörfer (Chapter 11) presents an empirical application of Fischel’s homevoter hypothesis arguing that homeowners, as compared to renters, will behave more prosocially by contributing more than average to the local public good of residential environmental conditions. The analysis of survey and administrative data indicates that homeowners actually do participate more often in protests against environmental bads in their neighborhood, including local road traffic and aircraft noise. Finally, Martin Abraham, Jan Gniza, and Kerstin Ostermann (Chapter 12) investigate mechanisms for solving problems of incomplete information in matching job seekers and employers on labor markets. In a factorial survey study, hypothetical job seekers use available information about firms’ prosocial behavior to assess its attractiveness as a possible employer. In addition, a firm’s prosocial reputation matters even if further information, such as salary and firm publicity, attracts job seekers attention simultaneously. In working on this volume, editors and authors intended to shed some new light on a core theme of social science that is at the same time at the center of Thomas Voss’ own work and thus suitable as a token of appreciation for the teacher, colleague, and friend and his scholarly achievements. As editors, we acknowledge smooth collaboration with all contributors and their willingness to comply with the requirements that have been associated with preparing the book.

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References Diekmann, A., and T. Voss. 2008. Soziale Normen und Reziprozität – Die Bedeutung ‘sozialer’ Motive für die Rational-Choice-Erklärung sozialer Normen. In Rational Choice: Theoretische Analysen und empirische Resultate, ed. A. Diekmann, K. Eichner, P. Schmidt, and T. Voss, 83–100. Wiesbaden: VS Verlag. Raub, W., and T. Voss. 1981. Individuelles Handeln und gesellschaftliche Folgen. Das individualistische Programm in den Sozialwissenschaften. Darmstadt: Luchterhand. Raub, W., and T. Voss. 1986a. Die Sozialstruktur der Kooperation rationaler Egoisten. Zeitschrift für Soziologie 15:309–323. Raub, W., and T. Voss. 1986b. Conditions for cooperation in problematic social situations. In Paradoxical effects of social behavior. Essays in honor of Anatol Rapoport, ed. A. Diekmann and P. Mitter, 85–103. Heidelberg: Physica. Raub, W., and T. Voss. 2017. Micro-macro models in sociology: Antecedents of Coleman’s diagram. In Social dilemmas, institutions, and the evolution of cooperation, ed. B. Jann and W. Przepiorka, 11–36. Berlin: De Gruyter. Voss, T. 1982. Rational actors and social institutions: The case of the organic emergence of norms. In Theoretical models and empirical analyses. Contributions to the explanation of individual action and collective phenomena, ed. W. Raub, 76–100. Utrecht: ESP. Voss, T. 1985. Rationale Akteure und soziale Institutionen: Beitrag zu einer endogenen Theorie des sozialen Tauschs. München: Oldenbourg. Voss, T. 1990. Eine individualistische Theorie der Evolution von Regeln und einige Anwendungsmöglichkeiten in der Organisationsforschung. Habilitationsschrift: Universität München. Voss, T. 2001. Game theoretical perspectives on the emergence of social norms. In Social norms, ed. M. Hechter and K.-D. Opp, 105–136. New York: Russell Sage. Voss, T. 2003. The rational choice approach to an analysis of intra- and interorganizational governance. Research in the Sociology of Organizations 20:21–46. Voss, T. 2017. Methodologischer Individualismus: Reduktion oder Direkterklärung? In Die Provokation der Reduktion, ed. G. Wagner, 154–174. Wiesbaden: Harrassowitz. Voss, T. 2020. Institutional design and human motivation: The role of homo economicus assumptions. In Advances in the sociology of trust and cooperation, ed. V. Buskens, R. Corten, and C. Snijders, 15–40. Berlin: De Gruyter. Voss, T., and M. Vieth. 2015. Kooperationsnormen und vergeltende Sanktionen – Experimentelle Untersuchungen. Soziale Welt, Sonderband 22 (Experimente in den Sozialwissenschaften):174–194.

Ivar Krumpal, PD Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: quantitative research methods, survey methodology, economic sociology, norms and social desirability.

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Werner Raub, Prof. (em.) Dr., Utrecht University, Department of Sociology/ICS, Padualaan 14, 3584 CH Utrecht; [email protected]; current research interests: theoretical sociology, formal models, experimental sociology. Andreas Tuti´c, PD Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: theoretical sociology, cognitive sociology, action theory, decision and game theory, experimental social science.

Foundations

From Pascal to Ellsberg: Paradoxes of Rationality Stimulate the Progress of Decision Theory Andreas Diekmann Abstract

The path to a modern theory of rationality and decision has led through many stages and has by no means reached a final goal. Time and again, theories have been proposed that have led to paradoxical consequences, and it is precisely these paradoxical consequences that have in turn stimulated the progress of the theory in the sense of an ascending spiral of knowledge. In this paper I will briefly sketch the development and then deal with a paradox of the theory of rationality that was pointed out by Daniel Ellsberg (1961, The Quarterly Journal of Economics 75:643–669). Experimental data show the resilience of the “anomaly”. Observed decisions contradict the “sure-thing principle” which is a core axiom of rational decision making. The hypothesis of a distinction between more or less rational actors was refuted. Even subjects who chose “rational” options in social dilemma games behave “irrational” when faced with the Ellsberg paradox. Keywords

Ellsberg-paradox • Paradoxes of rational choice • Anomalies • Rationality Sure-thing principle • Axioms of rational choice • Social dilemmas • St. Petersburg paradox • “problem of the unfinished game”

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A. Diekmann (B) Universität Leipzig, Leipzig, Deutschland ETH Zürich, Zürich, Schweiz E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_2

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Introduction

With admirable clarity, Thomas Voss drew attention very early on to the importance of the theory of rational action for sociological theory formation. The goal of sociology was, and still is, the explanation of collective phenomena and interrelationships at the macro level through a micro-theory of rational choice. “Individuelles Handeln und gesellschaftliche Folgen”, which Thomas Voss wrote four decades ago with Werner Raub, outlined a sociological perspective based on the theory of rationality (Raub and Voss 1981). This program followed a “bottomup” approach. The authors suggested the research perspective of building macro theories derived from rationality assumptions at the micro level. A little later, the new findings of game theory were added. In German sociology, Thomas Voss was probably the first to recognize the potential of the theory of repeated games and to use it to explain many sociological phenomena of interest (Voss 1982, 1985, 2001; Raub and Voss 1986). Opinions undoubtedly differ on the concept of rationality. Rationality is precisely defined by a set of axioms. The concept of rationality is, of course, an abstraction, which however has the great advantage of allowing parsimonious explanations. Rational choice theorists have long known that assumptions of rationality, such as the central axiom of transitivity, are not always fulfilled. Nevertheless, the models are often extremely helpful in deducing hypotheses about social science macro-events from a few assumptions. Parsimony of explanation, precise assumptions, deduction of substantive, empirically testable hypotheses, and consideration of strategic interaction can be regarded as the principles that play a key role in the work of Thomas Voss. The path to a modern theory of rationality and decision has passed through many stages and has by no means reached its final goal. Time and again, theories have been proposed that have led to paradoxical consequences, and it is precisely these paradoxical consequences that have in turn stimulated the progress of the theory in the sense of an ascending spiral of knowledge. In this paper, I will briefly sketch of the theory of rationality and then deal with a paradox of the theory of rationality as pointed out by Daniel Ellsberg (1961). In this context, “paradox” means that empirically observable actions systematically contradict assumptions of the theory of rationality. If there are systematic deviations, we can learn a great deal about human decisions from paradoxes or “anomalies”.

From Pascal to Ellsberg

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Origin of the Theory of Rationality

Neither economic necessities of ship insurers, nor entrepreneurs of risky commercial transactions heralded the birth of probability theory in the middle of the seventeenth century. It was the gambling passions of idle aristocrats that inspired philosophers and mathematicians to find solutions to decision-making problems. The Chevalier de Méré, a passionate gambler, posed the philosopher Blaise Pascal the question of how the winnings of a coin-tossing game could be fairly divided if the game were to end prematurely.1 In the game, one of the players bets on heads, the other on tails; the coin is tossed alternately. The player who (to give an example) first scores heads or tails ten times is the winner. Now the game is abandoned at a score of eight or nine. How should the winnings be divided – nine to eight perhaps? But the leading partner in the game has a much better chance of winning. Or two to one, since the leading player would only have to win once, but their opponent would have to win twice? In his correspondence with the mathematician Pierre de Fermat, Pascal and Fermat found a solution (Hacking 1975; Devlin 2008). The fair division is three to one, because the superior player has a three-quarter chance of winning and the partner only one-quarter if both were to continue playing. Pascal and Fermat suggested a division according to the relative chances of winning. This is in accordance with the ratio of the expected values for both players (the product of the probability of winning and the amount of the prize). At the same time, Pascal solved a number of other apparent “dice paradoxes” identified by the Chevalier. With an expected value, a fair game could also be defined. It would be fair if the stake were to correspond exactly to the monetary expectation. In the long run, the stake and the profit would then be in balance. The gambling industry can only survive from the fact that games are unfair; no system can help against that. Solving one problem creates new ones, because the expectation of money reaches its limits in the so-called St. Petersburg paradox (Hacking 1975). Imagine a game consisting of a series of coin-tosses that ends after the first occurrence of “tails”. If first throw is already “tails”, the player is rewarded with one Euro. “Heads” then “tails” wins two Euro, “heads, heads, tails” wins four, “heads, heads, 1 The

problem itself had been known long before as the “problem of the unfinished game”. Among others, the mathematicians Luca Pacioli (1494), Girolamo Cardano (1539), and Niccolo Tartaglia (1556) dealt with it. According to Devlin (2008), Tartaglia was of the opinion that the problem was unsolvable. For the history, see Devlin (2008). What may be considered a simple problem today was an enormous challenge for the greatest thinkers of their time before the development of probability theory. The coin-tossing game described below is a simple example. Pascal used a different example with four dice.

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heads, tails” wins eight, and so on. With common sense, how much would you offer to be allowed to participate in this game, and what would the expectation of profit be? Most people would not bid more than 20 EUR as a stake; in fact, the expectation of winning is infinite! This is because, with ever-decreasing probability, unimaginably high amounts can be won. The Swiss mathematician Daniel Bernoulli, who taught in Petersburg, explained the discrepancy between stake and profit expectation with the idea of the utility of money. The utility of money does not grow linearly. The second million creates less utility than the first. If one now calculates the expected utility instead of the expected monetary gain, the amount is finite. Bernoulli’s solution, dating from the first half of the eighteenth century, already indicated the direction in which modern economic and decision theory would move. However, Bernoulli’s idea did not yet have a procedure that could make the subjectively perceived utility of money or goods accessible to a well-founded measurement. Even Jeremy Bentham’s utilitarianism – which, as is well-known, strove for the “greatest happiness of the greatest number” (Burns 2005) – was still built on the faltering ground of a speculative concept of utility. Bentham was a committed reformer who, more than two centuries ago, stood up against slavery and sexual discrimination and for the rights of animals. A well-founded method of measuring utility was first created about 150 years later by von Neumann and Morgenstern with the “Theory of Games and Economic Behavior” (1947), later expanded by Savage (1954). Von Neumann, Morgenstern, and Savage laid the foundation for rational decision-making, utility theory, and utility measurement by formulating several principles (axioms). In contrast to vague everyday language and general, verbal definitions, “rationality” is now defined exactly by a few axioms or postulates.

3

The “Sure-Thing Principle”

Savage’s (1954) definition of a rational decision was based on seven postulates. Here, we consider only one: an event that occurs with every alternative and provides exactly the same utility should not play a role in a rational decision. Savage used the example of a businessman who intends to acquire a property. The businessman considers whether the winning party in the next presidential election may have an impact on his planned deal. He comes to the result that he would profit from the business if the Republicans were to win the election. But he would also make the deal if a candidate from the Democratic Party were elected. So it should be rational to make the decision to acquire the property even if he does

From Pascal to Ellsberg

15

not know in advance which candidate will claim the victory. Savage (1954) calls this immediately plausible demand on the rationality of a decision the “sure-thing principle”. In Savage’s (1954, p. 21) words: “I know of no other extralogical principle governing decisions that finds such ready acceptance.” To put this intuition in more formal terms, one can define a decision alternative or an act as a function f mapping an event (e.g. a Democratic victory) to its consequences. Savage’s Postulate 2 then says: “P2 If f , g and f  , g  are such that: 1. In ∼ B, f agrees with g, and f  agrees with g  , 2. In B, f agrees with f  , and g agrees with g  , 3. f  g; then f   g  .” Here, “f  g” is a preference relation and means g is preferred to f . This is the formal notation of the “sure-thing principle” in Savage (1954, p. 23). We come back to this postulate and its implication below. The “sure-thing principle” corresponds to a dominant strategy in strategic interaction. In a game theory context, this strategy always yields better results than other available strategies regardless of the choices made by other players. For example, two strictly individually rational players will always choose the dominant, non-cooperative strategy in the “one-shot” prisoner’s dilemma and thus achieve a worse result than in a collective contract solution. The axiom system of von Neumann, Morgenstern, and Savage is an elegant foundation for the theory of rationality and – even until today – for modern economics. To clarify a possible misunderstanding: utility theory has nothing to do with egoism because the axioms also apply to altruistic actions. Rationality is defined as behavior that is consistent with a set of axioms. Depending on the chosen set of axioms, the notion of rationality can vary. However, regardless of which set of axioms has been chosen, there is (commonly) no restriction concerning the content of the preferences. A homo oeconomicus is rational by definition, but a rational decision-maker is not necessarily a homo oeconomicus. Andreoni and Miller (2002) were able to demonstrate consistent rational altruism in experiments. However, the theory of rationality was already being challenged in the 1950s by paradoxes, which essentially inspired the further development of decision theory in the direction of a more psychologically oriented theory. These include the well-known “Allais paradox” and the “Ellsberg paradox”, which will be discussed in more detail below.

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Table 1 Ellsberg’s “Three-Color Problem”

30 Balls

60 Balls

Decision 1

red

black

a

100 $

0$

b

0$

100 $

30 Balls

4

green 0$ 0$ 60 Balls

Decision 2

red

black

green

c

100 $

0$

100 $

d

0$

100 $

100 $

The Ellsberg Paradox

Ellsberg’s paradox demonstrates that the rationality principles of the now classic von Neumann–Morgenstern–Savage Theory does not hold in all decision situations. Thus, Ellsberg2 could show that decisions by reasonable people can violate the “sure-thing principle”, which is considered essential in the theory of rationality. A decision situation, that demonstrates the paradox well, is the “three-color problem” (Ellsberg 1961). There are 90 balls in an urn. They are red, black, or green. Only the exact number of red balls is known (Table 1). With Decision 1, you have to choose between a and b; with Decision 2, you choose between c and d. The event “green” has the same consequences for both decisions (zero for a and b, $100 for c and d) and can therefore be cancelled according to the “sure-thing principle”. But then Decisions 1 and 2 agree, so the choice of a should result in the choice of c too. Likewise, b and d are consistent. Nevertheless, a large percentage of the probands prefer a to b, but not c to d. This “irrational” inconsistency contradicts the “sure-thing principle” of rationality theory. The inconsistency can be explained by a psychological tendency to avoid uncertainty.

2 Daniel Ellsberg was an employee of the Rand Corporation, a think-tank on military strategy

issues. The Rand Corporation had many game theorists in its ranks; the Prisoner’s Dilemma also emerged from the Corporation. Daniel Ellsberg, who worked for the Pentagon at the time, later became a peace activist. He was the courageous whistleblower who – like Edward Snowden – risked his freedom on the grounds of conscience in order to expose the deception of the American public regarding the Vietnam War by the Nixon administration (the “Pentagon Papers”). Snowden, in his own words, followed Daniel Ellsberg’s example. In the Steven Spielberg film “The Post”, the publication of the Pentagon Papers is staged. Ellsberg was awarded the Dresden Peace Prize in 2016.

From Pascal to Ellsberg

17

The inconsistency with the “sure-thing principle” can be shown more precisely (Segal 1987). Using P2 above define B as the event “green” and ∼ B (non-B) as the event “red or black”. Assume g corresponds to a, f to b, g  to c, and f  to d. When ∼ B(= red or black) turns out, g = g  and f = f  (Table 1). However, if B occurs (a green ball is drawn), f = g and f  = g  . By P2, when g is preferred to f (f  g) it follows that g  is preferred to f  ( f   g ). In other words, P2 implies that a rational person following the “sure-thing principle” and when preferring a to b, must prefer c to d. The inconsistency of Decisions a and d also becomes clear if one thinks about the beliefs of the decision under uncertainty. If option a is preferred to option b for Decision 1, a rational person should assume that there are fewer than 30 black balls in the urn. Otherwise, one would choose b. From this, it follows that the number of green balls is larger than 30. However, one would then have to choose option c for Decision 2, because by assumption there are 30 red balls and more than 30 green balls, i.e. a total of more than 60 red and green balls, which are assumed to bring a profit of $100.

5

An Experiment with the “Three-Color Problem”

How pronounced are the inconsistencies empirically? Which persons decide inconsistently and which “rationally” in the sense of von Neumann and Morgenstern’s standard rationality theory? It could be assumed that people who choose the rational alternative in other decision situations also behave according to the rationality postulates in the three-color problem. Furthermore, one could assume that persons who are risk-averse are more likely to avoid the uncertain alternative (Trautmann and Van de Kuilen 2015). To test the hypotheses, I conducted an online experiment with students of an Indian university.3 The students received a link to the survey. This pilot project involved 160 participants who worked on several decision problems of a decision science survey. Besides the three-color problem, decisions were to be made in various social dilemmas. However, the gains to be achieved in the decisions were hypothetical. For the three-color problem, Decisions 1 and 2 were presented in Table 1. The results are shown in Table 2. The results are very clear. The majority of respondents made inconsistent decisions. The combination a and d was the most common, with 48%; 10% chose b and c. Altogether, 58% of the decisions did not agree with the axioms of standard rationality theory.

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Table 2 Decisions made by subjects on the “Three-Color Problem”

a

b

c

36 (23%)

16 (10%)

52 (33%)

d

77 (48%)

31 (19%)

108 (68%)

113 (71%)

47 (29%)

160 (100%)

Are there people who consistently act rationally in the sense of classical theory? For the purpose of answering this question, the four combinations of decisions in Table 2 were related to individually rational decisions in four dilemma situations in a logistic regression (trust game, N = 10-volunteer’s dilemma, N = 100-prisoner’s dilemma, beauty contest game: see Table 3). Additionally, age and gender were included. There was no significant correlation in the predicted

Table 3 Logistic regression of combinations of decisions with Ellsberg Paradox (log odds) Dependent variablea

ac ad (consistent)

bc

bd acbd (consistent) (consistent)

Equilibrium strategy in −0.475 trust game (“sending no (0.421) money”)

−0.097 (0.360)

0.153 (0.598)

0.611 (0.481)

0.031 (0.359)

Freeriding in N = 10: volunteer’s dilemma

0.256 (0.444)

−0.433 (0.361)

0.204 (0.600)

0.346 (0.467)

0.339 (0.363)

Freeriding in N = 100: prisoner’s dilemma

−0.483 (0.407)

0.690** (0.351)

−0.597 (0.551)

−0.171 (0.428)

−0.452 (0.344)

Choice of low number in beauty contest game

0.096 (0.453)

0.745* (0.388)

−1.635 (1.057)

−0.682 (0.539)

−0.354 (0.389)

Risky choice of lottery

0.459 (0.409)

−0.547 (0.353)

−0.152 (0.588)

0.457 (0.420)

0.626* (0.346)

Age

0.008 (0.020)

−0.010 (0.018)

0.023 (0.024)

−0.009 (0.023)

−0.001 (0.018)

Gender (reference group women)

−1.156*** (0.438)

0.613 (0.416)

−0.195 (0.629)

0.744 (0.585)

−0.497 (0.401)

Constant

−0.340 (0.759)

−0.393 (0.688)

−2.220** −2.434** (1.012) (0.977)

160

160

Number of observations 160 Log likelihood

−80.390

−103.929 −48.719

−0.025 (0.680)

160

160

−74.622

−104.901

1 Binary dependent variable of combination (0/1). ac, bd, and acbd are consistent combinations

of decisions. *p < 0.1, **p < 0.05, ***p < 0.01. Standard errors in parentheses

From Pascal to Ellsberg

19

direction. For example, persons who chose the dominant strategy in the generalized prisoner dilemma were not more likely to make a consistent choice in the three-color problem than persons who behaved cooperatively in the prisoner dilemma. The signs even point in the opposite direction – i.e. those who chose the dominant strategy were more likely to make an inconsistent choice in the three-color problem. A significant coefficient was found for gender (p < 0.01), but only for the combination a and c: women chose this combination less often than men. A weakly significant correlation was observed for risky decisions ($300 lottery with a probability of one-third, $30 with a probability of two-thirds, versus a hypothetical $100) and the overall consistent decisions acbd. Subjects who took risky decisions exhibited a tendency for more consistent choices compared to risk-averse subjects. All in all, the Ellsberg paradox was very strong and the inconsistent decisions could not be attributed to a particularly “irrational” group of people. Persons who act in other decision situations in the sense of the classical theory of rationality do not do so in the problem presented by Ellsberg!

6

Explanation and Consequences of the Paradox

Ellsberg’s paradoxes occur in pairs of decisions when the probabilities of consequences are known in one case (“tomorrow the sun will shine with a probability of 30%”), but in the other case they remain uncertain (“tomorrow the sun could shine”). One explanation for the “irrational” and inconsistent behavior in the sense of the standard theory is that many people do not like uncertainty; they are willing to pay a price for avoiding “ambiguity”. Ellsberg (1961) already suggested this explanation. The Ellsberg paradox poses a serious challenge to the theory of rationality and thus to the foundation of modern economic theory. However, it is not merely an abstract problem for philosophers in an ivory tower. The avoidance of ambiguity can, in fact, make itself felt in many decisions in everyday life – in business, politics, law, or in medical treatment options, as Camerer and Weber (1992) note. For example, other things being equal, vaccinations may be less accepted when negative side-effects are uncertain than when there are known probabilities of side-effects. Insurance companies may demand additional premiums if the probability of damaging events is not quantifiable. A case in point are nuclear power plants and the uncertainties caused by climate change. In criminal proceedings, if the consequences of the proceedings in court are ambiguous, a plea bargain is more likely to be made to the detriment of the

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accused (Segal and Stein 2006). On stock markets, investors pay a price for investment strategies avoiding uncertainty. Thus it can happen that domestic companies are overweighted, although a broader commitment would have helped achieve higher profits (Camerer and Weber 1992; Trautmann and Van de Kuilen 2015). The paradox is of great importance precisely because, unlike in the models of economic theory and risky decisions in general, the exact probabilities for the consequences of action are not known in most cases. We do not know what the probability is that another euro crisis will occur or what consequences Brexit will have. In other words, we rarely make decisions “under risk”, but mostly “under uncertainty”. This is one of the reasons why Ellsberg’s work has generated a large amount of scientific research – theoretical work, the development of alternatives to the theory of rationality, and a large number of experiments (for an overview, see Trautmann and Van de Kuilen 2015). One of the best-known descriptive decision theories is Tversky and Kahneman’s (1981) Prospect Theory. Prospect Theory succeeds in systematically explaining a large number of anomalies of classical rationality theory, such as different behavior in case of gains and losses or the handling of very small probabilities. For example, people get involved in risky investments or gambling, while the same people buy insurance and thus pay a price to protect themselves against risks. If you own an expensive antique, you will not give it away even for a high price, but you would not buy a new one for the same price or even a slightly lower price (the “endowment effect”) – no doubt a contradiction to classical rationality theory. The merit of Kahneman and Tversky is above all the development of a systematic and very elegant theory of human decisions that can explain numerous paradoxes. It is a bit like the particle zoo of physicists. Again and again, in the spirit of the science theorist Kuhn (1962), new anomalies arise that are the breeding ground for a paradigm shift. Tversky and Kahneman’s theory is essentially based on the principle of the asymmetry of gain and loss. People take risks when they have suffered losses and act conversely when they are on the winning side. Even Prospect Theory, however, is not the end of the story. Some paradoxes disappear when the probabilities in decision problems are formulated as frequencies (Gigerenzer and Edwards 2003). This has very practical consequences. Medication package inserts do not state the probabilities of unpleasant side-effects; they provide information on frequencies that are easier for patients to understand. This also applies to more complicated decision-making problems. Lay persons and experts, not excluding experts in decision theory, make logical errors in risk assessments and draw erroneous conclusions from probabilities, especially under time pressure. For example, judges have come to the wrong conclusions in trials and doctors and patients incorrectly

From Pascal to Ellsberg

21

assess surgical risks in hypothetical tasks, as experiments have clearly demonstrated. If, on the other hand, probabilities are replaced by (relative) frequencies in more complex decision-making situations, then the correct conclusions are more likely to be drawn. However, the Ellsberg paradox is resilient and also not compatible with the original Prospect Theory. Tversky and Kahnemann have expanded the theory and tried to explain systematic behavioral deviations with a revised version of the theory: “Cumulative Prospect Theory”. Nevertheless, with each extension and revision of the theory – one is somewhat reminded of the epicycles of the Ptolemaic system – descriptive decision theory moves further and further away from normative rationality theory. The aim of the psychologization of descriptive decision theory is to explain the actual behavior of people. A simple and systematic theory is then replaced by complex theories or rules of thumb and heuristics, which are often superior to complex decision rules when faced with uncertainty and time pressure. How can the gap between descriptive and normative theory be overcome? If one wants to explain the actual behavior of people, one will resort to developments in psychological descriptive theory. In parts of the economic sciences, this path has been followed for several decades with behavioral economics. Increasingly, variants of descriptive decision theory are also becoming the basis of all empirical social sciences that aim to explain social behavior. If, however, one wants to improve decisions and make optimal use of available information, for example the introduction of a new surgical technique, then the reference point of normative rationality is indispensable. Explanations of human behavior require a theory that goes beyond the classical theory of rationality. Bounded rationality theories can meet these demands, but does this make classical rationality theory obsolete? That cannot be said either. The classical notion of rationality is similar to an “Idealtypus” in the sense of Max Weber. Advocates of the theory of rationality like Thomas Voss claim that the parsimony of the assumptions of classical theory is an advantage and that classical theory is sufficient in many situations to explain derived macrophenomena. Only when this is demonstrably not the case should one resort to bounded rationality theories. The paradoxes of decision theory have taught us much. They are a motor of scientific progress. On the long road to the development and refinement of descriptive as well as normative decision theory, paradoxes have repeatedly provided new impulses. However, an end to this development is still by no means foreseeable.

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Acknowledgements I would like to thank Felix Ries, University of Leipzig, Germany, for the implementation of the survey and the data analysis. I am grateful to Nikesh Kumar, Institute of Engineering and Management (IEM), Kolkata, India, for his support of the survey, and to the students of the IEM for participating.

References Andreoni, J., and J. Miller. 2002. Giving according to GARP: An experimental test of the consistency of preferences for altruism. Econometrica 70:737–753. Burns, J.H. 2005. Happiness and utility: Jeremy Bentham’s equation. Utilitas 17:46–61. Camerer, C., and M. Weber. 1992. Recent developments in modeling preferences. Uncertainty and ambiguity. Journal of Risk and Uncertainty 5:325–370. Devlin, K. 2008. The unfinished game. Pascal, Fermat, and the seventeenth-century letter that made the world modern. Philadelphia: Basic Books. Ellsberg, D. 1961. Risk, ambiguity, and the Savage axioms. The Quarterly Journal of Economics 75:643–669. Gigerenzer, G., and A. Edwards. 2003. Simple tools for understanding risk. From innumeracy to insight. British Medical Journal 327:741–744. Hacking, I. 1975. The emergence of probability. A philosophical study of early ideas about probability, induction, and statistical inference. Cambridge: Cambridge University Press. Kuhn, T. 1962. The structure of scientific revolutions. Chicago: University of Chicago Press. Raub, W., and T. Voss. 1981. Individuelles Handeln und gesellschaftliche Folgen. Das individualistische Programm in den Sozialwissenschaften. Darmstadt: Luchterhand. Raub, W., and T. Voss. 1986. Conditions for cooperation in problematic social situations. In Paradoxical effects of social behavior. Essays in honor of Anatol Rapoport, ed. A. Diekmann, and P. Mitter, 85–103. Heidelberg: Physica. Savage, L.J. 1954. The foundations of statistics. New York: Wiley. Segal, U. 1987. The Ellsberg paradox and risk aversion: An anticipated utility approach. International Economic Review 28:175–202. Segal, U., and A. Stein. 2006. Ambiguity aversion and the criminal process. Notre Dame Law Review 81:1495–1551. Trautmann, S.T., and G. van de Kuilen. 2015. Ambiguity attitudes. In The wiley blackwell handbook of judgment and decision, ed. G. Keren, and G. Wu, 89–116. Oxford: Wiley. Tversky, A., and D. Kahneman. 1981. The framing of decisions and the psychology of choice. Science 211:453–458. Tversky, A., and D. Kahneman. 1992. Advances in prospect theory. Cumulative representation of uncertainty. Journal of Risk and Uncertainty 5:297–323. Von Neumann, J., and O. Morgenstern. 1947. Theory of games and economic behavior, 2nd ed. Princeton: Princeton University Press. Voss, T. 1982. Rational actors and social institutions: The case of the organic emergence of norms. In Theoretical models and empirical analyses. Contributions to the explanation of individual actions and collective phenomena, ed. W. Raub, 76–100. Utrecht: Utrecht E.S.-Publ.

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Voss, T. 1985. Rationale Akteure und soziale Institutionen. Beitrag zu einer endogenen Theorie des sozialen Tauschs. München: Oldenbourg. Voss, T. 2001. Game theoretical perspectives on the emergence of social norms. In Social Norms, ed. M. Hechter, and K.-D. Opp, 105–139. New York: Russell Sage.

Andreas Diekmann, Prof. Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; ETH Zurich, D-GESS, Haldeneggsteig 4, 8006 Zürich; [email protected]; current research interests: social norms, social dilemma games, climate policy.

Rationology, Rationality and Reason Hartmut Kliemt

Abstract

Much of the success of the Rational Choice T heory, RCT, approach to human behavior is due to interpreting the so-called Folk theorem of game theory as explaining how the so-called Hobbesian problem of social order can be solved among opportunity-seeking rational actors. However, taking future directedness of rationality seriously, RCT may not at all be an explanatory theory of rational choice. It may be what Reinhard Selten characterized and endorsed as “rationology”, a kind of “theology of rationality” or a modeling tool without independent explanatory status. These issues are addressed in relation to views on RCT ascribed to Thomas Voss. Keywords

Rational choice theory • Folk theorem • Approximate explanations Instrumental reason • Reinhard Selten • Thomas Voss

1

•

Introduction and Overview

Thomas Voss and I went to school in the same town – Dortmund – share the same background in moral science – British Moralism – and have been early German adopters of formal rational choice theory, RCT. Our paths crossed first in 1983 after – independently of each other – we had formed very similar views

H. Kliemt (B) Justus-Liebig Universität Gießen, Gießen, Deutschland © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_3

25

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H. Kliemt

concerning the “possibility of cooperation”.1 Looking back it is a puzzle to me why we did not collaborate more after we first met.2 Suspecting with hindsight that this is due to the fact that Thomas Voss and I are members of two different sects within the broad church of rational choice approaches, I will dwell in this paper in honor of Thomas Voss mainly on what sets the two sects of RCT apart despite basic agreement on the fruitfulness of RCT. The one sect interprets classical game theory as an “explicatory” ideal rather than an “explanatory” real theory.3 Ideal RCT provides a modeling language. It does so much the same way in which modern geometry implicitly fixes the meaning of terms with pre-theoretical meaning like “point”, “line” etc. exclusively as fulfilling the axioms.4 The original Hobbesian aspiration of forming an empirically relevant RCT “more geometrico” on a priori grounds is not implied, though.5 The other sect intends to interpret RCT as an explanatory theory. Though within a modern, broadly Humean conception of empirical science there is no way 1 I am alluding here to Michael Taylor. His seminal “Anarchy and cooperation” had a decisive

influence on my own views on how to model arguments in political philosophy. It was republished in a less formal version under the title “The possibility of cooperation”; see (Taylor 1976, 1987). 2 My friend Manfred Holler had passed on a copy of a 1983 manuscript documenting my efforts to apply rational choice tools to reconstruct the Humean theory of institutional evolution. Then Rainer Hegselmann arranged a meeting between Thomas Voss, Werner Raub him and me in a restaurant at the old market of Dortmund. After this Rainer and I became “brothers in sin” cultivating our opposition to “deep German philosophy”. But somewhat strangely and despite my own move towards economics the collaboration with Thomas Voss and Werner Raub never took off. 3 “Explication” in the sense of (Carnap 1956), “explanation” in the sense of (Hempel 1966); see on explication (Siegwart 1997) see on the formal interpretation of classical game theory that is neutral with respect to the preceding distinction (M. Albert and Kliemt 2021). 4 The introduction to (Kleene 1952) and the more popular (Nagel and Newman 2008) still provide lucid introductions to structural thinking. 5 In economics old metaphysical conceptions pre-dating the rise of Non-Euclidean geometries in the second half of the nineteenth century lingered on in particular in v. Mises’ work on rational choice. They are still popular among many, not only “Austrian economists”. Though Reinhard Selten rejected claims to empirically relevant a priori insights he was indirectly influenced by some Austrian ideas. Biographically it is noteworthy but not commonly known that Heinz Sauermann – who together with Selten founded the German branch of experimental economics in the 1960 s independently but parallel to Vernon Smith’s efforts in the US – finished his dissertation in Vienna and became familiar with the ideas floated by Mises. That these aspects of the social network of science may be relevant, regrettably dawned on me only when it was too late to ask Reinhard Selten himself about them; see for background and references (Kliemt 2017).

Rationology, Rationality and Reason

27

to guarantee empirical truth on a priori grounds,6 Hobbesian apriorism lingers on in many economic applications of modern RCT. Economists, in particular, tend to claim that ideal RCT provides “approximate explanations” and, more importantly, “predictions” of behavior whenever RCT models logically imply that these behaviors should be observed.7 Calling mere logical implications of RCT by the term “prediction”, independently of the empirical validity of the axioms underlying RCT, is methodologically problematic.8 It conceals not only the distinction between claims made on a priori (analytical), respectively, a posteriori (empirical) grounds but also the difference between two conceptions of rationality: the one requires merely formal consistency of choice making whereas the other adds (at least) future-directedness. Thomas Voss seems to subscribe to a conception of rationality that reduces it to consistency of choice making.9 Yet, neglecting that the – in the pre-theoretical sense – rational actor “seeks” to improve her situation in view of the causal consequences of her choice acts is central to RCT, too. Without it a principled distinction from sociological approaches that endorse an “over-socialized conception of man” will be hard to make.10 Without further ado, I will assume subsequently that opportunity seeking future-directedness of rational choice making is constitutive for the rational choice conception of neo-classical economic and classical game theoretic approaches. For the sake of terminological simplicity and brevity I will refer to all approaches that claim approximate explanatory status for a RCT based on universal futuredirectedness of opportunity-seeking rational choice as “economic” (including RCT contributions from other disciplines of social theory). To approaches that

6 See

(H. Albert 1985); a view to which Thomas Voss seems to subscribe in principle, too.

7 (Friedman 1953) is still popular in one way or other. On the issue of approximate explanations

I am following Max Albert; see (M. Albert and Kliemt 2017). Harry Belafonte it seems “clear as mud but at least it covers the ground” https://www. youtube.com/watch?v=LvN6-RK66Bo. 9 In (Diekmann and Voss 2018) we read in Sect. 5: „Rationalität “ ist aber nicht mehr (und nicht weniger) als konsistentes Handeln.” It seems to me from the context of the paper and from (Voss 1985) that here “konsistentes Handeln” is characterized by the axioms that guarantee representability of preferences by a utility function as invoked in the revealed preference conception. 10 Behavioral choices resulting from internalized norms of behavior can be consistent and be representable by utility functions whether they be in the material interest of actors or not etc. 8 With

28

H. Kliemt

reject the universality of opportunity-seeking in rational choice I will refer as “sociological” (including empirical social psychology).11 Presenting my argument with a kiss (keeping it simple stupid) I start with an attack on sociologists who reject RCT in the name of reason (e.g. members of the “Frankfurt School” not the business school whose member I have been for a while) (2.). Next, I will turn to rationality and against the so-called Folk theorem – in fact a cluster of structurally similar theorems – whose alleged explanation of social phenomena has been behind much of the appeal of RCT approaches in and beyond economics (3.). Final observations on Selten’s “rationology” (4.) and a non-metaphysical interpretation of Selten’s “methodological dualism” lead to somewhat more conciliatory conclusions (5.).

2

Reason

Adherents of the so-called “critical” theory of the “Frankfurt School” dismiss the opportunity-seeking means-ends-rationality underlying RCT as ‘mere’ instrumental reason (“instrumentell halbierte Vernunft”). Most of the adherents of the Frankfurt School do so without ever adequately representing the conception that they reject. But Jürgen Habermas as current “leader of the pack” is different in that he understood the basic outlook if not the formalism of the position he was and is still trying to overcome. As a testimony of this we find an endorsement of McIntyre’s characterization of instrumental rationality in Habermas’ writings.12 The relevant passage from “After Virtue” to which Habermas refers deserves extended quotation since there McIntyre characterizes the position he criticizes with exemplary clarity: “Reason is calculative, it can assess truths of fact and mathematical relations but nothing more. In the realm of practice therefore it can speak only of means. About ends it must be silent.”

Next McIntyre puts his succinct characterization of the core of a “narrow conception of reason” into historical perspective: “Reason cannot even, as Descartes believed, refute skepticism; and hence a central achievement of reason according to Pascal, is to recognize that our beliefs are ultimately founded on nature, custom and habit. Pascal’s striking anticipations of Hume … point 11 This 12 In

use of terms is justified in more detail in (Kliemt 2020). (Habermas 1983).

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29

to the way in which this concept of reason retained its power. Even Kant retains its negative characteristics; reason for him, as much as for Hume, discerns no essential natures and no teleological features in the objective universe available for study by physics.” … (MacIntyre 1984, p. 54).13

Neither a rebuttal of McIntyre’s Anti-Enlightenment nor of Habermas’ rationalist Super-Enlightenment stance is an appropriate topic for an essay in honor of Thomas Voss. It is important to note, though, that the position McIntyre and Habermas oppose is the specific kind of non-cognitivism in matters practical which originated in the work of Hume and became widely shared in the twentieth century among social theorists. Max Weber and – in his tracks – Lionel Robbins come to mind immediately. Legal theorists like Hans Kelsen, moral theorists like John Mackie and political economists like James Buchanan all endorse this kind of basic meta-ethics as constitutive for their “moral science” perspective.14 It is here that they meet up with critical rationalist accounts of social theory. The latter, in the German context in particular that of Hans Albert, are diametrically opposed to dogmatic theories that derive their conclusions from assumptions a priori (the old “more geometrico” style). All claims to transcend instrumental rationality as formalized by the standard model of rational decision-making for normative purposes seem suspicious to me and as far as I know also to Thomas Voss. It seems important to explicitly state this fundamental agreement, since it is not here, but in another aspect of the rationality concept that our disagreement seems located.

3

Rationality

3.1

Modeling Rational Decision Making

In his book on rational decision theory, Itzak Gilboa states:

13 An adequate conception of practical reason cannot be founded on modern accounts of the scope and limits of reason since “(a)ll reject any teleological view of human nature, any view of man as having an essence which defines his true end. But to understand this is to understand why their project of finding a basis for morality had to fail.” (MacIntyre 1984, p. 54). 14 (Berggren 2016) is particularly instructive on some of the psychological motives behind these attitudes.

30

H. Kliemt “The classical notion of a decision matrix relies on the distinction between acts and states. This distinction may bring to mind the “Serenity Prayer” of the American pastor Reinhold Niebuhr, which reads, ‘God, give us grace to accept with serenity the things that cannot be changed, courage to change the things that should be changed, and the wisdom to distinguish the one from the other’… The things we cannot change are the states of the world. We should accept them, namely, cope with the fact that they are possible and estimate their likelihood irrespective of how desirable they are. The things we can change are our acts. We should have the courage to change our choices, which requires not taking as given knowledge that we have about ourselves from the past. And having the wisdom to distinguish between acts and states is one of the main challenges in approaching any decision problem.” (Gilboa 2009, pp. 12–13)

Again, I trust that Thomas Voss concurs with me in appreciating the wisdom of Gilboa’s characterization of the essential values underlying rational practices of forming decision models – inclusive level 2 practices of modeling level 1 practices.15 For me these values formed the point of entry to game theoretic models of inter-active choice and decision making.16 Whatever Thomas Voss’ point of entry to game theory may have been, we certainly agree that the rise of formal game theory since mid-twentieth century was essential for the impressive progress of social theory since World War II.17 But I sense out disagreement concerning 15 Extending Jeremy Bentham’s laconic remark “that the demand for a right is no more that right than hunger is bread” (Bentham 1843) it may be stated that ‘the demand that a fact exist is no more that fact than hunger is bread’. Though this may seem of triumphant banality in theory in the practice of social theory and so-called “political disourse” it is routinely violated along with the values expressed by Gilboa. 16 It may be interesting as an aside of not merely personal relevance that I came to RCT through Rawls when reading his theory of justice as a philosophy student (Rawls 1971). Rawls had been very strongly influenced by his reading of Baumol’s RCT text of 1961 (Baumol 1972). This attracted me in my parallel bread-winning studies of BWL, Business Administration, to OR. In my OR training I was warned that game theory is useless because it – except for zero sum games – does not provide a closed solution theory. When I was later teaching OR as a research assistant in an economics department it took a political philosophy book (Taylor 1976) to stir up my interest in game theory. For me it was too late for a thorough training in the field but even as a pedestrian game theorist I wonder what would have become of social and political philosophy had Rawls been exposed to (Schelling 1960) instead of Baumol’s text. It helped at least me to abandon contractarianism for good; see for a technical game theoretic account of some aspects (Okada and Kliemt 1991). 17 James Buchanan, when asked in 1998 with other Nobel Prize laureates in economics what the most important developments in economics in the years before the turn-of-the-century were, initially named several as did other laureates. But “thinking twice” he came to the conclusion that he should revise his view to single out game theory; see (Buchanan 2001). Further comments can be found in the celebratory reprint of von Neumann’s and Morgenstern’s seminal “Theory of Games and Economic Behavior” (Buchanan et al. 2001).

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31

what that success precisely amounts to. For me, it is mainly due to the establishment of the modeling language that RCT provided in formulating, communicating and testing empirical theories and not due to an independent explanatory contribution of RCT. Contrary to this, Thomas Voss, like most economists seems to attribute independent empirical status to RCT and to game theory as yielding (“approximate”) explanations of real behavior.18 I believe that professional economists or professionals from other disciplines are led astray here by the convenience of using the language of RCT. Focusing on proving certain theorems within the context of formal models, they lose sight of substantial factors like those Gilboa describes. In particular they do not take the crucial role of the assumption of opportunity-seeking behavior in RCT seriously enough.19 Dropping the term “language” I use Rational Choice Modeling, RCM, henceforth to refer to the language part of RCT. Though the explanatory status of RCT seems precarious, I endorse the use of RCM without reservation.20 When they address some situation of (inter-)active choice making, social theorists can rely on RCM to make their in the last resort empirical presuppositions concerning the “rules of the game” explicit.21 This becomes possible by implicitly accepting a practical norm that may be called “the explicitness norm of nonco-operative game theory” according to which what is not explicitly “on paper” is, for analytical purposes, assumed not to exist.22 Thereby, the interpretation of mathematical structures becomes fixed according to the semantic rules of

18 If I should misattribute this tenet to Thomas then this can be hopefully be clarified for good over a coffee in Munich sometimes in the future should he read this paper and take issue with it. 19 The distinction to rival sociological and social psychological approaches hinges on the different treatment of instrumental rationality and opportunism. 20 Yet, as later sections of this essay show, I am uncertain why exactly RCT is useful and for what purposes. 21 As understood here the rules comprise everything that is beyond the influence of moves of the actors as chosen in a play of the game. Note that not only the extensive game form in substantive payoffs but the preference ordering of possible “plays” are beyond the causal influence of choices within plays of the game. 22 This may seem utterly trivial. And, in a way it is. However, many of the more heated debates concerning rational choice models arise from violations of the explicitness norm – e.g. commitments that are not explicitly modeled are assumed to exist; see for more on this (Güth and Kliemt 2007).

32

H. Kliemt

RCM (which themselves are explicated by the axiomatics of ideal rational choice conceptions).23 Making good use of RCM shows that an RCT based on universal opportunityseeking is incompatible with elementary observational facts. This is clear ever since the ultimatum game was introduced in an “experimentum crucis” refuting future-directedness of choice in view of extrinsic substantive motives of the game form (Güth et.al. 1982). Moreover, beyond experimental evidence, once universal opportunity-seeking is taken seriously as a background premise, the “Folk theorem” – which plays an absolutely central role in game theoretic RCT “explanations” of social behavior – becomes precarious. It loses ground even on its home turf of ideal theory of interactive choice making among ideally rational actors: there is nothing left in the ideal RCT models that could serve as basis for the alleged approximation of real behavior.

3.2

No Theorem Folks!

For starters, recall a distinction originating in “social choice theory”: a game form is the description of the move and information structure along with substantive payoffs (e.g. rewards in e, status, …); a game arises once the subjective perceptions of the game form as endorsed by the players and their knowledge of the form and subjective preferences are included in the model (typically “closed” by postulating “common knowledge” on some level).24 As already indicated, I believe that Thomas Voss like most of neo-classical economists has been focusing too much on integrated “subjective” preferences and their consistency (representability) while neglecting the complementary assumption that the rational actor ranks and chooses exclusively in view of the anticipated causal consequences of each option of choice offered by the game form.25 23 This makes precise communication in particular in the burgeoning field of PPE (philosophy, politics, and economics) viable across disciplinary boundaries. 24 Many of the disputes concerning the interpretation of RCT can be avoided by distinguishing strictly between the two elements of the pair (game form, game). This has been one of the reasons for developing an indirect evolutionary approach that basically works both – the objective and the subjective – sides of the street by including both the “objective/substantive” payoffs and the “subjective payoffs” that represent as utilities the subjective rankings of objective payoffs by personal actors; see (Güth and Yaari 1992; Güth and Kliemt 1994; Berninghaus et. al. 2003, 2012). 25 The relative neglect of future-oriented opportunism as compared to consistency of preferences seems to me prevalent in the impressive dissertation Voss (1985), as well as in an early

Rationology, Rationality and Reason

33

According to the underlying action-related originally Hobbesian rationality concept “people would act economically; when an opportunity of an advantage was presented to them they would take it” (Hicks 1979, p. 43).26 In line with the conception of instrumental reason causal effects are exerted in pursuit of ends by a human actor as a “doer” – in the sense of Pearl (2000) and not merely as an “evaluator”. It is against this background that Reinhard Selten’s approach to the manifold relationships and tensions between commitment and future-oriented strategic choice should be understood. Guided along by his observations of real behavior in his first oligopoly experiments in the late 1950 s, early 1960 s, Selten started not only the tradition of formalizing aspects of Schelling’s (1960) insights concerning the substantive role of commitment power – or a lack thereof – in concepts like subgame perfectness. He also recognized subsequently that strict future directedness requires that “structurally identical” subgames (futures) reached after different histories of play should induce structurally identical strategic plans among strictly future-oriented actors (after all “bygones are bygones”). In particular, in the simplest case of identically repeated pd like 2X2 games this would not allow for any non-equilibrium deviation from the strictly dominant strategies singling out the unique equilibrium of the basic (one-off) pd games of the sequence. This would leave no wiggle room for the contingently cooperative strategies underlying the Folk theorem for repeated interactions: the only equilibrium profile for an indefinitely identically repeated 2X2 pd would be (D∞ , D∞ ); that is, both players would always choose defect or pursue a “supergame strategy” of choosing on all rounds of the indefinitely repeated play of the pd (the “supergame”) the dominant alternative D. At the risk of beating this to death, if the preceding argument goes through then on no round of play cooperation can be opportunistically rational regardless of social embeddedness in the sequence. Showing the possibility of cooperation in pd interactions would not be among the results of theorems that comply with the requirement of subgame consistency as a consequent expression of the assumption of future-directedness. programmatic paper by Hegselmann et al. (1986). My contrary position is to be found in (Kliemt 1987). Since what I have to say is in this regard not meant to be merely ad hominem I will not go into exegesis of that older paper. 26 Independently of the empirical truth or falsehood of Hicks’ statement it is noteworthy that it appears in his “causality in economics”. The quasi-teleological character of the psychology of choice making can be made compatible with the conception of a “causally closed world” in which events occur subject to stochastic law-like regularities in causal networks; see (Pearl 2000).

34 Table 1 Outcomes of standard pd0 game form in monetary payoffs

H. Kliemt

B A

CB

DB

CA

(3e, 3e)

(1e, 4e)

DA

(4e, 1e)

(2e, 2e)

Before I briefly rehearse the argument in proof of this inconvenient truth about the implications of strict future orientation let me hasten to mention three caveats: First, the subsequent sketch is not a formal proof but, I believe, sufficiently close to one to illustrate its core mechanics. Second, I do not know whether Thomas Voss has said something to broadly the same effect in his writings of which I am not aware, then I apologize. Third, if not, Thomas is in good company insofar as Robert Aumann, has defended views that also downplay the role of opportunism as opposed to the position of Reinhard Selten for whom future directed opportunism has been constitutive of rationality. Since an example of the one-off simultaneous pd game form must show up somewhere in a paper celebrating Thomas Voss, the one presented in Table 1 will do and we can consider for any finite n > 1 sequences n pd: = (pd1 , pd2 , pd3 , …, pdn ) of n such identical game forms with pdt : = pd0 , t = 1, 2,…, n. If future oriented actors are playing the game n pd then on the last round of play pdn = pd0 and, since it is the last game form in the sequence, there is – due to the explicitness assumption that shields off real world social embeddedness for modeling purposes – nothing in the future (as captured by the model) that could motivate behavior deviant from that in pd0 . Therefore, if actors are exclusively extrinsically motivated by the substantive monetary payoffs of the game form pd0 (in the “natural” payoff order in which more money is better than less) and by the future consequences of their acts taken separately the dominant strategy equilibrium of pdn is identical with that of pd0 (the numbering of games should not matter).27 In the round n-1 the same argument applies. By backward induction we can infer that the unique strategy equilibrium of pd0 which singles out the profile (DA DB )0 , will single out (DA DB )t for all games pdt , t = 1, 2,…, n in the sequence n pd.28

27 Since they are assumed to be self-regarding, too, only the payoff accruing to the individual actors matters. 28 The “chain store paradox” being the perhaps most famous of the backward induction paradoxes in economics; (Selten 1978).

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35

Now, a popular myth – popular among applied rational choice social theorists – has it that for unknown n the backward induction argument does not hold. But it should be noted that in the standard arguments concerning this, the probability distribution that the end will come at any round n is held constant (at least it does not fall below some positive threshold). This legitimizes to use the constant end-probability as if it were a constant discount factor. Under this assumption consistent exponential discounting yields the familiar expected objective payoffs assigned to the potentially infinite series of plays. Yet, the allegedly merely “simplifying” assumption of constant probability for n→∞ translates into the implausible implicit assumption that the series is infinite (since otherwise there would be rounds in which the game has ended with probability 1).29 We could stop here but for the sake of the argument, let us concede to adherents of the Folk theorem that the concept of an infinite series can be seen as an innocuous idealization like assuming perfect divisibility of discrete quantities.30 Yet, this makes things worse rather than better for adherents of the Folk theorem. For, in any such infinite series, after cutting off the first n rounds and renumbering, the (future) subgame looks always the same. It is structurally isomorphic with the original game and then should have the same solution “(DA , DB )”.31 If only the objective game form matters for overt play theoretical consistency seems to require that structurally identical sequences of objectively identical one-off game forms should have structurally identical solution profiles. Identical futures should lead to identical play and strategic plans independent of history.32

29 The finiteness condition can be rendered comparatively more acceptable by overlapping generations models as suggested in (Kandori 1992) and concretely illustrated in (Brennan and Kliemt 1994). But formally this does not help. 30 Albert and Kliemt (2017) argue that it cannot be treated as an innocuous assumption. 31 One characterization of infinity is that (“paradoxically”) an infinite set may be of the same power (has in a certain sense the same number of elements) as a proper subset of the set. Whereas a man with five fingers on the one and four on his other hand cannot “map” the two sets of fingers one-to-one (the fifth finger of the one hand does not have a counterpart on the other) the set of natural numbers can be mapped one-to-one on a proper subset (e.g., the squares of natural numbers and the natural numbers can be so matched ((1, 12 ), (2, 22 ), (3, 32 ) …) without leaving any number unmatched. Accordingly, in sequences n pd with n→∞ the future after any finite sequence is of the same power and by the assumption of identically repeated game forms pdt = pd0 is structurally the same – composed of identical objects except for isomorphic renumbering. 32 Excluding cycles etc. would require additional considerations but the basic intuition should be clear. A formal account can be found in (Güth et.al. 1991).

36

H. Kliemt

For instance, after n rounds of (DA , DB )t choices, future plans and play should be the same as after n rounds of (CA , CB )t choices – t = 1, 2, …n. If the future-directedness of rational choice is taken seriously the Folk theorem cannot account for “the possibility of cooperation”. Under ideal RCT, deviations from equilibrium play in basic pd games cannot be approximated by raising the number of repetitions.33 Thomas Voss has, like many in the field, nevertheless tried to make good use of the Folk theorem. Toiling in the neo-classical repair shop of combining future-directed pull with evolutionary push in indirect evolutionary modeling I did my best, too. Still, rather than trying to patch up what seems not only empirically – but in case of the Folk theorem also formally – a lost cause it may be better to strictly separate empirically informed uses of RCM in empirical modeling from exploring ideal RCT as a non-empirical enterprise. Reinhard Selten’s “methodological dualism” is an effort to do so.34

4

Rationology

Reinhard Selten is aware that his “methodological dualism” brings him, despite his otherwise thoroughgoing empiricism as a “worldly philosopher”, close to some rather “otherworldly” perspectives (e.g. of the von Mises type). Acknowledging the distance to empirical theory, he characterizes his own interest in pure RCT as quasi-theological. Here is what Selten says: “... let me explain my epistemological position on methodological dualism. In my view, there is a fundamental difference between normative and descriptive decision and game theory. Normative decision and game theory has the aim of exploring full rationality and its consequences. Full rationality is an ideal about the adequacy and coherence of decision-making. It is not meant to be descriptive of how human beings actually behave, but rather of what they think about the structure of the behavior of an idealized decision-maker without any cognitive limitations. This idealized decisionmaker is a mythical hero, whom we may call ‘fully rational man’. Real people have limited powers of logical deduction and computation, but fully rational man has instant access to everything that needs to be logically deduced or computed for adequate and coherent decision-making. …

33 For

a more recent treatment of related topics, see (Qu et al. 2014).

34 Dualism is related to the distinction between a participant’s internal and an objective external

observer’s point of view. How this plays out in the interpretation of game theory as a tool of moral science is discussed philosophically in Kliemt (2009).

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37

Empirical arguments are irrelevant for normative decision and game theory. What counts is the appeal to underlying tendencies in the thinking about what fully rational man is like. The situation is similar to theology, which is concerned about what we should think about God. … In view of the analogy to theology, the study of fully rational man may be called ‘rationology’.” (Selten 1999)

The ideal rationality of “fully rational man” is, as Selten puts it in the citation, “not meant to be descriptive of how human beings actually behave, but rather of what they think about the structure of the behavior of an idealized decision-maker without any cognitive limitations.” (emphasis added, H.K.)35 In view of Selten’s endorsement of evidence-focused experimental work it is slightly surprising that he does not make any effort to empirically describe what human beings as a matter of fact think about the structure of the behavior of an idealized decision-maker but rather relies – similar to Rawls in his search for a reflective equilibrium – on his own “thinking about thinking”. This being acknowledged, we can perhaps further interpret this passage by noting that in theology, experts – “theologians” – discuss with each other and not with ordinary people what anybody “should think about God” (emphasis added, H.K.). So, when it comes to figure out what “we” should think about rational man the term “we” in Selten’s statement may refer to the soul-searching of a rational choice philosopher like himself. It is perhaps not by chance that Spinoza’s related political treatise has a reference to theology also in its title. A remarkable passage in the Theological-Political Treatise reads36 : “Now it is a universal law of human nature that no one ever neglects anything which he judges to be good, except with the hope of gaining a greater good, or from the fear of a greater evil; nor does anyone endure an evil except for the sake of avoiding a greater evil, or gaining a greater good. That is, everyone will, of two goods, choose that which he thinks the greatest; and of two evils, that which he thinks the least. I say advisedly that which he thinks the greatest or the least, for it does not necessarily follow that he

35 As in the case of Herbert Hart’s „the concept of law”, to explicate “law” a whole theory must be developed in case of “ideal rationality” in interactive choice making. Other than in the case of (Hart 1961) who wanted to provide a realistic theory built on stylized facts, Selten intends to present an ideal theory separate from behavioral facts as an explication. 36 Spinoza shook off the last residuals of the older tradition of making what is conducive to survival an indisputable ultimate aim (an externally “imposed” telos as in McIntyre) that lingered on in the work of Hobbes. Spinoza endorsed a fully “economic” rational choice account in terms of subjective aims, ends or values; see on this also (Steinberg 2013). When I used this citation some ten years ago at a symposium in Berlin with critical intention it was rather amusing that Karl-Dieter Opp who attended also, asked with a sparkle in his eyes for the specific references since he thought that it was representing his own position so well.

38

H. Kliemt judges right. This law is so deeply implanted in the human mind that it ought to be counted among the eternal truths and axioms. As a necessary consequence of the principle just enunciated, no one can honestly forego the right which he has over all things, and in general no one will abide by his promises, unless under the fear of a greater evil, or the hope of a greater good…Hence though men make promises with all the appearances of good faith, and agree that they will keep to their engagement, no one can absolutely rely on another man´s promise unless there is something behind it. Everyone has by nature a right to act deceitfully, and to break his compacts, unless he be restrained by the hope of some greater good, or the fear of some greater evil.” (Spinoza 1670/1951, pp. 203–204)

It seems to me that Spinoza’s preceding perceptive remarks are substantively unrealistic but quite realistically reproduce what many economic adherents of RCT, in the tracks of Thomas Hobbes, intuitively think about fully rational man as an opportunity seeking actor to the present day. “Teleological” planning of behavior is possible for humans according to their own self-perception as authors of their choices despite the fact that their acts – thoughts – may from an external point of view regarded as subject to empirical laws (including those of cognitive psychology, if any). But this teleology should be explored as a cognitive psychology phenomenon rather than within a priori RCT. Empirical findings a posteriori can to this effect be represented in terms of RCM to facilitate thorough testing.

5

Teleology Within the Limits of Empirical Science

As a matter of psychological fact, human actors subjectively experience themselves as “authors” of goal-directed intentional action. As author of her acts at least the actor herself must make the distinction between predicting her future choices of acts and making choices of acts. The actor has a teleological understanding of her own action. She does not only represent the world but as an author of acts necessarily understands herself as intervening into it even though, apart from the very act, she may look at herself and be looked at by others as part of the world from an external point of view. To see what is up here, imagine an external observer with the aspiration to predict the trajectory of a human actor who has jumped out of an airplane traveling a thousand meters above ground. Taking into account ground speed of the plane at exit, speed of wind, weight and clothing of the falling individual, arm movements etc. the external observer may get the trajectory approximately right and may be in a position to predict location and time of “touch down” as a prediction in the sense of Hempel (1966).

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39

In analogy to this, a sufficiently informed external observer could on the basis of his knowledge of the natural laws that govern the workings of the human mind (brain and bodily functions) conceivably predict how an actor will make choices concerning how to move through, say a, Skinner box.37 Cognitive and emotional processes are real phenomena. As such they are part of the overall stochastic causal network to which we refer as reality and therefore can from an external point of view be conceptualized as regular natural phenomena. From his external point of view an omniscient observer of the actors in the Skinner box could therefore conceivably make probabilistic predictions of the actions of any specific actor in the box based on, say, a cognitive psychology model of decision making. But for the ideal RCT conception of cognitively unbounded actors this is not the end of the story. The assumption that such fully rational actors can know everything that an external observer knows about them may lead into difficulties: if the external observer would feed his information back to a specific actor in the box, would the prediction of her behavior by the external observer still be of the same type as the prediction of an actor’s trajectory after she had jumped out of the plane? If the external observer would know enough to anticipate the responses of the participant in the box to his feed-back he might still be able to predict her actions. Even the individual in the box could assume that the external observer is in a position to anticipate her responses and can predict her behavior analogously to her flight trajectory after she had jumped out of a plane. Yet, subjectively, until the last moment before making the choice that is predicted she herself must be under the impression that she might still choose otherwise. For her, her knowledge of the external prediction is but another causal influence exerted on her. She knew all the while that she is under causal influences when making her choices, but this knowledge did not put her in a position to predict them from her internal point of view in the proper external sense. At least from her internal agent-relative (first-person) point of view adopting a completely objective point of view is incompatible with a plausible self-conception of agency from her internal point of view. The preceding has given rise to all sorts of claims to an ontological separation of the world of reason and a world subject to law-like regularities. At least I and, as far as I know Thomas Voss, do not see any convincing reason to accept such

37 A popular, yet strikingly elegant and well-informed way to bring together many relevant insights from a vast literature can be found in Sapolsky (2017).

40

H. Kliemt

claims.38 Yet it is a matter of empirical fact, too, that “we” as boundedly rational beings do take an interest to think through what a fictitious world of unboundedly rational beings would be like. Interestingly enough in constructing theories about such a world of unboundedly rational beings, we are not completely unconstrained. From the internal point of view of the participant of interaction there is a reason to single out theories that fulfill the fundamental game theoretic idea that Morgenstern brought to v. Neumann’s high theory table: Theories about the world are a causal factor in the world to the extent that they are shared by participants in the game of life. Becoming known among the actors participating in inter-active choice making theories may be self-supporting or self-subversive.39 The theories that are selfaffirming are special in that they both descriptively predict from an external point of view what will and prescriptively suggest to actors – adopting an internal point of view to the interaction – what they should do in terms of their instrumental rationality on the basis of the theory. For fully rational actors this means that only theories that can become commonly known and commonly believed among and by them symmetrically can be deemed acceptable. To the extent that such actors are opportunity taking this implies that the theories must suggest strategies that are part of equilibria of the game of life since otherwise at least one actor would have a reason to deviate from the theory (i.e. the theory would turn self-subversive).40 To the extent that the objective facts and incentives of the game form of the game of life play a role for the participants in the game of life they have a reason to reflect on reasoning. That the evolutionary game theory analysis of the game form of biological life exhibits in case of our species striking structural similarities to the eductive analysis of the game of life is clearly underappreciated to the present day.41 “When there is a formal relationship between two interpretations, like the rationalistic conscious maximization and evolutionary interpretations of Nash equilibrium, then 38 Including their Cartesian and Kantian variants popular among rationalists ranging from von Mises to Habermas. 39 That theories about the world influence the world was addressed in (Morgenstern 1928). 40 Theory absorption is an interesting topic for equilibrium theory, but beyond the present paper; see (Morgenstern 1972; Morgenstern and Schwödiauer 1976; Dacey 1976; Schotter 1992; Güth and Kliemt 2004). 41 Binmore’s (1987/88) terms of eductive and evolutionary game theory broadly aim at the same as Selten’s distinction between rationology and empirical theory of boundedly rational behavior, though without any allusion to theology.

Rationology, Rationality and Reason

41

one can say, ‘Oh, this is an accident, these things really have nothing to do with each other.’ Or, one can look for a deeper meaning.” (Aumann 1998, p. 192)

Aumann himself states in the next sentence following the quote that “it’s a mistake to write off the relationship as an accident”. I happen to agree that we should not write the observation off. Yet, we lack a full understanding of how the game form of life with its evolutionarily stable equilibria relates to theoretical representations of it including “reflective equilibria” and constraints arising from theory absorption. It stands itself to reason that the points made here are in no way definite. It seems open whether, first, RCT is an approximately correct explanatory theory (as Voss and many of those who work in the economic tradition think), whether, second, there are two categorically distinct ideal and real (behavioral) RCTs (in the spirit of Selten) or whether, third, there is only a unified empirical RCT as legitimate scientific approach to human behavior (in the spirit of H. Albert). As should be clear from the preceding I tend to endorse the last, the critical rationalist unity of science alternative. But I hasten to add that without visiting the gym of ideal RCT we would not have the muscle to dig through the thick layers of social institutions to the core of elementary social problems. Without RCT social theorists would have a much lesser understanding of the (potential) social problems and dilemmas that are solved by social orders. Thomas Voss has contributed much to that understanding, but there are many unresolved problems that a future retiree Thomas Voss might be willing to address.

References Albert, Hans. 1985. Treatise on critical reason. Princeton: Princeton University Press. Albert, Max, and H. Kliemt. 2017. “Infinite idealizations and approximate explanations in economics.” MAGKS Papers on Economics. Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). https://EconPapers.repec.org/RePEc:mar:magkse:201726. Albert, Max, and H. Kliemt. 2021. Classical Game Theory (Ch. 9.1). In The Handbook of Rationality, eds. Markus Knauff and Wolfgang Spohn. Cambridge, MA: MIT Press. Aumann, Robert J. 1998. On the state of the art in game theory: An interview with Robert Aumann. Games and Economic Behavior 24:181–210. Binmore, Ken. 1987/88. Modeling rational players I&II. Economics and Philosophy 3 & 4:179–214 & 9–55. Baumol, William J. 1972. Economic theory and operations analysis, 3rd ed. London: Prentice Hall International. Bentham, Jeremy. 1843. Anarchical fallacies, ed. John Bowring (Vol. 2). Edinburgh: William Tait.

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Berggren, Niclas. 2016. Does belief in objective morality lead to coercion? An analysis of the arguments of kelsen and buchanan. The Review of Austrian Economics 29 (3):315–326. https://doi.org/10.1007/s11138-015-0318-8. Berninghaus, Siegfried, W. Güth, and H. Kliemt. 2003. From teleology to evolution. Bridging the gap between rationality and adaptation in social explanation. Journal of Evolutionary Economics 13 (4):385–410. Berninghaus, Siegfried, W. Güth, and H. Kliemt. 2012. Pull, push or both?: Indirect evolution in economics and beyond. In Evolution and rationality: Decisions, co-operation and strategic behaviour, Samir Okasha and Kenneth G. Binmore, eds. 110–132. Cambridge: Cambridge University Press. Brennan, H. Geoffrey, and H. Kliemt. 1994. Finite lives and social institutions. Kyklos 47 (4):551–571. Buchanan, James M. 2001. Game theory, mathematics, and economics. Journal of Economic Methodology 8 (1):27–32. Buchanan, James M., W. Güth, H. Kliemt, G. Schwödiauer, and R. Selten. 2001. John von Neumanns and Oskar Morgensterns “Theory of Games and Economic Behavior.” Düsseldorf: Verlag die Wirtschaft. Carnap, Rudolf. 1956. Meaning and necessity. Chicago: University of Chicago Press. Dacey, Raymond. 1976. Theory absorption and the testability of economic theory. Zeitschrift für Nationalökonomie 36 (3–4):247–267. Diekmann, Andreas, and T. Voss. 2018. Rational-Choice-Rezeption in der deutschsprachigen Soziologie. In Handbuch Geschichte der deutschsprachigen Soziologie: Band 1: Geschichte der Soziologie im deutschsprachigen Raum. Moebius, Stephan, and Andrea Ploder. 2018, 663–682. Wiesbaden: Springer VS. Friedman, Milton. 1953. The methodology of positive economics. In Essays in positive economics, ed. Milton Friedman, 3–46. Chicago: Chicago University Press. Gilboa, Itzhak. 2009. Theory of decision under uncertainty (1st ed.). Cambridge: Cambridge University Press. Güth, Werner, and H. Kliemt. 1994. Competition or co-operation: On the evolutionary economics of trust, exploitation and moral attitudes. Metroeconomica 45 (2):155–187. Güth, Werner, and H. Kliemt. 2004. Bounded rationality and theory absorption. Homo Oeconomicus XX I (3/4):521–540. Güth, Werner, and H. Kliemt. 2007. The rationality of rational fools. The role of commitments, persons and agents in rational choice modeling. In Rationality and Commitment, eds. Fabienne Peter and Hans Bernhard Schmid, 124–149. Oxford: Oxford University Press. Güth, Werner, R. Schmittberger, and B. Schwarze. 1982. An experimental analysis of ultimatum bargaining. Journal of Economic Behavior and Organization 3:367–388. Güth, Werner, W. Leininger, and G. Stephan. 1991. On supergames and folk theorems: A conceptual analysis. In Game Equilibrium Models. Morals, Methods, and Markets, ed. Reinhard Selten, II:56–70. Berlin et al.: Springer. Güth, Werner, and M. Yaari. 1992. An evolutionary approach to explaining reciprocal behavior in a simple strategic game. In Explaining Process and Change - Approaches to Evolutionary Economics, ed. U. Witt, 23 ff. Ann Arbor: The University of Michigan Press. Habermas, Jürgen. 1983. Moralbewusstsein und kommunikatives Handeln. Frankfurt: Suhrkamp.

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Hart, Herbert L. A. 1961. The concept of law. Oxford: Clarendon Press. Hegselmann, Rainer, W. Raub, and T. Voss. 1986. “Zur Entstehung der Moral aus natürlichen Neigungen.” Analyse & Kritik 8 (2):150–77. Hempel, Carl Gustav. 1966. Philosophy of natural science, 1st ed. Englewood Cliffs, N.J.: Pearson. Hicks, John. 1979. Causality in economics. Oxford: Blackwell. Kandori, Michihiro. 1992. Repeated games played by overlapping generations of players. The Review of Economic Studies 59 (1):81–92. Kleene, Stephen Cole. 1952. Introduction to meta-mathematics. Amsterdam: North Holland. Kliemt, Hartmut. 1987. The reason of rules and the rule of reason. Critica XIX:43–86. Kliemt, Hartmut. 2009. Philosophy and economics I. München: R. Oldenbourg Verlag. Kliemt, Hartmut. 2017. ABC – Austria, Bloomington, Chicago: Political economy the Ostrom way. In The Austrian and Bloomington Schools of Political Economy, eds. Paul Dragos Aligica , Paul Lewis, Virgil H. Storr, 22:15–47. Advances in Austrian Economics. Emerald Publishing Limited. Kliemt, Hartmut. 2020. Economic and sociological accounts of social norms. Analyse & Kritik 42 (1):41–95. MacIntyre, Alasdair C. 1984. After virtue: A study in moral theory, 2nd ed. Notre Dame, Ind: University of Notre Dame Press. Morgenstern, Oskar. 1928. Wirtschaftsprognose: Eine Untersuchung ihrer Voraussetzungen und Möglichkeiten. Vienna: Springer. Morgenstern, Oskar. 1972. Descriptive, predictive and normative theory. Kyklos 25:699–714. Morgenstern, Oskar, and G. Schwödiauer. 1976. Competition and collusion in bilateral markets. Zeitschrift Für Nationalökonomie 36 (3–4):217–245. Nagel, Ernest, and J. Newman. 2008. Gödel’s proof . New York: NYU Press. Okada, Akira, and H. Kliemt. 1991. Anarchy and agreement – A game theoretic analysis of some aspects of contractarianism. In Game Equilibrium Models II. Methods, Morals, and Markets., ed. Reinhard Selten, 164–87. Berlin et al.: Springer. Pearl, Judea. 2000. Causality. Models, reasoning, and inference. Cambridge: Cambridge University Press. Qu, Xinglong, Zhigang Cao, Yifen Mu, and Xiaoguang Yang. 2014. Repeated sequential prisoner’s dilemma: The stackelberg variant. SSRN Electronic Journal 32 (January). https:// doi.org/10.2139/ssrn.2405413. Rawls, John. 1971. A theory of justice. Oxford: Oxford University Press. Sapolsky, Robert M. 2017. Behave: The biology of humans at our best and worst. Vintage Digital: Penguin. Schelling, Thomas C. 1960. The strategy of conflict. Oxford: Oxford University Press. Schotter, Andrew. 1992. Oskar Morgenstern’s contribution to the development of the theory of games. History of Political Economy 24 (Supplement):95–112. https://doi.org/10.1215/ 00182702-24-Supplement-95. Selten, Reinhard. 1978. The chain store paradox. Theory and Decision 9:127–159. Selten, Reinhard. 1999. Response to Shepsle and Laitin. In Competition and cooperation: Conversations with nobelists about economics and political science, ed. James Alt, Margaret Levi, and Elinor Ostrom, 303–308. New York: Russel Sage Foundation. Siegwart, Geo. 1997. Explikation. In Dialog und System, ed. Winfried Löffler and Edmund Runggaldier, 15–45. Sankt Augustin: Academia.

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Spinoza, Benedikt de. 1670. A theologico-political treatise. A political treatise. New York: Dover. Steinberg, Justin. 2013. “Spinoza’s political philosophy.” In The Stanford Encyclopedia of Philosophy, ed. Edward N. Zalta, Winter 2013. Metaphysics Research Lab, Stanford University. https://plato.stanford.edu/archives/win2013/entries/spinoza-political/. Taylor, Michael. 1976. Anarchy and cooperation. London et al.: John Wiley. Taylor, Michael. 1987. The possibility of cooperation. Cambridge: Cambridge University Press. Voss, Thomas. 1985. Rationale Akteure und soziale Institutionen - Beitrag zu einer endogenen Theorie des sozialen Tauschs. München: R. Oldenbourg Verlag.

Hartmut Kliemt, Prof. Dr., Justus-Liebig-Universität Gießen, Fachbereich 02: Wirtschaftswissenschaften, Licher Str. 70, 35394 Gießen; [email protected]; current research interests: Philosophy, Politics and Economics (PPE), methodology and ethics of law, management and medicine as practical disciplines, exchange.

“Das Modell ist dafür nicht geeignet!” (“The Model is not Suitable for This!”): The Model of Frame Selection and a Corrective Replication of the Findings in the Fehr-Gächter Experiments on the Development of Cooperation in Public Good Situations Hartmut Esser Abstract

This paper addresses the question of whether the model of frame selection (MFS) is more capable of explaining the findings in Fehr and Gächter’s classic experiments on the effects of reciprocity and punishment than rational choice theory (RCT). The focus is on results on the replication of the original experiment and some modifications. The modifications refer to the extension or repetition of certain sequences with and without punishment. This was intended to address three questions: Are there effects of the salience of a cooperative framing in the start, even when cooperation decays in the absence of punishment? Does cooperative framing strengthen with the extension of the punishment phase by priming? Are there restart effects such that even a simple repetition of the same game after cooperation decays in a phase without the possibility of punishment causes cooperation to rise again? In fact, all three effects are observed. In a final step, these effects are reconstructed and compared against the background of the two approaches, MFS and RCT. The salience and priming effects are easily explained with the MFS, while RCT can H. Esser (B) Universität Mannheim, Mannheim, Deutschland E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_4

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only come up with an explanation given quite implausible additional assumptions, for instance with respect to reputation effects in finite iterated games. No approach provides an obvious explanation for the restart effects. Keyword

Fehr-Gächter experiments • Reciprocity and punishment • Model of frame selection • Salience and priming • Restart effects

1

Background

Thomas Voss is one of the most famous representatives of rational choice theory (RCT) in sociology. He has always been vehemently opposed to any tendency which just even touches the core of the approach. There are certainly good reasons for this, probably the most important ones being: the microtheoretical simplicity and formal precision of RCT allowing the more complex game-theoretic analyses of social situations, which are what sociology is all about. Any change in RCT would have to be measured by its implications. Nevertheless, there are also sufficient reasons for a change: among them are the countless anomalies and indications of violations of the basic axioms of RCT. Mainly to be mentioned are the discovery of framing effects, first with the contributions of Tversky and Kahneman (1981) and much more clearly in the experiments of Liberman et al. (2004) on the effect of linguistic framing. The debate about this is well known: there are various attempts to explain the anomalies considering other motives than egoism, but otherwise maintaining the basic assumptions (see Gintis 2017). Other recently developed approaches even model the basic processes differently and take cognitive processes, that are not provided in RCT, into account (see Tuti´c 2015, 2020). The model of frame selection (MFS) is intended as such an approach (Esser and Kroneberg 2015, 2020). It brings together various components of different traditions of action theory: from economics, the concepts of rational choice and a trade-off between different incentives; from cognitive (social) psychology, processes of perception and categorization and, following the so-called dual-process theories (DPT), different deliberation stages of the consequences of a particular action; and from sociology, the assumption that without a firm normative orientation there can be neither stable social action nor a reliable social order and that therefore the symbolic-interactively driven “definition” of situations precedes everything

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else. The starting point of the MFS are processes of categorization: the recognition of typical patterns of physical objects, which at first cannot be further controlled, and the more or less perfect match with internally-accessible mental models, certain “attitudes”, on which depend entire reaction programs. The most important implication is that under certain conditions an orientation becomes completely unconditional, which is reflected in the complete suppression of “rational” incentives. According to RCT this wouldn’t be possible because changes in the weighting of the benefit expectations only have an effect in the trade-off between all other incentives. Hence, there is never an unconditionality of orientations and actions. It is the old dispute about the so-called “Utilitarian Dilemma” that has separated sociology from economic thinking from the beginning. According to a common sociological critique, categorical imperatives, values and virtues could not be grasped with RCT, nor could phenomena of “sense”, “meaning” and “culture”. The MFS implies a considerable change in the microfoundation of all the theories and instruments, which were developed in RCT due to game theory especially for central social situations and helped answering questions on which sociology had not made much progress, in particular the problem of social order. Therefore, the always justifiable question: what would happen if we took it over? Until then, the MFS had only been an explanation for acting in parametric situations and one would hardly be equipped for the actual tasks of deriving collective consequences. This also was the case with Thomas Voss. He once commented on the usefulness of the MFS together with his colleague Werner Raub (Raub and Voss 2009): “Erstens ist es nicht notwendig, sozusagen unterschiedliche “Rationalitätsformen” einzuführen, um normatives Handeln zu erklären. Zweitens ist es entscheidend, die Beschränkung auf eine parametrische Handlungskonzeption zu überwinden und die sozialen Interaktionen in Prozessen der Situationsdefinition explizit zu berücksichtigen” (ibid., p. 188).

Afterwards, the apodictum: “Das Modell der Frame-Selektion ist dazu nicht geeignet” (ibid.). Of course, this did not remain uncommented (Esser 2009a, pp. 273–281; 2009b, p. 107 ff.), but the response was held back by a reservation that was already worthy of consideration: the empirical evidence of the MFS had up to that point been based almost entirely on survey data and rather indirect tests. There were in fact no applications explicitly related to social situations or even experimental tests. This is what will be now discussed: the somewhat delayed response to an objection that was justified at the time.

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Inducement

There are various possibilities for the empirical testing of theories. The ideal way is to make an experiment. For some time now, economics has been following the path of experimental game theory, which is one of the most important branches of behavioral economics and allows the empirical testing of various theoretical hypotheses. One of the classic contributions is the experiment conducted by Ernst Fehr and Simon Gächter on the effects of punishment on behavior in a standard public good situation (Fehr and Gächter 1999, 2000; from now abbreviated as F&G; see also Fehr and Gintis 2007). In this experiment, the subjects were able to pay a contribution into a common pool within two sequences of 10 rounds, respectively. The size of the pool increased with participation and its content was then distributed. There were two phases of the experiment. In one phase there was no possibility of sanction for defection, in the other there was the possibility of punishment, but its cost under certain circumstances was greater than the benefits. Therefore, there were two variations of the order: without punishment first, then the introduction of the possibility for it (variant N1–W2) and vice versa (variant W1–N2). Each game was played over 10 rounds, 20 in total. The subjects knew that the game would end after that. Then, there were two versions: a partner version, in which everyone in the groups that interacted with each other stayed the same, and one stranger version, in which the interacting groups changed randomly. The basic findings for the partner version are shown in Fig. 1. In the first variant (sequence N1–W2, without the possibility of punishment), there is, contrary to the expectations of traditional RC game theory, initially a high level of cooperation (N1), which successively decreases. With only the announcement of a possible punishment, the cooperation in W2 jumps to the top (arrow 1) and then remains stable. This can be explained quite easily with RCT: there are not only selfish motives, but also those of reciprocity, which are so strong that the subjects punish violations of fairness standards even if it costs them something. This results in a subgame-perfect equilibrium in such a way that everyone now has an interest in cooperation (Diekmann and Voss 2008: p. 92 f.). For the second variant, with the punishment option right at the beginning (sequence W1–N2), it begins and proceeds in a similar way with an uninterrupted high level of cooperation until the end of the sequence. With the removal of the punishment option (N2), the subgame-perfect equilibrium would be dissolved, and especially the selfish individuals would have an instant interest in contributing nothing. They have seen that there are altruistic reciprocals and can therefore hope to profit, but only if they immediately give nothing more and do not wait to see what the others do.

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What happens? At first, cooperation drops off only so slightly (arrow 3). According to the assumptions of RCT, the drop should have been much harder. If it doesn’t decrease all the way down again, then at least it should have dropped to the level of cooperation at N1, where in a comparable constellation there was a participation of about 50% (arrow 2 and dotted line). In line with RCT, the decrease in cooperation at N2 for the sequence W1–N2 should have been similar in size as the increase with the introduction at W2 for the sequence N1–W2. In short: something must have happened in the period W1 of the sequence W1–N2 that keeps the willingness to cooperate up, even if there are incentives to immediately stop all contribution, at least for the selfish. In any case, in agreement with RCT the delay is unexpected, even if later there is a decline in the cooperation level, which would correspond to it. In a reanalysis of the F&G experiment, now specifically separately for the selfish and the altruistic reciprocals, the unexpected effect was confirmed (Esser 2018, Fig. 3): after the abolition of the possibility of punishment, at first the reciprocals even increase their contributions and the selfish continue to do so—until both gradually give up. The contribution of the reciprocals decreases significantly only shortly before the end.

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RCT?

The F&G experiment and patterns of sequences are now content of textbooks. They are regarded as evidence that it is possible to explain the development of cooperation among selfish actors with the means of traditional RCT and that no changes in microfoundations and game theoretic modeling are needed. One can certainly see it that way: the decline of cooperation at N1 (in the N1–W2 variant) can be seen as a gradual adaptation of expectations to the defection of some of the subjects. Additionally, the sudden increase at W2 can be seen as a result of subgame-perfect equilibrium of cooperation with the possibility of punishment. One only needs the extension of the motives by altruism or reciprocity (which contains altruism), but also the unconditional disposition for even self-damaging punishment. The high level of cooperation and their stability right at the beginning of W1 (in the W1–N2 variant) can be explained in the same way. However, there is the disturbing anomaly for RCT, i.e. the drop off in cooperation is too small. Why is there no immediate downward adjustment when there no longer exists the central condition of the subgame-perfect equilibrium, the possibility of punishment? There would be different ways to explain it with the framework of RCT, but two of them are particularly important: expectations and reputation. Expectations refer to the experience gained during the phase of uninterrupted high cooperation at W1, with the consequence of a lasting influence, which can explain the delay. However, this does not seem plausible in the context of RCT assumptions. It is true that (at least) the selfish can now assume that there will be cooperation, but with the abolition of the possibility of sanctions this rather increases the incentive to defect. Additionally, an explanation through the motive of building up reputation is not convincing either. It is true that reputation effects can in principle explain cooperation, even in finite games: The selfish estimate or assume with a certain probability that there are reciprocals that are ready to cooperate and therefore they can trust that the profit would be even higher if they themselves continue to cooperate. Irrespective of whether there are formally satisfying game-theoretical models for this which are not too dependent on the respective assumptions, this explanation would be rather implausible: In the original design, explicit precautions had been taken precisely against reputation effects (cf. Esser 2018: pp. 11 and 24), and the effect also occurs in the stranger version, i.e. a one-shot game, quite similar to the framing experiments by Liberman et al. (2004). In addition, there is a methodological argument: The MFS explains the effect in a conceivably straightforward way, i.e. simply by the interruption of an activated mental

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model, an interruption with is associated with the announcement of the abandonment of the punishment option. No assumptions regarding the estimations of probabilities are required, which involve high cognitive effort on part of the subjects. There is a considerable advantage in thriftiness while explaining the same pattern: The delay of the abandonment of cooperation after repeated rounds of cooperation—possibly varying with respect to egoists and reciprocals. A third option isn’t available for a RCT- based explanation: a possible change of preferences in the 10 rounds of multilateral cooperation. The stability of preferences in the face of short-term influences is one of the foundations of RCT, which has remained stable, while other assumptions have been loosened (cf. Fehr and Schmidt 2006, p. 670 ff.). It is therefore no wonder that some reactions to the occurrence of framing effects are quite nervous (Ellingsen 2012, p. 119 ff.) and, occasionally, it has even been claimed that short-term changes in preferences were indeed included in RCT (so Opp 2019, p. 103; cf. also Esser 2017, Sect. 4, p. 516 ff.).

4

Approach and Design

Theoretically the MFS would have a simple answer to explain the delay in the decline in cooperation after the abolition of the punishment option: cognitive mental models of framing the situation as a “community game” are activated through the longer sequences of general cooperation and the signaling effects of the cooperative acts leading to salience of a certain view of the situation (Bordalo et al. 2012). The so-called priming gradually reinforces the course of the persisting and almost complete cooperation (Kay et al. 2004). The mechanism would be the increasing match of the mutually observed acts with the mental model in question, if it has not already instantly or even before determined the “definition” of the situation: the cooperation indicates the validity of a framework for dispositional cooperation through increasing temporary activation of a corresponding latently-existing and chronically-accessible mental model. These mental processes are alien to RCT, even to recent approaches, which include sociallywidespread cultural attitudes as symbolic “choreographers” into the repertoire of RCT and game theory (cf. Gintis 2017, p. 113 ff., 188 ff.). They only know shortterm changes in expectations, but these would be expected to cause an immediate defection, especially among the selfish. The basic idea for a more extensive empirical examination of the activation effect of such symbolic interactions is to change the design for the transition from a cooperation period with punishment to one without this possibility. To test

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for effects of salience, a period N3 is added to the sequence N1–W2 to obtain the sequence N1–W2–N3. The first period N1 without the possibility of punishment and with the then experienced decay of cooperation should already produce a temporary activation of the reciprocity motive, which should then in the transition from W2 to N3 have the effect of a further delay of the decay of cooperation with the loss of the possibility of punishment. This effect should be stronger for the reciprocals than for the selfish. With respect to priming, the sequence W1–N2 is intercalated with the sequence W2 to obtain the sequence W1–W2–N3, so that before the abolition of the possibility of punishment the phase of all-round cooperation should be extended and thus the delay of the decrease of cooperation in N3 should become even stronger. This effect should also be stronger for the reciprocals than for the selfish. Figure 2 shows the experimental arrangement, called ELFE experiment. The replication of F&G’s original experiment was done by comparing the corresponding first two sequences in the analogous sequences of the ELFE experiment: N and W by N1 and W2 of the sequence ELFE N1-W2-N3, W and N by W1 and N2 of the sequence ELFE W1-N2-N3. The sequences were designed to be extended by a third period N, in accordance with the F&G instructions: The participants in the experiment were not informed until the first 20 rounds had been completed that another 10 rounds would be played afterward. Thus, the expansion has no effect on the replication of Fehr and Gächter’s experiment, because the

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Fig. 3 Replications. (source: own research)

F&G experiment was followed by only one (unannounced) additional experiment with 10 rounds. The tests for the effects of salience and priming are performed for the respective comparisons of the transition from W to N. With respect to salience and the sequence N1–W2–N3 it is the comparison of W2 and N3 after the first period N1 for temporary activation. Regarding priming and the sequence W1–W2–N3, the relevant comparison is between W2 and N3, i.e. after the long phase of 20 rounds with the possibility of punishment and high cooperation over the preliminary phase with W1.

5

Experiments

The two experimental treatments intended for testing salience and priming were designed to be as close as possible to the specifications of the F&G experiments, i.e. using the partner version. Groups of 16 experimental subjects (N = 32) were

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collected in two sessions (July 4 and 8, 2019) at ELFE Laboratory for Experimental Economic Research at the University of Duisburg-Essen. In the two sessions both treatments were played simultaneously with two groups of four subjects each. This was carried out as part of a larger replication study (Betz et al. 2020). The subjects (including the three substitutes per session) were recruited from the ELFE laboratory’s pool of participants using the recruitment software ORSEE (Greiner 2015). During the recruitment process, attention was paid to an equal distribution of the sexes as well as to the first-time participation in a collective good game. Upon entry into the laboratory, the subjects were assigned to their computer seats (drawing of numbered table tennis balls) or, depending on the draw, were paid out as substitute players with 10 EUR. At each of the isolated computer workstations, an instruction sheet including control questions, which had to be answered with a ballpoint pen, was displayed analogous to the experimental design at F&G. Both the experiment and the survey after the end of the experiment were conducted with the software z-Tree (Fischbacher 2007).

6

Results

First, the findings on replications of the original F&G-experiments are reported (Sect. 6.1), followed by those on the effects of salience and priming (Sect. 6.2). Subsequently, and not directly related to the test, the results on restart effects which occurred rather randomly are discussed (Sect. 6.3).

6.1

Replication

Figure 3 shows the findings of the replication. The objective is not only to check whether the findings of F&G can be reproduced, but also whether the change of the context from Zurich for the F&G experiments in Switzerland to Essen in Germany as the context of the ELFE experiments already generates differences on the basic patterns of the courses. As a further replication, a data set from St. Gallen was used, which was collected as part of an international extension of the F&G experiment (Hermann et al. 2006) and used as a test case of the reconstruction via RCT and MFS by Esser (2018). The St. Gallen experiment used the stranger version. The patterns of the courses from the ELFE experiment correspond to those in Fig. 1 of the original F&G experiments and the St. Gallen replications (STG). For the transition from W1 to N2, which is focused here, a consistently higher

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cooperation rate is already evident in W1, but especially in N1. With the abolition of punishment, the cooperation rate in ELFE even increases, and toward the end the difference to F&G becomes even larger until the last two rounds where cooperation breaks down for all versions. In short: there is a regional (or other) context effect between Zurich and the ELFE project in the Ruhr area. There would be an obvious explanation, which cannot be described further here. The F&G experiment was conducted in Zurich. Zurich can be understood as a context in which a “Wall Street” framing is more salient than elsewhere, especially in comparison to the Ruhr area. Additionally, the subjects, unlike in the F&G experiment, had never participated in a public good experiment. There is also more than indirect evidence for this interpretation: a replication of the F&G experiment in St. Gallen in Switzerland generated a similarly pronounced higher cooperative response (cf. Esser 2018, p. 24 with reference to Hermann et al. 2006). In a contribution by Dufwenberg et al. (2011), which was conducted in Bonn and St. Gallen, explicit reference is made to such contextual differences in the wider environment: in St. Gallen there is still an atmosphere of cooperation and “community” orientation. Compared to that in Bonn with its mass university, where, according to the authors, things are more anonymous and colder, and the subjects, as partly in Zurich, are more aware of what a public good game is about. There is also empirical evidence (Dufwenberg et al. 2011, Table 7, p. 477): in Bonn, no framing effect was found to describe the game as a “community” project, whereas in St. Gallen it was very evident. Hypotheses on contextual orientations were not examined separately, nor were they tested according to what the selfish and the reciprocals did in each case. However, it should be mentioned that only the stranger version was tested in St. Gallen. Obviously, the general “community” atmosphere in St. Gallen affected everyone, regardless of motivation (selfish or reciprocal) and irrespective of whether they knew each other or not.

6.2

Salience and Priming

According to the MFS, the explanation of the anomaly of the delayed reaction to the removal of the punishment option corresponds to the activation of latent mental models of cooperation. They occur in different ways: the increase of attention in general, the salience that the situation is about a collective undertaking where solidarity and reciprocity are essential and where it is important what one does and what the others do. This framework is gradually strengthened through the iterated

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reinforcement of this attitude by the actors with their cooperative acts, unintentional or strategic. Their behavior indicates that they are not selfish and that they have an interest in the success of the group, priming as a “symbolic interaction”. Figure 4 describes the results of the investigation design for the reinforcement of salience and priming based on the ELFE experiments, compared to the corresponding findings by F&G, in St. Gallen and the simple replication of the ELFE experiment. It can clearly be seen that both salience and priming decelerate the decline of cooperation after the decay of the punishment option, compared to the simple replication. This is especially true compared to the original experiment by F&G in Zurich and once again compared to St. Gallen, with its already higher cooperation after the removal of the punishment option. According to the MFS, the effects should be particularly noticeable for those with greater accessibility to the reciprocity frame. For this purpose, the analyses of the replication and the effects of salience and priming were carried out again

200 180 160 140 120 100 80 60 40 20 0

F&G

STG

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Fig. 4 Comparison of salience and priming. (source: own research)

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Fig.5 Comparison of salience and priming for selfish and reciprocals. (source: own research)

separately for the types of egoists and reciprocals.1 The results are shown in Fig. 5. For priming, initially there are no differences in the reaction after the punishment option has been removed. But at the end, where the end-game effects should kick in, they become more pronounced. Nevertheless, the accessibility of the respective frames and motives plays a role: there is a steady decline among the selfish, while the reciprocals make a special effort. This was also found in the reanalysis of the F&G experiments in a pooled data set for Zurich and St. 1 As

in the reanalysis of the F&G experiments by Esser (2018), the contributions in the first round of the first sequence were used to classify the subjects into the categories of selfish and reciprocals. This procedure would be in line with the idea of revealed preferences as one of the principles of RCT still remaining despite the extensions. During the reanalysis of the F&G experiments, nothing else was possible since there were no additional surveys of the motives. The procedure was therefore consciously adopted for the replicating comparison. The data from the ELFE project also contain information about the motives from follow-up surveys. In principle, it would also be possible to refer to this information.

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Gallen (Esser 2017). In contrast, the difference between reciprocals and selfish in salience is quite extreme over the entire course. Apparently, those with stronger reciprocity motives are already activated by the experience of a decline earlier in such a way, that they do everything they can to avoid falling back to this first state of overall defection, when they have seen before that it is possible. Overall, this confirms the assumption that both circumstances interact for the effects of framing through salience and priming: internal accessibility and external events. The fact that after priming there is still a clear delay also among the selfish may have to do with the fact that reciprocity is a universal motive that is accessible to all actors and only needs to be activated more strongly in order to prevail over selfishness. Of course, this cannot be further verified with the given data.

6.3

Re-Start

According to RCT, the institutional changes should have an immediate impact. This does not always happen, but minor irregularities do not particularly show a contradiction either. Only if, so to speak, the sign also changes there would be a problem. For instance, there would be a problem, if, as in the example above, after a longer period of priming, the selfish remain cooperative, although the punishment option is absent and they could take advantage of it. A similar, but even more serious problem would arise if the institutional and other conditions did not alter anything, but the behavior changed completely, for example, if in an experiment after the end of the trial a further round was—unexpectedly—added repeating the previous round. This is exactly what was done in the replication round in ELFE, which starts with the punishment option, which is then withdrawn: a third round is added with no punishment option and a sequence with W1–N2–N3. According to RCT, one could expect that things would continue as before without the punishment option: tormenting in mutual defection until the end—because the subjects have seen that in case of doubt, by contributing something one would immediately be cheated again. Figure 6 shows the result. First, the results for the round with the punishment option are as usually shown on the left, then the findings for the second round of the ELFE experiment without the punishment option, and finally the outcomes for the third round of the ELFE experiment. For comparison, the results for the effects of salience and priming are shown on the left and right, because the hypothesis that re-start can lead to similar cognitive-emotional reactions as salience and priming is not unreasonable. The results are already listed separately for the selfish and reciprocals.

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Fig. 6 Re-start effects in comparison. (source: own research)

The central finding is already surprisingly clear: with the repetition of the sequence without the option of punishment and after the previous expiration of the cooperation, the participation jumps almost completely back to the top. Afterward, the cooperation declines again, but very similarly to before. Remarkable are also the courses of the selfish and reciprocals. In the phase with the punishment option, at the beginning the cooperation is higher for the reciprocals, when the sanction is removed in the first rounds as well, but after that it drops significantly, especially for the reciprocals. It seems that they turned away from the selfish because of the disappointment and frustration about their low level of participation, a reaction that George C. Homans, among others, described with the frustration-aggressionhypothesis. The selfish, on the other hand, react much more moderately: compared to the first phase with the punishment starting from their relatively low level, they hardly react at all and then much more moderately and calmly. Not much can be said about the background and explanation of the patterns. Although such re-start effects are occasionally reported (Gintis 2000, p. 317), they are barely tried to be classified theoretically. Re-start effects were systematically

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studied by Andreoni (1988) and Croson (1996) to clarify the question of whether subjects in public good games (without the possibility of punishment) must first learn the decline of cooperation before they react to it with a decrease. This was disproved by the discovery that they start again as if nothing had happened when they re-start (Andreoni 1988, p. 294 ff., 298 ff.; Croson 1996, p. 26 ff., 29 ff.). It was also shown that the effect occurs more strongly in the partner version. Finally, the conclusion was that these observations could not be explained by the normal means of RC game theory and that one would also have to search for microfoundations in which the subjective conceptions of the actors would have to be considered more strongly (Andreoni 1988, p. 301) and there would have to be more replication attempts before the effect could really be taken seriously (Croson 1996, p. 31). In this study, it is more than obvious. There still does not exist an explanation with the instruments of RC game theory, neither for the re-start effect nor for the obviously emotionally induced, particularly abrupt turning away of the reciprocals when the others do not contribute. However, it could have something to do with the interruption of a well-established routine and with the memory of so-called better times of general cooperation under a strict regime of reciprocity reinforced with sanctions. More should not be speculated on or even declared as an explanation. However, the MFS, with its constructs, would have some theoretical placeholders that could be filled at this point: the interruption, the (mis)match and the activation of affects, analogous to the effects of salience and priming of cognitive mobilization. The finding that the effects occur particularly in the partner versions would correspond to this. In any case, the findings help to achieve a more precise understanding of cultural details of concepts such as altruism and reciprocity (c.f. especially with regard to the different social meanings and variations of the concept of reciprocity: Bruni 2020, Appendix 1 to Chapter 1, p. 230 ff.). At least, it becomes clear that egoism, altruism and reciprocity are not just certain motives that are balanced among each other and other incentives in a trade-off, but are rather entire bundles of cognitive patterns that “correlate” with each other in affects, knowledge and willingness to act, which are triggered as a whole by certain cue stimuli and under certain circumstances overwrite everything else.

7

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The project of unifying social sciences, with the aim of integrating the different perspectives, assumptions and well-proven results of their individual sciences under the roof of an analytical-explanatory orientation and the value basis of the

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cumulative gain in knowledge, was for a long time nothing more than an attempt of a methodological imperialism. It was controversial from different sides, but especially between economics and sociology. Due to the many findings of behavioral economics, but especially of experimental game theory, there is a lot of evidence for a necessary extension of the microtheory of rational action by additional motives. However, it was always insisted that more than the extension of incentives was not necessary, that the variety of motives had always been part of the axiomatic theory of RCT anyway and that this alone could resolve the most important anomalies of a quite narrow version of RCT. This also applies to advances which, taking a large and important step in this direction, want to include the whole field of culture, symbols, “meaning” and “sense”, as Herbert Gintis (2017, p. 113 ff.), for example, intends to do. However, the core of the microfoundation remains the selection principle of RCT in all its variants: the maximization of the benefit expectation under secondary conditions and in a trade-off of all relevant incentives—without the idea that cognitive processes alone and even in extreme high-cost situations are able to overwrite the risks in a simple and uncontrolled way. The experiments of Ernst Fehr and Simon Gächter (1999, 2000), now considered classics, seemed to prove this for one of the most important theoretical problems in social sciences: the emergence of social order in cooperation within public good situations. Given this background, objections that no other microfoundation is needed appear plausible, and certainly none that is significantly more complicated at the core of the explanation of individual acts, but whose usefulness for the analysis of social situations and processes still seems barely applicable. This was the background to Thomas Voss’ statement (in Raub und Voss 2009), which gave the article its title. It is linked to examples, evidence and elaborations, such as the type of effects that Fehr and Gächter had found. In the case of Fehr and Gächter, it was initially a surprising phenomenon that with the announcement of punishment possibilities alone and without any opportunity of reaction, the cooperation rate in a public good situation rises to almost 100% and then remains there until the—announced—end. One anomaly with far-reaching consequences was not considered, namely that with the loss of the possibility of punishment after such a phase of sanctioned cooperation, cooperation should have decreased significantly. Thus, it also went unnoticed that there was a blank space in the available RCT explanations for the effects in the F&G experiment: neither the change in expectations nor reputation effects could explain that the defection was not immediately restarted. Rather to the contrary! And that even among the selfish! At least in the beginning and over a rather long distance. The MFS, on the other hand, would have had to offer a theoretical placeholder precisely for this purpose:

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the activation of certain reaction programs that are as well anchored as possible. These programs occur both through the symbolic meaning of the announcement of sanctions and through the acts that are mutually recognizable to the subjects as cues for framing as a “Community” in contrast to “Wallstreet” linked to cultural significance. This was the result of a first reconstruction of the F&G experiments (Esser 2018, p. 22 ff.)—much to the uncomprehending displeasure of convinced representatives of a especially wide version of RCT (as in Opp 2019). The reported results of an extended replication and targeted tests of the hypotheses of the MFS on the disputed anomaly have confirmed this in a striking manner. In addition, further findings pointed in the same direction, some of them unexpectedly. It seems like it is not only the distribution and strength of the individual incentives after the anchoring of selfishness or reciprocity that matters, but also the orientation environment in a broader cultural context. This became clear in the global differences of the experiments in Zurich, St. Gallen and Essen in the Ruhr region. Furthermore, at least among partners, the entire history of all rounds counts for the cooperation, even from previous phases, if they are related to the experience of the decline of the cooperation. Prehistory, the shadow of the recent past, apparently serves as a trigger for a certain salience and as a reference point for the further definition of the situation. The duration of the interactive reinforcement of cooperative orientation, the length of the symbolic interaction under a frame (the priming) has the same additional effect. There are even re-start effects from the mere interruption and repetition of a situation with otherwise unchanged structural conditions of both incentives and possibilities for sanctions or not. For all this, RCT has no theoretical explanation despite all the extensions it has made in the meantime. It is not even clear where in its constructs and assumptions there would be a possibility to address these phenomena. The already somewhat apodictic thesis that the model of frame selection is “not suitable” for such situations is therefore put into perspective. The MFS contains at least indications in which direction one might think in case of a further extension of RCT: the systematic integration of cognitive processes and those of symboliccontrolled interaction into the basic process of action selection and further into game theory explanations. Perhaps there will be RCT versions for this purpose available. So far, none is in the pipeline. That also seems hardly imaginable. This would mean abandoning one of the last fundamental doctrines of RCT: the notion of a trade-off from all incentives in a situation that is precisely what sociology once called the “Utilitarian Dilemma” and which was identified by the economist Ronald Heiner (1983) as the inevitable volatility of action precisely because of this principle of trade-off between incentive weights.

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There can, of course, be processes of rational choice of action with such a trade-off as a selection mechanism, but as it seems only under special conditions. The MFS contains both cases as an extension of the so-called dual-process theories: the selection with and without trade-off , each controlled by the mechanism of categorization and the match of objects and internal attitudes. The MFS specifies the conditions under which one or the other variant applies and thus explains why RCT was and is (very) successful in some cases (for example in market processes), and when not (as it is obviously the case in cooperation experiments). Perhaps some problems and solutions will be drastically simplified for those cases of a fixed “definition” of the situation for a part of the social action. For example, if it can be assumed that possibly the incentive structures will be completely overwritten and that there could also be other concepts of equilibrium - as Herbert Gintis, among others, suggests with his concept of correlated equilibrium and the cultural choreography of society, but does not implement it (Gintis 2017, p. 114 ff, 129 ff.; cf. Esser 2020, Sects. 2 and 5). In any case, there is no real reason why it should not be possible to accomplish, what some critics such as Thomas Voss have always denied: the necessity of changing RCT and thus also the traditional game theory to a different microfoundation, which would not only be more realistic and more complicated, but would finally eliminate certain incompleteness, which all variants of RCT still share today: the displacement of the cognitive processes of perception, interpretation and “definition” of the situation into the rather unnoticed context of culture and symbolic interaction. However, it would mean giving up the only remaining anchor of the orthodox RCT: the instrumentalism with the idea of remaining with recognizably false microassumptions as long as only the aggregated results are correct (cf. the concept of truth approximation of theories in general Albert 2020). This failed with Fehr and Gächter. The expanding replication presented has reaffirmed this. This case also shows how important the consistent use of all possibilities of a theory is for the general course of scientific development. This was and is the indispensable contribution of exactly the same resilience of maintaining the many advantages of RCT, as Thomas Voss (together with his colleague and friend Werner Raub, and many others, some of whom do not always do justice to the matter) has shown. This can be noted and emphasized more clearly and easily as there are now more than just indications that an integration of the various microtheoretical developments in the social sciences is already in concrete work. One example is the concept of an interdisciplinary theory of action as pursued by Andreas

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Tuti´c (2015, 2020). This is explicitly intended to develop and formalize the necessary game theoretical concepts for social situations; a task that, with a few exceptions, has in fact only been started in the first stages of the concepts and applications of MFS. James D. Montgomery (1996), for example, began with the classical role concept of sociology as an explicitly game-theoretically prepared approach to the concepts of frames and scripts, as the understanding of sociology has always been. This was already the case with Herbert Gintis, who, for example, systematically provides for social roles in his proposal for the sociologization of the economy, RCT and game theory. He even calls them “social frames” (Gintis 2017, p. 188)—but then continues as before: all that counts are the trade-off, the accustomed RCT and traditional game theory. At least in this respect, sociology is a bit more advanced. Acknowledgments The author thanks Dipl. Psych. Friederike Haiser for translating this manuscript from German.

References Albert, G. 2020. Kumulative Erkenntnis in einer realistischen Soziologie. Zeitschrift für Theoretische Soziologie 9. In press. Andreoni, J.A. 1988. Why free ride? Strategies and learning in public goods experiments. Journal of Public Economics 37:291–304. Betz, D., Esser, H., and C. Biniossek. 2020. Dataset feedback, punishment, and framing in 30 rounds public goods experiments. https://doi.org/10.23663/x2648 Bordalo, P., N. Gennaioli, and A. Schleifer. 2012. Salience theory of choice under risk. The Quarterly Journal of Economics 127:1243–1285. Bruni, L. 2020. Reziprozität: Grundform der sozialen, ökonomischen und politischen Ordnung. Wiesbaden: Springer VS. Croson, R.T.A. 1996. Partners and strangers revisited. Economics Letters 53:25–32. Diekmann, A., and T. Voss. 2008. Soziale Normen und Reziprozität. Die Bedeutung sozialer Motive für die Rational-Choice-Erklärung sozialer Normen. In Rational Choice: Theoretische Analysen und empirische Resultate. Festschrift für Karl-Dieter Opp zum 70. Geburtstag, ed. A. Diekmann, K. Eichner, P. Schmidt, and T. Voss, 83–100. Wiesbaden: VS Verlag. Dufwenberg, M., S. Gächter, and H. Hennig-Schmidt. 2011. The framing of games and the psychology of play. Games and Economic Behavior 73:459–478. Ellingsen, T., M. Johannesson, J. Mollerstrom, and S. Munkhammar. 2012. Social framing effects: Preferences or beliefs? Games and Economic Behavior 76:117–130. Esser, H. 2009a. Erwiderung: Bringing society (back) in! In Hartmut Essers Erklärende Soziologie. Kontroversen und Perspektiven, ed. P. Hill, F. Kalter, J. Kopp, C. Kroneberg, and R. Schnell, 255–286. Frankfurt a. M.: Campus.

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Esser, H. 2009b. Erwiderung: “Goals”, “Frames” und “Rational Choice”. In Hartmut Essers Erklärende Soziologie. Kontroversen und Perspektiven, ed. P. Hill, F. Kalter, J. Kopp, C. Kroneberg, and R. Schnell, 107–131. Frankfurt a. M.: Campus. Esser, H. 2017. When prediction fails. Reactions of rational choice theory and behavioral economics to the unexpected appearance of framing effects. In Social dilemmas, institutions and the evolution of cooperation, Festschrift for Andreas Diekmann, ed. B. Jann, and W. Przepiorka, 505–526. Berlin: De Gruyter Oldenbourg. Esser, H. 2018. Sanktionen, Reziprozität und die symbolische Konstruktion der Kooperations„Gemeinschaft“. Ein theoretischer Vergleich und empirischer Test von Rational-ChoiceTheorie und dem Modell der Frame-Selektion anhand von Befunden und Daten aus der experimentellen Spieltheorie zur Erklärung der Bereitstellung von Kollektivgütern. Zeitschrift für Soziologie 47:8–28. Esser, H. 2020. Anreize, Kognition, Kultur und die symbolische Choreographie der Gesellschaft. Zum Vorschlag der (der eher) unfreundlichen Übernahme der Soziologie durch eine abermals erweiterte Rational-Choice-Theorie bei Herbert Gintis. Zeitschrift für Soziologie 47:8–28. Esser, H., and C. Kroneberg. 2015. An integrative theory of action: The model of frame selection. In Order on the edge of chaos: Social psychology and the problem of social order, ed. E.J. Lawler, S.R. Thye, and J. Yoon, 63–85. Cambridge: Cambridge University Press. Esser, H., and C. Kroneberg. 2020. Das Modell der Frame-Selektion. In Rational choice, ed. Andreas Tuti´c, 308–324. Berlin: De Gruyter Oldenbourg. Fehr, E., and S. Gächter. 1999. Cooperation in public goods experiments. Institute for Empirical Research in Economics, University of Zurich: Working Paper 10. Fehr, E., and S. Gächter. 2000. Cooperation and punishment in public goods experiments. American Economic Review 90:980–994. Fehr, E., and H. Gintis. 2007. Human motivation and social cooperation: Experimental and analytical foundations. Annual Review of Sociology 33:43–64. Fehr, E., and K.M. Schmidt. 2006. The economics of fairness, reciprocity and altruism – Experimental evidence and new theories. In Handbook of the economics of giving, altruism and reciprocity, vol. 1, ed. S.-C. Kolm, and J.M. Ythier, 615–691. Amsterdam: Elsevier. Fischbacher, U. 2007. z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics 10:171–178. Gintis, H. 2000. Beyond homo economicus. Evidence from experimental economics. Ecological Economics 25:311–322. Gintis, H. 2017. Individuality and entanglement. The moral and material basis of social life. Princeton: Princeton University Press. Greiner, B. 2015. Subject pool recruitment procedures: Organizing experiments with ORSEE. Journal of the Economic Science Association 1:114–125. Heiner, R.A. 1983. The origin of predictable behavior. American Economic Review 73:560– 595. Hermann, B., C. Thöni, and S. Gächter. 2006. Antisocial punishment across societies. Science 319:1362–1367. Kay, A.C., S.C. Wheeler, J.A. Bargh, and L. Ross. 2004. Material priming: The influence of mundane physical objects on situational construal and competitive behavioral choice. Organizational Behavior and Human Decision Processes 95:83–96.

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Liberman, V., S.M. Samuels, and L. Ross. 2004. The name of the game: Predictive power of reputations versus situational labels in determining prisoner’s dilemma game moves. Personality and Social Psychology Bulletin 30:1175–1185. Montgomery, J.D. 1998. Toward a role-theoretic conception of embeddedness. American Journal of Sociology 104:92–125. Opp, K.D. 2019. Die Theorie rationalen Handelns, das Modell der Frame-Selektion und die Wirkungen von Bestrafungen auf Kooperation. Eine Diskussion von Hartmut Essers Erklärung der Ergebnisse eines Experiments von Fehr und Gächter (2000, 2002). Zeitschrift für Soziologie 48:97–115. Raub, W., and T. Voss. 2009. Lob des Modellbaus. In Hartmut Essers Erklärende Soziologie. Kontroversen und Perspektiven, ed. P. Hill, F. Kalter, J. Kopp, C. Kroneberg, and R. Schnell, 149–180. Frankfurt a. M.: Campus. Tuti´c, A. 2015. Warum denn eigentlich nicht? Zur Axiomatisierung soziologischer Handlungstheorie. Zeitschrift für Soziologie 44:83–98. Tuti´c, A. 2020. Die Dual-Process-Perspektive in der interdisziplinären Handlungstheorie: Stand und Perspektiven. Working Paper, Institut für Soziologie, Universität Leipzig. Tversky, A., and D. Kahneman. 1981. The framing of decisions and the psychology of choice. Science 211:453–458.

Hartmut Esser, Prof. (em.) Dr., Universität Mannheim, Fakultät für Sozialwissenschaften, A 5, 6 Gebäudeteil A, 68159 Mannheim; [email protected]; current research interests: methodology of the social sciences, sociological theory, interdisciplinary action theory, migration and integration, sociology of the family, sociology of education.

Sociology in Times of Pandemic: Metatheoretical Considerations and the Example of the Covid-19 Crisis Roger Berger and Ivar Krumpal

Abstract

The Covid-19 crisis initiated debates among sociologists concerning metatheoretical principles of sociology and how sociological analyses should be done in times of pandemic. We discuss the methodological basis of the explanatory sociology approach and demonstrate its relevance in times of pandemic. We start with the paradigm of realism and then proceed to the guiding principles of causality and methodological individualism. It is argued that this is the appropriate and reasonable epistemological basis for sociology and enables explanation of social phenomena as well as prediction of unintended consequences of social interventions associated with the Covid-19 crisis. We state that this sort of sociology now is disputed neither within the scientific community nor outside in the media and the general society, although this had been the case constantly before the pandemic. Keywords

Covid-19 • Pandemics • Sociological methodology • Sociological analyses Causality • Collective goods • Social norms

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R. Berger (B) · I. Krumpal Universität Leipzig, Leipzig, Deutschland E-Mail: [email protected] I. Krumpal E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_5

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Introduction

The Covid-191 crisis that has arrived in Europe in the first quarter of 2020 and is still ongoing initiated debates in regards to how the pandemic and the governmental countermeasures to fight the pandemic impact society and which unintended social consequences the governmental countermeasures cause. Also, among sociologists there is a debate concerning metatheoretical considerations and on how sociological analyses should be done in times of pandemic. Thomas Voss contributed to this debate. From the beginning of the pandemic and its media coverage, he called our attention to many media contributions, to scientific analyses that shed light on the Covid-19 crisis and he has been engaged in discussions with students and colleagues. Thomas Voss also identified key sociological research questions and problems regarding the social dimension of the pandemic (see Krumpal 2020). And, he has committed himself to certain methodological standards about how to analyze and evaluate social problems scientifically. Having accompanied Thomas Voss for many years in the German university system as much as in the sociological profession, we have the impression that the revival of the explanatory sociology approach must have appeared to him as a late victory. For decades, he has been under constant pressure for the sociological position he advocated in his research and teaching by university members (from below e.g. by representatives of the student body and from above e.g. by the university board and its administration),2 as much as by a considerable part of the sociological community.3 However, in times of pandemic, the explanatory sociology approach and its methodological basis now turns out to be undisputed within the scientific community as much as outside in the media and the general population. We take this as an inspiration for our article that is a homage to Thomas Voss and his way of doing sociology. The Covid-19 crisis and its diverse social consequences are social facts (in the sense of Durkheim) that have to be explained. The explanation of the social consequences of the Covid-19 crisis is a paradigmatic example for a sociology that follows the metatheoretical considerations and methodological heuristics that Thomas Voss argues for. The illustration of this is the first goal of our paper. Moreover, we argue that adherence to these methodological heuristics is fruitful 1 Covid-19

is a viral disease caused by the coronavirus SARS-CoV-2. and Traunmüller (2020) show that such ideological pressure is not confined to the University of Leipzig, but takes also place at other German universities. 3 We are happy to point out, that this has not been the case for the Institute of Sociology in Leipzig that always has been a backing for Thomas Voss in this respect. 2 Revers

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for a deeper understanding of the Covid-19 crisis. Especially, it leads to a better comprehension of causes that underlie and produce social phenomena (Hedström 2005; Braun 2008). It is argued that in turn rather these methodological heuristics are indispensable for a rational and sensible reaction to social problems like the Covid-19 crisis and can thus contribute to reducing harm for people. This is the second goal of our paper. We start with an overview of methodological heuristics of the explanatory sociology approach (Esser 1993) and how this approach can be employed for theory building (Sect. 2). Then, the example of the Covid-19 crisis is used to show how social theory and the underlying epistemological assumptions and methodological heuristics allow to explain social phenomena associated with the pandemics (Sect. 3). Finally, the results are summed up (Sect. 4).

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Metatheoretical Considerations and Methodological Heuristics

In the following, the methodological foundations of the explanatory sociology approach are sketched, starting with the paradigm of realism and then proceeding to the guiding principles of causality and methodological individualism. Any epistemological system, like a social theory, is based on certain assumptions that cannot be justified via empirical criteria, but must be set a priori. These assumptions have to suffice certain logical criteria such as consistency and freedom from contradictions in regards to other basic assumptions. Furthermore, it is possible to argue about the reasonableness and plausibility of these assumptions. Hereinafter the case for evidence based analytical sociology is made arguing that the explanation of relevant social facts and phenomena is the primary objective of science. In line with Popper’s epistemology (Popper 1934), it is argued that any social theory must have empirical implications and therefore in principle can be shown to be empirically wrong. According to Raymond Boudon’s reasoning (Boudon 2002, p. 373), the explanatory approach can be summarized as “the objective of sociology is to explain puzzling phenomena; explaining a phenomenon in sociology as in any other discipline means finding its causes; the causes of the social phenomena are to be found at the level of individuals, their attitudes, decisions, choices, or beliefs (…).”

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Realism

The explanatory sociology approach is metatheoretically based in the paradigm of realism (Braun 2008). It is an empirically oriented science that assumes that the correspondence of social theories to reality is a reasonable aim for sociological research. In this context, the key assumptions are that social facts such as social distributions, norms, institutions, empirical patterns and causal dependencies constitute a reality that • does exist independently from the fact that some social scientist (or any other researcher or observer) does research on it or not. Or in other words: the world keeps turning no matter if it is being researched or not. Its empirical patterns and causal dependencies can in principle be recognized and researched. This does not mean that research or the researcher may not (un)intentionally influence the social world. Realism simply states that the world is not a mere social construct generated in the mind of the researcher or by language. • can be objectively analyzed and researched, independently from any characteristic of the researcher himself. Because the social world exists independently of being researched, and because it is possible to analyze it objectively, empirical research of real world phenomena can reasonably be done. Against this background, it is useful to establish further methodological rules that guide empirical social research in regards to how this goal of objectivity (and reliability and validity in consequence) is to be achieved, and how sociological analyses therefore should be done. This methodology can be characterized as universal.4 A sociology that is based in the paradigm of realism should in principle be connectable to any other scientific discipline pursuing the same goals, i.e. explaining and empirically analyzing real word phenomena. These disciplines comprise natural sciences (e.g. physics, chemistry, biology) as well as applied or hybrid disciplines that are derived from natural sciences, e.g. geography, engineering, climatology, medicine and epidemiology (cf. Braun 2008). These characteristics of interdisciplinarity and connectivity are highly useful in cases where the subject under research (e.g. the Covid-19 crisis) is real with its physical as well as its social implications. 4 According

to Merton, one key element of the “ethos of science” is universalism (Merton 1973). That is, truth claims result from the application of impersonal methodological rules (for example, theories should be logically consistent and be in accordance with empirical observations).

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Because at least some part of the social world is intrinsically entangled to the natural world, it is important to establish a research methodology that takes these aspects into account, i.e. sociological research methods should be compatible with natural science methods. This does not mean that sociological methodology cannot comprise additional assumption to natural science methodology. But these additional assumptions should also be compatible with the natural sciences methodology, which in turn suggests that sociological methodology should be coherent in itself (cf. Gintis 2017). Realism is in line with Max Weber’s famous idea that science should be free from value judgment (Weber 1922 [1973]). This postulate states that normative statements cannot be derived logically from empirical statements. Similar ideas have already been written down by David Hume who insisted that an “ought” cannot be derived from “is”: “(…) the distinction of vice and virtue is not founded merely on the relations of objects, nor is perceived by reason” (Hume 1739 [1978]).

2.2

Causality

Besides valid descriptions of social phenomena, one key goal of sociology is the identification of causal mechanisms and causal inference. Through stringent reasoning and empirical research, sociology contributes to the cumulation of general knowledge about the causal mechanisms of the social world and thus provides a theoretical and empirical basis for evidence-based policies and rational decision making. If political decisions should benefit from sociological insights, e.g. about possible intended and unintended impacts of social interventions on people’s lives and the society, such insights necessarily must be founded in empirically validated social theories that explicitly specify causal mechanisms about the social world (Stegmüller 1974). First, this is not only true because a purely empiricist strategy misses the possibility to separate mere epiphenomena from true causal mechanisms that can be sensibly used and transported to a broader or another population (Elwert and Winship 2014). Second, the empiricist strategy is also not an option, because it is technically not possible to identify and control relevant covariates—be it implicitly—without assuming some causal structure (Schuessler and Selb 2019). Therefore, theoretical explanation, hypothesizing about causal mechanisms and testing of causal hypotheses via controlled and systematic empirical research have to be the main goals of sociology.

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Indeed, the diffusion of the idea of and different concepts of causality to social theory is old, going back to the Scottish Enlightenment. David Hume, in particular, already presented the concept of counterfactual causality that is the standard tool for causality in contemporary science (cf. Berger 2010; Winship and Morgan 1999). To put it in a nutshell, there is a causal structure as soon as statement such as “(…) if the first object had not been, the second never had existed” apply (Hume 1748 [2001]). Nevertheless, in sociology, the concept of causality has always been of minor importance (Berger 2010). The greater part of sociology simply ignored the idea. Typically, only a small group of analytically-empirically oriented sociologists, like Thomas Voss, promoted the idea of causality in social theory.

2.3

Methodological Individualism

The core principle of methodological individualism is to postulate micro–macro links in the explanation of social phenomena. The term “macro level” is used to describe social phenomena such as properties of social groups or networks, social cooperation, emergence of social norms or the production of collective goods. The term “micro level” refers to individuals and their properties such as their preferences, expectations, or actions. Social phenomena at the macro level should be explained as consequences of individual behavior at the micro level (Opp 2009; Raub and Voss 2017; Raub et al. 2011). Micro–macro models often use rationality assumptions at the micro level to explain how social phenomena at the macro level are generated as results of the interactions of rational individuals. This tradition of methodological individualism can be traced back to the works of Thomas Hobbes and David Hume (see Vanberg 1975). There are good reasons to choose methodological individualism, such as avoiding the problem of ecological fallacy that may arise, as soon as individual action is neglected (Robinson 1950). As stated in the former section, one goal of social theory building is causal explanation of a social phenomenon (the explanandum). Considering the principles of methodological individualism, causal explanations of social phenomena at the macro level should always refer to the individual actors and their actions at the micro level. They should specify how individuals perceive a specific social situation (that is part of the explanans), how these perceptions cause individual actions and, finally, how the actions of many individuals aggregate into a social phenomenon. Especially for the problem of aggregation—as Thomas Voss always points out—game theory is a powerful tool (Voss and Abraham 2000; Diekmann and Voss 2004).

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Furthermore, it is important to emphasize that social consequences and collective effects of purposive individual action are often unintended. A prototypical example of unintended social consequences are Schelling’s models of segregation (Schelling 1978). Because social phenomena on the macro level emerge from the aggregation of the interactions of several individual actors, the collective outcome may even end up being suboptimal and “irrational” from both, the individual and the societal perspective. Such situations are often referred to as social dilemmas, meaning that rational individual actions may lead to suboptimal social outcomes. Paradigmatic examples from game theory are prisoner’s dilemma and collective good games or “self-fulfilling-prophecy” phenomena as described by Merton (1948). Empirically, as results from behavioral game theory suggest, unintended social consequences of intentional and rational individual action are a common empirical observation (see e.g. Camerer 2003). Therefore, it is by no means the case that the intended outcome that has been acknowledged as the socially or morally best will actually be produced, even if all actors are strictly rational and self-regarding (Olson 1965). Finally, the motives and actions of individual actors on the micro level must consider some element of purposive action as well as of material egoism. This does not imply that all actors in all situations will always act completely egoistic and self-regarding without any consideration of social, altruistic or other-regarding motives and actions. However, to quote Adam Smith—a man who experienced somewhat harsher circumstances than most people living today—self-interest is a driving force of human nature constituting society: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” (Smith 1776 [2007]). And indeed, the pandemic situation reveals that as soon as there are not only additional gains at stake but shortcomings (e.g. of intensive care beds and vaccines) and losses (of mobility, health or even life) people abstain from their altruistic action that they claimed or showed in better times.5 To put it provocatively and from a consequentialist perspective: As Thomas Voss already pointed out teaching his course ‘Introduction to sociology’: Martin Luther was wrong when he stated that “Gute fromme Werke machen nimmermehr einen guten frommen Mann, sondern ein guter frommer Mann macht gute fromme Werke” (Krötke 2000, p. 1344). In the real social world, it is by no means the case that actions that are undertaken in good intention or supposed moral superiority 5 Recent empirical research studies that focus on real losses show that actors are more egoistic

when interacting in the loss domain compared to gains (Neumann et al. 2018; Windrich et al. 2020).

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necessarily will make the world a better place. On the contrary, and in accordance with Adam Smith and his precursors and scholars, even a dedicated evil person may—unintentionally—initiate a good deed. Consequences of individual actions are the driving forces of the social world and not good or evil intentions. Or to speak with von Goethe’s Mephistopheles, that it is “[j]ene[] Kraft, die stets das Böse will und stets das Gute schafft” (von Goethe 1808).

3

The Covid-19 Crisis

In this section the above formulated methodological heuristics and assumptions are applied to the case of the Covid-19 Crisis.

3.1

Realism

The analysis of the Covid-19 Crisis can be seen as a paradigmatic example demonstrating the epistemological value of realism and the explanatory sociology approach. The SARS-CoV-2 virus is an empirical structure and is part of the real world. Social constructs, fancy terms or interpretations of reality neither change reality nor the fact that something threatening is there outside and is coming closer. The virus does exist independently from the fact of being researched. It is infectious and leads to death in vulnerable people no matter if it is investigated or not. To capture these real-world processes, it is sensible that research on the Covid-19 crisis starts with realistic assumptions about nature and the social world. As argued above, sociology should be connectable to other scientific disciplines aiming at convergence of their theories with reality such as the natural sciences or hybrid disciplines. The virus does its harm with all its social consequences no matter if humans do like it or not, or human minds make sense of it or not. In the situation of the pandemic, this realistic perspective is hardly disputed any longer. Yet, exactly this happened permanently in times before the pandemic as much as with other topics. In sociology, a prominent metatheoretical counter position to realism exists, namely constructivism. Its key assumption is that empirical reality does not exist independently of the researcher’s mind and also cannot be recognized and researched objectively. Rather, reality is socially constructed by the researcher and the language she uses. This is illustrated by the admittedly extreme position of Bruno Latour (1998, 2000) about this exact question of the realistic existence of pathogenic germs. Precisely, he claimed that Ramses II could not have died

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of tuberculosis more than 3000 years ago because it was only in 1882 when R. Koch discovered (actually, in Latour’s sense: invented) the tuberculosis bacteria, and that the bacteria did not have a real existence before! In times of the Covid-19 pandemic it is hard not to consider such a position as grotesque. The rising death rates and excess mortality in certain groups are real and robust empirical patterns that have to be explained. The same holds for other natural phenomena whose existence is relativized or even denied in constructivist sociology. For example, this is the case for the popular idea of sex being a mere social construct (then called “gender”) instead of being a result of biological evolution.6 The same is found with other phenomena of human health, like obesity and adiposity (e.g. Villa and Zimmermann 2008). Tragically enough, the Covid-19 pandemic shows that obesity by no means is a question of social construction. Adipose Covid-19 patients do have a higher risk of death compared to patients with average weight (Sornette et al. 2020). These empirical patterns do not simply disappear after redefining, relabeling or reconstructing them. The constructivist view does not contribute much to solving the puzzle of causal explanation of the rising mortality rates for certain groups (cf. Pörksen 2020). Simply stating that they are social constructions is intellectually unsatisfactory. In addition, this constructivist view of the natural and social world in times of pandemics looks implausible because one implication would be that one only needs to redefine the pandemic and the virus to make them disappear. Rather, actually facing human disease, sickness and death, the haze of academic hermeneutics and sophistry, that is the rage in normal times, implodes and gives sight to the undisguised world as Reemtsa put it in his dictum concerning a boxing fight: “Ein Boxkampf ist einfach; wenn einer nach zehn Sekunden noch nicht wieder auf den Füßen ist, gibt es auch keine hermeneutischen Probleme.” (Reemtsa 1995, p. 15). Sociology would be irrelevant and would not contribute to a better understanding of the world if it rejected the key assumptions of realism, and instead relied on a radical constructivist perspective, as these examples demonstrate. Finally, one key element of realism is freedom from political ideology and political correctness. The consequences of a violation of this important principle of freedom from value judgment of empirical research and the temptation to contribute to the politically correct narrative can be demonstrated in an example in the context of the Covid-19 crisis: The sociologist Koopmans argues that several 6 Especially the gender ideology has a major influence on contemporary sociology and science

in general (cf. Heying 2020 for an extreme example). And, more than once Thomas Voss was attacked for not giving into this position—especially by representatives of the student body—and had to defend his methodological principles.

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Western European countries closed their borders too late due to the credo of open borders. Probably thereby they missed the optimal starting point to suppress the pandemic (Koopmans 2020a, 2020b).7 In contrast, Eastern European countries that adhere much less to the credo of open borders were less hesitating in closing down the borders early and suffered less victim numbers after the first pandemic wave. Similarly, Sornette et al. (2020) argue that Switzerland closed its border too late, especially to the Italian region of Lombardy and the French region of Savoy from where the SARS-CoV-2 virus was imported with the many—economically indispensable—commuting employees to Ticino and Geneva. These cases show that ideology, ignoring empirical research and reality did not much good for the respective societies in the context of the Covid-19 crisis.

3.2

Causality

During the Covid-19 Crisis, the concept of counterfactual causality of which a considerable part of Thomas Voss’ and our students until shortly thought as being rather academic and, in any case, too complex, suddenly resounded throughout the world. In a newspaper article, Straubhaar (2020) summed up some of the causal problems of the Covid-19 crisis that have to be solved. We paraphrase some of the problems raised in his article to illustrate the problems of counterfactual causality: • How would the mortality of some population have been if there had been no lock-down, e.g. in Germany? (E[Y1 |D = 0])8 • How would the mortality of some population have been if there had been a lock-down, e.g. in Sweden? (E[Y0 |D = 1]) • Would the mortality in Sweden have been the same as in Germany if Sweden had had a lock-down like in Germany? (Selection into treatment or control) • In comparison to 2019, the mortality is high in 2020. But in 2019, the mortality was exceptionally low? (Regression to the mean) • Will the mortality in countries with a comparable young population (e.g. in Africa) be the same as e.g. in Italy that has a rather old population? (Selection into treatment or control) 7 Because many of these countries belong to the main hubs for the worldwide air traffic closing

the borders would have been even more important for these countries. parentheses in each case the formal expression of the verbal statement beforehand using the terminology of Winship and Morgan (1999) is presented. We resign a further explanation of these formal terms and only point to the fact that formal analysis can and should also easily and sensibly be done in social science.

8 In

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• In comparison to Italy, is the lower mortality in Germany due to its more efficient health system or due to a lower degree of urbanization with less dense social networks? (Stable unit treatment value) There are many more similar questions that arose with the pandemic. Some of them have been answered, some can only be answered later, as soon as adequate data are available. Probably, some will never be answered. But all such questions have in common that they ask about causes of certain events or try to predict the future course of the pandemic. For explanation or prediction, it is necessary to refer to some concept of causality. In times of pandemic, it is consensus among scientists across disciplines that besides descriptions, causal explanations and predictions are the main goals of any scientific endeavor. Only the knowledge of the true causal mechanisms underlying the pandemics allows for effective medical, epidemiological, political or social interventions in order to improve the conditions of humans in these difficult times. Furthermore, there is also wide and interdisciplinary consensus about the crucial concepts for the validation of the causal mechanisms, in particular internal and external validity. Internal validity means that the causal mechanism under investigation is indeed causal in the theorized way and not due to some spurious causality or alternative explanations, respectively. If the latter were the case, any social intervention based on insufficient knowledge of the true causal mechanism would run the risk of being ineffective or even counterproductive. External validity should ensure that the causal mechanism as well as the effectiveness of some social interventions are not restricted to some special population but are generalizable beyond the population under investigation. For example, there is a discussion in the media whether the closure of schools and kindergarten is effective in decreasing the basic reproduction number R0 or not.9 In other words: is the supposed causal mechanism internally valid and are the corresponding social interventions effective, respectively. In addition, if this causal mechanism can be substantiated for some schools (in some country), will it also be true for other schools (in other countries)? In other words, is this causal mechanism generalizable and externally valid respectively?

9 One key parameter in monitoring the course of a pandemic is the basis reproduction number

R0 , which indicates how many more people an infected individual infects on average. Government measures aim to reduce the basis reproduction number of infections below a value of 1 (the parameter depends not only on the characteristics of the virus, but also on characteristics of the social network, the contact behavior of a population and how long an infected person has been infected, cf. Krämer 2020).

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A sociology that relies on the assumptions stated above has clear answers for these questions that can be resumed as the problem of inference (cf. e.g. King et al. 1994; Schnell and Smid 2020; Morgan and Winship 2007). Again, in sociological debates such problems are often seen at best as some specific problems without general importance. Yet, in times of pandemic this changes. Rather the relevance and importance of these problems become quite obvious, outside and within the sociological profession.

3.3

Methodological Individualism

Structurally similar formal models used by epidemiologists to predict the spread and course of a pandemic (Ferguson et al. 2005, 2020) are also used by sociologists (Manzo 2020; Manzo and van de Rijt 2020) to model processes of social infection. For decades, sociology has been developing models to analyze the properties of complex social systems on the basis of assumptions about individual behavior. A classic work in this context is the book “Growing Artificial Societies” (Epstein and Axtel 1996), which was already written in the mid-1990s. Well-known are also studies on the diffusion of innovations (Coleman et al. 1957, 1966; Coleman 1964; Hummell 1973; Burt 1987; Diekmann 2015), but also studies on the diffusion of infections in social networks (Liljeros et al. 2001; Bearman et al. 2004; Kuchler et al. 2020). Studies that make use of formal modeling methods are highly relevant in times of crisis such as the Covid-19 pandemic, as they provide forecasts of the spread and social consequences of the pandemic on the basis of assumptions about individual behavior. Some of these models explicitly consider sociological aspects such as complex social network structures in which individual interactions are embedded (Manzo 2020; Manzo and van de Rijt 2020). They also provide forecasts on the effectiveness of government intervention to contain the pandemic. They provide governments with a basis for rational decision-making and crisis management programs in an uncertain situation. Why were some governments late in responding? The simulated courses of the spread of the coronavirus SARS-CoV-2 follow (without countermeasures) an S-shaped logistic function with an initially slow increase in spread (almost linear increase in the cumulative number of infected individuals), which lulls the population and governments into a false sense of security at the beginning of the pandemic, and then a sudden sharp increase (exponential growth in the number of individuals infected), which continues until a large part of the population is

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infected (similar courses are also found in studies on the diffusion of innovations, cf. Coleman et al. 1957). If governments now introduce different levels of intervention in view of the exponential spread of such a pandemic (e.g. isolation of symptomatic cases; household quarantine; social distancing measures; closure of schools and universities; general lockdowns), the formal models (based on behavioral assumptions of many individuals on the micro level) predict flatter courses of infection spread on the macro level. The governmental coercive measures are thus designed to slow down the spread of the pandemic by reducing direct social contacts, with the aim of not overstretching the capacities of a national health system. Thus, studies from the field of formal modeling are useful in times of severe societal crises, as they provide comparative prognoses on the effectiveness of various non-medical interventions that have the potential to save many lives against the background of limited capacities and resources of societies and national health systems (cf. Ferguson et al. 2020). Note, however, that epidemic forecasting also has been subject of scientific controversy and criticism (Ioannidis et al. 2020). In addition to formal models, general sociological theories can also help to explain collective action in a crisis-ridden pandemic situation on the basis of individual assumptions. A key explanatory problem is the production of collective goods in times of crisis. For example, wearing face masks and adherence to social distancing rules can be seen as a contribution to the collective good “public health” and “ending the lockdown” (see Diekmann 2020). So how can cooperation in a social crisis be explained? Compliance with social distancing rules are a collective good problem.10 While members of vulnerable groups (elderly or pre-sick individuals) have a selfregarding motive to restrict their behavior and thus contribute to the collective good, members of more robust groups (younger or healthy individuals), who do not much worry about a possible infection, have little incentive to restrict their behavior. Uncooperative behavior of the more robust groups, however, jeopardizes the provision of the collective good on a societal level, because young individuals in particular, with a multitude of social contacts and high mobility, can greatly accelerate the pace of infection spread (so-called super spreaders, see Laxminarayan et al. 2020).11 A solution to the collective good problem requires external sanctions and selective incentives, like state-monitored and sanctioned curfews or 10 Collective goods are goods no actor (practically) can be excluded from. Contributing to the collective good is individually costly. 11 Both types of actors are assumed to act self-regarding and egoistic avoiding costs and striving for benefits.

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even more drastic measures like smartphone contact tracking and monitoring of the population via official contact “tracking apps” as in South Korea.12 In addition to dealing with collective good problems, another important task of sociology is to point out unintended consequences (cf. Hume 1739 [1978]; Vanberg 1975) of political and media attempts to manage the crisis. Such consequences can be explained by accounting for the expectations and interactions of many individual actors. A paradigmatic example of unintended consequences are self-fulfilling prophecy phenomena according to which predictions, guesses or even rumors develop a momentum of their own and for this reason alone can have unintended social consequences (cf. Merton 1936, 1948; Diamond and Dybvig 1983). In the course of the pandemic, the spread of rumors about an imminent shortage of certain products in everyday life (e.g. toilet paper, web cams, some drugs) could be observed. Such rumors (often fueled by media coverage) initially trigger fears and pessimistic expectations in the population. Typically such processes then are reinforced by social contagion and eventually lead to hamster purchases and the rumors come true. These situations can be understood as social dilemmas, comparable to mass panic (cf. Coleman 1990; Helbing et al. 2000). The interplay of the rational expectations and corresponding actions of a multitude of individuals (in the face of an impending shortage, from an individual perspective it is rational to quickly buy a large amount of toilet paper in the shop next door) results in an irrational collective outcome that nobody intended (cf. Holzer 2020). In the end, the shelves for certain products are empty and the feared scarcity actually has become real. In addition to such everyday phenomena, more serious unintended consequences of crisis management are also possible. In times of a pandemic, every policy of pandemic suppression is characterized by uncertainty13 and opportunity costs: “For every decision made, there is an opportunity cost which has to be taken into account if total damage is to be reduced” (Eichenberger et al. 2020, p. 472). If a recession takes hold of the economy, an increase in the number of non-coronavirus-associated deaths can be expected. For example, impoverishment due to company insolvencies or unemployment, social dislocation, domestic violence and generally more stress can increase the risk of 12 Selective incentives (cf. Olson 1965) are private (non-collective) advantages or disadvantages that are linked to a contribution or non-contribution to the creation of the collective good, e.g. state coercion (fines, prison sentences) or social incentives (social recognition or disapproval). 13 Containing the pandemic with governmental coercive measures that paralyze social and economic life and claim additional lives versus doing nothing with the risk of a fatal spread of the virus, which can also cost additional lives (risky decisions between losses; see also the seminal contributions of Kahneman and Tversky, e.g. Kahneman 2011).

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heart attack or suicide and reduce the life expectancy of the general population.14 Moser et al. (2020) show that mental health suffered as a consequence of pandemic mitigation strategies. Furthermore, patients with heart attacks stayed away from emergency rooms because of fears of infection with the coronavirus. This led to an increase in mortality that could not be explained by Covid-19 alone (see De Filippo et al 2020). Finally, Bendavid et al (2021) point to the unintended and harmful societal consequences of restrictive lockdown measures such as mandatory stay-at-home and business closures. It is concluded that methodological individualism proves to be a convincing heuristic for the explanation of social phenomena in the Covid-19 crisis. Especially, it allows for an explanation of unintended and unwanted consequences of rational and planned behavior.

4

Summary

Our contribution intends to honor Thomas Voss as a scholar and scientist who throughout his whole scientific career has followed certain general methodological principles being immune against short-lived trends of “Zeitgeist” and dilution of these principles. We are lucky having worked with him and being his colleagues and intellectual sparring partners. The outbreak of the Covid-19 crisis waltzed into the final two years of Thomas Voss’ career as a full professor at the University of Leipzig. He took this as a chance to show that his sociology was able to explain the social consequences of the Covid-19 crisis, and that it can be fruitfully being applied to ease their harmful impact. We followed this and show that the epistemological assumptions and methodological heuristics of Thomas Voss’ sociology are sensible, plausible and fruitful in a situation where academic sophistry, and muddleheaded idealism are hushed by the harsh consequences of the pandemic. We state, that this sort of sociology now is no more vocally disputed neither within the scientific community nor outside in the media and the general society, although this had been the case constantly before the pandemic. Specifically, we argue that realism is a reasonable epistemological basis for sociology. It allows to combine social insight with knowledge from natural 14 Possible explanations for an increased risk of suicide in times of crisis can be found in Durkheim’s anomie theory (cf. Durkheim 1973; anomie as a growing gap between expectations and opportunities under changed economic and social conditions) as well as in theories of relative deprivation (cf. Williams 1975).

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sciences and corresponding applied sciences like medicine and epidemiology. Furthermore, if the goal of sociology consists in the identification of causal mechanisms, this allows for beneficial and effective social interventions that temper the harm caused by the pandemic. Lastly, it is illustrated that the heuristic of methodological individualism is appropriate to explain various social phenomena related to the Covid-19 crisis. This is especially true for the unintended and unwanted consequences of social interventions. Acknowledgments We are grateful to Werner Raub and Andreas Tutic for valuable and detailed comments on former versions of this paper.

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Raub, W., and T. Voss. 2017. Micro-macro models in sociology: Antecedents of Coleman’s diagram. In Social Dilemmas, Institutions and the Evolution of Cooperation, ed. B. Jann and W. Przepiorka, 11–36. Berlin: De Gruyter. Raub, W., V. Buskens, and M.A.L.M. van Assen. 2011. Micro-macro links and microfoundations in sociology. The Journal of Mathematical Sociology 35:1–25. Reemtsma, J.P. 1995. Mehr als ein Champion. Über den Stil des Boxers Muhammad Ali. Stuttgart: Klett-Cotta. Revers, M., and R. Traunmüller. 2020. Is free speech in danger on university campus? Some preliminary evidence from a most likely case. Kölner Zeitschrift für Soziologie und Sozialpsychologie 72:471–497. Robinson, W.S. 1950. Ecological correlations and the behavior of individuals. American Sociological Review 15:351–357. Schelling, T.C. 1978. Micromotives and Macrobehavior. New York: Norton. Schnell, R., and M. Smid. 2020. Methodological problems and solutions for sampling in epidemiological SARS-CoV-2 research. Survey Research Methods 14:123–129. Schuessler, J., and P. Selb. (2019). Graphical causal models for survey inference. SocArXiv. November 27. https://doi.org/10.31235/osf.io/hbg3m. Smith, A. 2007. An inquiry into the nature and causes of the wealth of nations – Books I, II, III, IV and V, Eds. S. M. Soares. MetaLibri Digital Library (Erstveröffentlichung 1776). Sornette D., E. Mearns, and M. Schatz. 2020. Verlassen wir uns nicht nur auf den Staat. Schweizer Monat 1080. Stegmüller, W. 1974. Probleme und Resultate der Wissenschaftstheorie und Analytischen Philosophie, vol. I. Verbesserter Nachdruck: Springer. Straubhaar, T. (2020). Eine Übersterblichkeit ist nicht erkennbar – doch was sagt uns das? Welt Online. https://www.welt.de/wirtschaft/article207872263/Uebersterblichkeit-Wietoedlich-ist-das-Coronavirus-wirklich.html. Accessed 23 December 2020. Vanberg, V. 1975. Die zwei Soziologien. Individualismus und Kollektivismus in der Sozialtheorie. Tübingen: Mohr. Villa, P.-I., and K. Zimmermann. 2008. Fitte Frauen - Dicke Monster? Empirische Explorationen zu einem Diskurs von Gewicht. In Kreuzzug gegen Fette. Sozialwissenschaftliche Aspekte des gesellschaftlichen Umgangs mit Übergewicht und Adipositas, ed. H. Schmidt-Semisch and F. Schorb, 171–190. Wiesbaden: VS Verlag. von Goethe, J.W. 1808. Faust. Eine Tragödie von Goethe: Der Tragödie erster Teil. Tübingen: J.G. Cotta. Voss, T., and M. Abraham. 2000. Rational choice theory in sociology: A survey. In The international handbook of sociology, ed. S.R. Quah and A. Sales, 50–83. London Thousand Oaks: Sage. Weber, M. 1922. Gesammelte Aufsätze zur Wissenschaftslehre. Tübingen: Mohr Siebeck (Erstveröffentlichung 1973). Williams, R.M., Jr. 1975. Relative deprivation. In The idea of social structure. Essays in honor of Robert K. Merton, ed. L.A. Coser, 355–377. New York: Harcourt. Windrich, I., et al. 2020. Der Einfluss von Normen in Verlustexperimenten. Arbeitsbericht 78. Leipzig: Institut für Soziologie, Universität Leipzig. Winship, C., and S.L. Morgan. 1999. The estimation of causal effects from observational data. Annual Review of Sociology 25:659–706.

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Roger Berger, Prof. Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: methodology and methods of empirical social research, foundations of human cooperation. Ivar Krumpal, PD Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: quantitative research methods, survey methodology, economic sociology, norms and social desirability.

Norms

When Do People Follow the Behavior of Others? The Effects of Descriptive and Injunctive Norms, and the Werther Effect Karl-Dieter Opp Abstract

If most people perform a certain behavior (i.e. if there is a descriptive norm) or if most people think a behavior should be performed (i.e. if there is an injunctive norm), it is likely that the behavior is imitated because it is regarded as effective. Another condition for imitation is that the norms are “focused” upon (i.e. that they are salient or activated). These are the major hypotheses of the focus theory of normative conduct (FTN) by Cialdini and collaborators. The present article criticizes and modifies this theory. Its major weakness is that it is not clear what “effective” means. Cialdini and collaborators insinuate that “effectiveness” of following the behavior of others refers to the overall positive subjectively expected consequences of imitation. The question then is what these consequences are, and under which conditions they have an impact on imitating the behavior of others. To answer this question we apply the social psychological value expectancy theory that helps to answer these questions. We specify, among other things, a list of possible consequences of following the behavior of others. It is further argued that a distinction between the incentives generated by the behavior of others and the pre-existing incentives is important for explaining the impact of the behavior of others. We illustrate our modification of FTN with the Werther effect, in which the suicide of a figure in a novel by J. W. Goethe was imitated. Existing data suggests that follow-up suicides may be cues of incentives for suicides of others. These incentives are among the list of incentives specified before. However, the very K.-D. Opp (B) Universität Leipzig, Leipzig, Deutschland E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_6

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small effects of reported suicides on new suicides indicate that pre-existing incentives are the major factors. Value expectancy theory suggests that the number of others trigger imitation most likely when the overall pre-existing incentives for performing and not performing a behavior are similar. In this situation the behavior of others might become a “nudge” (i.e. might add sufficient incentives) to imitate the behavior of others. This happens most often in low-cost situations (such as littering) but rarely in high-cost situations (such as suicides). Keywords

Focus theory of normative conduct • Descriptive norms • Injunctive norms • Value expectancy theory • Rational choice approach • Werther effect • Suicide imitation

1

Introduction

If a relatively large number of individuals perform a behavior it is likely that many others follow suit. The “magnetic pull” (Cialdini et al. 1991, p. 203) of the behavior of a group of people has been documented by numerous empirical studies and is consistent with everyday experience. A classical experiment by S. E. Asch (e.g. 1956) showed that the likelihood of giving wrong judgments about the length of a line was relatively high if there was a relatively large number of others who provided a wrong judgment. In a similar vein, M. Sherif’s classical studies (1936) about judgments of the size of the autokinetic effect1 showed the impact of others’ judgments as well. It is even held that there is a “psychosocial law” (Latané 1981, p. 344) that the author specifies as a power function: I = sNt with t < 1. I refers to the social impact of the behavior of others, s is a coefficient to be estimated empirically, and N is the number of others. Note that a power function may have a positive exponent (t) such as 0.4, but also a negative exponent such as −0.4. In the former case (if the exponent is smaller than 1 and larger than 0), an increase in the number of others who behave in a certain way first strongly increases and then flattens. This is curve 3 in Fig. 3. If the exponent is negative (smaller than 0 and larger than −1) there is first a strong decline of a curve that then flattens. This is curve 5 in Fig. 3. Both curves represent power functions, but they describe completely different effects of a given independent variable. Thus, 1 If

in a dark room a small point of light is observed it seems that it moves, but it is actually stable. Subjects were asked in the experiment to estimate the size of the movement. Estimates depended on the judgments of others.

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to claim that the “psychosocial law” is a power function is not a very informative proposition. We will return to these curves later. Other disciplines such as cultural evolutionary theory or dual-inheritance theory (for overviews and discussion see Henrich and McElreath 2003; Russel and Muthukrishna 2018) also address descriptive norms: it is hypothesized, for example, that there is a “frequency-dependent transmission” of cultural items (e.g. Boyd and Richerson 1985, p. 206; see also p. 204 ff.; Liberman et al. 2020). There is thus a tendency to do what others do. However, there are models that specify the conditions under which this hypothesis is supposed to be valid. For limitations of space we will not further deal with this literature. Although there is some evidence for a “magnetic pull” of the number of others to imitate, there are empirical cases in which the number of others does not matter at all (see, e.g., Silva and John 2017). It happens that people increasingly consume a certain product, but consumption suddenly decreases because a new product replaces the old one. Another example that does not support the “magnetic pull” are media reports in the mid-nineties that child abuse among catholic priests was unexpectedly frequent. There is no evidence that after these reports child abuse in general increased. The perceived number of perpetrators thus did not have an impact on imitating. It is rather plausible that imitation decreased (one reason might be the expectation of more severe punishment due to increased observation of parents of how educators behave regarding their children). The question therefore arises what the conditions are under which the behavior of others is imitated. A widely discussed answer to this question is the focus theory of normative conduct (FTN) by Cialdini and co-authors.2 We criticize and modify this theory by applying a well confirmed social psychological theory of action, namely value expectancy theory (VET). The theoretical idea is that imitation does not depend on the number of others per se but on the perceived behavioral consequences, their subjective probabilities, and utilities of imitation. The idea that imitation depends on its costs and benefits is not new (see already Banerjee 1992; Gergely et al. 2002; Hedström 1998; Keuschnigg 2015a, b; Király and Oláh 2018). In this article we apply VET and show how FTN must be modified. The first part of this article exposes and discusses FTN. After introducing VET a set of incentives is suggested that might be associated with the behavior 2 See

particularly Cialdini 1993, 2007, 2012; Cialdini et al. 1990, 1991, 2004; Cialdini and Trost 1998; Chung and Rimal 2016; Goldstein et al. 2008; Kallgren et al. 2000; Kenrick et al. 2012; Silva and John 2017. For an overview see Stok and de Ridder 2019. The following exposition and critique of FTN is mainly based on Cialdini et al. 1990, 1991.

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of others. In a final section we illustrate our theoretical approach with the Werther effect and ask when a suicide triggers suicides of others. This article is a contribution to the Festschrift for Thomas Voss. I met him first (together with Werner Raub) at a conference in Tübingen in 1977 when he was a student. He has been my colleague at the University of Leipzig from 1993 to 2002. One theme of his publications is the emergence of norms (see, e.g., Braun and Voss 2014, 1985; Diekmann and Voss 2008, 2000a, 2001). Other topics are cooperation (e.g. Raub and Voss 1986; Voss and Vieth 2015) and trust (Voss 2000b). His theoretical approach is rational choice theory and in particular game theory (Voss 2001; Diekmann and Voss 2004). The present article is an extension of his work on norms. We outline a specific mechanism of norm emergence: it refers to the conditions of norm transmission due to certain external stimuli – others’ behavior. There is norm “emergence” in the sense that actors adopt a new norm. The theoretical argument is based on value expectancy theory that is a version of rational choice theory.

2

Cialdini’s Focus Theory of Normative Conduct (FTN)

Two kinds of norms are distinguished. A descriptive norm refers to what most people do, an injunctive norm denotes what most people think one ought to do. Note that a descriptive “norm” does not have anything to do with oughtness, i.e. with what one should do. This is the everyday meaning of “norm” and a frequent definition in the social science literature. A “descriptive norm” refers simply to “normal” behavior, i.e. to what people do. FTN assumes that descriptive norms influence the behavior of others because they “motivate by providing evidence as to what will likely be effective and adaptive action” (1991, p. 203)3 or what will be “efficiently and well” (1990, p. 1015). “If everyone is doing or thinking or believing it, it must be a sensible thing to do or think or believe” (1991, p. 203). For example, “individuals are more likely to litter into a littered environment because they perceive that their litter will do less damage to the state of the environment than if it were clean” (1990, p. 1016). Injunctive norms have a motivating power as well: they “motivate action by promising social rewards and punishments (informal sanctions) for it” (1991, p. 203). FTN claims that the influence of norms depends on the “degree to which the respondent’s attention is focused on that norm” (1991, p. 204), i.e. on the extent to which it is “salient” or 3 For

the sake of simplicity, citations refer to the year of a publication. For example, (1991, p. 203) refers to Cialdini et al (1991, p. 203).

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“activated” (ibid.). The name “focus” theory refers to this proposition. If there are conflicting norms the norm that will be adhered to is the norm that is “temporarily prominent in consciousness” (1991, p. 205). The focus on signaling and activation of cognitive elements anticipates modern dual-process theory (e.g. Kahneman 2011). Proponents of FTN assume that not only norms but other “cultural and dispositional conditions may influence one’s normative focus” (1990, p. 1025; 2012, p. 304; see also Goldstein et al. 2008). These factors are introduced ad hoc. There is no systematic application of a theory to derive these factors.

3

A Clarification of the Theory

FTN needs to be clarified.4 One problem is that the variables are formulated as dichotomies although they are quantitative. For example, a descriptive norm is defined as what “most others” do or do not. This is a dichotomy of the quantitative variable “number of others.” Replacing the dichotomies with quantitative variables offers the opportunity to explore functional relationships and does not pose the problem of specifying a cutting point. The two central concepts can be defined in the following way: Definition 1: Definition 2:

A norm is descriptive to a relatively high extent = df. a relatively high number of individuals perform a certain behavior. A norm is injunctive to a relatively high extent = df. a relatively high number of individuals think a certain behavior ought to be performed.

Descriptive norms are sometimes defined as the perceived number of others who perform a behavior (1991, p. 203). It is preferable to separate the actual behavior of others and its perception as two different variables. An advantage is that their causal relationship can be modeled. The relevant variable for matching behavior (i.e. imitation) is, however, the perceived number of others (see later in this article). Note that the variable refers to the absolute number of others and not to the percentage of members of a certain group. It is also not specified what the group 4 Our

procedure is what Carnap (e.g. 1962, p. 1 ff.) called explication: The goal is to provide a clarification of a concept or statement that seems theoretically most fruitful and is not an “interpretation” of what the author could have meant (it is unclear anyway what an author means). For a detailed discussion see Opp (2014, p. 149 ff.).

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is the “others” are members of. The theory simply assumes that the perceived number of others is the relevant variable. The theory refers to two groups of actors. One consists of those who hold a norm. They are called norm senders. Those who may adopt the behavior of the norm senders are called target actors or simply targets. Their behavior is to be explained. “Target” should not imply that the norm senders have any intention to change others’ behavior. Norm senders may act without considering the behavior of others. Figure 1 is a reconstruction of FTN. The upper panel consists of dimensions of descriptive norms, the lower panel of the dimensions of injunctive norms. The first dimension of the descriptive norm is the perceived frequency of a behavior B of norm senders (X1 ). The perception of what others do is only relevant for imitation if the norm is activated on the part of the targets (X2 ). Both variables have thus an interaction effect, i.e. the effect of one of the variables depends on the values of the other variable. It is not clear what the difference is between the perception of the behavior of others and the activation of the norm. Isn’t the meaning of “a person perceives that others have a descriptive norm N” identical with the meaning of “a person has activated norm N”? The relationship between X1 and X2 thus needs further clarification. The norm senders’ behavior B will only influence imitation of the target if the latter believes that B is effective (X3 ). There is thus an interaction effect of all variables of the first panel in Fig. 1. Regarding injunctive norms (see the second panel of Fig. 1) two factors influence imitation: the perceived number of norm senders who think B ought to be performed (X4 ) and the activation of the norm by the norm targets (X5 ). The “reason” for the effect of the injunctive norm on imitation is the belief of targets that they will receive external rewards for compliance (X6 ). As in the case of descriptive norms, there are interaction effects. Is FTN a conditional statement (if p, then q) or a biconditional statement (if and only if p, then q)? In terms of formal logic (see, e.g., Suppes 1957, p. 6 ff.), a conditional statement means that a behavior B need not be brought about by the behavior of others. Other factors may cause B as well. But if there is a descriptive or injunctive norm (and the required effectiveness), FTN predicts imitation. That FTN is a conditional statement is exemplified by the following example. If it begins to rain some people begin to open their umbrellas and others follow successively. The need is not to get wet. The sequence may be due to a different susceptibility to rain and is not caused by the number of others who open their

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Dimensions of descriptive norms Perceived frequency of behavior B of norm senders (X1) * Activation of the descriptive norm on the part of norm targets (X2) * Belief of targets that B is effective (X3)

+ Performance of behavior B by norm targets

Dimensions of injunctive norms Perceived frequency of norm senders who think B ought to be done (X4)

+

* Activation of the injunctive norm on the part of the targets to do B (X5) * Belief of future external rewards for compliance of targets to injunctive norm (effectiveness) (X6) * symbolizes an interaction effect Fig. 1 A Clarification of the Focus Theory of Normative Conduct. (Source: own research)

umbrella.5 Assuming that in general behavior is often not caused by the behavior of others we explicate FTN as a conditional statement. In contrast, a biconditional

5 The

example is taken from Max Weber’s “Soziologische Grundbegriffe,” section “Begriff des sozialen Handelns”.

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Correlation

Macro level

Micro level

Perceived behavior of a group

“Inference” of incentives for individual behavior

Matching behavior of observers

Individual behavior

Pre-existing incentives Fig. 2 Process of Matching the Behavior of Others. (Source: own research)

statement means that all behavior is caused by the behavior of others. This is not plausible. FTN is a micro–macro model that describes a process (see Fig. 2). The macro variable is a behavior of at least one individual, normally a group of individuals (the norm senders) that is perceived by norm targets. This perception activates certain preferences and beliefs about the effectiveness of imitation. There is thus a macro-to-micro effect: individual incentives are “inferred,” i.e. influenced by the macro variable. Not every incentive for imitation is influenced by the macro variable: there are pre-existing incentives such as internalized norms not to litter. The individual actions then aggregate to the matching behavior of the group. This link is an analytical and not an empirical relationship.

4

The Major Flaws of the Theory and Suggestions for Its Revision

Defining the “Effectiveness” of Descriptive Norms: An Application of Value Expectancy Theory I

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SEU of performing B by P (effectiveness) 3 SEU(B)> SEU(-B)

6 Negative

imitation

2 1

SEU(B)= SEU(-B) SEU(B)< SUE(-B)

Positive effectiveness of B (littering), i.e. imitation (functions 2 and 3)

B is not effective

4 5

Negative effectiveness of B (littering), i.e. no imitation (functions 4 and 5)

Number of others who perform behavior B An example is littering behavior B of norm senders. This is observed by persons P (targets). There may be different relationships between effectiveness and the behavior of others. Fig. 3 The Interaction Effect of the Number of Others Who Perform a Behavior B (such as Littering) and the “Effectiveness” of Imitation by Person P. (Source: own research)

There is no explicit definition of “effectiveness.” The concept is only illustrated with examples. The discussion of littering (see, e.g., 1990) insinuates that “effectiveness” refers to the belief about the consequences of a behavior. In a similar vein, a report in the media that most people cheat on their taxes might provide evidence that sanctioning of the state is unlikely. It is well known that beliefs alone do not lead to action. Subjects’ belief that littering is harmful will only affect imitation if subjects care about a clean environment. Individuals must thus want to avoid damage of the environment. To explain behavior, beliefs and goals must be considered. What these goals and beliefs are needs to be ascertained in the research setting. If this is accepted, it is useful to apply a theory that explicitly models the effects of goals (or, equivalently, preferences) and beliefs on behavior. This is

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value expectancy theory (VET) which is a widely applied and confirmed general social psychological theory.6 VET can be briefly summarized as follows. Assume an individual perceives several behavioral alternatives such as imitation and no imitation. The behavior is chosen that has a relatively large number of consequences that are valued relatively positively and subjectively expected to a high extent. This overall utility of a behavioral alternative is denoted as its subjective expected utility (SEU). The consequences (and their values and expectancies) are often called incentives or costs and benefits. VET claims that the action with the highest SEU is performed. VET can be applied to judge the validity of FTN because the explananda of VET include specific behaviors such as imitation. From the perspective of VET, “effective and adaptive” imitation (1991, p. 203) or imitation as a “sensible thing to do” (1990, p. 1015) could mean that a behavior of norm senders is a signal or cue of overall high expected positive behavioral consequences: Effectiveness is, by definition, given if the behavior of norm senders signals to the norm targets that imitation yields a higher SEU than non-imitation.

VET thus specifies the mechanism for the impact of descriptive and injunctive norms: they influence imitation only if imitation has a relatively high SEU. The work by Rimal and collaborators (see Rimal and Lapinski 2015) comes close to our approach. Their mechanisms for the effects of descriptive and injunctive norms are similar to incentives, but a theory such as VET is not explicitly applied. This holds for Cialdini and Trost (1998, p. 151) as well who argue that following norms can be “interpreted as purposive (but not necessarily conscious)” behavior. This is exactly implied by VET. Kallgren et al. (2000, p. 1011) note that FTN is “conceptually related” to decision theory, but they do not apply this theory systematically. They note that FTN and decision theory are likely to “profit from the other in future research” which, we hope, is shown in this article. Fishbein and Ajzen (2010, p. 131 ff.; see also the special issue on the theory of planned behavior in Europe’s Journal of Psychology 2020, vol. 16, no. 3 with free access)

6 See particularly Feather 1982,

1990; Wigfield et al. 2016. Subjective expected utility (SEU) theory is a version of VET that is used in economics. See Stigler 1950a, 1950b. For limitations of space it is not possible to discuss VET and its relationship to the wide version of rational choice theory. The wide version assumes, among other things, subjective (and not objective) utility maximization and admits all kinds of motives (including altruism and the goal to follow norms). For details see Opp 2021. For a discussion of different versions of rational choice theory see also Diekmann and Voss 2004.

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also discuss the mechanisms for the impact of the two kinds of norms, based on their theory which is similar to VET (see Opp 2019). Applying VET provides the possibility to separate the kinds of incentives for imitation in a clear way. There are incentives triggered by the norms on the one hand and the pre-existing incentives on the other. As our example of the Werther effect will show, the latter will often prevent the effects of the behavior of others. The incentives that finally lead to imitation are often brought about by a spontaneous process. Targets apply heuristics or rules of thumb, as is noted by Cialdini and collaborators as well. For example, when considering buying a cultural product such as a popular book the choice may be based on “easily attainable signals” such as the name of the author instead on an “elaborate search” (Keuschnigg 2015b, p. 18). VET can model the choice process as well: conscious “search” is an action that will be chosen if its SEU is relatively high. In many situations pre-existing incentives are activated and it does not “pay” to calculate. Defining the “Effectiveness” of Injunctive Norms: An Application of Value Expectancy Theory II Injunctive norms “motivate action by promising social rewards and punishments (informal sanctions) for it” (1991, p. 203). Applying VET suggests that imitation depends on what the cues of a perceived injunctive norms are. The signals may be quite different for different targets. For example, assume a person enters a subway station and perceives that others depose litter in a wastebasket. Let the person believe that there is an injunctive norm to use a wastebasket. The person may expect approval (rewards) of others, but also activate an internalized norm not to litter. This example suggests that an injunctive norm may elicit the same kinds of incentives as a descriptive norm and not only sanctioning by others. An Implication of the Definition of Effectiveness: When Conflicting Norms Are Simultaneously Activated FTN assumes that among several norms the one that is activated is heeded. It often happens that conflicting norms are activated simultaneously. For attitudes there is often “chronic accessibility” (Fazio 1986, p. 214): the attitude is always “present.” This holds for norms as well. For example, the descriptive norm of littering could be fully accessible: subjects may have recently seen photos with beaches filled with plastic waste so that when entering a littered parking the descriptive littering norm is activated. At the same time, the injunctive norm may be activated. The reports about beaches with plastic waste may include reports that most others think littering is morally wrong. There is thus an activated descriptive and a contradictory activated injunctive norm.

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We can apply VET to explain what happens in such a situation. We must determine the behavioral consequences of following the descriptive littering norm or the injunctive non-littering norm. There could be several configurations of incentives. The person might perceive only positive consequences for littering so that littering is the choice. Another scenario could be that the person has internalized a strong norm for environmentally friendly behavior and perceives an internal reward (a good conscience) for not littering so that non-littering has the highest SEU and is chosen. A Clarification of the Interaction Effects To model the interaction effect of the number of others and the effectiveness of imitation several situations are distinguished (see Fig. 3). The x-axis symbolizes the number of others (norm senders) who perform a behavior B such as littering. The y-axis refers to the SEU of imitating littering (referring to the targets). (1) Imitation is irrelevant to person P (line 1 of Fig. 3). The SEU of following or not following others’ littering is the same. Imitation will thus not yield any additional utility for P. It is irrelevant what others do. This includes the case that pre-existing incentives dominate imitation. For example, internalized norms against littering could be so strong that the behavior of others who litter does not matter at all. The importance of pre-existing incentives will be illustrated further when the Werther effect is discussed. (2) Imitation has a linearly increasing positive utility. Assume P observes others’ littering. Let this be a signal to P that his or her littering would not add more damage to the environment and that his or her littering will be rather encouraged by others. The belief (i.e. the subjective probability) is thus: the more people litter, the lower are the overall costs of P’s littering. The SEU of littering B thus increases with the number of others in a linear way (see line 2 in Fig. 3). (3) Imitation has a non-linearly increasing utility for person P. Already the littering of a few others into a clean environment lets P believe that his or her additional littering is rather advantageous for him or her. There is a steep increase of the SEU of littering at the beginning. Then the curve flattens. P does not care much about additional litterers. This is the “psychosocial law” (Latané 1981, p. 344), i.e. the power function, with a positive exponent that is smaller than 1 and larger than 0 mentioned above (see curve 3 of Fig. 3). This case seems to be more frequent than the linear relationship (line 2). (4) Imitation has a linearly decreasing utility. This time observing the littering of others provides evidence for P that his or her own littering does damage the

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environment. The SEU for not littering increases with the number of others who litter (see line 4 of Fig. 3). There is no littering because the SEU of littering is lower than of not littering. (5) Imitation has a non-linearly decreasing utility. The first few individuals have a major impact on the behavior of B. This is again the power function Latané (1981) refers to, but this time the exponent is smaller than 0 and greater than −1. This is line 5 in Fig. 3. Again, there is no imitation. (6) There is one class of cases that is so far not addressed. Entrepreneurs who have an idea about a new product will only produce it if there are very few other people who use a similar product. Not many, but few others or even the absence of others who behave in a certain way are an incentive to act. There are further people who simply want to behave differently (without producing some material good or service), i.e. who have an intrinsic need for non-conformity. The behavior of those individuals may be called negative imitation. Thus, the larger the number of individuals is who perform a behavior B, the less “effective” (or attractive) is imitation. This situation is modeled as curve 6 in Fig. 3. In cultural evolutionary theory this phenomenon is called nonconformist transmission (Boyd and Richerson 1985, p. 286): when individuals are exposed to “more than two models” they may be more likely to “imitate … the rare types.” The authors formulate models that explain when which imitation is to be expected. For limitation of space these models cannot be discussed. Our application of VET implies that it can be explained which line or curve (see Fig. 3) exists under which conditions. The relevant variables are the components of the SEU for imitation that are related to the number of others.

5

Kinds of Incentives Provided by the Behavior of Others

FTN claims that effectiveness (as defined before) determines the impact of the behavior of others. The theory is silent about what these elicited incentives are. To apply VET it is useful to provide some heuristic guidelines about possible incentives. Whether the following kinds of incentives matter for imitation needs to be determined by empirical research. It is important to note that the size of the effects of each of the following incentives on imitation depends on the pre-existing incentives. They determine the extent to which incentives elicited by the behavior of others matter. One of

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the researcher’s task in a study thus is to find out which incentives that determine a behavior are influenced by the number of others.7 The perception of new behavioral alternatives. Reports about the behavior of others could suggest new behavioral alternatives for targets to realize their goals. An example is observing the spread of a new product that indicates a new way to realize one’s goals. It is plausible that the likelihood of perceiving new behavioral alternatives increases with the number of others who perform different kinds of a certain class of behaviors (such as different kinds of tax evasion). Expected positive or negative sanctioning. Assume a person P reads a media report that the tax authorities hire new employees to enforce tax laws. This might suggest for P that his or her own cheating will more likely be punished due to the increased enforcement actions. Furthermore, if a relatively large number of others perform a positively valued behavior gaining status and approval by imitating others is likely. Perceived positive and negative externalities. Targets may perceive that the behavior of norm senders leads to positive or negative externalities. These are effects of individual behavior that cause costs or benefits to others. For example, targets may perceive that others’ cheating on taxes leads to less state revenues and, therefore, to less provision of public goods. This may be an incentive not to imitate. Internalized norms. Most norms are conditional. For example, people might think that littering is justified if there is no trash box or if many others litter. VET suggests that internalized norms are relevant determinants of behavior because following an internalized norm leads to a good conscience and thus provides internal benefits. Violating a norm yields a bad conscience and internal costs (bad conscience, shame etc.). These rewards and costs only occur if the conditions for the validity of a norm are given. There may not only be a norm that refers to the observed behavior. There may be a norm to imitate. For example, children learn that under certain conditions they should do what parents do. Costs and benefits of conforming to or deviating from internalized norms may be related to the number of others. As was said before, the littering norm is conditional. For example, if no one litters one’s own littering will cause a bad conscience. It is less “strainful” to litter in a place full of waste.

7 Some

of the following incentives are mentioned or insinuated in the literature. See, e.g., Keuschnigg (2015a, p. 904). But normally there is no detailed discussion or specification of a list of incentives.

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Identification with others who hold a norm. Assume the norm senders are people who have a high status or are friends of targets. Matching behavior is likely in this case because of identification. Thus, there exists an “intrinsic satisfaction derived from perceived similarity” (Bandura 1971b, p. 4). The more people one identifies with who hold a norm, the higher will be the satisfaction with a similar behavior. Intrinsic rewards of conformity or nonconformity. For many people it is unpleasant if they know that many people perform some behavior that they do not engage in. There is thus an intrinsic need for conformity. If this need is relatively strong it is likely that a behavior of others is matched. But activation of this preference is only one possible incentive for imitation. As was said before, there are also people who want to be special. They do not want to do what others do. They have an intrinsic need for nonconformity. Incentives for information seeking behavior. Assume a person observes that the number of others who perform a certain behavior increases. Take the example of tax cheating: a person reads a report that this crime has increased considerably in the last few years. In deliberating whether to follow suit the individual might not be able to assign subjective probabilities to certain behavioral consequences such as official punishment. What to do? The individual might think that the others will have “good reasons” to cheat but does not know what these reasons are. The best perceived behavioral alternative might be to collect information about these “reasons” before a decision to evade taxes is made. It is plausible that this happens in many cases: before imitating one will try to find information about the likelihood of certain behavioral consequences before deciding whether to imitate or not to imitate or to imitate only certain kinds of behavior of others. VET suggests to exploring sequences of decisions: in a first step information seeking might be the best alternative. Depending on the outcome it is decided whether to imitate or not. Other behavioral consequences. The previous list is not complete. We assume that it includes incentives that are relevant for most behaviors related to the number of others. Other incentives may exist for other behaviors that are performed by others. Examples are the dissemination of cultural products (Keuschnigg 2015b) and of consumer goods in general (e.g. Leibenstein 1950), of the number of people who are expected to vote for a specific candidate or party (see the bandwagon effect, e.g. Lazarsfeld et al. 1944), and the number of suicides (see Werther effect below). It should be explored to what extent the previous list of incentives holds for these cases as well.

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Examples for configurations of incentives. There may be different sets of conditions under which behavior of others generates imitation. (1) One scenario consists of low-cost situations. To illustrate, let person P observe that others buy some new brand of yogurt or watch a new movie (see, e.g., Gilchrist and Sands 2016). In general, let the size of the SEU of each of these behavioral alternatives (such as buying or not buying the new brand of yogurt) be low, and let there be small differences between the SEUs. A “wrong” decision – the new yogurt is a “disappointment” – does not hurt much. This is, by definition, a low-cost situation. In such a situation, the behavior of others may add a small incentive to imitate – or not to imitate. For example, one might have made the experience that new food products that are bought by many others for some time are in general “good.” A high number of others who buy the new yogurt may thus activate this belief. This increases the SEU for imitation to such an extent that the new yogurt is bought. However, P might also have realized that the quality of new products does usually not differ much from the existing products that a person is used to buy. This would not lead to imitation. It thus seems that low-cost situations are particularly susceptible to imitation. (2) There are other situations with strong pre-existing incentives of targets. An example is the unexpected news that numerous catholic priests abused children. For almost all people who become aware of this news pre-existing negative incentives for imitation are relatively strong. The Werther effect discussed in the next section illustrates such a situation too. Here imitation is rather the exception. These scenarios suggest how VET can be applied to model the effects of the perceived behavior of others. The task is always to determine empirically which incentives, related to imitation, are activated and to what extent pre-existing incentives encourage or discourage imitation. The following section about the Werther effect illustrates this.

6

The Werther Effect: An Illustration

The Werther effect, as it was first called by Phillips (1974, p. 341), refers to a young man in a novel by Johann Wolfgang von Goethe (Die Leiden des jungen Werthers – The Sorrows of the Young Werther –, 1774). Werther fell in an unrequited love and committed suicide by shooting himself. The novel was widely read, and several people committed suicide in the way Werther did. The Werther effect is the hypothesis that suicides reported in the media raise the suicide rate in the population. This proposition can best be explained by formulating a micro– macro model (see Fig. 2): the reported suicides (macro variable) are supposed

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to generate individual incentives that bring about individual suicides; they aggregate to the macro variable suicide rate. There is supporting empirical evidence for the macro proposition, but sometimes there is no effect of reported suicides, or the effect is very small (see., e.g., Maloney et al. 2014; Niederkrotenthaler et al. 2010). In explanations of the Werther effect numerous factors are mentioned, most of the time without any theoretical underpinning. In this section, we will apply VET. Suicide is a behavior so that VET can be applied to explain it. Committing suicide thus depends on the costs and benefits of the perceived behavioral options (see, e.g., Lester 1988a, b; Lester and Yang 1996; Lutter et al. 2020). As Clarke and Mayhew (1988, p. 79) put it: “... suicide is an intentional act designed to bring an end to deep, though sometimes transient, despair, chosen when moral restraints against the behavior are weakened and when the person has ready access to a means of death that is neither too difficult nor repugnant.”

The major conditions for committing suicide are thus strong grievances (“deep … despair”), low moral constraints (i.e. weak norms prohibiting to kill oneself), and access to means of suicide that are easy to use. FTN can be applied to explain the Werther effect. Compare this effect with the littering example. In the clean environment a great number of people – the norm senders – did not litter. In the suicide case, the overwhelming number of members of any group do not commit suicide. This is thus the descriptive norm. In one of the experimental conditions of the littering research, there was one person (the confederate of the experimenter) who littered. In the Werther case, there is one person who commits suicide. FTN can thus be applied to explain the Werther effect. This application of FTN shows particularly clearly that just the existence of a descriptive (or also an injunctive) norm does not explain much: if most people of any group do not commit suicide why do nevertheless some people kill themselves? Indeed, there is an extremely low number of suicides in every country. In the US about 13 people out of 100,000 commit suicide each year. This suggests that reported suicides provide very weak cues for incentives that suffice to bring about suicides. Let us assume that a suicide is reported – e.g. on the cover page of the New York Times (see the research by Phillips 1974) – and numerous people read the news. This is the independent macro variable in Fig. 2. What could be the cues of a reported suicide that are activated and lead others to commit suicide as well?

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It is plausible that not every suicide generates the same incentives. For example, the suicide of a celebrity (see Lutter et al. 2020) will send other signals to a target than the suicide of a murderer in a prison who expects his or her execution. To generate hypotheses about possible incentives triggered by a suicide report one could use existing content analyses of suicide reports in the media. This research describes factors that are mentioned in reports about suicides. Correlations of these factors with suicide rates after publication of the reports are computed (see, e.g., Maloney et al. 2014). The results of the content analyses could be used as plausible proxies of the perceptions of suicide victims. They refer to the cues transmitted to the victims about the “effectiveness” of imitation. The application of VET to explain suicides cannot be tested directly because the victims are no longer alive. But those who intended to commit suicide or those who have survived suicide attempts can be interviewed (see, e.g., Stevenson 2016). If such data is used an empirical assumption must be made that the same incentives that lead to suicides also lead to intended and unsuccessful suicides. So far, we are not aware that such data is used to test whether VET is successful. We will now return to the list of incentives for imitation discussed before. The question is to what extent these incentives may be conducive to commit or not to commit suicide, based on the suicides of others. The perception of new behavioral alternatives. The report of a suicide could elicit the perception of a new behavioral alternative that was not recognized before reading the report. In particular, the victim in the report could have used a method that led to a quick and painless death such as, for example, exposing oneself to carbon monoxide from public gas supply. This could have been a new information about the least costly suicide method. In terms of VET, low pain and a quick death would be behavioral consequences of committing suicide that are probably valued very positively (in contrast to, for example, hanging). Reports about the mastery of a crisis without committing suicide led to a decrease of the suicide rate. This is the Papageno effect.8 Such cues could prompt the person who reads the respective report about a suicide to search for alternative strategies to remedy grievances. But it seems plausible that a person who has considered suicide regards this as a last resort and normally has considered whether and perhaps how the individual’s problems could be solved without killing oneself.

8 In

Mozart’s opera “Die Zauberflöte” (The Magic Flute) Papageno (in scene 9 of the opera beginning with “Papagena! Papagena! Papagena! Weibchen!”) wanted to commit suicide but three young boys (“Knaben”) solved his problem.

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Expected positive or negative sanctioning. In many groups there exists a strong moral condemnation of suicide. This may be the case for important others of the person who reads a suicide report. Many individuals care about what happens after their death. The reported suicide of a person who is highly respected might suggest that social condemnation of suicide is not as high as thought before. But – again – a person who considers suicide will be aware of the reactions of friends and acquaintances. Nonetheless, there might be a small change of the SEU of suicide when a case is encountered where suicide is acceptable. Perceived positive and negative externalities. Reports about suicides might describe the griefs of friends and relatives of the suicide victim. An individual who considers committing suicide might become aware that his or her suicide will have the same negative consequences. These may thus reduce the likelihood of suicide. However, it is more plausible that individuals are aware of those reactions without having read suicide reports. Internalized norms. The previous discussion suggests that the major impact for a suicide comes from the pre-existing incentives and not from the incentives changed by media reports. One of those pre-existing incentives is the extent to which suicide is regarded as an unethical behavior. This norm not to commit suicide might be conditional. One condition that justifies suicide may be severe suffering with no end in sight. Now assume that a person reads a report about a suicide and its description suggests that the suicide was “understandable” in the situation of the victim and saved the person from severe suffering without any end in sight. This report might make the justification condition of the suicide norm salient. Reports of suicides as an “understandable solution” and as having “positive consequences” correlate with frequency of suicides (Maloney et al. 2014, p. 160). But it is hardly plausible that a person in a dire situation has not thought before reading the report about the moral issue of committing suicide. Is there an injunctive norm activated in the sense that those who commit suicide are considered to propagate their behavior as morally correct? It is not known whether reports about suicides address the moral position of the suicide victim. But perhaps a description of the dire situation of the victim suggests to the reader of the report that the suicide was right in the specific situation. Assume this is true. Then the effects of this injunctive norm depend, as is held by proponents of FTN, on the expected future rewards for compliance. The person could care about the positive valuation of the social environment of his or her suicide. This could be an incentive in terms of VET. But the other incentives mentioned before are relevant as well.

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Identification with others who hold a norm. Perhaps sometimes identification with a suicide victim plays a role as an incentive for a suicide. This is suggested when it is found that celebrity suicides in particular raise suicide rates (Lutter et al. 2020; Wasserman 1984; see also Stack 1987, 1990). Celebrities are important others, and performing similar behavior is particularly beneficial. But, again, just because a celebrity commits suicide one will not follow suit. This will happen only if pre-existing incentives for suicide are already strong. Intrinsic rewards of conformity or nonconformity. If there is such an intrinsic preference to imitate others this would be an incentive not to commit suicide because this would match the behavior of most others. But if a report about suicide is read this intrinsic cost to deviate from others’ behavior might be reduced a little. If someone wants to be different, i.e. if nonconformity is intrinsically rewarding, this would be an incentive for suicide because the suicide rate is so low. But normally other incentives are relevant: people who want to be different will normally not choose to kill themselves. Incentives for information seeking behavior. Reading reports about suicide might provide incentives for information seeking behavior. A person might want to know more about the circumstances of the reported suicide and search the internet. The result of this search may lead to some change of the incentives mentioned before. FTN implies (as our previous explication indicates) that not only descriptive or injunctive norms generate a behavior. We would thus expect that sometimes suicide rates change without any newspaper reports about suicides. Research shows that a condition for committing suicide is a dire grief (such as the loss of a partner or a chemotherapy with a low expectation of success). People in such a situation will most likely perceive suicide as a viable behavioral option. If gas is available people will not need a newspaper report to know that this provides an easy method to die. We therefore expect that an actual change of the available method of suicide will have a relatively strong effect on the suicide rate, without any coverage of suicide cases in media. The following finding is in line with this hypothesis. When the carbon monoxide gas supply was increasingly removed in England and Wales between 1963 and 1975 there was a strong decline of suicides (Clarke and Mayhew 1988). This was not caused by reports about suicides. Apparently, many people knew about this method. Thus, we can expect that there is only a small number of people who will be informed about the “best” method of committing suicide by a media report. Assume a suicide is reported and several suicides follow. This means that those suicides have increased its perceived effectiveness (in the sense defined before). This second wave is again a descriptive norm. We can assume that the

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effectiveness is similar as in the first wave. We would thus expect a second suicide wave, and after this, another third wave of suicides etc. There should thus be a cascade of suicides (i.e. exponential growth). However, this is not consistent with the data. Suicide contagion reaches “a peak within the first 3 days after media coverage and leveling off after approximately 2 weeks” (Maloney et al. 2014, p. 157; Phillips 1974; Wasserman 1984). This again confirms the hypothesis that the number of others has only an impact if they are related to incentives. Our discussion of the cues of reported suicides suggests that reports about suicides will only lead to imitation if the difference between the overall expected utility of suicide on the one hand and the overall utility of staying alive on the other is relatively small. Only then will a little increase of the SEU of suicide lead to more suicides. To illustrate this, let the overall subjective expected utility (SEU) of enduring the present situation have the value X, and assume this value is 2.20. This is period t1 (see the scheme below). Let the SEU for suicide be only a little smaller (e.g. 2.19). Now assume that the report of a suicide describes how quick and easy the victim died with gas. The person in a dire situation has certainly thought intensively about methods to commit suicide, but the report may add a small value to the net utility of suicide that suffices to generate a higher SEU for suicide than for tolerating the present situation. In everyday language one would say that the report was the last drop that causes the glass to overflow. t1 : t2 : t3 : t4 :

SEU (Staying in the present situation) = X (e.g. 2.20). SEU(Suicide) = Y (e.g. 2.19). The person reads a media report about a painless method to commit suicide that was unknown to the person. Y increases by a small amount (e.g. from 2.19 to 2.21). The person commits suicide (the SEU for suicide exceeds the SEU for staying in the present situation).

Note that the major costs and benefits for both behaviors are pre-existing incentives which exist before the report is read. The “number of others” – the reported suicide cases – provide only a small incentive for the Werther effect, but for few individuals it apparently had the required small marginal effects that bring about the suicide. FTN emphasizes the “salience” or accessibility of the descriptive or injunctive norms. In a stressful situation in which suicide is considered there is probably “chronic accessibility” (Fazio 1986, p. 214) of the incentives so that the number of others does not make certain incentives salient.

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Let us return to Fig. 3: what is the number of suicides that are generated by the suicides of others? Let us look at the curves in Fig. 3. Curve 3 is probably most often found. The Werther effect suggests that only one or only a few suicides suffice to trigger incentives that lead to new suicides. But, as the previous analyses show, whether this pattern can be found depends on the “effectiveness” (as defined before) of the descriptive and injunctive norms. Incidentally, already Émile Durkheim addressed the effects suicide reports in his classic work on suicide (1951, first 1897). He criticizes authors “ascribing imitation a power it does not possess” (ibid.: 92): these authors demanded that reports of suicides in newspapers should be prohibited because this would reduce suicides. Durkheim objects that such reports would not affect “the moral state of the group” that is conducive to suicide. Nonetheless, “what may contribute to the growth of suicide … is not talking of it but how it is talked of.” For example, if suicidal acts are “loathed” such reports will “offset rather than encourage individual inclinations” (ibid, p. 93). These basic ideas are consistent with the argument in this article.

7

Conclusions and Discussion

Our conclusion is that the focus theory of normative conduct (FTN) has major weaknesses. One is that the condition for the imitation of descriptive and injunctive norms, namely their “effectiveness,” is left unclear. The contribution of this article is a critique and improvement of the theory by applying value expectancy theory (VET) – a well confirmed social psychological theory. The theory suggests a clarification of “effectiveness” as the overall positive subjectively expected consequences of imitation. We further suggested a list of “effective” incentives imitation might be associated with. It is important that this list goes beyond purely normative factors. This list could be used in future research. The example of the Werther effect illustrates the viability of this list and of our theoretical approach. Empirical research allegedly confirms FTN. The problem is that major studies do not measure the theoretical variables (“effectiveness” and activation) directly. Their existence is only assumed. For example, when a confederate deposes a single piece of litter in a clean environment, it is assumed that the descriptive non-littering norm is activated, but if two or more pieces are deposed a descriptive littering norm becomes salient (1990, p. 1017). Activation is not measured. Beliefs that littering more or less damages a clean environment are not measured either but assumed. The behavior is regarded as an indicator of the existence of the independent variable. The theory consists of subjective phenomena such as

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perceptions, beliefs, and activation (see Fig. 1). The measurement, however, refers to behaviors of confederates in experiments, of the behavior of experimenters and the subjects (such as littering). A meta-analysis would be useful that explores the extent to which FTN is tested in a rigorous way. The behavior FTN focuses on is imitation, modeling, model learning, observational or vicarious learning (see classics such as Miller and Dollard 1941; Bandura 1971a. For a recent review see Fryling et al. 2011; for a classic sociological treatise see Tarde 1903 (1890)). The behavior of others may also be an innovation (see the classic work by Rogers 2003). Finally, rational choice scholars addressed imitation (see the literature mentioned before). There are extensive literatures about these themes. A detailed theory comparison of the approach advanced in this article and those theoretical approaches is useful. There are causal relationships between the independent variables of the theory. For example, there could be an effect of the perceived frequency of a behavior (X1 ) and the belief that the behavior is effective (in the sense explicated above) (X3 ) – so many people cannot be wrong! A welcome extension of the model is to explore those causal interrelationships and add further factors. All this should be based on social psychological theories. Applying VET and the respective wide version of rational choice theory (see note 7) allows further theoretical refinements. One possibility is to apply hypotheses about the critical mass to derive propositions about the spread imitation (see, e.g., Oliver and Marwell 2002). Another extension would be to include the impact of social networks on the spread of behavior (e.g. Centola 2018). The norm targets may be linked in different ways which may influence their imitation. In the suicide example, those affected by heavy griefs may get help and care from friends and family. Those contacts might lead to access of coping strategies and reduce the likelihood of suicide. It would be an interesting extension of our theoretical approach to apply game theory in explaining imitation. The behavioral alternatives of a possible norm target could be to imitate or not to imitate (or to imitate certain features of the behavior of others). The perceived numbers of others are represented in the columns of the game matrix. The cells of the matrix refer to the payoffs of imitating. This simple matrix could be the starting point for a detailed modeling. FTN is a rather simple theory. Our suggested improvement adds conditions for its validity that are not easy to measure. Some scholars might prefer the “elegance” or “simplicity” of FTN to the improved version. This means to adopt a clearly wrong theory for some aesthetic reasons (“elegance”). We do not agree with such a decision. The goal of science should be to apply valid theories, even if they are more complicated than the wrong ones.

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The standard example for applying FTN is littering. This is a low-cost behavior. This is a behavior with low costs and benefits and with costs and benefits that are similar for several perceived behavioral alternatives. In such a situation a small change of incentives, i.e. a “nudge,” suffices for imitation. The behavior of others may lead to such a push. The Werther effect indicates that such small increments of incentives by the number of others generates imitation only rarely. It is an important task for future research to explore in particular high cost situations and the influence of descriptive and injunctive norms. What can we learn from FTN? As was said before, it is a precursor of modern dual-process theories. Researchers convincingly show how important signaling and activation of incentives are. Adding hypotheses about these processes would be an important extension of VET and of a wide rational choice approach. What is further impressive is the variation of research designs by using surveys as well as laboratory experiments for a wide range of explananda (except, of course, suicides). However, more direct measurement of the major variables in future research is desirable. Acknowledgments I am very grateful to Yuan Hsiao, Marc Keuschnigg, Ivar Krumpal, Heiner Meulemann, Werner Raub, and Peter Schmidt for valuable comments on a former version of this paper.

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Karl-Dieter Opp, Prof. (em.) Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig: [email protected]; current research interests: sociological theory, norms and institutions, political participation, philosophy of social science, deviant behavior and crime.

Revenge and Gratitude in Trust-Based Encounters. Experimental Evidence on Process-Based Reciprocity Manuela Vieth Abstract

Reciprocity is a fundamental behavioral principle: People are inclined to reward others’ kindness and to retaliate for others’ unkindness. Based on feelings of obligation or indignation and on a desire for self-consistency, the mere choice of an action can influence subsequent own and others’ decisions (i.e., without any change in objective outcomes). This can motivate sanctioning behavior and, thus, help enforce social norms. In this study, influences of behavioral advances on sanctioning behavior of trustors are investigated. For this purpose, an exploratory lab experiment has been conducted in which some trust situations involve options for trustors to announce sanctions or options for trustees to promise trustworthiness. Announcements are cheaptalk commitments; sanctions are costly and not always effective in objective terms. The experiment is designed as within-subject sets of structurally identical (sub)games resulting from kind and unkind actual behavior in single encounters. This design allows for control of effects of objective outcomes and of individual heterogeneity. It has been found that sanctioning behavior is strongly influenced by preceding behavior. Even cheap-talk announcements are powerful means to increase actual and costly rewarding and punishing decisions. Reward for kept promises of trustworthiness tends to be less likely than expected which offers further insights. Keywords

Reciprocity • Sanctions • Commitment • Process-based motivations Within-subject lab experiment

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M. Vieth (B) Universität Paderborn, Paderborn, Deutschland E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_7

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In social and economic interactions, people express their gratefulness and take revenge in various ways. For instance, they send postcards or give small gifts (e.g., flowers, chocolate, wine) in order to express their gratitude for received help, kept promises, or a particularly satisfying deal, especially if, for example, a dealer kept promises that were not contractually fixed. People also vent their anger about someone’s betrayal or retaliate for losses. For instance, they confront the offender with an outburst of rage, take revenge by playing a trick, or express their disapproval by ignorance, exclusion, or exit. Thereby, people often accept substantial costs in order to punish or reward others. The prospect of sanctions can limit incentives for opportunistic behavior (Williamson 1985). For example, in trust situations, people are tempted to take advantage of those who have trusted them (e.g., Coleman 1990; Voss 1998b). This temptation will diminish or even completely vanish, if people expect being punished for misbehavior or rewarded for good conduct. However, people have to be sufficiently convinced that sanctions will indeed be performed. The mere possibility of punishment or reward is not necessarily a credible prospect (e.g., Coleman 1990; Voss 1998a, 2000, 2001), especially if substantial effort is required in order to perform punishment or reward. Yet, strong positive or negative emotions can outweigh objective costs of sanctioning. Anticipating that others have such emotions increases the perceived chance of actually being sanctioned (Frank 1988; Voss 1998b; Diekmann and Voss 2008). For instance, people often react particularly angry about being misled by lies. Consider, someone asked for a favor and explicitly promised to behave well, but then took advantage of the other whom he owes the favor. This might be penalized harshly. Also promising reward or threatening with punishment can enhance beliefs about the credibility of sanctions. This implies that misbehavior and good conduct might be punished and rewarded differently after sanctions had been announced. The present study contributes to the question how preceding behavior affects subsequent sanctioning decisions. Concerned are effects on others’ decisions as well as effects on own decisions. The focus is on trust-based encounters.

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Intention-Based Sanctioning in Trust Situations and Sharing Situations

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In order to represent sanctions in trust situations, the standard Trust Game (Dasgupta 1988; Kreps 1990) is supplemented with sanctioning options for the trustor (TGS, Fig. 1a). First, the trustor (1) decides whether or not to place trust. In the case in which trust has been placed, the trustee (2) chooses between abusing and honoring trust, i.e., between keeping and sharing gains. Depending on

Decisions labels are abbreviated with “pun” for punishment, “rew” for reward, and “inv” for investment; bar for “no”.

Fig. 1 Sanctioning decisions with different behavioral contexts.

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the trustee’s choice, the trustor decides either whether or not to punish for abused trust or whether or not to reward for honored trust. The indicated payoffs represent objective outcomes, e.g., in terms of money. Honored trust is beneficial for both actors (Ri > Pi , with i = 1, 2). This creates an incentive for the trustor to place trust. However, the trustee is tempted to abuse trust (T2 > R2 ), which inflicts a loss upon the trustor (S1 < P1 ). Sanctioning options limit the trustee’s temptation by way of a fine ( f 2 ) and a gratification (g2 ), given that the trustor incurs the outlay (o1 ). Sanctioning is effective in objective terms if it removes the trustee’s temptation to abuse trust ( f 2 + g2 > T2 − R2 ), and sanctions are credible if the trustor has no costs to carry (o1 ≤ 0). However, if sanctioning is costly (o1 > 0) and actors are primarily concerned with own objective outcomes, trustors neither reward nor punish the trustee. Under these circumstances, trustors withhold trust because it would be abused. This description of the decision situation can be perceived as a variant of the Norm Game (Voss 1998a, 1998b, 2000, 2001) with choice-dependent values of sanctioning parameters (i.e., sanctioning option only for trustors after placed trust and positive and negative sanctions depending on the trustee’s decision). Experimental studies on social dilemmas and on informal sanctioning have directed attention to the principle of reciprocity, i.e., people reward kindness and retaliate for unkindness, even if this requires incurring costs or forgoing gains (for reviews, see Cooper and Kagel 2015; Kolm and Ithier 2006; Ostrom and Walker 2003). The findings provide strong evidence for other-regarding motivations (i.e., people are not only concerned with their own objective outcomes) as a basis for reciprocal behavior in general and for revengefulness and gratefulness in particular. Sociological and social-psychological research suggests that feelings of obligation drive people to return favors, in order to escape the “shadow of indebtedness” (Gouldner 1960, p. 174; Coleman 1990, ch. 12; Cialdini 2001, ch. 2). Intrinsic distress and emotional tension arise from delaying or not fulfilling an outstanding obligation. In contrast to positive reciprocity, experienced harm invokes feelings of indignation (or “sentiments of retaliation”, Gouldner 1960, p. 172) that create a thirst for revenge. Many studies propose that fairness motivations induce people to punish or reward others in order to approach equality in outcomes (for reviews, see Cooper and Kagel 2015; Camerer 2003, ch. 2). Theoretical models of fairness in terms of such inequality aversion incorporate emotional disutility resulting from guilt or envy about outcome differences that complements utility an actor derives from his own objective outcomes (e.g., MacCrimmon and Messick 1976; Kelley and Thibaut 1978; Weesie 1994a; Fehr and Schmidt 1999; Bolton and Ockenfels 2000;

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Diekmann and Voss 2008). Inequality aversion can create an incentive to sanction only if this reduces inequality between an actor’s own and others’ outcomes. Such “equalitarian orientations” (MacCrimmon and Messick 1976) are one specific example of social (value) orientations (Liebrand 1984; McClintock 1972; Messick and McClintock 1968). Various preferences concerning the distribution of people’s own and others’ outcomes have been identified (for reviews, see Au and Kwong 2004; McClintock and van Avermaet 1982). For instance, models of altruism regarding cooperation or trust account for benevolence and spite (e.g., Brew 1973; Taylor 1987/1976; Snijders 1996; Weesie 1993, 1994b). Similarly, an aggressive or competitive social orientation can motivate punishment, while altruistic or collectivistic social orientations can motivate reward. However, if people cared only about the distribution of outcomes, their behavior would not be different in a decision situation in which the trustee decides about sharing his original property. Such a decision situation is described by a dichotomous Dictator Game with Sanctions (DGS, Fig. 1c). In the DGS, the trustee is in the position of a dictator but restricted by an active responder (formerly, the trustor) who can reward shared gains and punish if the dictator has kept the gains. Similarly, the subgames that start with the trustor’s sanctioning decision represent two Allocation Games (AG), one for punishment (AGf , Fig. 1b) and one for reward (AGg , Fig. 1d). In an AG, the trustor is in the position of an allocator deciding whether to retain a certain distribution of objective outcomes or to invest in decreasing (AGf ) or in increasing (AGg ) the receiver’s outcome (formerly, the trustee’s outcome). The trustor’s decision in the TGS, the receiver’s decision in the DGS, and the allocator’s decision in the respective AG are structurally identical. In the case of punishment, the decision is always an investment in order to reduce the other’s outcome by a fine. And in the case of reward, the decision is always an investment in order to increase the other’s outcome by a gratification. The only difference is the behavioral context, i.e., the preceding choice options and actual decisions previously made. In addition to outcome-based other-regarding motivations, it has been suggested that people also respond to perceptions about others’ kind and unkind intentions (for a review, see Cooper and Kagel 2015). The basic idea is that people take into account the behavioral processes of how certain outcomes are obtained. Thereby, preceding behavior is evaluated in terms of kindness and unkindness. In a theoretical model, Falk and Fischbacher (2006) assume that intentionality and size of outcome changes caused by others’ behavior determines perceived kindness of others’ behavior (for other models of intentions see, e.g., Charness and Rabin 2002; Dufwenberg and Kirchsteiger 2004; Levine 1998; Rabin 1993). Some studies employ this idea for investigating whether kindness and unkindness

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of preceding decisions motivate people to punish or to reward others (e.g., Falk et al. 2003, 2008). Intention-based motivations induce actors to respond to previous decisions and, thus, to discriminate between the decision situations presented above (see Fig. 1). In the TGS, placed trust can be perceived as a kind advance (Vieth 2009; Vieth and Weesie 2017). If a trustee abuses trust, he refuses to return the favor of placed trust and inflicts harm on the trustor to whom he owes the favor. Therefore, abused trust more strongly demands for retaliation than a lack of generosity in the DGS that does not fail to fulfill an outstanding obligation. At first sight, a similar reasoning applies to rewarding honored trust. By sharing the gains that result from the trustor’s trustfulness, the trustee behaves in a friendly manner. Trustors might therefore feel an obligation to return the favor. However, the feeling of obligation to return an original favor might be stronger than the desire to reward the fact that another person has returned a favor. Thus, it seems reasonable to distinguish between a reward for favors and a reward for returned favors. Fulfilling an obligation might even be perceived as something that can be expected and not as something that deserves to be particularly rewarded (see also Coleman 1990, ch. 12). In contrast to the TGS, the dictator’s generosity in the DGS is an original favor. Moreover, it might also seem more legitimate in the DGS not to share the gains generously, because they are the dictator’s property anyway. This reduces motivations to punish greediness but can increase motivations to reward for a surprising gift. Note that the trustor’s gratefulness in the TGS might well increase with the sure gain given up by the trustor, but that gratefulness should also be hampered by the improved outcomes provided to the trustee. An allocator’s decision can only be motivated by preferences concerning the distribution of objective outcomes (social orientations). In the DGS and in the TGS, the other’s kind or unkind behavior precedes the decision of whether or not to invest in changing the other’s outcome and thus activates intention-based motivations. The dictator’s generosity is a favor that demands a favor in return. Although keeping gains might be perceived as more legitimate in the DGS than in the TGS, omitting a friendly option is unkind and triggers revenge. Responders in the DGS should therefore invest more in both increasing and decreasing the other’s outcome than allocators in the respective AG. Similarly, in the TGS, abused trust is particularly unkind and triggers punishment, because the trustee has refused to fulfill an obligation and thereby inflicted a loss upon the trustor, whereas relief and gratitude about trustworthiness motivate reward.

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Informal Sanctions and Announced Intentions

Theoretical and experimental research on intention-based motivations is mostly based on the assumption that the evaluation of others’ decisions in terms of kindness solely depends on actually forgone objective outcomes (for further remarks, see Vieth 2009, ch. 4). However, previous studies show that even cheap-talk communication strongly promotes cooperative behavior (for reviews see, e.g., Balliet 2010; Crawford 1998; Ostrom and Walker 2003; Sally 1995). For instance, people can explicitly promise to behave cooperatively or to honor trust. Promises are announced intentions to perform a certain action that yields a relative gain to the other person. Due to the prospect of gains, promises have an inherent kindness which creates an obligation to return the favor in the person who receives the promise (Cialdini 2001; Vieth 2009, ch. 4; Vieth and Weesie 2017). Moreover, expressing an intention to perform a certain action activates a fundamental psychological mechanism: the desire for self-consistency induces people to “keep their word” (for reviews see, e.g., Webster 1975; Cialdini 2001, ch. 3; Gass and Seiter 2007; Kunda 2002). People do so, in order to avoid or to reduce cognitive dissonance (Festinger 1957; Heider 1944, 1958). Vieth and Weesie (2017) provide a more detailed discussion (also see Vieth 2009). Self-consistency creates intrinsic bonds, such that promises serve as commitments. A commitment is a “voluntary strategic action”, costly or not, with the purpose of “reducing one’s freedom of choice” or of changing the outcomes, i.e., a “strategic move” by which an actor voluntarily offers a “hostage” in the sense of a bond (Schelling 1960). In contrast to cheap-talk promises, announcements in research on commitments have been associated with objective incentives (binding values, compensating values, transaction costs). Such extrinsic commitments have been theoretically studied in trust situations and cooperation problems (Raub 2004; Raub and Weesie 2000; Voss 1998b; Weesie and Raub 1996; and including other-regarding motivations Snijders 1996). Experimental research provides evidence that imperfectly binding commitments also promote cooperative behavior and that even small transaction costs hamper commitment posting (Mlicki 1996; Raub and Keren 1993; Snijders 1996; Vieth 2009, ch. 4; Vieth and Weesie 2017; and for negotiation problems, also see Prosch 2006). In addition to intrinsic bonds, sanctions can provide additional (extrinsic) incentives to keep one’s word. For instance, Brandts and Charness (2003) provide evidence that lies are punished more strongly than unkindness that does not involve a reneged promise. They do not find evidence that keeping cooperation promises makes a difference for rewarding. However, the possible reward was only minimal in their study. In fact, their experimental design involves an

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asymmetry between reward and punishment, because punishing is five times more effective than rewarding and half as costly as rewarding. In the presence of sanctions, people not only can promise cooperation but can also promise a reward for cooperative behavior. Previous studies on bonus contracts do not provide support for the idea that the promised reward is actually paid (Fehr et al. 2007; Fehr and Schmidt 2004, 2007). However, the design of these experiments inhibits the study of influences that making the reward promise as such has on subsequent behavior, because participants only have reward options after they have made a promise. Thus, changes in expectations about objective outcomes are induced because of the suddenly available reward options, such that influences of the mere choice of promising a reward on subsequent behavior cannot be studied. In addition to promising a reward, people can also threaten with punishment. Threats are expressed intentions to perform a certain action that inflicts a relative loss upon the other person. A yet unpublished part of the study by Voss and Vieth (2015) provides evidence that actual punishment increases with the amount of punishment announced, indicating support for the idea of self-consistency. In the present study, the TGS (Fig. 1a) is extended with an option for the trustee to promise his trustworthiness (H2 TGS). Specifically, the trustee decides whether or not to make the promise prior to the trustor’s decision of whether to place or to withhold trust. The trustor is informed about the trustee’s decision. This creates two additional behavioral contexts for the trustor’s sanctioning   decisions: the TGS after the trustee has promised trustworthiness (TGSH+ 2 and the TGS after the promise has been omitted (TGS|H02 ). Similarly, the trustor can announce sanctions (H1 TGS), while the trustee has no opportunity to promise trustworthiness. Announcing sanctions is only meaningful in combination with placing trust. Thus, the trustor chooses one of four options: withholding trust, placing trust with promising a reward (TGS|H+ 1 ), placing trust with threatening ), or placing trust without announcing sanctions (TGS|H01 ). punishment (TGS|H− 1 Thereafter, the trustee decides whether or not to honor trust, followed by the trustor’s sanctioning decision. Sanctioning decisions in each of these five behaviorally embedded TGSs are compared to decisions made in the TGS without announcement options. Promises and threats are assumed to be cheap-talk. Thus, the outcomes in all subgames of the H2 TGS and of the H1 TGS are identical to those in the TGS. The reasoning on intention-based other-regarding motivations can be applied in the same way as presented for the TGS, DGS and the two AGs (Sect. 2.1; for a detailed discussion, see Vieth 2009, ch. 5). Summarizing the main hypotheses highlights the differences between the expected influences of behavioral contexts

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Table 1 Overview of hypotheses and notations for behavioral contexts Hyp.

Punishing

Rewarding

AG

H2

– –

– –

Allocation Game

DGS

H1

–

+

Dictator Game with Sanctions (no placed trust)

TGS

(ref.)

(ref.)

(ref.)

Trust Game with Sanctions

TGS|H+ 2

H3

+

–

TGS after a made promise to honor trust

TGS|H02

H4

–

+

TGS after an omitted promise to honor trust

TGS|H+ 1

H5

+

+

TGS after placed trust with a reward promise

TGS|H− 1

H6

+

–

TGS after placed trust with a punishment threat

TGS|H01

H7

–

–

TGS after placed trust with an omitted announcement of sanctions

The hypotheses are formulated in terms of differences toward the TGS (i.e., the behavioral context without announcement options). In the Allocation Game the allocator decides whether or not to investment in changing the other’s outcome, which represents the trustor’s “sanctioning decision” without behavioral context. “Punishing” decisions indicate revengefulness and “rewarding” decisions indicate gratefulness.

on revengefulness and on gratefulness (Table 1). Due to feelings of indignation, revengefulness should be increased after the trustee has refused to return a favor + (in the TGS vs. DGS, as well as in the TGS|H+ 1 , and in the TGS|H2 ; Hypotheses 1, 3, and 5). Gratefulness might be increased, if the favor is less likely to be expected, which thus inflicts stronger feelings of obligation (in the DGS and in the TGS|H02 ; Hypotheses 1 and 4). In turn, gratefulness might be decreased if the preceding decision is already a returned favor, i.e., rewarding rewards becomes less 0 likely (in the TGS vs. DGS, in the TGS|H+ 2 , and in the TGS|H1 ; Hypotheses 1, 3, and 7). Self-consistency should increase the motivation to punish after punishment has been threatened (TGS|H− 1 ) and to reward after a reward has been promised (TGS|H+ ; Hypotheses 5 and 6). In turn, reduced revengefulness is expected after 1 sanctioning announcements have been explicitly omitted (TGS|H01 ; Hypothesis 7). Moreover, trustors should perceive abused trust after an explicitly omitted promise of trustworthiness as own mistake which reduces their revengefulness (TGS|H02 ; Hypothesis 4). In turn, punishment threats should reduce the perceived kindness of trustworthiness which, thus, would reduce gratefulness (TGS|H− 1 ; Hypothesis 6).

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Furthermore, since neither obligation nor indignation nor self-consistency are activated in the AG, investments in changing the other’s outcomes are expected to be much less likely than in the TGS or in the DGS (Hypothesis 2).

3

Design of the Experiment, Data, and Statistical Method

3.1

Experimental Design: Sets of (Sub)Games

The design of the experiment satisfies two main features. First, the behavior of each participant in decision situations with different behavioral contexts is recorded. Second, influences of outcome-based motivations can be controlled. For this purpose, participants made decisions in different games, for the analyses presented here, in TGSs, H1 TGSs, H2 TGSs, DGSs, and AGs (for details, see Vieth 2008). Each game was a single encounter. Following the approach developed by Vieth and Weesie (2017; and see Vieth and Weesie 2006), the experiment was designed as within-subject sets of structurally identical (sub)games that consist of the same behavioral options and the same outcomes for both actors (for related designs, see Charness and Rabin 2002, 2005; Cox 2004; McCabe et al. 2003; Snijders 1996; Vieth and Weesie 2017). This design allows for the comparison of participants’ behavior in decision situations that only differ with respect to the behavioral contexts resulting from preceding kind and unkind behavior (Fig. 2). Intra-personal differences in behavior between the (sub)games should therefore reflect the impact of the behavioral contexts. Varying some outcome parameters yielded different sets of (sub)games (Table 2) These variations were included in the design for methodological reasons (for details, see Vieth 2009) and for further analyses not reported here. Together with the three payoff structures, the parameter variations resulted in 48 different combinations of payoffs and sanctioning properties. Every participant made decisions in four sets of games in the role of player 1 (trustor, responder, allocator) and in four sets of games in the role of player 2 (trustee, dictator, receiver). For each encounter, every participant was randomly and anonymously matched with another participant (for details, see Vieth and Weesie 2006). The sets of (sub)games were mixed by clustering types of games. For the results reported here, the clustering was as follows: first 10 TGSs, followed by 10 H1 TGSs, subsequently 10 H2 TGSs, then 8 DGSs, and finally 16 AGs. The experiment also included some games without sanctioning options and some socio-demographic questionnaires for separation of some decision situations in between (for details, see Vieth 2008). The ordering of game clusters was fixed

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In the H1TGS, the trustor can only choose to announce sanctions (3 options) if he places trust. Full graphs of the H1TGS and the H2TGS are omitted because these graphs are complex without being more informative for cheaptalk announcements. The experimental design allows for the comparison of the trustor’s revengefulness in (sub)games indicated by dashed boxes and the trustor’s gratefulness in (sub)games indicated by dotted boxes (8 contexts each: TGS|Η1+, TGS|Η1−, TGS|Η10 , TGS|Η2+, TGS|Η20 , TGS, DGS, and AG). These sets of (sub)games high constitute “subject-payoff response sets” used in statistical analyses. Numerical example: 1low = 20, 2 = 120, high low = 5, 2 = 30, 2low = 10. Decision labels are abbreviated with “pun” 1 = 2 = 80, 1 = 2 = 50, 1 for punishment, “rew” for reward, and “inv” for investment; bar for “no”.

Fig. 2 Sets of games with identical subgames.

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Table 2 Outcome parameters of the experimental design Design Parameters: S1 (2) × T2 (2) × πi (3) × f 2 (2) × g2 (2) Symmetric payoff structure: S1 (2) × T2 (2) S1low = 20 high

S1

= 40

R1 = R2 = 80 P1 = P2 = 50

Sanctioning properties: f 2 (2) × g2 (2) T2low = 100 high

T2

= 120

f 2low = g2low = 1 4 (T2 − R2 ) = {5, 0} high high f 2 = g2 = 3 4 (T2 − R2 ) = {15, 30} o1low = 16 (R1 − P1 ) = 5 high

o1 10

= 26 (R1 − P1 ) =

Asymmetric payoff structure: πi (3) (π1 ∈ {R1 , P1 , S1 }; π2 ∈ {T2 , R2 , P2 }) Trustor advantage: π1 + 10, π2 − 10 Trustee advantage: π1 − 10, π2 + 10 The outlay o1 was fixed per combination of T 2 , S 1 , f 2 , g2 such that it varied for each three of the four parameters.

for practical and methodological reasons, e.g., minimizing the chance that participants would become aware of the (sub)game structure. Two TGSs, two H1 TGSs, and two H2 TGSs were included in which trustees had no objective incentive to abuse trust (T2 < R2 ). These decision situations are not used in the analyses but had the purpose to check for participants’ attention (for this approach, see Vieth and Weesie 2017). In fact, 93% trustfulness and 99% trustworthiness were observed in these decision situations, indicating that participants sufficiently paid attention to the objective outcomes. (Full trustfulness or trustworthiness is not expected because of possible influences of social orientations.) In each game cluster, player roles were changed after half of the periods. Interaction partners, payoffs, and sanctioning properties changed from one period to the next. The combinations and sequences of payoffs and sanctioning properties were varied across experimental sessions employing a factorial design. The experiment was computer-assisted using the software package “z-Tree” (Fischbacher 2007) (for an example of the decision screens, see Fig. A.1). Participants received general information on paper and, before each game cluster, specific on-screen instructions with a tutorial. Outcomes were displayed as points

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in decision trees and represented monetary gains (one British pence for four points). Participants were paid anonymously and immediately after the session. On average, participants earned approximately £ 14. The experiment was conducted in April 2008 at the CeDEx lab at Nottingham School of Economics. Using “ORSEE” (Greiner 2004), 166 students were recruited from the CeDEx participant pool and took part in nine groups of 16 to 20 participants. Participants were enrolled in various fields of study, primarily at Nottingham University.

3.2

Data and Statistical Method

The 166 subjects made 2955 “sanctioning” decisions about investing in changing the other’s outcome, i.e., 1857 “punishing” decisions (reducing the other’s outcome) and 1098 “rewarding” decisions (increasing the other’s outcome) (Table 3). Since the focus in this study is on analyses of sanctioning behavior, “placing trust” and “honoring trust” decisions are not reported (for respective analyses, see Vieth 2009, ch. 4). Recall that participants made “punishing” decisions and “rewarding” decisions in structurally identical (sub)games that only differ with respect to the behavioral context. Specifically, every participant could make 20 “sanctioning” decisions of either punishment or reward, i.e., up to 12 decisions in three differently embedded TGSs (four decisions per game), up to 4 decisions in the DGSs, and 4 “sure decisions” in the respective AGs. Since participants always reacted to decisions actually made, the number of decisions per subject in the data varies between 8 and 16 for “punishing” decisions and between 4 and 13 for “rewarding” decisions. Due to the “sure decisions” in the AGs, both types of “sanctioning”

Table 3 Number of cases and units of analyses Number of …

Punishing

Rewarding

Subjects

166

166

Total payoffs

48

48

Subject-payoff response sets

664

664

Decisions in total

1857

1098

Decisions per subject

6–18

4–13

Decisions per response set

1–5

1–5

Total payoffs are combinations of payoffs and promise properties. Number of decisions for rewarding without TGS|H02 : 1090 in total, 4–13 per subject, 1–5 per response set.

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decisions are available in the data for all the 48 combinations of payoffs and sanctioning properties (“total payoffs”). For the data analyses, decisions are grouped per subject and per total payoff, which constitutes 664 “subject-payoff response sets”. Response sets involve between 1 and 5 decisions of either punishment or reward. In order to describe the composition of response sets and the data, Table 4 gives an overview of decisions made in subject-payoff response sets per (sub)game. For instance, in response sets that involve the TGS, 205 of the 1857 “punishing” decisions and 72 of the 1098 “rewarding” decisions have been made. Of the 205 “punishing” decisions in the TGS, 111 decisions have been made in response sets in which punishment was never performed (all x¯ ), 4 decisions have been made in response sets in which punishment was always performed (all x), and 90 decisions have been made in mixed response sets in which punishment was performed in some decision situations and in others not. All decisions made in a (sub)game belong to different response sets, because each participant could face a (sub)game with certain total payoffs at most once. Of course, decisions made in different (sub)games can belong to the same response set. For instance, of the

Table 4 Number of decisions within subject-payoff response sets per (sub)game Punishing (x) all x AG

all x mix

Rewarding (z) 

%x

all z

664

5.3

514

all z mix

%z 4.7

207

DGS

373

11

186

570

15.4

59

1

34

94

26.6

TGS

111

4

90

205

22.9

39

2

31

72

26.4

TGS|H+ 2

102

6

86

194

40.2

71

5

38

114

16.7

TGS|H02

12

0

5

17

11.8

5

0

3

8

0.0

TGS|H+ 1

81

4

87

172

45.3

49

4

85

138

64.5

TGS|H− 1

1

0

5

6

66.7

1

0

2

3

33.3

TGS|H01

23

1

5

29

13.8

4

1

0

5

20.0

1144

42

671

742

41

315

1098

16.8

1857 18.1

122



16



28

664

441

“Punishing” decisions are denoted by x for no punishment and by x for punishment. Similarly, “rewarding” decisions are denoted by z for no reward and by z for reward. The percentages of punishment (%x) and reward (%z) are calculated for the respective sum of decisions (data in the analyses).

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664 response sets involving the AG, 205 “punishing” decisions and 72 “rewarding” decisions also include the TGS. In addition, other (sub)games can be involved depending on the specific decisions made. Table 4 also provides information about the frequency of abused trust (“punishing” decisions), honored trust (“rewarding” decisions), and placed trust (sum of “punishing” decisions and “rewarding” decisions) per subgame and in total (in the DGS, about kept and shared gains). Moreover, it is visible that 308 (194 + 114) of the 333 cases (194 + 114 + 17 + 8) in the H2 TGS were observed after the trustee had promised trustworthiness (TGS|H+ 2 ), which amounts to 92.5% kept promises. For the whole data set (i.e., including withheld trust), trustees promised trustworthiness in 575 of the 664 cases (86.5%) in the H2 TGS (Vieth 2009, ch. 4). Similarly, in 87.8% of the decision situations, trustors combined placing trust with a reward promise in the H1 TGS, namely in 310 (172 + 138) of the 353 cases (172 + 138 + 6 + 3 + 29 + 5) of placed trust (Table 4). Thus, considering that behavioral contexts endogenously depend on actual decisions made, only a few observations are available in the data for some subgames. Across (sub)games, “punishing” decisions were made in 18.1% (336 cases) of all 1857 cases and “rewarding” decisions in 16.8% (185 cases) of all 1098 cases (Table 4). In other studies, the level of costly sanctioning is likewise found to be rather low (e.g., on sanctioning for non-cooperation, see Voss and Vieth 2015; and on rejection rates of low offers, see Camerer 2003, ch. 2). Nevertheless, the levels of punishing and rewarding differ considerably across behavioral contexts, ranging from approximately 5% to over 60%. These average percentages of punishing and rewarding provide information about the actual decisions made in the (sub)games irrespective of the specific payoffs in the (sub)games and irrespective of the fact that each person made several decisions. For instance, it is possible that trust was abused and punished more frequently in some behavioral contexts than in others just because of the specific outcomes. Thus, testing the hypotheses about effects of behavioral advances on subsequent decisions requires accounting for the grouping structure of the data in order to control for influences of outcome-based motivations and individual heterogeneity. For analyzing effects of behavioral contexts on people’s decision-making, logistic regression models with random effects for subject-payoff response sets are employed. This method allows for a more skewed response pattern than the fixed effects approach used by Vieth and Weesie (2017), while still only minimal assumptions have to be made about subject-specific effects, effects of outcomes, and interactions between them. Models are fitted by maximum marginal likelihood and have the following general form:

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 Yki j =

1 if Yki∗ j > 0 0 if Yki∗ j ≤ 0 

Yki∗ j = β0 + ηki j β + u 0i j + eki j Where u 0i j ∼ Normal (0, σu2 ) eki j ∼ Logistic (0, σe2 ) The model is applied to describe the probability of revengefulness or gratefulness of a subject i in the behavioral context of a (sub)game k that has a total payoff combination j. The intercept parameter (β0 ) and the (sub)game effects  (ηki j β), together with controls, constitute the fixed part of the model, i.e., effects are assumed to be the same across response sets. The random part consists of two random variables for the residuals on the two levels of analysis. Errors at the level of decisions are assumed to have a standard logistic distribution with a mean of 0. The variance within response sets is fixed in logistic regression for identification purposes and serves as a scaling parameter (σe2 = 13 π 2 ≈ 3.29, Long 1997, pp. 47–48). The group-dependent intercept (β0 + u 0i j ) is allowed to vary randomly between response sets, reflecting that the average response probabilities differ between response sets. Models with random effects at the level of response sets require additional assumptions about the distribution of deviations that are specific to response sets. Specifically, it is assumed that response sets are drawn from a population in which combinations of subjects and total payoffs are normally distributed with a mean of 0. The variance (σu2 ) between response sets reflects the extent of unexplained deviations of the average probability per response set from the overall average probability. Note that the normality assumption might be more problematic for subject-payoff response sets than for subject response sets. However, subject-payoff response sets are preferred because this grouping of the data allows additive payoff effects to be controlled without requiring further assumptions about specific representations of individually heterogeneous outcome-based motivations (this problem of preference heterogeneity has been addressed in Sect. 2.1, and for further discussion, see Vieth 2009, ch. 3). In the study presented here, the reported results obtained with the random intercept models are qualitatively similar to the results obtained with a fixed effects approach.

Revenge and Gratitude in Trust-Based Encounters

4

Results

4.1

Analyses for Revengefulness

133

First, consider the various behaviorally embedded TGSs in which the trustor is confronted with abused trust and decides whether or not to punish the trustee + − 0 0 (six behavioral contexts: TGS, TGS|H+ 2 , TG|S H2 , TGS|H1 , TGS|H1 , TGS|H1 ). In addition, the decision about investing in reducing the other’s outcome is also observed in the DGS (without the preceding favor of placed trust) and in the AGf (representing the trustor’s aggressive tendencies). In the statistical analyses, revengefulness in the various behavioral contexts is compared to revengefulness in the TGS (Table 5). Pairwise comparisons of differences in revengefulness between the behavioral contexts are reported in Table 6. The upper part of Table 5 shows the estimates for effects of the behavioral contexts (discussed below). The number of past decision situations (periods with changing partners) per type of game is included as control but shows no significant influence on revengefulness. Note again that (additive) influences of objective outcomes are controlled by subject-payoff response sets. For each behavioral context the probability of revengefulness is estimated at the mean of the number of periods. Thereby, the random effects are ignored for reasons of computational convenience, i.e., fixed to u 0i j = 0. The random part of the model, summarized in the lower part of Table 5, consists of the non-estimated scaling parameter (SD of the error of decisions) and of the (estimated) standard deviation of the random effects of response sets (SD of the error of response sets). The standard deviation of the random effect for response sets (rho = 0.55) indicates unexplained influences that are specific to subjects and outcomes. Further analyses including a random effect for subject-payoff response sets and a random effect for sessions show that there is basically no unexplained variance at the session level. Therefore, the simpler two-level model is reported here. The likelihood-ratio test against the model without (sub)game dummies reported at the bottom of Table 5 (Panel B) shows that revengefulness significantly differs between the behavioral contexts (LR χ72 df = 221.35; p < 0.0001). In the following, the results for the specific behavioral contexts are described and discussed. Recall that keeping gains as a dictator is assumed to be less unfriendly than keeping gains as a trustee because the trustee then omits to return the favor of placed trust (Hypothesis 1). The results in Table 5 show that revengefulness is indeed significantly lower in the DGS (5.6%) than in the TGS (10.1%). The decrease of 4.5% seems relatively small. However, the probability of punishment is anyway low in the TGS, which leaves little room for hampering influences.

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Table 5 Logistic regression of revengefulness with random intercepts for subject-payoff response sets (A) Regression coefficients Hypotheses

b

se

AGf

H2 : – –

−2.01***

0.34

DGS

H1 : –

−0.63*

0.27

TGS

(ref.)

TGS|H2+

H3 : +

TGS|H20 TGS|H1+ TGS|H1− TGS|H10

H4 : – H5 : + H6 : +

Pr(%) 1.5 5.6 10.1

1.46***

0.32

−0.35 1.78***

0.97

7.3

0.33

39.9

1.29

72.7

−0.62

0.78

5.7

Past periods per game

−0.05

0.03

Constant

−1.89***

0.30

H7 : –

SD(error decisions)

3.17*

32.7

1.81

fixed

SD(error response sets)

2.01

0.21

rho

0.55

0.05

(B) Model comparisons χ2

df

LR test (rho = 0)

108.88***

1

LR test (control)

221.35***

7

N(response sets) = 664, N(decisions) = 1627, N(subjects) = 166; two-sided p-values: *** p ≤ 0.001, ** p ≤ 0.01, * p ≤ 0.05, ° p ≤ 0.1; (sub)games (0/1), past periods per game   (0…7/ 9/ 19). The standard deviation (SD) for decision residuals eki j is constant, and the   SD of random intercepts u 0i j for response sets is estimated. The proportion of unexplained variance at the level of response sets is denoted by rho. The absolute probability of revengeful  ness per (sub)game which is estimated for an average period t = 5.85 assuming u 0i j = 0. Likelihood-ratio tests are reported for the proportion of unexplained variance at the level of response sets (rho = 0) and for the presented model (ll = −345.79) against null model with controls (ll = −463.88).

In the AGf , aggressive behavior should be even more reduced, as no unkindness is preceding the allocator’s decision (Hypothesis 2). Indeed, the probability of aggressive investments is only 1.5% in the AGf . The differences of −8.6% between the AGf and the TGS and of −4.1% between the AGf and the DGS

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(Table 6) are highly significant, despite revengefulness is already decreased in the DGS. In the H2 TGS, in which the trustee decides about promising his trustworthiness, the trustor is assumed to be particularly annoyed if the trustee reneged on his promise (Hypothesis 3). Lies are indeed punished significantly more than abused trust as such. Revengefulness increases by 22.6%, from 10.1% in the TGS to 32.7% in the TGS|H+ 2 , i.e., lies are punished every third time (Table 5). Note again that this is the “pure” influence of indignation and does not result from outcome-based motivations. In contrast to reneged promises, trustors might perceive abused trust as their own mistake, if the promise of trustworthiness has explicitly been omitted (Hypothesis 4). Revengefulness is indeed reduced by 2.8% (from 10.1% in the TGS to 7.3% in the TGS|H02 ), but this difference is not significant. In fact, some remaining indignation does play a role, since trustors still tend to be more revengeful in the TGS|H02 than in the AGf (Table 6). After the trustor has promised reward (TGS|H+ 1 ) but is nevertheless confronted with abused trust, revengefulness sharply increases to 39.9%, which is significantly higher than the 10.1% in the TGS (Table 5). This supports the argument that the trustor’s indignation rises, because the trustee omits fulfilling two obligations: one resulting from placed trust and one resulting from the reward promise (Hypothesis 5). The increase in revengefulness by 29.8% in the TGS|H+ 1 is even larger than after the trustor has discovered a lie in the TGS|H+ 2 (22.6%), but the difference of 7.2% is not significant (Table 6). If the trustee dared to abuse trust after the trustor threatened punishment (TGS|H− 1 ), revengefulness jumps up by 62.6% amounting to 72.7%. This difference is highly significant. Differences in revengefulness in the threat situation (TGS|H− 1 ) compared to the promise situation (TGS|H+ 1 ) and to the situation in which no announcement of sanctions has been made (TGS|H01 ) are not significant (Table 6). The reason seems to be that only 6 decisions have been made in this (sub)game (Table 4). Therefore, the huge increase in revengefulness should be interpreted carefully (see the discussion for further remarks). Nevertheless, this finding indicates some support for the argument that self-consistency is also relevant for performing unfriendly behavior, not only for friendly behavior (Hypothesis 6). If the trustor neither threatened punishment nor promised a reward (TGS|H01 ), the desire for self-consistency might limit feelings of indignation (Hypothesis 7). Revengefulness is indeed reduced by 4.4% (from 10.1% in the TGS to 5.7% in the TGS|H01 ), but this difference is not significant (Table 5).

5.7

72.7

39.9

7.3

− 0.62 0.78

3.17* 1.29

1.78*** 0.33

− 0.35 0.97

1.46*** 0.32

− 0.63* 0.27

− 2.01*** 0.34

TGS

1.39° 0.78

5.18*** 1.30

3.79*** 0.38

1.66° 0.99

3.47*** 0.37

1.38*** 0.30

AGf

0.01 0.79

3.80** 1.28

2.41*** 0.30

0.28 0.93

2.09*** 0.28

DGS

− 2.08** 0.78

1.71 1.28

0.32 0.31

− 1.81° 0.97

TGS|H+ 2

− 0.27 1.21

3.52* 1.58

2.13* 0.98

TGS|H02

− 2.40** 0.79

1.39 1.28

TGS|H+ 1

− 3.79** 1.47

TGS|H− 1

The table presents differences between coefficients of (sub)games (row – column). Standard errors are reported underneath. The entries in the columns Pr(%) and TGS (with N = 205, Pr(%) = 10.1) are repeated from Table 5. Wald tests (two-sided p-values, not adjusted for multiple testing): *** p ≤ 0.001, ** p ≤ 0.01, * p ≤ 0.05, ° p ≤ 0.1.

(N =29)

TGS|H01

TGS|H− 1 (N =6)

TGS|H+ 1 (N =172)

TGS|H02 (N =17)

32.7

5.6

DGS (N =570)

TGS|H+ 2 (N =194)

1.5

AGf (N =664)

Pr(%)

Table 6 Pairwise comparisons of behavioral contexts for revengefulness

136 M. Vieth

Revenge and Gratitude in Trust-Based Encounters

4.2

137

Analyses for Gratefulness

Gratefulness is analyzed in the eight behavioral contexts after the trustee has + − 0 0 honored trust (TGS, TGS|H+ 2 , TGS|H2 , TGS|H1 , TGS|H1 , TGS|H1 ), in the role of the responder after the dictator has shared gains (DGS). In addition, the allocator likewise decides about investing in increasing the other’s outcome in the AGg , which represents the trustor’s altruistic tendencies. The results are presented in the same format as for revengefulness (Tables 7 and 8). The proportion of unexplained variance at the level of response sets amounts to 76%. Due to numerical and convergence problems, the models for gratefulness could not be fitted with a random effect for sessions. The coefficient for the number of past periods per game is again negative and insignificant (Table 7). The likelihood-ratio test against the model without (sub)game dummies shows that gratefulness differs significantly between the behavioral contexts (LR X62 df = 236.14; p < 0.0001). Generally, the probability of gratefulness is very low: lower than 10%, with one outstanding exception, and only 6.7% in the TGS. On the one hand, little room is left for a further decrease motivated by preceding behavior. On the other hand, reductions that are found to be significant provide even stronger evidence. Directions of the effects are largely in line with the hypotheses. It has been argued that shared gains in the DGS are more kindly than in the TGS, because they are an original favor and not a returned favor (Hypothesis 1). Although gratefulness is indeed increased from 6.7% in the TGS to 9.5% in the DGS (Table 7), this 2.9% increase is not sufficient to become significant. As previously addressed, this might be due to the low overall frequency of rewards. However, the results show that altruistic investments are significantly less likely in the AGg . Allocators invest in increasing the other’s outcome with only a probability of 0.2%, compared to 6.7% in the TGS (Table 7) and to 9.5% in the DGS (Table 8). Thus, altruistic inclinations in the AGg are reduced by 6.5% compared to the TGS and by 9.3% compared to the DGS. This supports the argument that preceding kind behavior increases gratefulness and that altruistic investments are much lower, if they are only motivated by outcome preferences (Hypothesis 2). In the H2 TGS, the trustee decides whether or not to promise trustworthiness. Keeping a promise can be seen as a matter of course, especially if it required a preceding favor like the favor of placed trust (Hypothesis 3). Gratefulness indeed tends to be decreased by 4.8% after the trustor received a promise of trustworthiness, from 6.7% in the TGS to 1.9% in the TGS|H+ 2 (Table 7). Gratefulness for the returned favor is by 7.6% even significantly lower in the TGS|H+ 2 than in the DGS without placed trust (Table 8). Concerning the decision situation after the

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Table 7 Logistic regression of gratefulness with random intercepts for subject-payoff response sets (A) Regression coefficients (B) Model comparisons (A) Regression coefficients Hypotheses

b

AGg

H2 : – –

−3.46***

DGS

H1 : +

TGS

se 0.39

Pr(%) 0.80

0.2

0.64

9.5

0.68

1.9

0.92

77.5

2.23

1.1 1.0

(ref.)

TGS|H2+

H3 : –

TGS|H1+

H5 : +

TGS|H1−

H6 : –

TGS|H10

H7 : –

−1.33° 3.87*** −1.88

6.7

−1.98

2.58

Past periods per game

−0.04

0.05

Constant

−2.35***

0.68

SD(error decisions)

1.81

SD(error response sets)

3.22

fixed 0.75

rho

0.76

0.08

(B) Model comparisons χ2

df

LR test (rho = 0)

42.01***

1

LR test (control)

236.14***

6

N(response sets) = 664, N(decisions) = 1627, N(subjects) = 166; two-sided p-values: *** p ≤ 0.001, ** p ≤ 0.01, * p ≤ 0.05, ° p ≤ 0.1; (sub)games (0/1), past periods per game (0…7/ 9/ 19). The TGS|H02 is excluded because all 8 cases are “no reward” decisions (versus   H4 : +). The standard deviation (SD) for decision residuals eki j is constant, and the SD   of random intercepts u 0i j for response sets is estimated. The proportion of unexplained variance at the level of response sets is denoted by rho. The absolute probability of grateful  ness per (sub)game which is estimated for an average period t = 7.21 assuming u 0i j = 0. Likelihood-ratio tests are reported for the proportion of unexplained variance at the level of response sets (rho = 0) and for the presented model (ll = −707.83) against null model with controls (ll = −160.23).

trustee has omitted the promise of trustworthiness (TGS|H02 ), the trustor might be particularly grateful if the trustee has nevertheless fulfilled the obligation induced by the trustor’s decision to place trust (Hypothesis 4). This behavioral context (TGS|H02 ) could not be included in the analyses because of lacking variation in

1.0

1.1

77.5 1.58 2.09 1.48 2.50

− 1.98 2.58

7.33*** 1.33

2.13*** 0.62

3.85*** 0.86

AGg

− 1.88 2.23

3.87*** 0.92

− 1.33° 0.68

0.39 0.64

− 3.46*** 0.80

TGS

− 2.37 3.84

− 2.27 2.25

3.48*** 0.81

− 1.72* 0.71

DGS

− 0.65 2.46

− 0.55 2.08

5.20*** 1.11

TGS|H+ 2

− 5.85* 2.79

− 5.75* 2.52

TGS|H+ 1

− 0.10 3.24

TGS|H− 1

The table presents differences between coefficients of (sub)games (row – column). Standard errors are reported underneath. The entries in the columns Pr(%) and TGS (with N = 72, Pr(%) = 6.7) are repeated from Table 7. The TGS|H02 is excluded because “no reward” was chosen in all 8 cases Wald tests (two-sided p-values, not adjusted for multiple testing): *** p ≤ 0.001, ** p ≤ 0.01, * p ≤ 0.05, ° p ≤ 0.1.

TGS|H01 (N =5)

TGS|H− 1 (N =3)

TGS|H+ 1 (N =138)

1.9

9.5

DGS (N =94)

TGS|H+ 2 (N =114)

0.2

AGg (N =664)

Pr(%)

Table 8 Pairwise comparisons of behavioral contexts for gratefulness

Revenge and Gratitude in Trust-Based Encounters 139

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responses. Contrary to the hypothesis, all trustors refrained from rewarding trustworthiness in this subgame (Table 4). Although only 8 decisions had been made in this subgame, the complete lack of rewarding suggests that trustors feel rather stressed than grateful (discussed in Vieth 2009, ch. 5). Now consider the situation in which the trustor decides about accompanying placed trust with a sanctioning announcement (H1 TGS). Obligation feelings (due to the shared responsibility for the trustee’s decision) and the desire for self-consistency should induce the trustor to actually perform a promised reward (Hypothesis 5). The results show that gratefulness sharply increases by 70.8%, from 6.7% in the TGS to 77.5% in the TGS|H+ 1 . Thus, in more than three of four cases the reward promise is indeed carried out. This high level of gratefulness contrasts with the low level in the other behavioral contexts ( 0. Norm enforcers can decide to spend the inspection cost c > 0 to detect the norm violators. If they detect them, norm enforcers receive inspection rewards s > c. Detected norm violators receive the punishment ω > r . The incentive structure of this simple inspection game is displayed by the 2 × 2 game matrix in Table 1. The model assumes simultaneous decision making in the sense that the target actor does not know whether or not the norm enforcer inspects and vice versa. The payoff structure implies that rational and selfish target actors commit a norm violation if not inspected and adhere to the norm if inspected. Rational and selfish norm enforcers perform inspections if target actors violate the norm and do not inspect if target actors adhere to the norm. The interesting point is that there is no strategy combination for which both actors would have no incentive to change their strategies. Consider the following thought experiment. In the situation that the norm enforcer inspects and the target actor violates the norm, the target actor makes a loss since the punishment

Table 1 The simple inspection game. The payoffs denote r rewards for the norm violation, w punishment, c inspection cost, s rewards for successful inspection with w > r > 0, s > c > 0 Norm enforcer Inspect Target actor

Norm violation

r − w,s − c

Not inspect ⇐

⇓ Norm adherence

0,−c

r ,0 ⇑

⇒

0,0

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exceeds the reward from the norm violation (ω > r ) and it would have been more profitable to choose the norm adhering behavior. If the target does not violate the norm, but the enforcer inspects, the enforcer pays inspection costs c without receiving the reward s. In this situation, the norm enforcer would have been better off not to inspect. However, given the norm enforcer would have chosen not to inspect, the target actor would have had an incentive to commit a norm violation, because she would receive the reward r , which is higher than receiving no payoff. This strategy combination, however, would have given the norm enforcer an incentive to change her strategy to inspection, yielding the payoff s − c, which is higher than nothing. This thought experiment yields a circle of constant changes of strategies. In game theoretic terms, this means that there exists no equilibrium in pure strategies where both actors have no incentive to unilaterally change their strategy. This absence of a dominant strategy is illustrated by the arrows in Table 1. They indicate that ego always has a reason to change her strategy, once the strategy of alter has changed. However, once ego updates her strategy and changes her behavior, alter receives a reason to change her strategy as well, giving another reason for ego to change again, and so on. The solution is that actors “mix” their strategies: instead of always going for one action, players choose a certain probability to perform one of their alternatives. Mixed strategies can be compared to the notion that actors try to outsmart their opponents. A combination of such strategies of ego and alter yields a situation in which both actors are indifferent: Target actors choose the probability of committing a norm violation at the indifference point of norm enforcers and norm enforcers choose the probability of inspection at the indifference point of target actors. To derive the equilibrium in mixed strategies for the standard inspection game, we denote ph as the probability that target actor h violates the norm and qi as the probability that norm enforcer i inspects norm target h. Inspection is costly (c) but is rewarded with s > c in case of success. Norm violations pay r for the norm target, but are only profitable if undetected and no punishment ω > r is received. W.l.o.g. we set the payoff of doing nothing to 0, such that the inspector is indifferent if ph (s − c) − (1 − ph )c = 0 and the norm target is indifferent if r − qi ω = 0. Solving for p yields the target actors optimal violation probability, ph∗ = cs ,

(1)

which depends only on costs and rewards of the inspector, but not on the severity of the sanction. Solving for q yields the inspector’s optimal inspection probability

How More Severe Punishment Generates Less Norm Enforcement

qi∗ =

r ω,

155

(2)

which in turn only depends on the rewards and punishment of the norm target. For any ph < p ∗ or ph > p ∗ , the inspector would never inspect or always inspect, respectively. The same logic holds for the norm target. Since every finite compact non-zero sum game that does not have an equilibrium in pure strategies must have a unique mixed strategy equilibrium (Nash 1951), the equilibrium characterized above is unique. This is an important property of the game: it implies that the Nash equilibrium of the stage game described here is also the unique subgame perfect equilibrium of any finitely repeated version of the game (Benoit and Krishna 1985). In summary, the analysis shows that more severe punishments reduce the inspection rate and do not affect norm violations. Vice versa, higher inspection rewards reduce the rate of norm violations and do not affect inspection rates.

3

Combining the Inspection Game with the Prisoner’s Dilemma

The inspection game goes beyond modeling norm violations as an optimization problem of the norm violator against nature. However, it still falls short of “real” violations of social norms inasmuch as it lacks welfare losses among target actors. Norm violations generally involve victims suffering the consequences of misconduct and crime. We therefore extend Tsebelis’ inspection game by modeling the interaction between target actors explicitly as a prisoner’s dilemma; a choice strongly inspired by Thomas Voss’ work on the prisoner’s dilemma. In our setup, two target actors (or criminals) can individually decide to either steal or not steal from each other. Stealing is always more profitable than not stealing when ignoring the sanctions imposed by the inspector. However, stealing is inefficient: both criminals would do better if they could coordinate on not stealing. Table 2 shows the payoff matrix of the prisoner’s dilemma as implemented

Table 2 The prisoner’s dilemma played between two target actors. Payoffs are denoted in Euro-Cent as used in the experiment Norm target I Steal Norm target II

Not steal

Steal

−12 Cent, −12 Cent

8 Cent, −20 Cent

Not steal

−20 Cent, 8 Cent

0 Cent, 0 Cent

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in our experiment. At the same time, every norm target is inspected by one inspector under the conditions described above. Criminals are thus facing a prisoner’s dilemma between themselves and an inspection game between each target actor and the inspector (see Fig. 1). Table 3 gives an overview over the parametrization of the game as used in our experiment.

theft target actor I

( prisoner’s dilemma )

target actor II

norm enforcer I

( inspection game )

inspect

inspect

( inspection game )

theft

norm enforcer II

Fig. 1 The extended inspection game: a combination of the prisoner’s dilemma between two target actors and the inspection game between target actors and inspectors. ( Source: own research)

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Table 3 Payoffs for illustration of the game dynamics (also used in the experiment) Target actor Reward r

Punishment ω

Victimization v

+ 8 Cent

−10 Cent

−20 Cent

Severe punishment + 8 Cent

−40 Cent

−20 Cent

Mild punishment Norm enforcer

Inspection costs c Reward for successful inspection s −10 Cent

+ 20 Cent

Severe punishment −10 Cent

+ 20 Cent

Mild punishment

4

The Frequentistic Inspection Game

The extended inspection game discussed above has been tested in previous articles (Rauhut 2009, 2015; Rauhut and Jud 2014). In this contribution, we present a novel setup, which allows a more fine-grained measure of mixed strategies in inspection games. The limitation of both, the original and the extended inspection game, is that players can only make dichotomous choices. This means that mixed strategies can only be measured indirectly in two ways. Either the strategy mix is measured inter-individually over the rate of choices of a population of many actors or it is measured intra-individually over the rate of one actor’s choices over several periods. Both measures are indirect and relatively rough-grained. The idea of our new measurement is to let people make frequentistic choices. This has two advantages. First, this yields a more fine-grained measure of actors’ proclivity for norm violations and inspections respectively. Second, it also yields a measure with better construct validity (Rauhut and Winter 2012). This is the case because the novel measure reflects the psychological literature on probabilistic decision making which shows that people have problems with stating, estimating and acting according to probabilities (Gigerenzer and Hoffrage 1995). The extent to which people can understand and communicate probabilities depends on the format in which the probabilities are presented. The standard way of presenting probabilities is the so-called “probabilistic” format, where either percentages or probabilities with “p-values” between 0 and 1 are stated. However, research shows that people can operate and communicate better with probabilities if they are framed in the so-called “frequentistic” format (Gigerenzer and Hoffrage 1995; Hoffrage et al. 2000; Siegrist 1997). An example of a frequentistic probability statement is “two out of ten” or “twenty out of one hundred”, which corresponds

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to the “probabilistic” statement of twenty percent (or p = 0.2). Although both versions are formally equivalent, fundamental and applied research in a variety of areas has shown that people make more accurate statements and decisions if they are confronted with and can express probabilities in frequentistic rather than probabilistic terms. The strategy mix in our design can be expressed in frequentistic terms as follows. For example, the target actor can state to commit two out of ten possible norm violations. This is equivalent to a strategy mix of committing norm violations with probability 20%. Note that our design goes beyond just framing the decision in different words. Our proposed design directly implements a frequentistic choice. The target actors can specify how many other norm targets they want to victimize. Likewise, the norm enforcers can specify how many choices of their target actor they want to inspect. Hence, our design extends the 1-1-1 design of one norm enforcer who is matched with one target actor who is matched with one other target actor (Fig. 1) to a 1-1-n setup (Fig. 2). In this setup, there is still one

Fig. 2 The interaction network on the left shows how players interact in the extended inspection game. Black nodes denote inspectors, white nodes denote norm targets. Norm targets can randomly steal money from any number of other norm targets; from none up to all other norm targets (represented by solid lines). The inspector can inspect the behavior of “her” norm target, signified by the dashed arrow. The example on the right shows how the decisions of one inspector and one norm target affect the number of detected norm violations in the frequentistic inspection game. The target actor commits four norm violations (shaded circles 3, 6, 7, 9), the norm enforcer performs three inspections (dashed lines 4, 6, 10) and one norm violation is detected (number 6), ( source: own research)

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159

norm enforcer matched with one target actor. However, the target actor is matched with n other target actors. In our specific implementation, there are eleven target actors who can steal money from each other. This means that each target actor is matched with ten other target actors and can make the decision how many out of ten she wants to victimize. Each target actor is assigned to the same norm enforcer over the course of the experiment. The norm enforcer has the power to inspect the interactions between the target actors. The decision is implemented in the same way so that the enforcer can make the decision how many out of ten actions of her target actor she wants to inspect. Thus, both actor types make a frequentistic decision of choosing n out of ten. It is determined randomly which specific n actors are victimized and which specific n actions are inspected. In the experiment, this is done by a computer program. The interaction structure is visualized in Fig. 2. Figure 2 also gives an example of the interaction between an inspector and a norm target in the frequentistic inspection game. The depicted target actor steals from four other target actors. The four victims are randomly selected (shaded circles 3, 6, 7 and 9 in Fig. 2). Simultaneously, the norm enforcer decides to inspect three of the target actor’s interactions, which are also randomly selected (dashed lines 4, 6 and 10 in Fig. 2). In this example, the norm enforcer pays 30 Cent for three inspections and gains 20 Cent for one successful inspection (interaction number 6). This adds up to a loss of 10 Cent. The target actor would earn 22 Cent in the mild punishment and lose 8 Cent in the severe punishment condition. This is true if she has not been victimized. Each victimization would yield an additional loss of 20 Cent.

5

Hypotheses and Predictions

In what follows, we present the baseline predictions of the frequentistic extended inspection game. The respective predictions in Nash equilibria are substantially similar in the simple inspection game, in the extended inspection game and in the frequentistic inspection game. The mixed strategies in the simple and extended game are stated in probability mixtures with likelihood l ∈ [0, 1] that the target actor commits one norm violation or that the norm enforcer inspects the action of the target actor. In the extended inspection game, however, the same probability is stated in frequentistic terms in a pure strategy ( p out of 10 interactions) or in a mixed strategy ( p1 /10 with probability p1 and p2 /10 with probability p2 ). For example, if the predictions for players in the simple inspection game is given 



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by the likelihood l = 0.2 (i.e. 20%), the prediction in a formally equivalent frequentistic inspection game is 2 out of 10 (i.e. 2/10 = 0.2). The likelihood l that n out of p norm violations are detected is given by ⎛ ⎝

l( p, q) =

⎞⎛

⎞

p ⎠⎝ 10 − p ⎠ n q −n ⎛

⎞

(3)

10 ⎠ ⎝ q

when the inspectee commits p norm violations and the inspector chooses q inspections in the range between 0 and 10 where n ∈ [0, q] is the number of detected norm violations. The expectation value d of detected norm violations is computed by summing up the likelihood l that a given amount of n norm violations are detected over all possible n ≤ q: ⎛

d( p, q) =

p  n=0

nl( p, q) =

p  n=0

n

⎞⎛

⎞

p 10 − p ⎠ ⎝ ⎠⎝ n q −n ⎛ ⎝

⎞

10 ⎠ q

(4)

Quite intuitively, the expected number of detected norm violations is higher when there are more controls, and inspections are more successful if there are more norm violations. Mathematically, this can be checked by noting that the inspections q are always in the lower part of the binomial coefficient, and therefore the detection probability is monotonically increasing in q, but also in the number of thefts p, which is always in the top part of the binomial coefficient. The increase of the detection probability with higher numbers of inspections and norm violations is reflected in the expected payoffs for both inspector and inspectee. The expected utility h for target actors is a function of the payoffs, namely reward r and punishment ω, the number of committed norm violations p, the expectation value of the number of detected norm violations d for a given number of inspections q, and the expected losses form victimizations by other norm targets E(ν). This last term introduces the strategic interaction stemming from the prisoner’s dilemma into the payoff function. We thus denote the expected utility for norm violations h as h( p, q) = pr + d( p, q)ω − E(ν).

(5)

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161

The expected utility i for norm enforcers is a function of the payoffs, namely inspection cost c and reward for successful inspection s, the number of performed inspections q and the expectation value of the number of detected norm violations d for a given number of performed norm violations p. This yields the expected utility for inspections i as i( p, q) = qc + d( p, q)s.

(6)

In the following, we provide numerical solutions for the equilibria of the game.1 While this is usually done via the first derivatives of the payoff function with respect to p and q, we will take a more illustrative and numeric approach; yet this leads to the same results. It is still worth noting that the expected victimization losses E(ν) caused by other norm targets would be treated as constants when taking first derivatives and hence do not affect equilibrium predictions. In terms of equilibrium predictions, the prisoner’s dilemma can thus be ignored. First, let us illustrate the unique pure strategy equilibrium for the mild and the severe punishment scenarios. Using the payoffs from Table 1, we can compute expected utilities for all combinations of the number of norm violations and inspections (Tables 4 and 5). The table shows payoffs for target actors on the left side of the comma and for norm enforcers on the right side. The expected utilities can be used to compute best responses for both players (gray areas) and the corresponding pure strategy equilibria (overlapping gray areas). For the target actor, expected utilities are generally higher in the mild punishment condition than in the severe punishment condition. This supports the intuition that target actors receive higher payoffs for lower punishment. Up to a certain point, target actors receive higher payoffs for more norm violations. This is true up to the “indifference point” of target actors (gray column), where payoffs are zero no matter how many norm violations are committed. The indifference point for the target actor is exactly at eight inspections in the mild punishment scenario (Table 4) and at two inspections in the severe punishment scenario (Table 5). When the target actor commits more norm violations than at the indifference point, payoffs become negative and subsequently decrease for more norm violations.

1 In

general, equilibria of this game can be found by taking the partial derivatives of (5) and (6) with respect to p and q, respectively, setting this to zero and then solving for q and p, respectively. This makes the other player indifferent between choices. If both players are at their indifference points, the equilibrium is found. We were not able to find a general closed form solution, but present a numerical solution with respect to the payoffs used in the experiment.

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Table 4 Game matrix of expected utilities in normal form (mild punishment). Payoffs for target actors are on the left side of the comma, payoffs for norm enforcers on the right side. Best responses are denoted by gray columns (target actors) and gray rows (inspectors). Corresponding equilibria are reflected by overlapping gray areas # inspections 1

2

3

4

5

6

7

8

0

0,0

0,-10

0,-20

0,-30

0,-40

0,-50

0,-60

0,-70

1

8,0

7,-8

6,-16

5,-24

4,-32

3,-40

2,-48

1,-56

2

16,0

14,-6

12,-12

10,-18

8,-24

6,-30

4,-36

3

24,0

21,-4

18,-8

15,-12

12,-16

9,-20

4

32,0

28,-2

24,-4

20,-6

16,-8

12,-10

5

40,0

35,0

30,0

25,0

20,0

6

48,0

42,2

36,4

30,6

7

56,0

49,4

42,8

8

64,0

56,6

48,12

9

72,0

63,8

10

80,0

70,10

# norm violations

0

9

10

0,-80

0,-90

0,-100

0,-64

-1,-72

-2,-80

2,-42

0,-48

-2,-54

-4,-60

6,-24

3,-28

0,-32

-3,-36

-6,-40

8,-12

4,-14

0,-16

-4,-18

-8,-20

15,0

10,0

5,0

0,0

-5,0

-10,0

24,8

18,10

12,12

6,14

0,16

-6,18

-12,20

35,12

28,16

21,20

14,24

7,28

0,32

-7,36

-14,40

40,18

32,24

24,30

16,36

8,42

0,48

-8,54

-16,60

54,16

45,24

36,32

27,40

18,48

9,56

0,64

-9,72

-18,80

60,20

50,30

40,40

30,50

20,60

10,70

0,80

-10,90

-20,100

Table 5 Game matrix of expected utilities in normal form (severe punishment). The notation of payoffs, best responses and equilibria follows Table 4

# norm violations

# inspections 0

1

2

3

4

5

6

7

8

9

10

0

0,0

0,-10

0,-20

0,-30

0,-40

0,-50

0,-60

0,-70

0,-80

0,-90

0,-100

1

8,0

4,-8

0,-16

- 4,-24

-8,-32

-12,-40

-16,-48

-20,-56

-24,-64

-28,-72

-32,-80

2

16,0

8,-6

0,-12

-8,-18

-16,-24

-24,-30

-32,-36

-40,-42

-48,-48

-56,-54

-64,-60

3

24,0

12,-4

0,-8

-12,-12

-24,-16

-36,-20

-48,-24

-60,-28

-72,-32

-84,-36

-96,-40

4

32,0

16,-2

0,-4

-16,-6

-32,-8

-48,-10

-64,-12

-80,-14

-96,-16

-112,-18

-128,-20

5

40,0

20,0

0,0

-20,0

-40,0

-60,0

-80,0

-100,0

-120,0

-140,0

-160,0

6

48,0

24,2

0,4

-24,6

-48,8

-72,10

-96,12

-120,14

-144,16

-168,18

-192,20

7

56,0

28,4

0,8

-28,12

-56,16

-84,20

-112,24

-140,28

-168,32

-196,36

-224,40

8

64,0

32,6

0,12

-32,18

-64,24

-96,30

-128,36

-160,42

-192,48

-224,54

-256,60

9

72,0

36,8

0,16

-36,24

-72,32

-108,40

-144,48

-180,56

-216,64

-252,72

-288,80

10

80,0

40,10

0,20

-40,30

-80,40

-120,50

-160,60

-200,70

-240,80

-280,90

-320,100

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For the norm enforcer, the exact opposite structure holds. The inspector’s expected utilities are similar for mild and severe punishment for given norm violations of the target actor. This reflects the intuition that payoffs of the target actor do not directly affect expected utilities of the norm enforcer. If there are at least five norm violations, the inspector’s expected utility is positive and becomes higher, the more inspections she performs. If there are less than five norm violations, however, her expected utility is negative and becomes smaller the more inspections she performs. If there are exactly five norm violations, the inspector is indifferent and every number of inspections returns the same expected utility. These dynamics are true for both scenarios; mild and severe punishment. The game, however, has also a large number of mixed strategy equilibria—in our case, there are 441 mixed strategy equilibria. While we, again, will not provide a closed form, our numerical approach characterizes them quite clearly as follows.2 In all mixed equilibria, either only one or both players mix their strategy such that the probability-weighted number of norm-violations and inspections corresponds to the equilibrium prediction of the pure strategy equilibrium. If, for instance, the pure strategy equilibrium predicts two inspections, there exists a mixed strategy equilibrium in which the inspector inspects one interaction with probability 2/3, and four interactions with probability 1/3. To reiterate, the assumed underlying logic is that both players make their opponent indifferent. In the case of dichotomous choices, this works with mixed strategies. In the case of choosing a number of norm violations and inspections between 0 and 10, this works with pure strategies. Yet, predictions in both game designs are qualitatively the same. Target actors choose their norm violations based on the payoffs of norm enforcers and norm enforcers choose their inspections based on payoffs of the target actor. In short, the theoretical prediction is that more severe punishments do not affect the level of norm violations, but have the consequence of less inspections. More specifically, inspectees choose an optimal norm violation rate p ∗ = N · inspection cost payoff norm violation ∗ , inspection reward and inspectors their inspection rate q = N · punishment where N is the number of available actions. We thus hypothesize that. Hypothesis: More severe punishment has no effect on norm violations, but instead decreases inspection rates.

2 We use a combination of Mathematica and Gambit (McKelvey, McLennan, and Turocy 2006)

to derive the mixed strategy equilibria. The code is available from the authors upon request.

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6

Experimental Design

6.1

Procedures, Rules and Participants

The experiment was conducted at the University of Leipzig, Germany. Students from various disciplines (N = 220) participated in the experiment. The experiment consisted of paper- and computer-based instructions, comprehension questions for both roles in the game, a knowledge quiz, the inspection game experiment and a reciprocity questionnaire. The experiment was conducted using z-tree (Fischbacher 2007). In the knowledge quiz, participants answered questions about general topics. Participants earned money for each correct answer. As a consequence, the start-off money for every participant in the experiment varied depending on the quality of answers in the quiz. There were ten experimental sessions. Twenty-two participants took part in each session. They were randomly divided into target actors and norm enforcers, using neutral wording. This yielded N = 220 participants divided into 110 target actors and 110 norm enforcers. Target actors and norm enforcers were paired in partner matching. Instructions were common knowledge for both roles. Each session comprised of 50 periods, yielding a total of 11,000 observed decisions. These decisions are split between 5500 decisions of target actors and 5500 decisions of norm enforcers. On the individual level, there were 25 decisions in mild and 25 decisions in severe punishment scenarios. In half of the sessions (experiment 1), participants started with mild punishment, in the other half (experiment 2) with severe punishment. After 25 periods, the punishment regime changed (from mild to severe in experiment 1 and from severe to mild in experiment 2). Each target actor was matched with ten other target actors from whom she could steal the fixed amount of 20 Euro-Cent. Each norm violation earned 8 Cent for the perpetrator. The norm enforcers could inspect any number of interactions of her paired target actor at own costs. The computer randomly allocated the exact persons from whom money was stolen and whose interactions were inspected. Hence, it was impossible for the target actor to identify from whom she stole money or by whom she was victimized. This was common knowledge. Detected norm violations were automatically punished. The severe punishment condition considered 40 Cent and the mild punishment condition 8 Cent of punishment. The payoffs for the inspectee and the inspector are reported in Table 3.

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7

165

Results

We will now briefly report the results of our experiment. The main finding is displayed in Fig. 3. Here, we plot the average norm violation rates (top panel) and inspection rates (bottom panel) for experiment 1 and 2, respectively. Gray markers denote the mild and black markers the severe punishment condition. Solid lines represent the average norm violation and inspection rates in each treatment and dashed horizontal lines the equilibrium predictions derived above (see Tables 4 and 5). A visual inspection suggests that norm violation rates are above, but close to the equilibrium prediction in the mild punishment conditions, and below and further away from the equilibrium in the severe punishment condition. The picture is reversed for the inspection rates. Here, inspection rates are far below the

norm violations

0

5 10 15 20 25 30 35 40 45 50

period

period

experiment 1

experiment 2 inspections

0

0 1 2 3 4 5 6 7 8 9 10

5 10 15 20 25 30 35 40 45 50

0 1 2 3 4 5 6 7 8 9 10

0

inspections

experiment 2

5 10 15 20 25 30 35 40 45 50

period

0 1 2 3 4 5 6 7 8 9 10

norm violations

0 1 2 3 4 5 6 7 8 9 10

experiment 1

0

5 10 15 20 25 30 35 40 45 50

period

Fig. 3 Average norm violation rates (top panel) and inspection rates (bottom panel) for experiment 1 and 2, respectively. Gray markers denote the mild and black markers the severe punishment condition. Solid lines represent the average norm violations and inspection rates and dashed black horizontal lines the equilibrium predictions. ( Source: own research)

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predicted 8 inspections in the mild punishment condition and very close to the predicted 2 inspections in the severe punishment condition. Combining the results for norm violators and inspectors suggests that norm violators react to inspectors off-equilibrium play adequately by stealing above equilibrium in the mild condition and below equilibrium in the severe condition. Inspectors, however, do not seem to adapt to the (off-equilibrium) play of target actors. Table 6 quantifies the descriptive results from Fig. 3. We estimate four linear random intercept models with two nested intercepts for the session and the player, respectively. The random intercepts are necessary, because the 5500 decisions used in each model are nested within players, and players are nested within

Table 6 Linear random intercepts models Mild/severe

Severe/mild

(1)

(2)

(3)

(4)

Norm violations

Inspections

Norm violations

Inspections

5.72***

4.32***

5.86***

3.27***

(25.1)

(20.7)

(30.2)

(17.3)

−2.60***

−2.18***

−2.38***

−0.75***

(−21.6)

(−23.7)

(−18.9)

(−8.55)

0.31

0.000045

0.000030

0.0000011

(−1.43)

(−1.13)

(−0.024)

(−0.051)

1.19

1.47***

1.28*

1.32**

(1.53)

(3.82)

(2.25)

(2.78)

s.d. residual

1.15***

0.88***

1.20***

0.83***

(84.6)

(64.6)

(88.0)

(61.2)

N(decisions)

2750

2750

2750

2750

N(subjects)

55

55

55

55

N(sessions)

5

5

5

5

Fixed effects Intercept Severe punishment Random effects s.d. intercept subject s.d. intercept session

t statistics in parentheses Severe punishment: dummy, 0—low, 1—severe punishment Norm violations and inspections are discrete variables going from 0 to 10 * p < 0.05, ** p < 0.01, *** p < 0.001

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sessions. The decisions thus can not be treated as if they were independent observations. Models 1 and 3 report the results for the norm violations in experiment 1 and 2, while models 2 and 4 present the respective results for the inspectors. As predicted by our hypothesis, severe punishment significantly reduces inspections by 2.18 and 0.75 inspections in experiment 1 and 2, respectively. However, contrary to our hypothesis, it also reduces norm violations by 2.6 and 2.4 norm violations, respectively. In fact, the reduction in norm violations is significantly higher than the reduction in inspection rates in both experiments (Wald test, χ 2 (1) = 7.7, p = 0.0055 and χ 2 (1) = 112.92, p < 0.0001, respectively). The analyses provided in Rauhut and Jud (2014) hint at a partial explanation for the stronger reaction on punishment severity among norm targets. While the inspectors only interact with one potential norm violator, the inspectees face two games at once: the inspection game against the inspector as well as the prisoner’s dilemmas with other peers. As theoretically shown above, this should not influence their play, but empirically this could of course well be the case. Some players might react much more strongly to the exploitations through “equals” in the PD and ignore the inspection game as a background noise. These types of players could employ strategies of reciprocity and thus react mostly to the number of victimizations, not the number of inspections. Rauhut and Jud show that the prisoner’s dilemma structure does indeed play an important role for some inspectees, though the extent is quite heterogeneous and does not seem to affect other inspectees. People who hold strong attitudes about negative reciprocity seem to react more to the PD, while those with weaker attitudes react stronger to sanctions, and thus to the behavior of the inspector.

8

Discussion

Thomas Voss has been one of the pioneers who inspired rigorous research in sociological theory, especially by his broad perspective on rational choice and game theory (e.g. Diekmann and Voss 2004; Voss and Abraham 2000). He focuses on precise theoretical modeling, direct tests of mechanisms and empirical corroborations of counter-intuitive predictions. Our work on the inspection game may be regarded as such an example. It has certainly been strongly inspired by his approach of studying micro-level behavior and their aggregation to counter-intuitive macro-level patterns. Most rational choice theories on norm violations and norm enforcement suggest that more severe punishments cause less violations of informal and formal social norms. However, survey, field and laboratory studies often produce mixed

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results and suggest more complex mechanisms. A game theoretical perspective offers an interesting explanation of why more severe punishment may not have such a strong effect on norm violations. The proposed inspection game and the underlying game theoretical model focuses on the opposing incentive structure between norm enforcers and target actors. This anti-coordination game between enforcers and target actors suggests a counter-intuitive effect of how punishment affects norm violations. From this theoretical point of view, offenders’ incentives only affect the decisions of enforcement agents and the incentives of enforcement agents only affect decisions of target actors. Quite counter-intuitively, it implies that more severe punishment reduces enforcement activities with the consequence that the rate of norm violations remains unaffected. The results from the presented laboratory experiments show that more severe punishment causes lower enforcement rates, supporting the game theoretical argument. However, not only enforcement is affected by punishment, but norm violations as well. If punishment is more severe, there is less enforcement and less norm violations. Hence, changing the incentives of ego affect the behavior of ego and alter. One way of explaining why a change of ego’s incentives changes ego’s behavior would be to assume less sophisticated calculations and less anticipatory reasoning of norm violators. Offenders may use rules of thumb and “heuristics” in decision making (Gigerenzer and Goldstein 1996; Todd and Gigerenzer 2000). A simple example of an offender heuristic is a reversed tit-for-tat strategy: commit a crime if no inspection occurred previously and do not commit a crime if there has been an inspection recently.3 In addition, relaxing the selfishness assumption may explain some of our findings. In particular, it may matter as to whether target actors were often victimized in the past from other target actors or not. In other words, there may be offender types who care about payoff differences between their own outcomes and outcomes of other offenders. Such an other-regarding type cares about becoming a victim of norm violations and may retaliate by committing more norm violations compared to what a payoff-maximizing type would do. In this sense, victimizations may trigger generalized reciprocity such that thefts increase as a reaction to previously experienced victimizations. Previous work (i.e. Rauhut and Jud 2014)

3 Note that as to whether the game is one-shot or finitely repeated does not make a difference for

standard assumptions of rationality and selfishness. However, empirically and behaviorally, it is plausible that people learn and react “socially” upon their experiences.

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shows that behavioral reactions toward inspectors’ behavior (relaxing the rationality assumption) and other target actors’ behaviors (relaxing the selfishness assumption) can explain some of the anomalies between the theoretically derived mixed Nash equilibria and the empirical data. Another approach to explain why punishment severity affects norm violations is to assume that people expect others to make errors and to expect that others do not behave according to the model of perfectly farsighted rational choices. In this sense, actors may form beliefs about the probability of each of their opponents’ choice alternatives. This can be modeled by the so-called “quantal response equilibrium” (McKelvey and Palfrey 1995). The intuition behind this model is that errors of the opponent can become very costly if ego does not anticipate these errors and take them into account in calculating expected payoffs from choice alternatives. For example, if the punishment is very high, target actors may doubt that norm enforcers indeed perform only very few inspections. If target actors err on this side, they face a very high punishment, which they may seek to avoid. Nosenzo et al. (2014) support predictions from this so-called “quantal response equilibrium” with data from simpler versions of the inspection game than presented here. The findings from our “frequentistic” implementation resemble earlier experiments on the inspection game (Rauhut 2009, 2015). This indicates that the empirics of the inspection game are relatively stable and that the novel design of implementing a “frequentistic” version of the inspection game with a range of norm violation and inspection decisions instead of the earlier “probabilistic” version of dichotomous decisions does not substantially change the results. This poses a second empirical puzzle for future research: why do the two versions of the game lead to very similar results, even though the psychological literature stresses the important differences in presenting probabilities (e.g. Gigerenzer et al. 1988; Gigerenzer and Hoffrage 1995)? Obviously, this study was not designed to give a definitive answer, because evidently, not only did we change the decision format from probabilistic to frequentistic, but also embedded the interactions in a much richer social context. Instead of two norm targets stealing from each other as in Rauhut (2009), we have 11 norm targets. However, we speculate that the potentially better measurement may be outweighed by the more intense social interaction structure. The above mentioned mechanisms extend the classical rational choice theory by either relaxing the rationality assumption of farsighted and perfectly calculating actors or by relaxing the selfishness assumption by introducing otherregarding motives of fairness, inequality aversion or altruism. The presented data suggests that game theoretical models in the area of norm enforcement should

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assume actors who are less calculating, less adaptive and less farsighted, but more prosocial, more other-regarding and more sensitive to others’ mistakes than what is assumed by classical rational choice models. In recent years, Thomas Voss has inspired theoretical and empirical research in this direction of behavioral game theory. The above discussed behavioral mechanisms may be one example of this and may inspire follow-up research on norm enforcement. Thomas Voss also inspired the presented example of norm enforcement in the inspection game by his methodological perspective. One main lesson from his research and teaching is to focus on the micro–macro link. More specifically, he pushed the idea that inspiring, thought-provoking and creative research uses frugal and intuitive assumptions at the micro-level of decision making, such as “rational choice”, and shows how multiple interdependent decisions of actors in strategic interactions aggregate to counter-intuitive macro-level outcomes. One of the main examples of Thomas Voss’ research in this direction are his early studies of the prisoner’s dilemma and how it can be used to study the emergence of cooperation, social norms and norm enforcement. The prisoner’s dilemma is a simple example of a counter-intuitive micro–macro link: It shows how it can happen that nobody contributes to a collective good of a group although it is in everybody’s interest. And it is not only a theoretical exercise, but can be used to understand little contributions to environmental protection, helping behavior and many other examples of low contributions to cooperation. Thomas Voss’ focus on the prisoner’s dilemma also inspired the above presented version of the inspection game, since it is a combination of the prisoner’s dilemma (between target actors) and the inspection game (between target actors and norm enforcers). While the format of the Festschrift is usually focused on the scientific achievements of the honoree, we would also like to mention the importance of Thomas Voss’ teaching for our own scientific endeavors. The authors (and many more) owe their interest in Rational Choice Theory particularly to his introductory lectures to sociology and to the empirical research seminars on behavioral game theory. These lectures where full of counter-intuitive hypotheses that follow from rational-choice theory and its applications in the social sciences. Besides his scientific contributions, the inspiration of many students to go out and test counter-intuitive hypotheses may be one of his most important achievements: the volunteers’ dilemma shows why more bystanders may lower the probability that a victim of a norm violation may receive help (Przepiorka and Berger 2016; Winter and Franzen 2017; Hillenbrand and Winter 2018; Hillenbrand et al. 2020). Popitz’ hypothesis of the preventive effect of ignorance illustrates why not knowing the actual number of norm violations may reduce the extent of norm violations (Diekmann et al. 2015; Rauhut 2013; Kroher and Wolbring 2015). Boudon’s model of

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relative frustration illustrates why a low rate of promotion may lead to higher job satisfaction (Berger 2015; Berger and Diekmann 2015). In a similar fashion the presented example of the inspection game shows why higher punishment may lead to lower enforcement rates. This thinking and focus on counter-intuitive macro-outcomes from basic and intuitive assumptions at the micro-level inspired the above mentioned and more junior and senior scholars in the field of rational-choice and experimental sociology and is a promising venue for future research. Eventually, a critical threshold of a growing number of scholars may be reached so that a strong field of analytical, behavioral and experimental sociology emerges. Acknowledgments We are grateful for comments on the game theoretical part by Stefan Traub and Adrian Hillenbrand for general discussions with Silvana Jud. Note that this paper contains novel experimental data, reporting experimental treatment effects of punishment severity on norm enforcement in inspection games. The interested reader is referred to Rauhut and Jud (2014) for a simulation of a behavioral learning model and tit for tat strategies, using the same data. The theoretical parts of the paper build on the previous two inspection game experiment papers by Rauhut (2009,2015), which are summarized in Rauhut (2017).

References Benoit, Jean-Pierre., and Vijay Krishna. 1985. Finitely repeated games. Econometrica 53 (4): 905–922. Berger, Joël. 2015. Competition and cooperation: Sociological studies in experimental game theory. PhD thesis, ETH Zurich. Berger, Joël., and Andreas Diekmann. 2015. The logic of relative frustration: Boudon’s competition model and experimental evidence. European Sociological Review 31 (6): 725–737. Coleman, James S. 1990. Foundations of social theory. Cambridge; London: The Belknap Press of Harvard University Press. Diekmann, Andreas, Wojtek Przepiorka, and Heiko Rauhut. 2015. Lifting the veil of ignorance: An experiment on the contagiousness of norm violations. Rationality and Society 27 (3): 309–333. Diekmann, Andreas, and Thomas (Eds.) Voss. 2004. Rational-Choice-Theorie in den Sozialwissenschaften: Anwendungen und Probleme. Oldenbourg, München. Durkheim, E. 1979 [1897]. Suicide: a study in sociology. Free Press. Falk, Armin, and Urs Fischbacher. 2002. Crime in the lab. Detecting social interaction. European Economic Review 46: 859–869. Fehr, Ernst, and Urs Fischbacher. 2004. Third–party punishment and social norms. Evolution and Human Behavior 25 (2): 63–87. Fischbacher, Urs. 2007. Z-Tree. Zurich toolbox for ready-made economic experiments. Experimental Economics 10 (2): 171–178.

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Gigerenzer, Gerd, and Daniel G. Goldstein. 1996. Reasoning the fast and frugal way: Models of bounded rationality. Psychological Review 103 (4): 650–669. Gigerenzer, Gerd, Wolfgang Hell, and Hartmut Blank. 1988. Presentation and content: The use of base rates as a continuous variable. Journal of Experimental Psychology: Human Perception and Performance 14 (3): 513. Gigerenzer, Gerd, and Ulrich Hoffrage. 1995. How to improve Bayesian reasoning without instruction: Frequency formats. Psychological Review 102 (4): 684–704. Gigerenzer, Gerd, and Ulrich Hoffrage. 1999. Overcoming difficulties in Bayesian reasoning: A reply to Lewis and Keren (1999) and Mellers and McGraw (1999). Psychological Review 106 (2): 425–430. Hillenbrand, Adrian, Tobias Werner, and Fabian Winter. 2020. Volunteering at the workplace under incomplete information: Teamsize does not matter. MPI Collective Goods Discussion Paper 2020/4. Hillenbrand, Adrian, and Fabian Winter. 2018. Volunteering under population uncertainty. Games and Economic Behavior 109: 65–81. Hoffrage, Ulrich, Samuel Lindsey, Ralph Hertwig, and Gerd Gigerenzer. 2000. Communicating statistical information. Science 290 (5500): 2261–2262. Kroher, Martina, and Tobias Wolbring. 2015. Social control, social learning, and cheating: Evidence from lab and online experiments on dishonesty. Social Science Research 53: 311–324. McKelvey, Richard D, Andrew M McLennan, and Theodore L Turocy. 2006. Gambit: Software tools for game theory. McKelvey, Richard D., and Thomas R. Palfrey. 1995. Quantal response equilibria for normal form games. Games and Economic Behavior 10 (1): 6–38. Nash, John. 1951. Non-cooperative games. Annals of Mathematics, 286–295. Nosenzo, Daniele, Theo Offerman, Martin Sefton, and Ailko van der Veen. 2014. Encouraging compliance: Bonuses versus fines in inspection games. The Journal of Law, Economics, & Organization 30 (3): 623–648. Opp, Karl-Dieter. 1983. Die Entstehung Sozialer Normen: Ein Integrationsversuch soziologischer, sozialpsychologischer und ökonomischer Erklärungen. Vol. 33. Mohr Siebeck. Parsons, Talcott. 1937. The structure of social action. McGraw Hill. Przepiorka, Wojtek, and Joël. Berger. 2016. The Sanctioning dilemma: A quasi-experiment on social norm enforcement in the train. European Sociological Review 32 (3): 439–451. Rauhut, Heiko. 2009. Higher punishment, less control? Experimental evidence on the inspection game. Rationality and Society 21 (3): 359–392. Rauhut, Heiko. 2013. Beliefs about lying and spreading of dishonesty: Undetected lies and their constructive and destructive social dynamics in dice experiments. PLoS ONE 8 (11): e77878. Rauhut, Heiko. 2015. Stronger inspection incentives, less crime? Further experimental evidence on inspection games. Rationality and Society 27 (3): 1–41. Rauhut, Heiko. 2017. Game theory. In The Oxford handbook of offender decision making, Eds. Wim Bernasco, Henk Elffers, and Jean-Louis van Gelder. Oxford University Press. Rauhut, Heiko, and Silvana Jud. 2014. Avoiding detection or reciprocating norm violations? An experimental comparison of self- and other-regarding mechanisms for norm adherence. Soziale Welt 65 (1): 153–183.

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Rauhut, Heiko, and Fabian Winter. 2012. On the validity of laboratory research in the political and social sciences. The example of crime and punishment. In Experimental political science: principles and practices, Eds. Bernhard Kittel, Wolfgang Luhan, and Rebecca Morton, 209–232. Palgrave Research Methods Series. Siegrist, Michael. 1997. Communicating low risk magnitudes: Incidence rates expressed as frequency versus rates expressed as probability. Risk Analysis 17 (4): 507–510. Todd, Peter M., and Gerd Gigerenzer. 2000. Simple heuristics that make us smart. Behavioral and Brain Sciences 23 (5): 727–780. Tsebelis, George. 1989. The abuse of probability in political analysis: The Robinson Crusoe Fallacy. American Political Science Review 1: 77–91. Voss, Thomas. 1985. Rationale Akteure und Soziale Institutionen: Beitrag zu einer endogenen Theorie des sozialen Tauschs. München: Oldenbourg. Voss, Thomas. 1998. Strategische Rationalität und die Realisierung sozialer Normen. In Norm, Herrschaft und Vertrauen, ed. Hans-Peter. Müller and Michael Schmid, 117–135. Opladen: Westdeutscher Verlag. Voss, Thomas. 2000. The realization of social norms among rational actors. In Rationality, rules, and structure, 49–65. Springer. Voss, Thomas. 2001. Game-theoretical perspectives on the emergence of social norms. In Social norms, Eds. Michael Hechter and Karl-Dieter Opp. New York: Rusell Sage Foundation. Voss, Thomas, and Martin Abraham. 2000. Rational Choice Theory in Sociology: A Survey. In The international handbook of sociology, Eds. Stella R. Quah and Arnaud Sales, 50–83. London: Sage Publications. Winter, Fabian, and Axel Franzen. 2017. Diffusion of responsibility in norm enforcement. In Social dilemmas, institutions, and the evolution of cooperation, Eds. Ben Jann and Wojtek Przepiorka, 303 ff. Berlin: de Gruyter.

Heiko Rauhut, Prof. Dr., Universität Zürich, Soziologisches Institut, Andreasstr. 15, 8050 Zürich; [email protected]; current research interests: social theory, analytical sociology, game theory, quantitative methods, experimental sociology, social norms and cooperation, sociology of science. Fabian Winter, Dr., Max-Planck-Institut zur Erforschung von Gemeinschaftsgütern, KurtSchumacher-Str. 10, 53115 Bonn; [email protected]; current research interests: social norms, analytical sociology, migration, field- and lab-experiments, social norms of the internet.

Balancedness. Emerson’s Theory in the Upanishads, in Cooperative Game Theory, and Beyond Harald Wiese Abstract

This article builds on an important paper by Emerson (1962) and its central idea that relations that are characterized by unbalanced dependency or by differential power-over tend to balance out. It can be shown that the Shapley (1953) value from Cooperative Game Theory and Old Indian (post-Vedic, pre-classical) texts can be linked to Emerson’s paper in a fruitful manner. Emerson’s approach presupposes interpersonally comparable utilities. Adducing some vague ideas of Emerson (1987), interpersonal comparability can be defended. I then apply Emerson’s balancing approach to the standard (to microeconomists) Edgeworth exchange box. This allows to determine a particular allocation within the core. Inversely, taking the “revealed preference” approach, allocations resulting from Emerson bargaining help to determine utility functions with interpersonal comparability. Furthermore, a dynamic bargaining model is presented that is somewhat related to the Ståhl-Rubinstein model, but builds on balancedness. As an aside, I offer a few comments on the perennial problem of defining power. Keywords

Emerson • Balancedness • Shapley value • Old Indian rank-order contests Interpersonal comparability of utility

•

H. Wiese (B) Universität Leipzig, Leipzig, Deutschland E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_9

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1

H. Wiese

Introduction

I am very happy to have been invited to contribute to a Thomas-Voss felicitation volume. From 1999 to 2005, Thomas Voss and myself have organized so-called reading classes on topics like “culture and social norms”, “contract theory from a game-theoretic perspective”, and “social exchange and reciprocity”. In all these meetings, Thomas Voss had much more to contribute than me. He is not only more knowledgeable than me in sociology (of course), but also in Non-cooperative Game Theory, a fact that was always embarrassing to me. I finally switched to a narrow field where I think I am still ahead of him: application of microeconomics and Cooperative Game Theory to Old-Indian texts. In 2010, I had the chance to deliver a talk in Leipzig’s department of sociology on how to operationalize the concept of “power-over”. My main point was that the Shapley value is intimately linked to “power-over” because this solution concept fulfills the following property: If a player A withdraws from a game, any other player B suffers from that withdrawal to the very same extent to which A suffers should B withdraw. Luckily, Thomas Voss was among the listeners of my talk and he pointed out to me that the sociologist Richard Emerson had provided very influential (in the field of sociology) insights relevant to my discussion. Relevant indeed. Now, ten years after my talk in front of Thomas Voss and his colleagues (among them Andreas Tuti´c, one of this volume’s editors), I am happy to share with you what I learned from Richard Emerson and Thomas Voss. Emerson (1962) is about power and dependence. However, it is commonplace to observe that no accepted definitions of power exist, neither in the form of power-to nor in the form of power-over. See, for example, Bartlett (1989, pp. 9– 10). At the same time, power is considered a (or even the) central concept of the social sciences. See the introduction (written by the editors Clegg and Haugaard (2009a)) to the SAGE Handbook of Power. Most authors (including the present one) prefer to understand power relatively, i.e., in terms of the power an actor A exercises over another actor B. Proponents of this tradition are Cartwright (1959, p. 196), Emerson (1962), Hösle (1997, pp. 394–396), and Weber (1978), to name but a few. In particular, I like to quote Dahl’s (1957, p. 202) influential definition of power-over: A has power over B to the extent that A can get B to do something that B would not otherwise do. My paper is a companion article to the somewhat neglected (among economists or political scientists) paper by Emerson (1962) (not mentioned in the nearly 500 pages thick Handbook of Power). For Emerson, power-over is dependency reversed. The author convincingly argues that unbalanced dependence relations

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(or unbalanced power-over relations) tend to balance out. The link between Emerson and Shapley was not stated in Emerson’s paper and, to the best of my knowledge, has been observed by Thomas Voss for the first time. Wiese (2021) elaborates on Voss’ idea and explains how Emerson and Shapley are concerned with the same central insight although their approaches are very different. Extending the perspective beyond sociology and economics, that paper focuses on an indological issue: Emerson’s balancing idea and Shapley’s value are foreshadowed in Old Indian texts. I embed the comparison between Emerson and Shapley into a discussion of power-over definitions. Against the above definition by Dahl and similar definitions in the literature, Vanberg (1982, p. 59, fn. 48) has observed that in every exchange relationship both sides do what they would not have done without the influence (or existence) of the other party. Following Wiese (2009, p. 520), consider an exchange relationship between two agents A and B, with B performing a service for A against money paid by the latter. One might say that A exerts power over B (or “exploits” B) because A obtains the service for only a small amount of money. Or, the other way around, B might be said to exert power over A (or engage in “profiteering” or “usury”) because B asks for a very high price while A urgently needs the service. From this difficulty, it might seem that any definition of power-over or of dependence needs a more or less arbitrary reference point. Emerson has proposed a non-arbitrary reference point, the “where would you be without me” reference point. But this reference point is rather useless in identifying power-over. While power-over is typically asymmetric, the Shapley value obeys symmetry and Emerson postulates symmetry. Here, the symmetry between any two agents A and B is of the following kind: A suffers from B’s withdrawal as much as B suffers from A’s withdrawal. One side result of my argument, to be explained in detail later on, is the power-definition paradox: If we want to talk about power-over, value judgments cannot be avoided.1 The paper is structured in the following manner. In the next section, I will tell (one part of) the story of how Old Indian writers established the eminence of breath in relation to other vital functions, such as sight, hearing, and so on. I then turn to Emerson’s paper and how it relates to the Old Indian literature. The Shapley value is introduced in the following section. Here, I will explain how the Shapley value can be linked to both the Old Indian texts and Emerson’s balancedness. Significantly, all three (the Old Indian authors, Emerson, and Shapley) 1 This

power-definition paradox should not be confused with the well-known paradox of power which refers to the theoretical possibility that more parliamentary seats (or agendasetting power or …) may work against the interest of the allegedly more powerful party. See, for example, Ordeshook (1992, p. 162).

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necessarily depend on interpersonal utility comparisons. For a microeconomist, this poses a problem that needs to be addressed, with the help of Emerson, Nozick, and Harsanyi. In order to put some flesh on these ideas, I look at bargaining (with and without interpersonal utility comparisons) in the framework of an Edgeworth box and within a dynamic model of bargaining as introduced by Ståhl and Rubinstein. The second-to-last section revisits definitional issues and how they can be put to productive use. The last section concludes.

2

Post-Vedic Texts on Eminence

About ten years ago and without any help by Thomas Voss, the current author stumbled over the Shapley value (see the section after next) in an Old Indian literature genre known for esoteric discussions, the Upanis.ads. In particular, the ¯ Br.had¯aran.yaka Upanis.ad (BAU) (which perhaps dates from 7th to sixth centuries BCE) describes how the “vital functions” breath, speech, and the like quarrel over the question of who is the most superior. They solve their dispute by applying the ¯ 6.1.7–8): “where would you be without me” approach (BAU Once these vital functions were arguing about who among them was the greatest. So they went to brahman and asked: “Who is the most excellent of us?” He replied: “The one, after whose departure you consider the body to be the worst off, is the most excellent among you.” (7) So speech departed. After spending a year away, it came back and asked: “How did you manage to live without me?” They replied: “We lived as the dumb would, without speaking with speech, but breathing with the breath, seeing with the eye, hearing with the ear, thinking with the mind, and fathering with semen.” So speech reentered. (8)2

Similarly, following the example of speech, the other vital functions sight, hearing, mind, and semen, leave and reenter, one after another. Finally, it is breath’s turn. But the other functions realize that they cannot even perform the experiment ¯ 6.1.13): of breath’s leaving for a year (BAU Then, as the breath was about to depart, it strongly pulled on those vital functions, as a mighty Indus horse would strongly pull on the stakes to which it is tethered. They implored: “Lord, please do not depart! We will not be able to live without you.” He told them: “If that’s so, offer a tribute to me.” “We will,” they replied.3 2 Translation 3 Translation

by Olivelle (1998) based on Olivelle (1998), copied from Wiese (2021)

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As noted by Wiese (2021), “breath’s threat of withdrawal is more damaging to speech than the corresponding threat of speech is to breath. This very fact is the basis for breath’s demand for a tribute.”

3

Emerson’s Definition of Power-Over

This paper owes a lot to Emerson’s (1962, p. 32) characterization of dependence. According to Emerson, the dependence of actor B upon actor A is. (1) directly proportional to B’s motivational investment in goals mediated by A and (2) inversely proportional to the availability of those goals to B outside of the A-B relation. Intuitively, this definition makes a lot of sense. If B wants to have something (Emerson’s “motivational investment”, see (1) above) that is controlled by A, B depends on A. Similarly, if B has providers other than A (Emerson’s “availability of goals”, (2)) for whatever he likes to have, his dependence is diminished. Emerson (1962, p. 33) then goes on to claim P AB = D B A i.e., “the power of A over B is equal to, and based upon, the dependence of B upon A.” Thus, Emerson defines power-over as inverse dependence. Emerson’s (1962, p. 34) theory of power now builds on his concept of balancing operations “as structural changes in power-dependence relations which tend to reduce power advantage” P AB − P B A > 0 Emerson’s procedure seems clear-cut: In line with (1) and (2) above, power-over balances out if the less powerful party B becomes less interested in goals that depend on A or if B finds alternative sources to satisfy his needs. Similarly, balancing may involve A becoming more interested in the A-B relation or being cut-off from alternative (to B) sources. While I find Emerson’s ideas path-breaking, I do not think of (1) and (2) on a similar plane. In my mind, (1) is a balancing operation, while (2) may create unbalancedness. We elaborate on this distinction in this paragraph and the next.

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With respect to (1), the examples provided by Emerson (playing children, dating adults) make clear that “motivational investment” refers to the terms under which relationships exist. Let me illustrate with the following example from Emerson’s paper. Consider two children A and B that play their respective favorite games in a balanced relationship. But when child B gets to know an alternative playing buddy C, B does not need A as much as before. The relationship between A and B has become unbalanced for a short while and B can insist on her favorite game more often than before. But now, with this change in place, the relationship between B and A has returned to a balanced state. Emerson uses examples such as these to argue for balancedness in the long run. Turning to (2), Emerson is surely right that alternative sources may balance unbalanced power-over relationships. However, they may just do the opposite. Irrespective of whether power relations are balanced or not, it is surely in every agent’s interest to increase the number of own alternative sources and to decrease the number of the other’s alternative sources. An economic example may help to clarify this important point: A firm B that offers attractive products to a customer A (so that A depends on B) may nevertheless try to merge with other firms thereby decreasing A’s “availability […] outside of the A-B relation” (and thereby increasing dependence even further). As noted by Emerson (1962, p. 32) himself, he does not define dependence itself, but “can do no more than specify the directional relationships” involved. For Emerson, dependence is that relationship between agents that increases or decreases with “motivational investments” and “availability of goals” in the appropriate manner. In my view, the need for an arbitrary reference point (see introduction) may be a very good (but possibly unwitting) reason to adopt the modest definitional approach taken by that author. Emerson (1962, p. 32) uses a different line of defense by referring to the empirical problems of ascertaining “the precise nature” of how dependence is linked to “motivational investments” and “availability of goals”. Let us revisit the Old Indian approach involving alternating withdrawal. It seems clear that the tribute demanded by breath serves as a “balancing mechanism” of the kind that Emerson had in mind. We will see that the balanced situation itself is implicit in the Shapley value.

Balancedness

4

181

The Shapley Value

The reader who is interested in the technicalities of the Shapley value is referred to Wiese (2020) or to one of the textbooks on Game Theory, for example to Peleg and Sudhölter (2003). Here, I try to explain the gist of the Shapley value without delving into the mathematical details. In Cooperative Game Theory, some set of people N , the players, is given. The central concept is a so-called coalition (or characteristic) function v that describes the social and/or economic possibilities open to various groups of players, called coalitions. Formally, the coalition function assigns a “worth” v(K ) to any subset K of N . In the gloves game, for example, holders of left and right gloves buy and sell gloves with the purpose of assembling pairs of gloves. It is assumed that single gloves are useless while a pair of gloves carries the worth of 1. For example, two holders of a left glove and one holder of a right glove can create the worth 1 (the minimum of 2 and 1) while two holders of left gloves and three holders of right gloves create the worth of 2 (the minimum of 2 and 3). After defining a coalition function, Cooperative Game Theory goes on to apply some or other “solution concept” (core, nucleolus, Shapley value) to such a coalition function. The idea is that these solutions predict the payoffs the players can expect to achieve. For my purpose, I find the Shapley value useful. For each solution concept, Cooperative Game Theory uses two different, but equivalent, approaches to arrive at payoff vectors from coalition functions: (i) The algorithmic approach applies some algebraic manipulations of the coalition functions in order to derive payoff vectors. (ii) The axiomatic approach suggests general rules of distribution. The algorithmic approach is not important for this paper.4 Among the diverse axioms used to characterize the Shapley value, I am only interested in the equal-damage axiom: If player A withdraws from the game, the damage to player B in terms of his Shapley payoff equals the damage that player A suffers should player B withdraw. This particular axiomatization has been introduced by Myerson (1980). Let us now turn to a specific gloves game (employed for the same purpose in Wiese (2009, p. 527)) in order to understand why Myerson’s balancedness axiom might be expected to hold. Assume one left-glove holder (player A) and 4 right-glove holders (players B through E). The left-glove holder is in a monopoly position, or, from the point of view of network theory, the left-glove holder is the 4 The

algorithmic approach amounts to calculating the average “marginal contributions” of players along all sequences of players. Wiese (2021) manages to link the algorithmic approach to Old Indian texts that are about as old as the Upanis.ads.

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center of a hub-and-spoke network. The Shapley value awards the payoff of 4/5 to player A and (1/20) to each of the other players. Assume that player A sells his left glove. He obtains the price of 4/5 (if the Shapley value is a good predictor for the market outcome). Each of the players B through E have the chance of 1/4 to buy the glove for a price of 4/5. Hence, each right-glove holder has an expected payoff of 1/4(1 − 4/5) = 1/20. What, now, is the damage that the players A and B can do to each other by withdrawing? The reason for the equality of these differences is this: Player A obtains a price of 4/5 for his left glove in case of 4 potential buyers, but a price of 3/4 in case of 3 potential buyers. So indeed, player B’s withdrawal would not do much damage to player A, only 1/20 = 4/5 − 3/4. But player B’s disutility caused by player A’s withdrawal is small also. As noted before, if player A is around, player B will obtain the expected payoff of 1/20. If player A withdraws, player B’s payoff is zero because no pair can be formed.5 A second example for Myerson’s axiom is related to the threat of withdrawal found in the Old Indian texts on superiority. Indeed, the tribute to be paid by the other vital forces makes staying within the body more attractive to breath than without the tribute. If the tribute is sufficiently large, breath is harmed as much by withdrawal of hearing as hearing is harmed by withdrawal of breath. The high price charged by player A in the five-player gloves game (or the tribute collected by breath in the Old Indian quarrel for superiority) are special instances of what Emerson (1962, p. 34) calls “balancing operation” of type (1). By paying a high price to player A (by paying a tribute to breath) player B’s (hearing’s) motivational investment in trading with A (in staying within the body) and hence B’s dependence on A (hearing’s dependence on breath), is reduced. In both cases, changes in “motivational investments” bring about the equality of power-over. The terms of exchange (which price or tribute to pay) are adjusted so that, finally, power is balanced out.

5 For further examples see Wiese (2009)

network, and armed robbery.

who discusses emotional dependence, centrality in a

Balancedness

5

Balancedness and Interpersonal Comparisons of Utility

5.1

Arguments for Balancedness

183

To my mind, balancedness is a very fruitful solution concept. However, from a microeconomic point of view it suffers from the very serious defect that it presupposes interpersonal comparability of utility (ICU).6 After all, balancedness amounts to setting equal two utility differences. From a very puristic microeconomic point of view one might be tempted to do away with Old Indian methods, Emerson, and Shapley. This would be a very bad idea. While microeconomics is to be lauded for producing—without ICU— impressive models and results in the frameworks of General Equilibrium Theory and Non-cooperative Game Theory, one would go too far in requiring this wise restriction everywhere. I have been inspired and puzzled by a late paper by Emerson (1987) that has been published posthumously. The first few pages clearly indicate that Emerson was aware of the attractiveness of allowing interpersonal comparisons.7 With respect to economics, Emerson (1987, p. 12) adds: “[…] conventional economic analysis cannot deal with interpersonal utility comparisons […]. That is no great loss in a science that does not deal with interpersonal relations.” While the first part of his remark is true, I find the second part plainly wrong on two counts. First, microeconomics is certainly a theory of interpersonal relations. Apparently, Emerson identifies economics with market theory and does somehow forget about (Non-cooperative and Cooperative) Game Theory. Second, doing without ICU would be a loss to all of the social sciences, including economics. Emerson (1987) was not, of course, the first to advocate a second or third look at ICU. Harsanyi (1977, chapter 4) argues that ICU is indispensable when we talk about justice. While that is clearly true, it might be better to “triangulate”— employing the word used by Nozick (1985)—without the intervening and possibly distorting influence of normative beliefs (see Nozick (1985, p. 169)).

6 There

is a pun here. “I see you” may be short for “I see you and your preferences. I have some idea about how much you might lose if we do not strike a bargain. I sort of know where you would be without me.”. 7 The paper is rather cryptic and I remain agnostic as to whether the main part of the paper (following the introduction) might deserve a modern reconstruction as Andreas Tuti´c suggests in a private communication.

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I like to follow Emerson’s late plea for ICU8 by taking his balancing operations seriously. From the point of view of the current paper, ICU makes sense because: • Old Indian authors clearly understood the ICU-dependent “where would you be without me” argument. • The Shapley value is a concept that provides sensible theoretical predictions and ICU belongs to its very DNA. • Emerson’s balancing approach is a fruitful manner to understand social exchange situations, and again, ICU is necessary for carrying out Emerson’s balancing project. • In the context of a dynamic conception, balancing also underlies the thinking of the famous anthropologist Malinowski (1926, p. 40): “[…] most if not all economic acts are found to belong to some chain of reciprocal gifts and counter-gifts, which in the long run balance, benefiting both sides equally”.9 Furthermore, balancing arguments occur in pop songs, such as. • Belinda Carlisle with “You’re Nothing Without Me”10 : You’re nothing without me I wouldn’t walk out that door Or you may find out the hard way Just what love is for You’re nothing without me You’ll never fall in love again Because there’s only one me and you Why pretend • Markus Schulz with “Nothing Without Me”11 : ‘Cause you know, you know we belong together, and we’re only strong together. You are nothing without me

8 It

seems that Emerson (1987, pp. 12–13) uses “cardinal utility” and ICU interchangeably. (1926, p. 40). 10 https://www.letras.mus.br/belinda-carlisle/364810/ accessed on October 13, 2020. 11 https://lyricstranslate.com/en/markus-schulz-nothing-without-me-lyrics.html accessed on October 13, 2020. 9 Malinowski

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As Nozick (1985, p. 161) remarks: “No satisfactory general procedure has thus far been devised for making interpersonal comparisons of utility, and many doubt its feasibility despite the fact that we make such comparisons everyday on an ad hoc and intuitive basis. It would be surprising if our ordinary (and often apparently obvious) judgments were completely built on sand.”

5.2

Emerson-Edgeworth Allocations

5.2.1 Balanced Core Allocations I hope to have convinced the reader that ICU can be defended. What then is the relationship between ICU and balancing? On the one hand, balancing arguments build on ICU. On the other hand, one can use balancing in order to “triangulate” ICU. When pursuing that project, Nozick (1985, p. 169) came up with balancing arguments, without citing Emerson or the Shapley value. With respect to bilateral monopoly, he remarks that “we lack a fully adequate theory […] of where on the contract curve a bargain will be struck. […] The question is: who diswants no agreement more?” Thus, ICU and balancing arguments are closely interconnected and mutually dependent. In order to put some flesh on these ideas, I follow Emerson and Nozick and look at bargaining in the Edgeworth box. Assume two agents A and B and two goods 1 and 2. Each agent possesses a so-called endowment, that is a bundle that he might consume without recourse to the other agent. The agents may decide to engage in trade. The usual microeconomic analysis assumes a core outcome. A core allocation (specifying a consumption bundle for each agent) fulfills two properties. (i) It is at least as good as the endowment for each agent individually. (ii) It lies on the contract curve where it is not possible to make one agent better off without making the other agent worth off. This analysis proceeds without ICU. Formally and more specifically, agent A has an endowment of (χ1 , χ2 ) and consumes a bundle (x1 , x2 ). B has an endowment of (ω1 , ω2 ) and consumes a bundle (w1 , w2 ). The size of the Edgeworth box is χ + ω and every consumption allocation has to obey x + w = χ + ω. On top, we assume a quadratic Edgeworth box: χ1 + ω1 = χ2 + ω2 . Finally, without loss of generality, we require χ1 ≤ χ2 . The agents’ utility functions are assumed to be given by U A (x1 , x2 ) = α min(x1 , x2 ) U B (w1 , w2 ) = β(w1 + w2 )

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The parameters α and β are strictly positive. From agent A’s utility function, the contract curve is defined by x2 = f (x1 ) = x1 It is a straight line that reaches from (0, 0) to (χ1 + ω1 , χ2 + ω2 ). framework, the core (index “co”) consists allocations  coIn this   of those  x1 , x2co, w1co , w2co on the contract curve that fulfill U A x1co , x2co ≥ U A (χ1 , χ2 ) and U B w1co , w2co ≥ U B (ω1 , ω2 ). On the basis of the contract curve and the endowments, the worst bundle that A may obtain is (χ1 , χ2 ). It lies in the core and yields the utility U A,min = αχ1 . A’s best bundle in the core is defined by indifference on B’s part, i.e., by x2 = f (x1 ) = x1 and β((χ1 + ω1 − x1 ) + (χ2 + ω2 − x2 )) = β(ω1 + ω2 )   2 χ1 +χ2 with This best bundle (best from A’s perspective) is given by χ1 +χ 2 , 2 2 utility U A,max = α χ1 +χ . One might, now, let Emerson “enter” Edgeworth’s box. 2 Then, a particular allocation within the core can be identified, namely an outcome from the core such that each agent would suffer the same from a breakdown of trade which would lead the agents back to their endowment points. That is, I start for some given preferences of the two agents and then derive the unique “Emerson-Edgeworth solution” or “Emerson-Edgeworth allocation”. Pursuing the  concrete example from above, balancedness (index “ba”) requires an allocation x1ba , x2ba , w1ba , w2ba that fulfills the “where would you be without me” equation     U A x1ba , x2ba − U A (χ1 , χ2 ) = U B w1ba , w2ba − U B (ω1 , ω2 ) Now, apply the contract-curve equation from above (or require x 1ba = x1co , etc.) and obtain the Emerson-Edgeworth (index “EE”) allocation x1EE =

αχ1 + β(χ1 + χ2 ) α + 2β x2EE = x1EE

w1EE = ω1 − β

χ2 − χ1 α + 2β

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w2EE = w1EE Both agents profit from this allocation, and they profit by the same amount.

5.2.2 Revealed Intertemporal Utility Comparison Vice versa, ICU can be revealed by particular bargaining outcomes. The procedure employed is similar to “revealed preference” from microeconomic household theory. There, on the basis of given tuples of prices and demanded quantities, one can narrow down the utility function (which is ordinal and does not allow ICU). Similarly, assuming balanced bargaining, particular bargaining outcomes help to narrow down relations between the utility functions of the bargaining agents. I now sketch this inverse procedure on the basis of very simple types of utility functions, namely those from the previous subsection. Assume some “actual” barbarg 2 gaining (index “barg”) outcome x1 = p χ1 +χ + (1 − p)χ1 which lies between 2 the best outcome (for A) ( p = 1) and the worst outcome ( p = 0) from the core.  barg barg If A obtains such a bundle x1 , x1 as a result of the Emerson-Edgeworth bargaining process, this tells us something about how the utility functions of the two agents are related. Indeed, we have barg

x1

= x1EE

and hence p = Let γ =

α β.

2β α + 2β

We then obtain p=

2 2β = α + 2β γ +2

This means: If player A is found to obtain a relatively good bargain in terms of p, γ = βα is relatively low. That is, player A has a small utility (as measured by α) in comparison to B’s utility (measured by β). A does not care a lot about bundles and about differences between bundles. Inversely, if we know p, we can deduce βα = γ = 2p − p which lies between 0 and infinity.

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H. Wiese

Emerson Dynamic Bargaining

I like to present a second application of balancedness, inspired by the StåhlRubinstein bargaining model. Their model is concerned with alternating-offer bargaining between two agents with differing discount factors. While Ståhl (1972) introduced and solved the finite alternating-offer bargaining model, Rubinstein (1982) presented and solved the infinite horizon version. Assume two agents who bargain about how to split a pie of size 1. They have discount factors, δ A for player A and δ B for player B. I assume 1 > δ B , δ A > 0. The model runs for T + 1 periods where T is a natural number (without zero). If player A obtains the portion at of the pie in period t ≤ T + 1, that player’s utility is U A (at , t) = αδ t−1 A at , α > 0 while player B has the utility U B (at , t) = δ t−1 B (1 − at ) The two agents bargain up to T periods. If they do not agree by T , they obtain exogenously defined portions a ≥ 0 and b ≥ 0 (respectively) at T + 1. Assume a + b ≤ 1.  In the alternating-offer models, we do not obtain a1 = 1 2 for identical discount factors. The reason is that one of the players makes the first offer which is accepted in the subgame-perfect equilibrium. Details and extensions can be seen from Rubinstein (1982) and Binmore et al. (1992). Assume that player A makes the first offer. In the infinite version (where a + b = 1), this offer which is accepted immediately equals a1 =

1 − δB 1 − δAδB

The alternating-offer bargaining models do not employ interpersonal utility comparisons and hence α is irrelevant. Depending on one’s stand with respect ICU, one may like or dislike this property. I argue that a player who does not “care a lot” about the pie might be expected to obtain a larger share. At least, he can tell the other player: “You have more to lose than me if we do not agree.” This argument cannot be reflected in Ståhl’s or Rubinstein’s model.

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The effect of α is to be distinguished from the effect of possibly differing discount factors. In Rubinstein’s model as in my model below, the more patient agent obtains the larger share. I now turn to Emerson dynamic bargaining which might also be addressed as backward-induction equal-gain bargaining. One obtains the Lemma: For t ∈ {1, . . . , T }, the backward-induction equal-gain bargaining solution yields at =

δ t−1 B t−1 δ t−1 B + αδ A

−

bδ TB − aαδ TA t−1 δ t−1 B + αδ A

and, in particular, a1 =

bδ T − aαδ TA 1 − B 1+α 1+α

The proof follows from three observations: First, start with the last bargaining period T . If there has not been an agreement up to that period, the equal-gain condition in T leads to αδ TA −1 aT − αδ TA a = δ TB −1 (1 − aT ) − δ TB b and hence aT =

δ TB −1

δ TB −1 + αδ TA −1

−

bδ TB − aαδ TA

δ TB −1 + αδ TA −1

aT conforms with the lemma. Second, for any t ∈ {1, . . . , T − 1}, the equal-gain condition given by t−1 t t αδ t−1 A at − αδ A at+1 = δ B (1 − at ) − δ B (1 − at+1 )

is fulfilled by the lemma’s at and is not fulfilled by any other share for player A. Third, agreement on a deal specified by equal gains is profitable for both players at each stage. In particular, it is profitable at the last stage by a + b ≤ 1. Let us now discuss the comparative-statics results. First, we have ∂a1 0 and 0 and B’s payoff due to power-over. minus B’s payoff in the absence of power-over. Pi for each actor i. Using common terminology, we refer to Ci as ‘cooperation’. Since D is the unique subgame perfect equilibrium, C cannot be a subgame perfect equilibrium. We assume furthermore that C is also not a Nash equilibrium that is 4 We

address core features of the game-theoretic model. See a textbook such as Rasmusen (1994) for details on game-theoretic concepts and assumptions that are employed in our analysis. Appendix A provides a summary of our notation and assumptions.

Endogenizing Conditions for Cooperation of Rational Egoists

205

not subgame perfect. Therefore, Ci is not a best-reply strategy against C j for at least one actor i. Rather, for at least one actor i there is a pure strategy Bi  = Ci that maximizes i’s payoff against Cj . Let Ti denote player i’s best-reply payoff  against C j . We thus have Ui Bi , C j = Ti > Ri for at least one actor i. Note that often, and also always in our examples below, Bi = Di for actors with Ti > Ri . It is useful to assume, fourth, that the strategies Di are minimax strategies. Since D is an equilibrium, this implies that the strategies Di are likewise maximin strategies. In less technical terms, Di maximizes i’s payoff under the assumption that j tries to make i’s payoff as low as possible (maximin) and Di is i’s strategy to keep j’s payoff as low as possible (minimax; see Rasmusen 1994, pp. 126–127 for explicit definitions). ‘Defection’ will refer to any deviation from Ci . In general, actor i can deviate in more ways from Ci than exclusively by playing Bi or Di . Similarly, actors may achieve a strict Pareto-improvement compared to D in more ways than exclusively by playing the strategy combination C. Nevertheless, we reserve the term ‘cooperation’ for playing the Pareto-optimal strategy combination C. This finalizes the characterization of the ‘stage game’ G that we later embed in a repeated game. Throughout, we interpret payoffs as cardinal utilities. Then, under the assumptions of equilibrium behavior as well as that each actor’s utility depends exclusively on and increases in his own material outcomes (very roughly: ‘utility = own money’), we have the case of ‘rational egoists’. Consider now some examples of well-known social dilemma games with two actors that satisfy the properties of G (see Raub et al. 2013, pp. 720–723 and Raub et al. 2019, pp. 491–493 for further references on the different games and for sketches of social and economic interactions that are ‘approximately modeled’ by these games). The most prominent of these examples is the Prisoner’s Dilemma (Fig. 1). In the Prisoner’s Dilemma, actor 1 is the row player and actor 2 the column player. Each actor has an incentive to exploit cooperation of the other actor, since Ti > Ri for both actors. Note, too, that our notation for payoffs in social dilemma games G is derived from common notation for payoffs in the

Actor 2 Cooperation Actor 1

Defection

Cooperation Defection

Fig. 1 The Prisoner’s Dilemma (Si < Pi < Ri < Ti ); the bold-faced cell indicates the unique equilibrium. (source: own research)

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Prisoner’s Dilemma, with Ti ‘temptation’, Ri ‘reward’, Pi ‘punishment’, and Si ‘sucker’s payoff’ (for example, Axelrod 1984). In the standard version of the Prisoner’s Dilemma, the actors move simultaneously in the sense that each actor, when moving, does not know about the move of the other actor. In the sequential Prisoner’s Dilemma, actor j moves after actor i and knows what i has chosen. One easily verifies that the sequential Prisoner’s Dilemma is likewise an example of G. Another example of a social dilemma game G is the 2-actor version of the Public Goods Game. This is a variant of the Prisoner’s Dilemma in the sense that both actors can choose the degree to which they cooperate or defect. Each actor has an endowment E. They simultaneously choose a contribution ei to a public good (0 ≤ ei ≤ E). The joint contribution e = e1 + e2 is then multiplied by m(1 < m < 2). The gain me is distributed equally so that Ui (e1 , e2 ) = Ui (e) = E − ei + me/2. Contributing nothing maximizes each actor’s payoff, irrespective of the behavior of the other actor. The game thus has a unique subgame perfect equilibrium such that both actors contribute nothing. Hence, Di = 0 and Ui (D) = Pi = E for both actors. Both actors are better off than in the equilibrium and the outcome is Pareto-optimal in the Public Goods Game if both actors contribute their complete endowment, choosing Ci = E. Thus, for the Public Goods Game, Ui (C) = Ri = m E > Pi = E for each actor. Both actors have an incentive for defection in the Public Goods Game in the sense that   their best-reply strategy against C j is to contribute nothing so that Ui Di , C j = Ti = E + m E/2 = E(1 + m/2) > Ui (C) = Ri = m E. Note that the sequential version of the Public Goods Game, with actor j moving after actor i and knowing what i has chosen, is also an example of G. Our next example of a social dilemma game G is the Trust Game, depicted in Fig. 2. In this game, actor 1 is the trustor and actor 2 is the trustee, with D1 = no trust, D2 = abuse trust, while C1 = place trust and C2 = honor trust. Note that only actor 2 has an incentive for defection in the sense that U2 (C1 , D2 ) = T2 > U2 (C1 , C2 ) = R2 . The trustor’s best-reply strategy against cooperation of the trustee (C2 = honor trust) would be to cooperate himself by playing C1 = place trust. The trustor’s equilibrium strategy D1 = no trust implies protection against the trustee’s opportunism rather than an attempt to increase the trustor’s payoff by exploiting cooperation of the trustee. Note that the Trust Game is a special case of the Centipede Game (Rosenthal 1981) that is likewise an example of a game G . The Investment Game is a more complex model of a trust problem and is a further example of a social dilemma game G. Again, actor 1 is the trustor and actor 2 is the trustee. The trustor can choose the degree to which he trusts the trustee

Endogenizing Conditions for Cooperation of Rational Egoists Fig. 2 The Trust Game (S1 < P1 < R1 , P2 < R2 < T2 ); double lines indicate behavior in the unique subgame perfect equilibrium. (source: own research)

207

1: Trustor No trust

Trust 2: Trustee Abuse trust

P1 P2

S1 T2

Honor trust

R1 R2

and the trustee can choose the degree to which he honors trust. More precisely, like in the Public Goods Game, each actor has an endowment E. The trustor chooses an amount e of his endowment to send to the trustee (0 ≤ e ≤ E). This ‘investment’ e is multiplied by m > 1 and the trustee receives me. Subsequently, the trustee chooses an amount g he returns to the trustor, with 0 ≤ g ≤ E + me. The game ends with the trustor receiving U1 = E −e + g and the trustee receiving U2 = E + me − g. While e indicates how much the trustor trusts the trustee, g indicates how trustworthy the trustee is. The Investment Game has a unique subgame perfect equilibrium such that the trustee would never return anything, while the trustor sends nothing. Thus, D1 is the strategy to choose e = 0, while D2 is the strategy to choose g = 0 for all e. Hence, for the Investment Game, Ui (D) = Pi = E for both actors. In the Investment Game, both actors are better off than in the subgame perfect equilibrium and the outcome is Pareto-optimal if the trustor sends everything and the trustee chooses g ∗ so that both actors end up with equal payoffs. These are the cooperative strategies C1 and C2 respectively. If the trustor indeed chooses C1 , i.e., e = E, then C2 implies that the trustee returns g ∗ = E(m + 1)/2. Thus, Ui (C) = Ri = E(m + 1)/2 > Pi = E for both actors. Like in the Trust Game, only actor 2 has an incentive for defection in the Investment Game. The trustee’s best-reply against C1 is to return nothing so that U2 (C1 , D2 ) = T2 = E + m E > U2 (C1 , C2 ) = R2 , while the trustor’s best-reply strategy against C2 is to cooperate himself by sending the complete endowment E. The trustor’s equilibrium strategy D1 to send nothing again protects him against the trustee’s opportunism rather than increasing the trustor’s payoff by exploiting cooperation of the trustee. Our examples reveal that the properties for a social dilemma game G are satisfied by standard models of such games. It is useful to notice, too, that we allow

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for asymmetric versions of our examples in the sense that we do not exclude Ti  = T j , Ri  = R j , or Pi  = P j . Also, we could assume that the endowments of actors i and j in the Public Goods Game or in the Investment Game are different. Remark: Note that C need not be the only combination of pure strategies that is Pareto-optimal and is a strict Pareto-improvement compared to D. For example, in the Public Goods Game, the gain me could be distributed in many ways that imply Pareto-optimality as well as a strict Pareto-improvement compared to the equilibrium outcome. Likewise, in the Investment Game, the trustee could divide the sum of what he receives from the trustor (multiplied by m) plus his own endowment in many ways that imply Pareto-optimality as well as a strict Paretoimprovement compared to the outcome if the trustor sends nothing: while our characterization of g ∗ is based on distributive justice, g ∗ could be defined differently. Moreover, we might even choose C so that it is a strict Pareto-improvement compared to D, without being Pareto-optimal (this follows from the well-known ‘folk theorems’ for repeated games; see Taylor 1976 for some discussion from a more applied perspective). The implications of our model remain valid, irrespective of the combination of pure strategies that we ‘select’ as C (see Fudenberg and Maskin 1986 on including mixed strategies in the analysis of games like those analyzed in this chapter). However, while the selection of C might look intuitively straightforward for our examples of social dilemma games, the selection might be less straightforward in other cases. From another perspective, this also shows that it is not at all ‘evident’ or ‘trivial’ to conclude from a strict gametheoretic analysis something like ‘rational actors cooperate in repeated games’. In fact, quite some assumptions, some of which might merit discussion in at least certain applications, are needed for deriving such conclusions.

3

A Game-Theoretic Model for Endogenous Dyadic Embeddedness

Using the approach in Raub et al. (2013, 2019), we now embed G in a repeated game  that is played in rounds t = 0, 1, 2 . . .. In round 0 of , actors can establish dyadic embeddedness. In the spirit of analyzing  via backward induction, we first specify the structure of  for rounds 1, 2, . . . and then turn to round 0.

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3.1

209

Subgames of 

Depending on what happens in round 0,  continues either as a subgame denoted by  repeated or as a subgame denoted by  one-shot . The subgame  repeated is an indefinitely often repeated game G between actor 1 and actor 2 in rounds 1, 2, . . .. We employ the standard assumption that each actor i, in  repeated and in rounds t = 2, 3, . . ., knows his own moves as well as those of the other actor j in all previous rounds 1, . . . , t − 1. Other than  repeated , subgame  one-shot comprises one-shot games. In round 1 of subgame  one-shot , actor 1 and actor 2 play G. Subsequently, in rounds 2, 3, . . ., each actor i plays G with different partners i(2), i(3), . . .. Subgame  one-shot therefore comprises two series of one-shot games G. In one of these series, the ‘long-lived’ actor 1 plays G with ‘short-lived’ actors 1(2), 1(3), . . . in rounds 2, 3, . . . after the first round with actor 2. In the other series, the longlived actor 2 plays G with short-lived actors 2(2), 2(3), . . . in rounds 2, 3, . . . after the first round with actor 1. Each short-lived actor plays only one game G. In  one-shot , there is no information exchange between the actors.5 This excludes third party-effects on behavior in G in this subgame. Remark: Note that the important feature of  one-shot is not that each actor i plays G only once with j and with each actor i(2), i(3), . . .. Also, we need not assume that information exchange between the actors involved in  one-shot is completely excluded. The important feature is that cooperation cannot be supported by equilibrium behavior in  one-shot . Rather, equilibrium behavior must imply that actors defect throughout all rounds 1, 2, . . . in  one-shot . Our assumptions on  one-shot ensure this property for the subgame, while keeping the model simple.

3.2

Modeling Investments in Dyadic Embeddedness

Round 0 includes the core new feature of our model. In round 0, actors 1 and 2 can choose how to play the subsequent series of games G. More specifically, they can choose to play rounds 1, 2, . . . with different partners, that is, to play subgame  one-shot , or they can choose to play games G with each other in rounds 1, 2, . . . by entering subgame  repeated . Thus, in round 0, actors 1 and 2 can establish dyadic embeddedness. our assumptions, two games G are played in each round 2, 3, . . . of  one−shot , one involving actor 1, the other involving actor 2. We do not need to further specify in which sequence these two games are played per round.

5 Given

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If and when establishing dyadic embeddedness is costless, accounting for social organization would be trivialized because no trade off would be involved. We therefore assume that establishing dyadic embeddedness is associated with total costs τ > 0. Scenarios for allocating these costs can be conceived as different kinds of institutions: rules of the game in which the actors are involved (North 1990, Chapter 1). We thus model effects of institutions for establishing dyadic embeddedness as well as how institutions and dyadic embeddedness interact in affecting cooperation of rational egoists (see Voss 2020 for a general discussion). For our model, we consider a class of simple institutions for sharing the costs of dyadic embeddedness. More precisely, we assume that actor 1 and actor 2 decide simultaneously and independently in round 0 of  about their individual investments τi , with τ1 + τ2 = τ . Each actor can either invest τi > 0 or decide not to invest. If each actor invests τi , dyadic embeddedness is established and the actors enter subgame  repeated of repeated games G. Conversely, if at least one actor decides not to invest, dyadic embeddedness is not established and the actors enter subgame  one-shot of one-shot games G. In the latter case, an actor who had been willing to invest does not lose his investment. After round 0 and before playing round 1, both actors are informed about each actor’s decision in round 0.6 Note that our institutions for sharing the costs of dyadic embeddedness correspond to common assumptions in models of strategic network formation, namely, two-sided link formation (a link is only formed if both actors wish to be linked) with shared costs of links (Jackson 2008, Chapter 6).

Further Assumptions on 

3.3

We assume that round 1 of  is always played after round 0. After each round t = 1, 2, . . ., the next round t +1 is played with a constant probability w (0 < w < 1), while  stops after each round with probability 1 − w. Actor i’s (expected) payoff for  therefore equals the sum of his costs, if any, in round 0 and the exponentially discounted payoffs in rounds 1, 2, . . .. This implies, for example, that actor i’s payoff is Ui = −τi + Ri + w Ri + w 2 Ri + . . . + w t−1 Ri + . . . = −τi +

Ri 1−w

if i and j both invest in dyadic embeddedness and if they subsequently cooperate in all games G in rounds 1, 2, . . .. Similarly, our cost sharing institutions,  has one subgame r epeated and three subgames  one-shot .

6 Given

Endogenizing Conditions for Cooperation of Rational Egoists

Ui = Pi + w Pi + w 2 Pi + . . . + w t−1 Pi + . . . =

211

Pi 1−w

is actor i’s payoff if round 0 of  does not result in establishing dyadic embeddedness and if i as well as all partners of i play D in all games G in rounds 1, 2, . . ..7 We further assume that all actors are informed on the structure of  (and thus also on the structure of game G), that they know from each other that they have this information, etc. The structure of  is therefore ‘common knowledge’. Finally, we assume that  is played as a noncooperative game, that is, actors cannot incur binding agreements or binding unilateral commitments that are not explicitly modeled as moves in the structure of the game.8 Remark: Our characterization of  implies that there is no ‘endogenous exit’ from subgame  repeated in the sense that an actor i could decide himself to no longer interact with j. Including such options would complicate the game-theoretic analysis considerably and is beyond the scope of this chapter. For examples of experimental work including ‘exit options’, while not employing standard gametheoretic analysis of repeated games, see Kollock (1994) and Frey and Van de Rijt (2016).

4

Analysis of : Conditions for Cooperation and for Investments in Dyadic Embeddedness

We wish to derive conditions for cooperation in social dilemmas as well as conditions for endogenously established dyadic embeddedness. We assume rational behavior of actors and hence derive conditions for equilibria of  such that both actors invest in dyadic embeddedness in round 0 of  and subsequently cooperate throughout all rounds 1, 2, . . . in all games G of  repeated . We refer to such an equilibrium as a ‘cooperation equilibrium’. Obviously, ‘mutual defection’ in the sense of playing D throughout the repeated game  repeated is likewise an outcome of equilibrium behavior. We employ the commonly used assumption for 7 Recall

that we interpret payoffs as cardinal utilities. Note, too, that the model includes discounting of future payoffs due to the probability that  might end and that we neglect negative time preferences. It would be no problem to include negative time preferences and results would remain robust. 8 We assume a noncooperative game precisely because we wish to specify conditions such that rational actors will cooperate without external enforcement in social dilemmas, based exclusively on the embeddedness of the dilemma in a long-term relation.

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the analysis of an indefinitely often repeated social dilemma that an equilibrium such that both actors cooperate throughout all rounds 1, 2, . . . is the ‘solution’ of the game because each actor maximizes his own payoff, given the equilibrium strategies of both actors and because such an equilibrium is associated with higher payoffs for each actor than the situation where actors play D throughout all rounds 1, 2, . . . of  repeated . To specify conditions for cooperation equilibria, we use backward induction. We first consider equilibrium behavior in subgame  one-shot of one-shot games G and in subgame  repeated of repeated games G. Subsequently, we derive conditions such that establishing dyadic embeddedness in round 0 is implied by equilibrium behavior.

4.1

Equilibrium Behavior in  one-shot and  repeated

Subgame  one-shot comprises one-shot games G without information exchange between the actors involved. Given the properties of G, this implies: Proposition 1—Defection without dyadic embeddedness: Equilibrium behavior in subgame  one-shot implies that D is played in all rounds. Given our assumptions on , we can apply standard theory on indefinitely often repeated games (for example, Friedman 1990) for the analysis of subgame  repeated . In  repeated , as has been clearly seen in Voss’ work in the 1980s, cooperation can be the result of equilibrium behavior based on reciprocity and conditional strategies. The following proposition is a direct implication of the fundamental theorem on trigger strategy equilibria in indefinitely often repeated games (see, for example, Friedman 1990, pp. 126–127 for details). Proposition 2—Cooperation under dyadic embeddedness:  repeated has an equilibrium such that both actors cooperate throughout all rounds if and only if w ≥ T E M P := max(T E M P1 , T E M P2 ), with T E M Pi :=

Ti − Ri for i = 1, 2. Ti − Pi

T E M Pi is the well-known measure for actor i’s incentive (‘temptation’) to defect. Note that 0 ≤ T E M Pi < 1, with 0 = T E M Pi if and only if actor i has no incentive to defect, that is, Ti = Ri . Proposition 2 shows that cooperation in an indefinitely often repeated game G constitutes equilibrium behavior if and only if cooperation problems are not too large in the sense that the incentives to defect are compensated by a sufficiently large probability w that  repeated continues. Voss (1982, 1985) and

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Raub and Voss (1986a; b) show how Proposition 2 can be employed to generate predictions on social conditions for cooperation among rational egoists in social dilemma situations.

4.2

Endogenizing Dyadic Embeddedness

We now turn to the new feature of our model, namely, investments in dyadic embeddedness. This requires to derive conditions for equilibria of  that induce dyadic embeddedness to be established in round 0, with cooperation in subsequent rounds 1, 2, . . .. Without dyadic embeddedness, rational actors defect in subgame  one-shot and Pi hence Ui = 1−w is the payoff for each actor i in  one-shot . On the other hand, when cooperation is equilibrium behavior in  repeated and under our assumption that actors will then indeed cooperate, each actor’s payoff in  repeated is Ui = Ri 1−w . This yields: Proposition 3—Value of dyadic embeddedness and net gain from establishing dyadic embeddedness: Assume that w ≥ T E M P so that  repeated has an equilibrium such that both actors cooperate throughout all rounds. The value of i −Pi i −Pi dyadic embeddedness is then R1−w for actor i, while R1−w − τi is i’s net gain from establishing dyadic embeddedness. Under our assumptions on equilibrium behavior, the value of dyadic embeddedness is equal to the difference between the equilibrium payoffs from the two kinds i −Pi is the upper bound for investments in dyadic of subgames of . Note that R1−w embeddedness that a rational actor would be willing to incur. Proposition 4—Investments in dyadic embeddedness:  has a cooperation equilibrium such that actor 1 and actor 2 invest in dyadic embeddedness in round 0 and subsequently cooperate in all rounds 1, 2, . . . if and only if w ≥ T EMP

(1)

Ri − Pi for i = 1, 2 1−w

(2)

and τi ≤

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Proposition 4 is the key result of our analysis. It follows from Propositions 1–3, the assumption on institutions for sharing the costs of establishing dyadic embeddedness, and the definition of subgame perfect equilibrium. Each actor’s equilibrium strategy for  is to invest in dyadic embeddedness in round 0, to choose Di unconditionally in each subgame  one-shot and to cooperate conditionally in subgame  repeated . In this equilibrium, mutual cooperation throughout all rounds 1, 2, . . . is the outcome in  repeated . For a sizeable class of social dilemma games, Proposition 4 shows that rational egoists can invest in dyadic embeddedness if their cooperation problems are not too large and if the costs of the investment are sufficiently small. Note that  always has an equilibrium such that actors do not invest in dyadic embeddedness and subsequently defect throughout all rounds 1, 2, . . .. Hence, an equilibrium selection problem emerges not only for the subgame  repeated but also for  itself. Consequently, payoff dominance arguments are needed not only with respect to conditional cooperation as a solution of  repeated . Such arguments are also needed with respect to establishing dyadic embeddedness in round 0 and conditional cooperation in all subsequent round as a solution of  itself: in both cases one needs to assume that actors tacitly coordinate on the equilibrium that makes them better off.

5

Discussion

For a broad class of social dilemma games, we have derived conditions such that rational egoists endogenously establish dyadic embeddedness and subsequently cooperate. The result on conditions for endogenous cooperation under dyadic embeddedness is not new. In fact, it is the same result Thomas Voss introduced for the analysis of the problem of social order in sociology. The new result, building on Voss’ work as well as implementing Coleman’s suggestion on how to develop the rational choice approach in sociology, are the propositions on investments in dyadic embeddedness. These show that and how conditions for cooperation of rational egoists can themselves be endogenized in one and the same model. While Raub et al. (2019) provided results for the Prisoner’s Dilemma as a prominent example of a social dilemma game, the present chapter shows that extensions for other social dilemma games are feasible. In principle, it would be no problem to generalize the analysis further to repeated games with trigger strategy equilibria (Friedman 1990). This would also include social dilemma games with n > 2 actors. However, as has been argued already in Raub and Voss (1986a; b), for n increasing, the assumption on  and  repeated that each actor is reliably informed on previous behavior of all

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other actors would become more and more problematic. This is one of the reasons why such extensions, while ‘technically’ feasible, should be considered with care. Concerning other generalizations of the analysis, note that we considered games with complete information. See Raub et al. (2019, pp. 505–506) on models for social dilemma games with incomplete information that are related to the approach employed in this chapter. Another extension of the analysis could focus on the institutions for sharing the costs of dyadic embeddedness. Note that dyadic embeddedness can secure that conditional cooperation is equilibrium behavior so that rational egoists can both benefit from higher payoffs than in the one-shot game G. Therefore, dyadic embeddedness has collective good properties: actor i could benefit from dyadic embeddedness even if i did not contribute himself to the costs of establishing dyadic embeddedness. Institutions for sharing the costs of dyadic embeddedness therefore affect incentives for free riding and risks of suboptimal investments in dyadic embeddedness. The rules in our class of simple institutions for sharing the costs of dyadic embeddedness imply that opportunities and incentives for free riding are mitigated. Specifically, dyadic embeddedness is established if and only if both actors invest and an actor who is willing to invest does not lose his own investment if the other actor refuses to invest, too. Thus, an actor cannot unilaterally exploit the other actor’s investment in dyadic embeddedness. This ensures that investing in round 0, under the conditions in Proposition 4, is consistent with equilibrium behavior. Still, it could be fruitful to consider criteria for further narrowing down the set of rules for investments in round 0. This could be done by employing principles of distributive justice or of cooperative game theory. For example, for a symmetric game G, such as a Prisoner’s Dilemma with T1 = T2 = T > R1 = R2 = R > P1 = P2 = P > S1 = S2 = S, it might seem plausible to require τ1 = τ2 = τ/2. Conversely, for asymmetric games G such that one of the actors, say, i has only minor gains from cooperation as well as minor (or no) incentives to defect, while j could gain a lot from cooperation, one might wish to require that τi < τ j in addition to τi + τ j = τ . Analyses along such lines could address how an impartial social planner should design such rules. These analyses would also shed light on those rules rational actors i and j could agree on when they would be enabled to bargain and agree on the rule before entering game . Finally, Sokolova et al. (2021) provide an experimental test of the model in Raub et al. (2019). More precisely, the experiment tests predictions for a symmetric Prisoner’s Dilemma on how changes in the costs of establishing dyadic embeddedness affect participants’ investment decisions and their subsequent behavior in the (repeated) Prisoner’s Dilemma. The results provide empirical

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support for quite some of those predictions. The generalization of the model presented in this chapter allows for ‘conceptual replication’ through testing analogous hypotheses for other social dilemma games. There is a more general message by way of conclusion. Thomas Voss suggested his RE approach to the problem of social order in the early 1980s, meanwhile almost forty years ago. This approach, while provocative, turned out to be fruitful and is ‘alive and kicking’—without doubt a sound contribution to sociology and social theory more broadly. Acknowledgments The chapter is part of a research line on which I am collaborating with Vincent Buskens and Vincenz Frey since quite some time and with much pleasure. Discussions with Vincent and Vincenz and their contributions, including comments on this chapter, are gratefully acknowledged. I can hardly claim that all remaining errors in the present chapter are exclusively mine. As the chapter makes clear, I likewise build on joint work with Thomas Voss in an early phase of our academic careers.

Appendix A (See Table A1). Table A1 Notation and Assumptions Symbol

Description and assumptions

Social Dilemma game G G

A social dilemma game with two actors i = 1, 2; examples: Prisoner’s Dilemma, Public Goods Game, Trust Game, Investment Game

Di

Maximin and minimax strategy of actor i (a pure strategy)

D = (D1 , D2 )

Pareto-suboptimal strategy combination; unique subgame perfect equilibrium of G

Ci

Cooperation (a pure strategy)

C = (C1 , C2 )

Mutual cooperation and Pareto-optimal strategy combination; C is not an equilibrium of G; hence, Ci = Di , for at least one actor i = 1, 2 (continued)

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Table A1 (continued) Symbol

Description and assumptions

Bi

Actor i’s best-reply strategy against C j (i = j); Bi is a pure strategy; Bi = Ci for i = 1 or i = 2

Ui

Actor i’s payoff (cardinal utility) in G

Ui (D) = Pi

Actor i’s payoff from D

Ui (C) = Ri

Actor i’s payoff from mutual cooperation; Ri > Pi for i = 1, 2 (C is thus a Pareto-improvement compared to D)

  Ui Bi , C j = Ti

Actor i’s best-reply payoff against C j (i = j); Ti ≥ Ri for i = 1, 2; Ti > Ri for i = 1 or i = 2; in our examples: Bi = Di for Ti > Ri and Bi = Ci for Ti = Ri

Repeated game  

A noncooperative game with two actors who play in rounds 0, 1, 2 . . .; structure of the game is common knowledge

Rounds t = 1, 2, . . .

In each round t, each of the actors plays G once

w

Probability that round t + 1 of  is played after round t = 1, 2, . . . has been played; 0 < w < 1

Round 0

Actors can invest in dyadic embeddedness

 repeated

Subgame of  after dyadic embeddedness has been established

 one-shot

Subgame of  after dyadic embeddedness has not been established

τ

Total costs of establishing dyadic embeddedness; τ > 0

τi

Actor i’s costs of investing in dyadic embeddedness; τ1 + τ2 = τ

Ui

Actor i’s payoff in  (cardinal utility); Ui equals the sum of realized costs in round 0 and the exponentially discounted payoffs in rounds 1, 2 . . .

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Werner Raub, Prof. (em.) Dr., Utrecht University, Department of Sociology/ICS, Padualaan 14, 3584 CH Utrecht; [email protected]; current research interests: theoretical sociology, formal models, experimental sociology.

Opposing Effects of Objective and Subjective Social Status on Prosociality: Theory and Quasi-Experiment Andreas Tuti´c and Ulf Liebe Abstract

Previous research in sociology, social psychology and economics on the question if and to what extent social status groups differ in prosocial behavior provides only inconclusive and contradictory evidence. While some studies find a negative relationship between social status and prosociality, others find a positive one. We propose a formal model and predict that (1) objective social status is positively correlated with prosociality and (2) subjective social status is negatively correlated with prosociality, given statistical control of objective status. These hypotheses are put to an empirical test using data from a quasi-experiment with over 600 ninth-graders from Germany. The data include measures of objective and subjective social status. Our findings support both hypotheses and provide direct evidence for a self-enhancing bias in subjective social status. We therefore contribute to explaining the inconclusive findings of subsequent research on the status-prosociality nexus. Keywords

Socioeconomic status • MacArthur Scale • Dictator game • Prosociality Adolescents

•

A. Tuti´c (B) Universität Leipzig, Leipzig, Deutschland E-Mail: [email protected] U. Liebe University of Warwick, Coventry, UK E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_11

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Introduction

In this paper, we will relate both objective social status and subjective social status to altruism, i.e., the propensity of providing benefits to others even if this involves material costs for oneself. Prosociality and in particular altruism are of great interest for explaining the most puzzling feature of human societies from a sociological (cf. Hobbes 1996; Durkheim 1997; Parsons 1937) as well as a Darwinian perspective (cf. Wilson 2012; Richerson and Boyd 2005; Henrich 2004): the prevalence of wide-spread, large scale cooperation among unrelated individuals. Recently, scholars from sociology (e.g. Liebe and Tuti´c 2010; Simpson et al. 2012), social psychology (e.g. Piff et al. 2010, 2012), and economics (e.g. Ball and Eckel 1996; Ball et al. 2001; Eckel and Wilson 2007; Visser and Roelofs 2011; Kumru and Vesterlund 2010) started to explore the relationship between social status and prosociality using simple games such as the dictator and ultimatum game from experimental economics. These games allow for easy-to-interpret, incentivized, behavioral measures of different forms of prosociality. Yet, the current state of research suffers from ambiguous, inconclusive evidence regarding the empirical relationship between status differentials and prosociality. Some studies find that high-status actors are less prosocial, more egoistic, and less ethical than low-status actors (e.g. Piff et al. 2010, 2012; Visser and Roelofs 2011; Chen et al. 2013). Other studies find the reverse pattern, i.e., high-status actors are more prosocial than low-status actors (e.g. Fershtman and Gneezy 2001; Benenson et al. 2007; Liebe and Tuti´c 2010; Korndörfer et al. 2015). Only little evidence has hitherto been provided regarding the interplay of subjective social status and prosociality. Piff et al. (2010) report that subjectively high-status actors send more generous offers in the dictator game than subjectively low-status actors. Also, Piff et al. (2012) find that in comparison to subjectively low-status actors subjectively high-status actors report higher probabilities to engage in unethical behavior, report more frequently favorable attitudes toward greed, and lie more frequently. In this study, we provide evidence for both, effects of objective social status and effects of subjective social status on prosocial behavior. We collected data on over 600 ninth-graders in Germany. The students took part in a dictator game, an experimental method to measure altruistic behavior. In this game, students attending different types of school were matched in pairs. One student in each pair was given 10 Euro and asked to allocate this sum of money between herself and the other student. Objective measures of social status include type of school attended (lower, middle, higher, and private secondary school) and school grades. Additionally, we measured several aspects of the subjective status of the participants by

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using different versions of the MacArthur Scale (Adler et al. 2000) including their assessment of the status of their families, their assessment of the average pupil attending different types of secondary schools, and their anticipated own status. This allows to test the effects of subjective social status on prosocial behavior, while controlling for objective social status. Surprising on intuitive grounds, but in accordance with our theoretical model, which rests on ideas regarding selfenhancing cognitive biases, it turns out that objective and subjective social status have opposing effects on altruistic giving in the dictator game: High objective status leads to more altruistic giving. High subjective status leads to less altruistic giving. These findings corroborate our results from a previous study (Liebe et al. 2019). Besides providing additional evidence for the opposing effects of objective and subjective status, the main contribution of the present study lies in introducing and analyzing a formal model, from which these effects can be derived deductively. Before we delve into the details of the exposition, we want to stress that both of the authors picked up and learned this analytical approach to social science and in particular the science and art of constructing models from our academic mentor Thomas Voss. Not only do we owe the general analytical approach to his teachings, but also some of the very details of our model. That is, we assume that actors are endowed with inequality averse preferences as introduced by Fehr and Schmidt (1999). Thomas Voss was among the very first sociologists recognizing clearly that theories of social preferences allow to go beyond the limitations of the neoclassical tradition, without falling into the trap of ad hocism regarding assumptions about the dispositions of actors (Voss 2020). The remainder of this paper is organized as follows: Sect. 2 sketches theoretical arguments that connect status differentials with prosociality and provides an elementary model on how objective and subjective social status interact in shaping prosocial behavior. Sect. 3 describes our sample, methods, and the measurements of key variables such as objective social status, subjective social status, and altruistic giving. Sect. 4 presents our empirical findings and Sect. 5 concludes.

2

Theoretical Considerations

Although theories of prosociality abound in all behavioral sciences, surprisingly little effort has been directed at theorizing on how status differentials affect prosociality. Strikingly, the two main mechanisms described in the literature predict opposing effects of social status on prosociality.

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Status and Prosociality

First, Liebe and Tuti´c (2010) and Andreoni et al. (2017) provide a simple argument that predicts greater prosociality of high-status actors in comparison to low-status actors across the board of all interaction situations that bear upon prosociality. Their derivation of this hypothesis works via combining the widely shared idea of social preferences with standard microeconomics. In microeconomic consumption theory, the demand for a consumption good typically decreases with price (law of demand) and increases with income (income effect). Hence, if actors have a taste for prosociality, i.e., acting prosocial is a consumable good for them, greater prosociality on behalf of high-status actors can simply be explained as an income effect, because status correlates positively with control of resources (cf. Coleman 1990) and income. Note that this argument is largely independent of the specific assumptions regarding the type of social preference such as linear altruism (e.g. Taylor 1976), warm-glow giving (Andreoni 1989, 1990), or inequality aversion (Taylor 1976; Fehr and Schmidt 1999). These specific assumptions shape the patterns of prosociality in interaction situations, whereas the income effect raises its level. While the microeconomic income effect predicts a positive correlation between social status and prosociality, the second account advocated in the literature predicts a negative relationship. Piff et al. (2010, 2012) draw on social-psychological literature regarding contextualism (cf. Kluegel and Smith 1986; Kraus et al. 2009) as well as the disposition to attend to others (e.g. Keltner and Kraus 2009), and empathy (cf. Batson 2011, 2014) in deriving their argument. According to their line of argumentation low-status actors lack resources that high-status actors possess and are therefore more dependent on others. This dependency forces them to be more attentive to their social environment. Consequently, low-status actors have a predisposition to develop empathy which is an established codeterminant of prosocial behavior. In addition, the greater independence of high-status actors promotes an egocentric outlook, which results in heightened greediness and hence lower prosociality.

2.2

Biases in Subjective Status

Probably due to the typically observed high correlation between objective and subjective status and due to the findings that both generally affect health propensities in a similar manner (e.g. Adler et al. 2000), neither of the two theoretical approaches described above did problematize the question whether objective and

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subjective status do necessarily affect prosociality similarly. Liebe and Tuti´c (2010) do not even touch upon measures of subjective status. Piff et al. (2010, 2012) use both objective indicators of status such as education or income and the MacArthur Scale of subjective status in their empirical studies without modifying any of their theoretical arguments. This practice suggests that they do not expect different effects of objective and subjective status on prosociality. As argued in a previous paper (Liebe et al. 2019), this is striking against the background of psychological research on cognitive biases. According to the positive illusion perspective (cf. Greenwald 1980; Brown 1988) humans tend to adopt distorted views about themselves to maintain positive self-perception and strengthen self-esteem. Subconscious, cognitive strategies for self-enhancement involve, among other things, the self-serving bias in attribution (cf. Weiner 1985), i.e., explaining success in dispositional and failure in contextual terms, and the so-called better than average effect (Allicke 1985; Brown 2012), i.e., the welldocumented phenomenon that the average respondent regards herself as more intelligent, a better driver, more attractive, etc. than the average respondent (e.g. Dunning and Kruger 1999, Heine and Lehman 1997). Particularly, Barkow (1975) and Krebs and Denton (1997) have argued that self-enhancement is common in assessing one’s own social status, because social status is deemed as a strong factor in self-perception. Building on these insights, Liebe et al. (2019) hypothesize that subjective social status is affected by objective social status and a cognitive bias that relates to the motive on self-enhancement. Moreover, it is conjectured that actors with a strongly biased self-perception are less prone to engage in prosocial behavior than actors with a status-wise unbiased self-perception. The reasoning that leads to the second hypothesis is more speculative than the reasoning that leads to the first one, since there is no direct evidence relating self-enhancing biases in cognition to prosociality in the psychological literature. However, evidence on narcissism indirectly backs this conjecture. That is, research shows that narcissism and biased self-perception are positively correlated (e.g. John and Robinson 1994) and that narcissism and empathy (e.g. Watson and Morris 1991) as well as narcissism and prosociality (e.g. Thomaes et al. 2008) are negatively correlated. Taken together, these findings back the supposition that strongly biased actors are more egocentric and self-loving than status-wise unbiased, modest actors. All in all, the previous arguments suggest a prima facie counterintuitive conclusion regarding the interplay of objective status, subjective status, and prosociality. That is, we predict that, given statistical control for objective status, subjective

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objective

+

prosociality

status

bias

+ subjective

-

+

status

Fig. 1 Modeling the status-prosociality nexus. (source: own research)

status is negatively correlated to prosociality, even if objective status and subjective status as well as objective status and prosociality are positively correlated (see Fig. 1). To clarify this argument, in the following we present a simple model and derive this prediction formally for the case of altruistic giving in the dictator game.

2.3

Modeling Biases in Subjective Status

Assume that there are two types of agents, those with objectively high status os = h and those with objectively low status os = l. Objective social status is modeled via two real numbers in the unit interval such that h > l. Subjective social status depends on objective social status as well as on a bias for self-enhancement, b ∈ [0, 1]. Specifically, assume that subjective status ss is drawn from a convex combination of two uniform distributions (for simplicity we denote uniform distributions by intervals) as follows: ss(os, b, δ) ∼ (1 − b)[os − δ, os + δ] + b[os, os + δ] in which 0 ≤ δ ≤ min{l, 1 − h} measures the extent to which subjective social status can depart from objective status. Note that E(ss(os, 0, δ)) = os, i.e., for the

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average unbiased member of a status group, subjective status just equals objective status. Assume that each agent is endowed with inequality averse preferences as advocated by Fehr and Schmidt (F/S) (1999). It is well-known that an agent with F/S-preferences will never donate more than half of the pie to the recipient. Hence, for the problem under consideration the F/S-utility function simplifies to u = x − β(2x − 10), in which x ∈ [0, 10] denotes the amount of money the dictator keeps for herself and the pie consists of 10 monetary units. The parameter β ∈ [0, 1] measures the strength of the moral feeling of shame/guilt. The greater β the worse an agent feels when she obtains a higher material payoff than her co-player in an interaction. Drawing on arguments suggesting a positive relationship between objective social status and prosociality (cf. Liebe and Tuti´c 2010; Homans 1951), we assume that this moral feeling depends on objective social status. However, we also assume that the self-serving bias b has a negative impact on β. Specifically, assume that βh > βl and that β is drawn from a convex combination of two uniform distributions as follows: β(os, b, σ ) ∼ (1 − b)[βos − σ, βos + σ ] + b[βos , βos − σ ], in which 0 ≤ σ ≤ min{βl , 1 − βh } measures that extent to which the moral sentiment guilt β can depart from the average sentiment in the status group. A dictator with F/S-preferences either donates exactly half of the pie (x = 5) or keeps all for herself (x = 10), depending on whether β > 1/2 or β ≤ 1/2, respectively (focusing on generic cases, we ignore β = 1/2). These extreme predictions are due to the linearity of the F/S-utility function (corner solutions). They should not be a cause for concern, since this problem can easily be fixed by slightly modifying the utility function such that differences in payoffs between the players affect utilities in a non-linear manner (cf. Bolton and Ockenfels 2000). First of all, we have a look at the relationship between objective status and altruistic giving. The probability pos (b, σ ) that a member of status group os donates a positive amount equals

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pos (b, σ ) =

⎧ ⎪ ⎪ ⎪ ⎨ ⎪ ⎪ ⎪ ⎩



0,

1−b 2σ βos + σ − 1+b 1 2σ βos − 2 +

1,



1 2 , 1−b 2 ,

> βos + σ, βos ≤ 21 < βos + σ, βos − σ ≤ 21 ≤ βos , 1 2 ≤ βos − σ. 1 2

Thus, ph (b, σ ) ≥ pl (b, σ ) and moreover ph (b, σ ) > pl (b, σ ) as long as βl −σ ≤ 1 2 < βh + σ . Hence, if b and σ are similarly distributed among objectively highand low-status actors, we have Proposition 1 The higher objective status, the greater the extent of altruistic behavior. We now turn to the relationship between subjective status and altruistic giving. Speaking intuitively, since b has a positive impact on subjective status and, at the same time, b negatively affects the moral feeling of shame, there should be a negative correlation between subjective status and altruistic giving for each status group. To be more precise, assume that b can either take a high value b or a low value b . Consider some member of status group os with relatively high subjective status ss ∈ [os, os + δ]. Given b, the probability of observing an agent with subjective 1+b status ss ≥ os equals 1+b 2δ (os + δ − os) = 2 . Hence by Bayes rule, 1 1 + b >   2+b +b 2 gives the probability that this agent carries b instead of b . Now consider some member of status group os with relatively low subjective status ss ∈ [os − δ, os]. If this agent carries trait b, the probability of observing ss or a lower status equals 1−b 1−b 2δ (os + (os − δ) = 2 . By Bayes rule, 1 1 − b > 2 − b − b 2 gives the probability that this agent carries b instead of b . Hence, agents with higher subjective status than objective status are more likely to carry a high b and agents with lower subjective status than objective status are more likely to carry a low b. Since higher values of b lead to higher probabilities of altruistic giving (see Eq. 1), this establishes

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Proposition 2 For each status group: The higher subjective status, the smaller the extent of altruistic behavior. The model backs the prediction already indicated in Fig. 1, i.e., given statistical control for objective status, subjective status negatively correlates with prosociality. Note that neither our formal account nor the underlying intuition drawn from psychological research on cognition biases provides a prediction regarding the bivariate correlation between subjective status and objective status. The framework depicted in Fig. 1 suggests that subjective social status statistically influences prosociality via two channels, i.e., positively via objective status and negatively via biased selfenhancement. It depends on the strength of both effects whether a positive, negative, or no statistical correlation between subjective status and prosociality obtains. For instance, unreported Monte Carlo experiments show that, assuming a uniform distribution on the unit interval for b as well as a sample that consists of objectively highand low-status groups in equal numbers, both positive correlations and negative bivariate correlations between subjective status and altruistic giving in the dictator game are possible. Since adding more and more questionable assumptions regarding the distribution of unobservables seems unwise, we abstain from providing a prediction regarding the bivariate correlation of subjective status and prosociality. Regarding the bivariate correlation between objective social status and prosociality, our formal analysis shows that as long as b and σ are sufficiently similarly distributed among high- and low-status actors, we expect a positive relationship. Note that the model does not theorize on plausible correlations between objective status and the prevalence of cognitive biases in self-enhancement. Both preliminary findings as well as our own data (see Sect. 4.1) suggest that objectively low-status agents are more biased than subjectively high-status agents. Adding this assumption to the model would in fact not change but even strengthen our conclusions, since objective status would bivariately affect prosociality positively via two channels. In the following we put both propositions stated above to an empirical test. Also, we provide direct evidence for the existence of a cognitive bias in subjective status, i.e., by using additional information regarding the MacArthur Scale contained in our questionnaires, we demonstrate a strong better than average bias (see Sect. 4.1).

3

Sample, Methods, and Measurements

Our sample consists of 629 ninth-graders attending lower (Hauptschule) (N = 200), middle (Realschule) (N = 153), higher (Gymnasium) (N = 196), or private

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higher (Privatgymnasium) (N = 80) secondary schools in the city of Berlin and several cities in the federal state of Brandenburg, Germany. Over all types of schools, 45% of our subjects are female and 34% report that at least one of their parents was not born in Germany. With a sole exception, the proportion of females increases by type of school (i.e., Hauptschule 41%, Realschule 38%, Gymnasium 52%, and Privatgymnasium 54%) and the proportion of students with a migration background decreases by type of school (i.e., 44%, 31%, 31%, and 20%, respectively). Average age of all students is 15.3 years (sd = 0.70) and mean as well as variance of age differ only marginally between types of school. There are two reasons that make it hard to tell to what extent our sample is representative for the population of ninth-graders in the federal districts of Berlin and Brandenburg. First, there are hybrid forms of secondary schools in both districts (Berlin: integrated secondary school; Brandenburg: Gesamtschule, Oberschule), i.e., schools which allow for different types of graduation and which differentiate between type of schooling internally by classes. Due to our approach of measuring social status objectively via type of school attended, these schools were excluded from our study. Second, official statistics (cf. Lohauß et al. 2010) do not differentiate between different types of schooling (mostly lower and middle schooling, i.e., equivalent to Hauptschule and Realschule) within these hybrid schools. Consequently, we are unable to assess whether the proportions of type of schooling in our sample match the proportions in the federal states Berlin and Brandenburg. However, at least with respect to the split between higher (Gymnasium) and lower forms of secondary schooling our sample is quite close to official statistics (44% attendants of a Gymnasium or Privatgymnasium in our sample, 48% attendants of a Gymnasium or Privatgymnasium according to official statistics). Data were collected in 32 classes at 15 schools from May 2008 to March 2009. We obtained the permission to conduct this research from the respective local authorities, headmasters, and the teachers in advance. We offered all involved teachers to visit their classes again and debrief the participating students upon completing all data collecting at all schools. In addition, the involved teachers obtained written didactic materials about the results of the study enabling them to debrief their students by themselves. In each class the procedure was as follows: Each participant received an envelope including several blocks of sheets which encompassed instructions, the measurement instruments for the dictator game, and a short questionnaire. Before the participants filled in each block, the experimenter gave some instructions and participants were allowed to ask questions. Each experiment was conducted within a single lesson (i.e. lasted no longer than 45 min), respectively. If more than one

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class from a school participated in the study, we conducted the research simultaneously in all classes and ensured that no contact between the classes could take place during the experiment. Our key variables were measured as follows: Objective social status. The primary measure for objective social status is type of school attended. This clearly reflects the educational factor in socio-economic status (SES). Moreover, there is abundant evidence that in Germany attendants of different types of secondary schools have vastly divergent prospects with respect to life-time income and occupational prestige (cf. Klein 2005). Adding to that there is evidence that higher secondary schooling correlates with higher socioeconomic stratum of the student’s family (e.g. Baumert and Schümer 2001; see also Boudon 1974; Gambetta 1987; Breen and Goldthorpe 1997). A second measure of objective social status derives from grades. Subjects were asked to give their grading in mathematics, German language, English language, and physical education on the last report card (Schulzeugnis). The average grade in these four subjects will be used as a second measure of objective status. This measure is reverse coded such that higher values denote better performances in school (range: 1 to 6). Of course, type of school attended as well as grades are imperfect measures of objective status. In particular, both indicators are correlated with additional factors such as gender and cognitive abilities, some of which we cannot control in our analyses. As the final section of this paper makes clear, due to the encompassing nature of the construct social status, we advocate a multi-faceted approach in which various types of measures of objective status are used in empirical research. For the present purposes, our claim is simply that both type of school attended as well as grades are reasonable measures for objective status, in particular when it comes to minors. Subjective social status. Subjects were asked to indicate several answers with respect to the societal version of the MacArthur Scale. Specifically, the following version (translated from German) of this scale was employed (cf. Adler et al. 2000): “Think of this ladder as representing where people stand in Germany. At the top of the ladder are the people who are the best off, those who have the most money, most education, and best jobs. At the bottom are the people who are the worst off, those who have the least money, least education, and worst jobs or no job”. Each subject had to indicate her answers to the following questions on a 10point scale, which was depicted by a 10-rung ladder:

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• What do you think? Where on this ladder stands your family? • What do you think? What rung of this ladder will the average [attendant of school type] achieve in his life? [four questions one for each type of school in order of increasing objective status] • What do you think? What rung of this ladder will you achieve in your life? Each subject answered these questions in this order. Altruism. Altruism was measured by incentivized dictator game experiments. There are two players in a dictator game, the dictator and the recipient. The dictator receives an endowment (in this case: e10) and allocates shares of this endowment to himself and to the recipient. Regarding the dictator game, the specific instructions for the subjects were as follows: The experimenter told the participants that they have to make four decisions, that in these decisions they can allocate e10 between themselves and another student, that they can give any amount between e0 and e10 to the other student, and that they will get the remaining amount of the e10. It was emphasized that only the participant can make the decision and that the other student cannot influence the outcome of this decision. Moreover, participants were asked to make each of the four decisions independently from the other three decisions. It was stressed that anonymity is guaranteed. Decisions in the dictator game were incentivized. The instruction material informed the subjects about the following mechanism: After the completion of the experiment, the experimenter used a random device (drawings from a bag containing numbered billiard balls) to determine one of the four decisions each subject has made during the experiment. The subjects were told in advance that they would only receive the amount of money that they had allocated to themselves in the decision that would be determined by the random device. The subjects received their payment anonymized by using identification numbers that were randomly assigned to the survey instruments. Each subject played four dictator games as the dictator. The co-player was described as an attendant of a Hauptschule, Realschule, Gymnasium, or Privatgymnasium, respectively. Each subject played with an attendant of each type of school. To avoid order effects, we employed a fully randomized design. Every possible ordering with respect to the four school types was supplied to at least three subjects from any status group. Our measure of altruism used in this paper is simply the average donation over all four decisions. Following is an example of the exact wording of our measurement instrument (translated from German):

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“You receive 10 EUR. You can allocate these 10 EUR between you and a Realschüler. The Realschüler attends grade 9 in a Realschule in Berlin/Brandenburg. It is your decision alone. How do you decide? Of 10 Euro I keep…Euro for me and give…Euro to the Realschüler. (Please enter the amounts of money in the places marked…! Use full Euro amounts, that is, 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 EUR.)”

Please note that the recipients in the dictator games actually did not exist, i.e., our design involves deception. We employed deception for at least two reasons. First, in our field setting it is difficult to match participants from different schools since there is limited time for conducting experiments during class. Second, the presence of a projection bias is likely (cf. Loewenstein et al. 2003). Students might prefer to receive payoffs immediately. Real matching across schools would mean that payments are made after a couple of days or a week. Students might take the experimental tasks less seriously, if they get their earnings at another day. Further, disciplines in social science differ with respect to the question whether deception of subjects is ethically acceptable in experimental research or not (cf. Barrera and Simpson 2012). Our approach of using deception and debriefing subjects afterward parallels that of other researchers in the field (e.g. Piff et al. 2010, 2012) and accords to ethical guidelines in psychology (e.g. the code of ethics and conduct of the British Psychological Society).

4

Results

In this section we present our results. First, we study the relationship between objective and subjective measures of social status. This encompasses validations of our measures of objective and subjective status in terms of consistency. Second, we explore the relationship between both types of social status and altruistic giving in the dictator game.

4.1

Objective and Subjective Social Status

This section provides details on our measurements of objective and subjective status and explores their relationship. In addition, we provide evidence for the validity of both our measurement of objective status via type of school attended as well as our measurement of subjective status via the MacArthur Scale. Moreover, we provide direct evidence for the existence of a self-enhancing bias in

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subjective status, which is the basis of our prediction regarding the negative correlation between subjective status and prosociality, given statistical control for objective status. Figure 2 gives an overview on how students from different schools assess the achievable status of the average student that is attending one of the four school types. The assessments are grouped in terms of objective status groups. Hence, the first four bars depict how attendants of a Hauptschule assess achievable SES of the average attendants of all types of school. Inside each group, the bars are ordered in increasing objective status. Recall, these measurements refer to the same ladder used to measure subjective status in the MacArthur Scale. Hence, if subjects sensibly assess the achievable SES of average students attending different school types, this lends credibility to the claim that the subjects also thought of SES when indicating their subjective status. Strikingly, all status groups agree on the relative ranking of status groups. In fact, for each type of assessor it is true that all status groups were assessed significantly different. For example, even the very small difference between average

10 9 8 7 6 5 4 3 2 1 0

Hauptschule

Realschule Hauptschule Gymnasium

Gymnasium

Privatgymnasium

Realschule Privatgymnasium

Fig. 2 Average perceived status by and of status groups. (source: own research)

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achievable status of attendants of a Privatgymnasium and average achievable status of attendants of a Gymnasium in the eyes of attendants of a Privatgymnasium is highly significant (t = 2.99, two-sided p = 0.00; a Wilcoxon matched-pairs signed-rank test yields z = 3.37, p = 0.00). Note that the results of all t-tests reported in this paper are supported by Wilcoxon tests as well. Henceforth, we will refrain from reporting the latter. The consistency depicted in Fig. 2 lends validity to both our objective and subjective measures of social status. On the one hand, students obviously are aware of the fact that type of school attended is a solid predictor for achievable SES. Consequently, our strategy of measuring objective social status via type of school attended works. On the other hand, the fact that the assessments of achievable status via the MacArthur Scale mirror the distribution of de facto expectable SES shows that the anchoring of the MacArthur ladder in terms of SES succeeded. That is, when placing people on the ladder, students obviously thought of the status hierarchy in terms of SES. A second observation to take away from Fig. 2 refers to a leveling bias: Lower objective status groups tend to assign higher values across the board than higher objective status groups. Averaging the four assessments given by each objective status group gives 7.14 (Hauptschule), 6.53 (Realschule), 6.33 (Gymnasium), and 6.17 (Privatgymnasium). Two-sided t-tests reveal that all of the observed differences in average assessments are statistically significant. Though speculative, it is reasonable to argue that these differences in average assessments among objective status groups stem from cognitive pressure on objectively low-status students to assign a sufficiently high average attainable status to their own group and at the same time maintain plausible differences in attainable status among the status groups. Despite this leveling effect, there is a remarkable consensus among students attending different types of schools regarding the attainable status attached to type of school attended. We now turn to our two measures of subjective social status. As already indicated these measurements refer to the same ladder used in measuring the assessments of average attainable status described above. Figure 3 depicts the average ratings of members of each status group regarding the status of their own family and the future status they expect for themselves. Objective status measured via type of school attended and both measures of subjective status are positively related, as expected. There is only one exception to this pattern. Descriptively attendants of a Hauptschule (6.20) rate the status of their families slightly higher than attendants of a Realschule (6.16). However, this difference is merely due to chance (t = 0.18, p = 0.86). With respect to family status, the observed differences between attendants of a Realschule and a Gymnasium (t = 2.57, p = 0.01) as well as between a Privatgymnasium and a Gymnasium (t = 4.22, p = 0.00)

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10 9 8 7 6 5 4 3 2 1 0

Hauptschule

Realschule Family

Gymnasium

Privatgymnasium

Expected

Fig. 3 Average family and expected own status by status groups. (source: own research)

are in the right direction and highly statistically significant. The picture is more complicated regarding expected own status. While descriptively there is no exception to the rule—the higher objective status, the higher subjective status, in fact average assessments of attendants of a Hauptschule and attendants of Realschule (t = 1.56, p = 0.12) as well as attendants of a Gymnasium and of a Privatgymnasium (t = 1.27, p = 0.20) do not differ significantly. The observed difference in average expected status between attendants of a Realschule and attendants of a Gymnasium is statistically significant (t = 4.95, p = 0.00). Both measures of subjective social status, i.e., status of own family and expected own status, correlate positively with objective social status and are significantly different between the group of high-status actors (attendants of a Gymnasium or a Privatgymnasium) and low-status actors (attendants of a

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Hauptschule or a Realschule). To do justice to these findings, in the following we will no longer differentiate between four objective status groups, but use a binary variable called school type taking value 1 when the subjects attends a Gymnasium or Privatgymnasium and 0 otherwise. Similar to Fig. 2, 3 also reveals a bias in assessments that probably stems from the low-status actors cognitive need to maintain a positive identity (cf. Greenwald 1980; Barkow 1975). Against the background of the large literature on both the relationship between social background and schooling (cf. Baumert and Schümer 2001) as well as educational decision making (cf. Boudon 1974; Gambetta 1987; Breen and Goldthorpe 1997) and the relationship between type of school attended and achievable SES (cf. Klein 2005), the high values attendants of lower types of school assigned to their family and their expected status are highly implausible. Moreover, comparing the figures we find that the average attendant of a Hauptschule expects to outperform the average attendant of a Hauptschule in terms of SES measured on the MacArthur Scale by almost 2 points. Though smaller in magnitude the picture is similar with attendants of a Realschule. In contrast, the average attendant of Gymnasium or a Privatgymnasium does not expect to outperform the average member of their status groups at all. So, next to the leveling bias observed in Fig. 2, we have plain evidence for a better than average bias in the measurements of subjective social status via the MacArthur Scale. Both biases combined weaken the relationship between objective social status and subjective social status to a considerable degree. However, subjective SES as measured in this study is still positively and significantly related to objective social status. As indicated, next to type of school attended we obtained a second measure of objective social status, i.e., average grade in mathematics, German language, English language, and physical education. Although grades are hardly comparable among different types of school, it is interesting to note that our two measures of objective social status are monotonically correlated: High-status school type with a mean value of 4.33 and low-status school type with 3.80. This observed difference is highly significant (t = 9.08, p = 0.00). More importantly, grades and both measures of subjective status are positively correlated (grades / status of family corr = 0.18, p = 0.01 and grades / expected own status corr = 0.25, p = 0.01). Figure 2 suggests that both measures of subjective status are highly correlated. Indeed we find that expected own status and family status correlate positively and highly significantly (corr = 0.47, p = 0.01). Hence, in the following analyses we use the average of both measures as our measure for subjective social status.

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Social Status and Prosociality

Having established the soundness of our measurements of objective and subjective status, we now turn to the main questions addressed in this paper: Do status groups differ in altruistic giving? Does subjective status, as suggested by current theoretical accounts on the status-prosociality nexus, have similar effects on prosociality or will our counterintuitive, but theoretically grounded prediction obtain that, given statistical control of objective status, subjective social status correlates negatively with prosociality? In a first step we take a look at the bivariate relationship between objective status and altruistic giving in the dictator game. We observe mean altruistic donations of e1.91 (low school type) and e2.44 (high school type) and this difference is highly significant (t = 3.90, p = 0.00). Also, there is a statistically significant and positive correlation between grades and altruistic giving (corr = 0.24, p = 0.01). Thus, for both measures of objective status we obtain the following result: The higher the objective status of an actor, the more she donates in the dictator game. In a second step, we turn to the bivariate relationship between altruistic giving and our measure of social status. Since subjective status and objective status are positively correlated and objective social status positively affects altruistic giving, it is reasonable to expect a positive relationship. However, we obtain a descriptively small negative but insignificant correlation between subjective status and altruistic giving (corr = −0.02, p > 0.10). To check upon the validity of our predictions regarding the effects of objective and subjective social status on prosociality we performed a series of OLS regressions (see Fig. 4). Due to missing values in some of the control variables, we lose some observations. All of the regressions are performed over the same 600 cases. Figure 4 depicts three models, in all of which altruistic giving serves as the dependent variable. Model 1 (adjusted R 2 = 0.06) contains only both measures of objective status as explanatory variables. Model 2 (adjusted R 2 = 0.07) adds subjective status and Model 3 (adjusted R 2 = 0.08) adds gender. For convenience the estimated constants are not shown. Comparing Models 1-3, we see that the effects of both measures of objective status are stable, significant, and point in the same direction: The higher objective status, the more altruistic giving. Most importantly, Models 2 and 3 reveal that subjective social status indeed has a significant negative effect on altruism, once we control for its correlation with objective status. Finally, Model 3 replicates the well-known finding that female subjects are more generous in the dictator game (Engel 2011).

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school type

grades

subjective status

gender

-.2

0 Model 1

.2

.4 Model 2

.6

.8

Model 3

Fig. 4 Coefficients and confidence intervals (90%, 95%) for OLS regressions of altruistic giving on status and gender. (source: own research)

5

Conclusions

Drawing on the psychological literature on self-enhancing cognitive biases (Greenwald 1980; Brown 1988), we argued that net of each other objective social status and subjective social status have opposing effects on prosociality. Specifically, we claimed that objectively high-status actors behave more prosocial than objectively low-status actors and that, given statistical control for objective status, subjectively high-status actors show less prosocial behavior than subjectively low-status actors (Liebe et al. 2019). We find clear evidence in support of our hypotheses for the case of altruistic giving in the dictator game. Besides verifying the prediction that, given statistical control of objective status, subjective status correlates negatively with prosociality, we also provide direct evidence for the central mechanism driving our prediction, i.e., a self-enhancing bias in subjective status. Taking into account that all of our measures are solid—altruistic giving is measured via four dictator games and

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correlational analyses strongly suggests that both objective and subjective measures refer to socio-economic status—and that our sample is rather large and, in a sense, more telling with respect to a well-defined population (i.e. ninth-graders in Berlin/Brandenburg) than in most experimental work on the status-prosociality nexus (e.g. Ball and Eckel 1996; Ball et al. 2001; Eckel and Wilson 2007; Visser and Roelofs 2011; Kumru and Vesterlund 2010; Piff et al. 2010, 2010; Simpson et al. 2012), we feel confident in using our study as a basis for drawing conclusions regarding the body of research on the status-prosociality nexus. At the same time, replications of our findings using other measures of prosociality as well as objective and subjective social status are desirable. Our theoretical reasoning and empirical observations suggest that bivariate correlations between subjective social status and prosociality are, due to the selfenhancing bias in subjective status, hardly informative on the status-prosociality nexus. It depends, among other things, on the distribution of biases on objective status groups as well as the relative numbers of objectively high- and objectively low-status actors in the sample under consideration, whether and how subjective status correlates with prosociality. This insight qualifies the persuasiveness of the research by Piff et al. (2010, 2012) who rely to a considerable degree on bivariate correlations between subjective social status and prosociality in supporting their hypothesis that high-status actors are less prosocial than low-status actors. Note that, by no means, does our research suggest that measuring subjective social status is pointless. To the contrary, we advocate to study the effects of subjective social status, especially if measured via the MacArthur Scale, in all kinds of research, since whenever this measure has been employed, subjective social status has proven to have strong, independent, and sometimes even opposing effects to objective measures of social status. Considering the fact that objective social status bears upon a plethora of characteristics and behavioral traits in humans (see Sect. 1), subjective social status has all the potential to be a core variable for great parts of sociological and more generally social science research. However, our study clearly shows that the effects of objective social status cannot necessarily be inferred from the effects of subjective social status. Hence, we advocate to generally work with measurements of both objective social status and subjective social status. Our final comment refers to the current state of research on the relationship between objective social status and prosociality. We feel that against the background of inconclusive and contradictory evidence—some researchers find a positive relationship (e.g. Liebe and Tuti´c 2010; Simpson et al. 2012; Benenson et al. 2007; Fershtman and Gneezy 2001), other researchers find a negative relationship (e.g. Piff et al. 2010, 2012; Visser and Roelofs 2011; Chen et al.

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2013)—future empirical research on the status-prosociality nexus needs to step up in terms of methodological sophistication. We need large-scale, more representative samples, solid measures of objective and subjective social status, and incentivized, behavioral, and credible measures of prosociality. Put differently, while working with small or selective samples (e.g. Piff et al. 2010, 2012), artificially induced status differentials (e.g. Ball and Eckel 1996; Ball et al. 2001; Eckel and Wilson 2007) or poor measures of prosociality is fine for providing explorative insights and kick-starting this field of research, future efforts should be devoted to the establishment of reliable stylized facts on the relationship between social status and prosociality. From our point of view, integrating simple experimental games in large-scale, representative surveys lends itself to this task and promises to bolster our understanding of the status-prosociality nexus. Acknowledgments Funding by the German Research Foundation (LI 1730/2-1, TU 409/21, TU 409/3-1) and Swiss National Science Foundation (grant number 100017L_169286) is gratefully acknowledged.

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Andreas Tuti´c, PD Dr., Universität Leipzig, Institut für Soziologie, Beethovenstr. 15, 04107 Leipzig; [email protected]; current research interests: theoretical sociology, cognitive sociology, action theory, decision and game theory, experimental social science. Ulf Liebe, Prof. Dr., University of Warwick, Department of Sociology, Coventry, CV4 7AL; [email protected]; current research interests: discrimination, environmental behavior, experimental methods, prosociality, sustainability.

Green Homeowners? An Empirical Application of Fischel’s Homevoter Hypothesis Peter Preisendörfer Abstract

It is a no-brainer that owners of private property usually care about their personal possessions. But does this also apply to public goods? Fischel’s homevoter hypothesis argues that property owners—in this case homeowners—will exhibit more than average concern with regard to public goods, particularly local public goods in their own neighborhood such as the local crime rate, nearby schools, and environmental quality. This contribution applies Fischel’s hypothesis to the public good of residential environmental conditions. Based on survey and administrative data collected in two cities, Mainz in Germany and Zurich in Switzerland, it examines whether house and apartment owners, as compared to house and apartment renters, are more eager to participate in protest against environmental bads in their neighborhood. Empirical results show that homeowners tend to live under better residential environmental conditions than renters. In line with the homevoter hypothesis, they also tend to participate more often in public protest activities against residential environmental bads, including local noise pollution due to road traffic and aircraft noise. However, some empirical findings, e.g., the “aircraft noise challenge” for homeowners, contradict the originally formulated hypotheses. Keywords

Homeownership • Homevoter hypothesis • Noise pollution • Environmental activism • Political protest P. Preisendörfer (B) Johannes Gutenberg-Universität Mainz, Mainz, Deutschland E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_12

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Introduction

Private property is a fundamental institutional feature of modern, capitalist societies. For instance, according to the program of new institutional economics, the rights and obligations typically connected with private property help to stimulate economic efficiency, internalize negative external effects, overcome commons dilemma constellations, and contribute to a sustainable use of human and natural resources (e.g., Voss 1985, Chap. 3.2.1). This position is, however, not uncontested. It faces criticism from authors who are skeptical of capitalism and its basic institutional arrangement of private property (for a short review of these critiques, see Berger 2020). The main critical argument is that capitalist and/or neoliberal economic systems, primarily driven by the profit motive, are trapped in a vicious and paradoxical “treadmill of production” (Gould et al. 2008), leading them to exploit not only human, but also natural resources. Against the backdrop of this long-standing debate on the advantages and disadvantages of the institution of private property and property rights, the subject matter of this contribution is comparatively focused and specific. The research question is whether private property is not only helpful for a sustainable and proper handling of private goods, but—contrary to critiques of capitalism—also of public goods, particularly local public goods. In dealing with this question, the paper considers Fischel’s (2001) so-called homevoter hypothesis stating that homeowners—guided by their concern about the value of their private property— engage more often in the production of local public goods than renters do.1 As an empirical example of local public goods, this contribution focuses on residential environmental conditions. This, in turn, allows for the more specific research question of whether homeowners are more eager than renters to participate in collective protest activities against environmental bads such as road traffic and aircraft noise in their neighborhood. Starting with a more detailed look at the homevoter hypothesis, the paper begins by outlining the theoretical and empirical background (Sect. 2). This section introduces the homevoter hypothesis, discusses its broader theoretical underpinnings, and formulates a set of specific hypotheses for the empirical analyses. The subsequent section describes the empirical data and the main variables (Sect. 3). The data stem from a study in two cities, Mainz in Germany and Zurich in Switzerland. In addition to the opportunity of comparing two cities, a special

1 If

not explicitly stated otherwise, the term “homeowners” is used as a shorthand for house and apartment owners; similarly, “renters” refers to both house and apartment renters.

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feature of this study is that it includes not only survey data, but also administrative data pertaining to objectively measured local environmental conditions in the form of actual exposure to road traffic and aircraft noise.2 Next, the empirical results will be presented in three steps (Sect. 4): The first step is an exploration of the extent to which homeowners generally live under more favorable residential environmental conditions than renters. Step two then examines the hypothesis that—given certain objective environmental disamenities (residential road traffic and aircraft noise)—homeowners are subjectively more annoyed by such environmental conditions than renters. Finally, step three gets to the heart of the issue by investigating the genuine prediction of the homevoter hypothesis that homeowners engage more often than renters in protest activities against environmental bads in their neighborhood. The contribution concludes with a summary of the findings, limitations of the study, and some remarks on the more general relevance of the homevoter perspective (Sect. 5).

2

Theoretical and Empirical Background

2.1

The Homevoter Hypothesis

In his book “The Homevoter Hypothesis” William Fischel (2001) proposes and elaborates on the idea that homeowners, as compared to renters, take especial care of public goods in their neighborhood because this capitalizes on the value of their private homes. He coined the term “homevoters” to indicate that homeowners vote for all kinds of local policies and projects that preserve the real-estate value of their property. They support political measures which tend to increase the value of their property and oppose public activities with the potential of endangering it. Although, at base, the assumed crucial motive of homeowners is elementary monetary self-interest, i.e., the asset value of their home, Fischel argues that this self-interest spills over into the collective welfare of the local neighborhood and community. Homeowners show “watchfulness and activism against community decline” (p. 75). They dislike an increasing crime rate in their residential area, they are in favor of superior schools and appropriate public services, they opt for nearby green spaces for recreation, and they are willing to pay higher property 2 To include aircraft noise as “environmental bad” makes sense because both Mainz and Zurich

are located near international airports. Mainz (with about 220,000 inhabitants) is affected by Frankfurt Airport, which is about 25 km east of the city. Zurich (with about 430,000 inhabitants the biggest city of Switzerland) is affected by Zurich Airport, which is located about 10 km north of the city.

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taxes if it contributes to the reputation of their neighborhood as “a good place to live”, thus, ultimately adding to their private property’s value. In fact, this concept of a spillover-effect of self-interest into collective welfare is far from new, as it can be qualified as an unintended-consequences explanation and as a variant of Adam Smith’s famous “invisible hand” mechanism. In expounding upon his hypothesis, Fischel focuses on the US context. In a first step he demonstrates empirically that for most US homeowners their home is the single most important asset they own. Consequently, they become painfully aware of any public event or project with the potential to affect or even impinge upon their crucial economic stake. Further, the author argues that homeowners, in the political arena of a typical American municipality, are the dominant players, making their interests of paramount political importance. Thus, political leaders in local government, whom homeowners voted for, cannot afford to neglect the interests of their principle “shareholders”—and it should not be overlooked that they are very often homeowners themselves. Based on survey data (gathered in other studies), case studies, and many illustrative examples, Fischel makes the case for his conviction that homeowners are “more conscientious citizens” (p. 12), because they “are more likely to participate in school board meetings, vote in local elections, and otherwise participate in community affairs” (p. 12). In his book, also aimed at a broader, non-scientific audience, he demonstrates the validity of his hypothesis in fields such as property tax regulation (which is important for financing local public goods), zoning and other land-use controls (which affect supply and demand for land and, thus, property prices), school financing (which is important for better schools and the overall reputation of a residential district), landfill locations (which influence housing and rent prices), and environmental protection. It is this final field (see mainly Chap. “The Race to the Top in Environmental Protection” in Fischel’s book) which finds its application in the present paper. With regard to environmental protection in municipalities, when sizable fractions of owner-occupied family houses are present, Fischel assumes that there is more of a race to the top than to the bottom. Collective investment in the improvement of local environmental quality may be expensive and require higher property taxes, but the chances of simultaneously increasing house prices and rents, which more than offset the additional tax burden, are very high. Numerous neighborhood upgrading projects and dynamic gentrification processes in the US (and elsewhere) confirm this prediction. According to Fischel, homeowners exhibit “hypersensitivity to local environmental risk” (p. 205) and are “eager to participate in local environmental decisions” (p. 183). In this regard, there is an important difference between homeowners and renters. Whereas renters may

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pay for the improvement of environmental conditions in the form of higher rents or—conversely—benefit from worsening conditions via lower rents, there is no such compensation for homeowners. Ignoring potential changes of property tax, homeowners simply benefit from improved environmental conditions or suffer disadvantages when conditions deteriorate. Dehring et al. (2008) distinguish between a consumption and a wealth effect of changing environmental conditions. The consumption effect denotes the direct utility of environmental goods in terms of quality of life. The wealth effect encompasses the monetary effects of (changing) environmental conditions in terms of capitalization. A decline in environmental conditions will have a negative consumption effect both for renters and homeowners; however, the wealth effect tends to be positive for renters manifesting in lower rents, but negative for homeowners due to lower housing prices and/or less rent revenue. Thus, consumption and wealth effects function for renters in opposite directions (compensation mechanism), while they are unidirectional for homeowners—providing a core argument in favor of the Fischel hypothesis. As already mentioned, Fischel himself mainly presents case studies and illustrative material in support of his hypothesis. Subsequent researchers following his ideas have used quantitative data and applied more stringent empirical test procedures (e.g., Brunner and Sonstelie 2003; Dehring et al. 2008; Ahlfeldt 2011; Ahlfeldt and Maennig 2011, 2015). Within urban economics, gentrification processes, resistance to urban renewal and investment projects, and spatial displacement effects of socially disadvantaged groups are prominent research topics (e.g., Wolch et al. 2014; the “Journal of Urban Economics” and “Landscape and Urban Planning” are the most important publication sources for this research). Furthermore, research under the heading of environmental justice regularly deals with the socially unequal distribution of environmental bads and reactions taking on the form of political resistance and protest (Mohai et al. 2009; Walker 2012). Since the topic and context of Ahlfeldt and Maenning’s (2011, 2015) study on airport effects and aircraft noise in the metropolitan area of Berlin are similar to those of the present study, it is worth taking a more detailed look at it: At the time of the German reunification in 1990, Berlin had three relatively small airports, Tegel and Tempelhof, both in Berlin-West, and Schoenefeld in BerlinEast. In July 1996 the Mayor of Berlin, the Prime Minister of Brandenburg, and the Federal Minister for Transport agreed upon a new aviation concept for the metropolitan area of Berlin. This concept established that Schoenefeld would be redeveloped and enlarged to a representative hub airport (Berlin-Brandenburg International Airport BER), Tempelhof would stop operation in October 2008, and Tegel would be closed once the new hub airport had successfully commenced

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operation. Getting to a consensual agreement on the concept (Konsensbeschluss) was a long and arduous political process. However, when Tempelhof’s end date neared, opponents of its closure initiated in April 2008 a public referendum pushing for the airport’s continued operation. This referendum’s success (yes vote) would have actually been akin to a rejection of the 1996 concept, whereas its failure (no vote) would have signaled compliance with it. Although a majority of yes votes was attained in the referendum, it fell short of the necessary 25% quorum of all citizens of Berlin, thus, not impacting the 1996 consensus decision. Ahlfeldt and Maenning use these aviation plans and events in Berlin as a kind of natural experiment to examine the predicted capitalization effects on land and housing property on the one hand, and the Fischel hypothesis on the other hand. For Tempelhof and Tegel the capitalization effects predict rising property prices due to the announced airport closures and the concomitant reduction of aircraft noise and other aircraft-related environmental bads, whereas the wider area of Schoenefeld should see decreasing property prices owing to the new hub airport and the expected rise in environmental bads. Based on empirical analyses of all the approximately 75,000 transactions of built-up land parcels in Berlin between 1990 and 2012, the authors were essentially able to confirm these predictions. The price effects were more pronounced in Tempelhof (the airport was closed at the end of 2008) than in Tegel (the airport was still in operation in 2012) and in Schoenefeld (the new airport was not yet in operation). Furthermore, in the direct vicinity of the terminal buildings of the new hub airport, the prices of land parcels did not go down, but increased instead. To test the homevoter hypothesis, Ahlfeldt and Maenning analyze the voting results of the 2008 Tempelhof referendum, looking at the compliance rates (implicit agreement with the 1996 consensus concept, i.e., no votes in the referendum) in all 1201 voting precincts of Berlin. Also these analyses basically fit with theoretical expectations. After controlling for (a restricted set of) other influence factors, the compliance rates regarding the consensual agreement were clearly above average in precincts near Tempelhof and Tegel, and below average in precincts near Schoenefeld. Nevertheless, the results should be handled with care because voting outcomes and all the other data do not stem from the level of individual citizens, but from the aggregate level of voting precincts. The present study will use individual-level data.3 3 To provide an update to the Berlin aviation story, there was another referendum in September

2017, now making the case for a continued operation of Tegel. This referendum was also able to win over a majority of voters, and (because it was connected with a general federal election in Germany) it actually fulfilled the criterion of the quorum of 25% of all citizens of Berlin. However, the referendum was not legally binding and, thus, the Senate of Berlin decided

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251

Broader Theoretical Underpinnings of the Hypothesis

Concerning the dependent variable of his hypothesis, Fischel remains relatively vague and open. Evidently, as many of the empirical examples in his book show, he does not only mean the voting behavior of homeowners in local political elections, but their participation in local political affairs in general. Such participation, manifested in actual behavior (and not just in attitudinal support of political measures and projects), can take on a wide range of forms, occurring within or outside established political channels and finding more or less active expression in the manner of its commitment. The explanation of political participation, political activism (including environmental activism which is important here) and political protest is an important research field within the political and social sciences, and there has been a great deal of both theoretical and empirical research on this topic (for overviews, Klandermans 2004; Opp 2009; Quaranta 2017). Focused on a narrow economic and management perspective, Fischel almost completely ignores this research—a clear shortcoming of his approach. The political participation theory that Fischel more or less implicitly has in mind can be found in the relevant literature under the heading self-interest model and often also—but with a strong normative bias—under the label NIMBY model (not in my backyard, e.g., Rohrschneider 1988; van der Horst 2007; Devine-Wright 2013; Johnson and Scicchitano 2012). This model assumes selfish individual actors who calculate the costs and benefits of their behavior and who engage only, or at least primarily, in political affairs when the issues at hand impinge directly upon their personal life circumstances. Changing asset values of personal property and improving or worsening residential environmental conditions (such as residential road traffic or aircraft noise) clearly belong to the issues selfish actors would care about. Indeed, there are many everyday examples illustrating the application of the self-interest principle, but the question remains whether this principle holds as a general regularity. Research on political participation shows that it is a long road getting from objective opportunities or risks to individual participation in political activities, be it in favor or against certain issues. The opportunities or risks have to be perceived, framed, and evaluated as promising or threatening and, even if subjective representations have been formed, political engagement is just one of

in June 2018 that any further operating of Tegel was not a viable option. Since November 2020 Tegel Airport is actually closed, whereas Berlin-Brandenburg International Airport BER started operation in October 2020.

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several behavioral strategies toward subjectively promising or threatening conditions. Threats and discontent with regard to residential environmental conditions, for example, may lead to people taking measures with the aim of sheltering their houses and apartments (noise insulation), or they may lead to “exit” decisions, that is, moving out of the residential area. Hirschman’s (1970) exit, voice, and loyalty theory argues that voice (i.e., active personal engagement in activities in favor or against something) is more likely when exit costs are high and/or loyalty is high. That homeowners have higher exit costs than renters seems to be straightforward. And, it is also plausible that families or singles who own a house or an apartment in a neighborhood would be more loyal and emotionally attached to their place of residence than renters. At the least, these suggestions serve to remind us that— besides the Fischel motive (the asset value of the personal property)—there are alternative explanations for a positive relationship between homeownership and political participation. A further problem not sufficiently accounted for by Fischel is the fact that his hypothesis pertains to the production of public goods and to a collective action problem. The public good character means that those who do not contribute to the good (here: improvement of the local environment) will also benefit from it because it is not possible and/or feasible to exclude them from the consumption of that good when it is provided. The collective action problem implies that there is an incentive for individual free-riding behavior. In this sense, strictly rational actors will not participate in protest, but instead follow the logic of freeriding (Olson 1965). However, there are theoretical approaches within political participation and protest research, most prominently the collective-interest model (Finkel et al. 1989; Opp 2009, pp. 108–118), suggesting more open versions of the rational actor by leaning toward a broader conception of rational behavior. Such broader conceptions allow for selective costs and benefits (including those of a social or moral nature) and also often include subjective estimates of projected outcomes (such as whether the production of the public good will finally be successful or whether one’s own contribution will make a difference). In general, one should be aware that political participation and protest are dependent on a broad array of influences and that homeowners’ concern about their property is just one of many potentially significant factors. In a review of theoretical and empirical research on political participation, Klandermans (2004) develops a socio-psychological framework of participation in protest activities. In this framework he distinguishes between supply- and demand-side influences on protest participation. Here, supply factors refer to existing social and political opportunities for protest. If, for instance, infrastructure for protest groups is already available, it is easier for individual actors to convert dissatisfaction into

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actual protest behavior. On the demand side, Klandermans identifies three fundamental motives which “account for most of the demand for collective action in a society” (p. 361): “instrumentality” (i.e., people may want to change their circumstances), “ideology” (i.e., they may want to express and affirm their political convictions), and “identity” (i.e., they may want to act as members of their group). The motive guiding Fischel’s homeowners clearly belongs to the instrumentality motivation. The ideology component pertains to general values and basic political orientations such as post-materialism, environmental concern, and the traditional left- versus right-wing political orientation. The third of Klandermans’ factors, “identity”, primarily comprises group identification on the one hand and local identification on the other. The main conclusion from this “tour d’horizon” through the research field on political participation and protest for the homevoter hypothesis is the following: If there is a positive association between homeownership and political participation, it may be for other reasons than those proposed by Fischel. Therefore, any meaningful test or application of the Fischel hypothesis should ensure that competing explanations are taken into account—at the least by statistically controlling for other well-known influence factors on political participation and protest.

2.3

Hypotheses for the Empirical Analyses

The core variables of the analyses in the subsequent sections will be homeownership, objective and subjectively evaluated residential environmental bads, and individual participation in various protest activities against environmental bads. More generally, environmental bads describe residential environmental conditions, which also include environmental goods such as private gardens and public green spaces in the neighborhood. Such environmental goods should be included to get a full picture of the residential surroundings and to account for them properly. Concerning the environmental bads, especial focus will be on residential road traffic and aircraft noise pollution. For these two noise sources, the data used here contain both objective and subjectively perceived measures at the individual level and, therefore, offer the potential of jointly evaluating objective and subjective noise parameters. Furthermore, noise pollution seems to be a good summary measure for residential environmental disamenities in general, because it is perceived directly and usually comes in tow with other local threats such as air pollution or a lack of recreational green spaces. Approaching the question of homeownership and protest against local environmental threats, it seems reasonable to begin with looking at the point of departure,

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i.e., the residential environmental conditions under which homeowners and renters live. Since homeownership typically coincides with a higher level of wealth and monetary resources, the hypothesis is that homeowners, as compared to renters, live under more favorable environmental conditions. This means they should be confronted with less unfavorable environmental bads (road traffic and aircraft noise) and more favorable environmental goods (green neighborhood). According to studies in noise research (e.g., Marquis-Favre et al. 2005; Hellbrück et al. 2008) showing that objective noise exposure is the most important predictor of subjective noise annoyance, the privileged position of homeowners should show up both with regard to objective as well as subjective environmental quality. The hypothesis that homeowners live under better environmental conditions is in line with the environmental inequality hypothesis in environmental justice research, which states that privileged social groups are better off with respect to their residential environmental conditions (e.g., Mohai et al. 2009; Walker 2012; Preisendörfer 2014). If this social privilege hypothesis holds true, homeowners are in a position that basically gives them less reason to protest against existing environmental bads in their neighborhood. Although, as just mentioned, objective noise exposure is the strongest predictor of subjective noise annoyance, noise research also makes clear that several other factors influence subjectively perceived and evaluated noise conditions (Guski 1999; Klaeboe et al. 2004; Miedema 2007). Depending on attributes of the noise, subjective predispositions toward the noise (source), and individual characteristics, people evaluate the same objective noise differently, i.e., as more or less subjectively annoying. Here, Fischel’s asserted “hypersensitivity” of homeowners toward local environmental risks (see Sect. 2.1 above) comes into play. Two related propositions will be tested in the empirical analyses: First, keeping objective noise level constant, homeownership shows a positive effect on subjective noise annoyance, i.e., homeowners express more subjective noise annoyance about a given level of objective noise than renters; second, when homeowners are actually confronted with a high level of objective noise, there is an additional positive effect on their subjective noise annoyance, i.e., homeowners react in an especially sensitive and annoyed manner to high objective noise levels. In the language of statistical modeling, the first part of this hypersensitivity hypothesis leads to the expectation of a positive main effect of homeownership on noise annoyance after controlling for objective noise, the second part to the expectation of an additional positive interaction effect of homeownership and objective noise on noise annoyance. The hypersensitivity issue notwithstanding, the core of Fischel’s homevoter hypothesis is that homeowners engage more actively in local public affairs than

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renters (thus, contributing to the production of local public goods). Applied to the topic of protest against local environmental disamenities, this leads to the protest hypothesis that homeowners participate more often in protest activities against residential environmental bads. It can be expected that there is a positive relationship between homeownership and protest participation on the level of simple bivariate analyses because homeowners have higher local stakes and also have more protest resources available. However, the conjecture that homeowners already live under more favorable environmental conditions than renters (which awaits empirical testing, see above) contradicts a positive relationship on the bivariate level. Ultimately, the crucial question is whether the presumed positive association also holds in multivariate analyses. Confirming Fischel’s hypothesis in the context of the present study would mean that homeownership positively affects protest participation—even after controlling for differences both in existing residential environmental conditions (environmental goods and bads) and in other prominent influence factors on environmental and political activism (environmental concern, left-wing political orientation, etc.).

3

Data and Variables

3.1

Empirical Data

The main empirical data for the following analyses stem from surveys in Mainz and Zurich. Data were gathered in a joint project supported by the German Research Foundation (DFG) and the Swiss National Science Foundation (SNSF). The project’s title was “Environmental Justice—Social Distribution, Justice Evaluations and Acceptance Levels of Unfavorable Local Environmental Conditions.” The surveys in the two cities were strictly comparable in terms of both research design (sampling procedure, etc.) and question program. They were carried out as postal questionnaires and were conducted between October 2016 and March 2017 (for methodological details, see Bruderer Enzler et al. 2019). The surveys were based on random samples of the adult population (18- to 70-year-old) in Mainz and Zurich. The addresses of the random samples, specifically named persons, came from the official population registers managed and maintained by the city administrations (Einwohnermeldeamt in Mainz, Einwohnerregister in Zurich). The samples included not only people of German or Swiss nationality, but also foreigners living in the cities. Because we had the exact address of our respondents, we were additionally able to locate the spatial coordinates of their places of residence using a geographic

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information system (GIS). The spatial coordinates enabled us to match objective, i.e., administrative noise data with the survey data (see Sect. 3.2). Subjects selected for participation in the study were approached following Dillman’s (2007) tailored design method; that is, they received an initial invitation to participate in the survey (cover letter and questionnaire), a postcard one week later, a second invitation after three weeks (cover letter and questionnaire), and a third invitation after seven weeks (again, cover letter and questionnaire).4 Field work was organized by the University of Mainz and the ETH Zurich, which was readily apparent to the respondents via the cover letter and the questionnaire. It is important to note that the surveys were not introduced as an environmental survey, but as a survey called “Housing and Living in [City].” In Mainz, the postal survey began with 4000 addresses leading ultimately to 1801 completed questionnaires. Ignoring diverse causes for nonresponse, the raw response rate is 45%. The corresponding figures for Zurich are: 4000 starting addresses, 1931 successfully realized questionnaires, and a response rate of 48%. Based on diverse plausibility and consistency checks, some cases were excluded from the analyses leaving 1700 respondents in Mainz and 1871 in Zurich.

3.2

Variables and Their Operationalization

The analyses hinge upon the following variables: homeownership, residential environmental bads (noise variables), residential environmental goods (green neighborhood variables), participation in environmental protest activities, and a couple of control variables. Homeownership: Whereas homeownership is a simple 0/1-variable in Mainz (0 = renters, 1 = homeowners), it is slightly more complex in Zurich. In addition to renters and homeowners, there is a sizable group in between consisting of citizens living in cooperative dwellings (Genossenschaftswohnungen). These dwellings are owned by non-profit cooperatives; the current renters have to be a member of their cooperative and—for the duration of their membership—they also have to deposit some money in the cooperative, although this is usually a relatively small amount. Thus, these “coop-renters” (this label will be used from this point onward) are basically renters, but with tendencies verging toward ownership. Having such an in-between group may present a useful challenge to the homevoter hypothesis; therefore, the coop-renters will be treated as a separate group and 4 For practical reasons, the Dillman procedure was slightly modified in the Zurich survey (see

Bruderer Enzler et al. 2019, Chap. 4).

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not conflated with the normal renter group. In Mainz, 38.5% of respondents are homeowners, 61.5% renters; Zurich has 10.5% homeowners, 11.8% coop-renters, and 77.7% renters.5 Residential environmental bads: As explained in Sect. 2.3, objective and subjective noise measures due to road traffic and aircraft noise will be used as proxies for local environmental bads. The information on “objective” road traffic and aircraft noise was not obtained in the survey, but from external sources, namely, official or organizational noise registers in Mainz and Zurich. Thus, the term “objective” here means simply that the information is based on such external administrative sources. In Sect. 3.1 it was mentioned that the addresses of the survey respondents denoted their exact place of residence. This enabled us to determine the spatial coordinates for these locations using a geographic information system (GIS). Based on the spatial coordinates, very fine-grained statistical data on local road traffic and aircraft noise were merged with the survey data. In this context, fine-grained means that these data pertain directly on the building where the respondents lived. To capture road traffic noise and aircraft noise, weighted average 24-h noise levels Lden (level during the day, evening, and night) were used. These were measured in decibels dB and the usual penalties for evening and nighttime noise of 5 dB and 10 dB were applied respectively (see Brink et al. 2018). In Mainz, the mean values of objective road traffic and aircraft noise for the survey respondents are 52.9 dB and 47.6 dB, in Zurich 53.4 dB and 45.3 dB. So, levels of road traffic noise are similar in both cities, whereas aircraft noise is significantly higher in Mainz than in Zurich. The World Health Organization WHO (2018) strongly recommends that the average road traffic noise level Lden should be lower than 53 dB and the average aircraft noise level Lden lower than 45 dB. With respect to the mean levels of road traffic noise, the two cities are near the WHO limit. With respect to aircraft noise, Mainz clearly surpasses the WHO limit, whereas Zurich is again near the limit. On a scale ranging from 0 (not annoyed at all) to 10 (highly annoyed), the survey asked respondents how annoyed they felt in their residence by various sources of noise (including road traffic and aircraft noise) under four different conditions: during the day when the residence’s windows were open, during the day when the windows were closed, during the night when the windows were open, and during the night when the windows were closed. Adding up these items on the four conditions and dividing the sum by four yields indices of subjective road traffic and subjective aircraft noise with a range of 0 to 10. In Mainz, the 5 Generally,

the homeownership rate in Switzerland is lower than in Germany (38 vs. 53% at the national level), and in urban areas it is usually lower than in rural areas.

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mean values of the subjective road traffic and aircraft noise annoyance indices are 2.40 and 3.03, in Zurich 2.45 and 1.04. Thus, analogous to objective noise exposure, subjective annoyance due to road traffic noise is similar in the two cities, but aircraft noise annoyance is higher in Mainz than in Zurich. Residential environmental goods: To measure the level of environmental goods in the residential area, three variables are used. First, the information whether a private garden belongs directly to the house where the respondents live. This holds for 45.0% in Mainz, and 31.7% in Zurich. Second, respondents were asked whether they can see “no green”, “some green” or “a lot of green” when they look out of the windows of their dwelling. Of the Mainz respondents, 43.3% see a lot of green, of the Zurich respondents 46.8%. Third, on a scale of 0 (not satisfied at all) to 10 (very satisfied) respondents could answer how satisfied they were with the availability of parks and green spaces in their neighborhood. The mean of this variable is 6.93 in Mainz, and 7.95 in Zurich. Whereas the first two variables were intended to measure more on an objective level, the third variable is clearly a subjective evaluation. Participation in environmental protest activities: Six separate 0/1-coded protest behaviors serve as indicators of Fischel’s eagerness to participate in local environmental decisions. The respondents were asked whether they have (1) ever participated in a protest rally against residential noise, (2) ever complained about residential noise to a state agency, (3) signed an environmental petition in the last five years, (4) complained to a state agency or a political representative in the last five years, (5) participated in an environmental protest rally in the last five years, (6) engaged in a local environmental action group in the last five years. Descriptive results of these protest items can be found in Table 3 further below (Sect. 4.3). They show that, with the exception of signing an environmental petition, the prevalence of protest activities is higher in Mainz than in Zurich. For the multivariate analyses, an additive protest index was computed counting the sum of undertaken protest activities. The means of this index are 0.71 in Mainz, and 0.60 in Zurich. Control variables: Gender (0 = male, 1 = female), age in years, education (0 = low, 1 = high), environmental concern (index of six items, based on the environmental concern scale of Diekmann and Preisendörfer 2003, each item could be answered on a scale ranging from 1 = do not agree at all to 5 = fully agree), left-wing political orientation (scale ranging from 0 = right to 10 = left), and city attachment (scale ranging from 1 = not at all attached to 5 = very strong

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attached) are included as control variables in the multivariate models of the next section.

4

Empirical Results

4.1

Residential Environmental Living Conditions of Renters and Homeowners

In relation to the environmental bads and goods specified in Sect. 3.2, Table 1 shows whether and to what extent renters and homeowner live under different environmental conditions. As expected according to the social privilege hypothesis, homeowners in Mainz and Zurich are exposed to a significantly lower level of objective residential road traffic noise than renters. This also spills over to a lower level of subjective annoyance due to road traffic noise. Furthermore, homeowners have more opportunities to enjoy residential environmental goods; very often they have their own garden that is directly adjacent to their house, can see “a lot of green” when looking out of the windows of their dwelling, and are more satisfied with nearby parks and green spaces. A remarkable exception in both cities, however, is aircraft noise. In terms of objective exposure, there are no significant differences between renters, cooprenters, and homeowners in Zurich, whereas in Mainz—contrary to the social privilege hypothesis—homeowners have to deal with higher objective aircraft noise. Although the means of renters and owners in Mainz do not differ greatly, the difference is statistically significant. The reason is that a sizable group of homeowners in Mainz has no or only a low level of aircraft noise, but another group—living in certain relatively wealthy city districts—has a high level. Compared to homeowners, the majority of renters in Mainz is exposed to an intermediate level of aircraft noise. In terms of subjective aircraft noise, this pattern translates into clearly higher annoyance values in Mainz, and, as a tendency, also in Zurich. Nevertheless, for Zurich, in contrast to Mainz, it should be noted that the percentages of those feeling highly annoyed by aircraft noise are very low. The offense homeowners feel in regard to aircraft noise also tends to show up in their critical answers to the additional survey question of whether local authorities do enough to limit citizens’ exposure to aircraft noise. In Mainz, 47.2% of renters and 54.2% of homeowners find the engagement of local authorities to be insufficient (“don’t do enough at all” and “don’t do enough” on a scale of 1–5). The corresponding percentages in Zurich are 18.2% for renters, 23.9% for coop-renters, and 33.7% for homeowners (not shown in Table 1).

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Table 1 Residential environmental bads and goods Mainz Renters (n = 1020)

Zurich Owners (n = 640)

Renters (n = 1430)

Coop-Renters (n = 210)

Owners (n = 190)

51.0* 14.4*

53.9 23.4

52.6 15.7

51.4* 11.4*

47.9* 39.0*

45.4 10.4

45.9 17.1

45.1 11.3

1.93* 11.4*

2.55 17.3

2.41 14.0

1.84* 9.9*

2.46 18.3

3.95* 34.2*

0.94 4.1

1.40 6.7

1.40* 5.2

25.4

75.6*

26.0

33.3

68.2*

57.6*

42.0

60.6

64.9*

8.23 73.9

8.49* 78.2*

Objective road traffic noise Mean in dB % 60+ dB

54.0 27.0

Objective aircraft noise Mean in dB % 50+ dB

47.5 24.4

Subjective road traffic noise Mean (0–10) % highly annoyed (8–10)

2.72 19.7

Subjective aircraft noise Mean (0–10) % highly annoyed (8–10) House with garden %

Green outlook from windows %

34.2

Satisfaction with nearby parks and green spaces Mean (0–10) % highly satisfied (8–10)

6.85 47.6

7.07 53.3*

7.83 65.4

Notes Due to missing values, the case numbers show some variation between the items. * differences between groups in the city are significant at 5% level.

Finally, the aircraft noise “anomaly” may also be the reason why a subjective summary measure of residential environmental conditions yields no strong differences between renters and homeowners, neither in Mainz nor in Zurich. Asked on a scale of 0–10, whether they are satisfied with the environmental quality in their neighborhood, the percentages of those highly satisfied (8–10 on the scale) are: 29.9% of renters and 36.6% of homeowners in Mainz; 52.9% of renters, 51.6% of coop-renters, and 54.1% of homeowners in Zurich (not shown in Table 1).

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261

Objective Noise Exposure and Homeownership as Influence Factors on Subjective Noise Annoyance

The aircraft noise pattern showing stronger homeownership differences on the level of subjective noise annoyance as compared to objective noise exposure is a first (but only indirect) hint in the direction of the hypersensitivity hypothesis. To test this hypothesis appropriately, Table 2 presents the results of four separate OLS-regressions, using subjective noise as the dependent variable and thereby differentiating between road traffic and aircraft noise on the one hand and Mainz and Zurich on the other. Independent variables are the objective exposure to road traffic or aircraft noise, homeownership, and interaction effects of objective noise and homeownership. With respect to aircraft noise, both components of the hypersensitivity hypothesis find confirmation in Mainz, i.e., holding objective aircraft noise constant there is a significant positive main effect of homeownership and a significant positive

Table 2 Effects of objective noise exposure and homeownership on subjective noise annoyance (OLS regressions) Subjective road traffic noise annoyance

Subjective aircraft noise annoyance

Mainz

Zurich

Mainz

Zurich

Objective noise exposure (ONE)

0.11* (14.63)

0.18* (21.97)

0.38* (14.57)

0.20* (16.40)

Homeowner (0 = no, 1 = yes)

−0.45* (4.06)

−0.34* (1.98)

1.02* (6.57)

0.49* (3.79)

Coop-Renter (0 = no, 1 = yes) ONE*Homeowner

0.06 (0.38) −0.01 (0.43)

−0.03 (1.02)

0.32* (2.61) 0.13* (3.59)

−0.02 (0.72)

ONE*Coop-Renter

0.02 (0.54) 0.03 (1.06)

Adj. R2

0.18

0.24

0.30

0.18

No. of cases

1654

1832

1655

1825

Notes When subjective road traffic noise (range 0–10) is the dependent variable, ONE means objective exposure to road traffic noise (range 35–80 dB). When subjective aircraft noise (range 0–10) is the dependent variable, ONE means objective exposure to aircraft noise (range 40–55 dB). Unstandardized regression coefficients. t-values in parentheses. *significant at 5% level.

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interaction effect on subjective aircraft noise annoyance. The predicted positive main effects of homeownership (homeowners and coop-renters, as compared to renters) are also present in Zurich, but the interaction effects are a long way off from being significant. With respect to road traffic noise, however, the picture in Mainz as well as in Zurich is completely different and fully at odds with the hypersensitivity hypothesis. When renters and homeowners are exposed to the same objective road traffic noise, homeowners articulate not more, but significantly less subjective noise annoyance. This finding clearly contradicts the original expectation. Nevertheless, both logically and post-hoc (i.e., after having seen the results), there are at least two reasons that can probably explain this unexpected finding. First, homeowners live in houses and apartments larger than renters. On average, their residences both span more square meters and have more rooms. This, in turn, means that if there is outside residential road traffic noise, homeowners have greater opportunities to arrange their domestic lives in a way to reduce their noise exposure time. Second, in privately owned homes, housing standards and quality are typically higher than in rented accommodation. This also pertains to window quality. Asked—with respect to noise insulation—whether their residence has bad or good windows (scale of 1–5), 48.6% of renters, but 71.2% of owners in Mainz judge their windows to be good or very good. The corresponding figures for the three ownership groups in Zurich are 61.6, 79.8, and 85.1%. Of course, high quality windows also shield against aircraft noise. But aircraft noise is generally more difficult to absorb and, unlike in the case of road traffic noise, there are no “backyard escape options.”

4.3

Participation in Protest Activities Against Environmental Disamenities

This section examines whether—in line with the protest hypothesis inspired by Fischel’s more general homevoter hypothesis—homeownership correlates with protest activities on a bivariate as well as on a multivariate level. Presenting the results of both levels may be helpful in detecting potential spurious correlations. Table 3 summarizes the bivariate analyses for the six protest behaviors separately. With regard to Mainz, it can be seen in this table that homeowners have higher participation rates than renters for all six protest items. For four items, the difference between renters and homeowners is significant, for two it is not. Looking at Zurich and disregarding the in-between group of coop-renters, homeowners also exhibit higher participation rates for all six protest items. Three differences are

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Table 3 Participation in protest activities (%) Mainz

Zurich

Renters (n = 1020)

Owners (n = 640)

Renters (n = 1430)

Coop-Renters (n = 210)

Owners (n = 190)

Noise protest rally

5.4

15.2*

2.0

2.8

5.4*

Noise complaint

9.2

16.0*

9.5

11.0

11.2

Environmental petition

28.2

33.6*

35.1

41.1

44.1*

Environmental complaint

4.3

6.0

2.8

1.4

6.4*

Environmental protest rally

8.6

13.0*

4.6

6.5

5.3

Local environmental action group

4.0

4.6

2.8

2.8

4.3

Notes Due to missing values, the case numbers show some variation between the items. * differences between groups in the city are significant at 5% level.

significant, three insignificant. This means that bivariate breakdowns confirm the protest hypothesis. The multivariate analyses are OLS-regression models, for Mainz and Zurich respectively, using the additive protest index (0–6 range) as the dependent variable. In addition to the focus variable, homeownership, the models include nine control variables. These controls were chosen on the basis of the theoretical discussion regarding influences on protest participation (Sect. 2.2); their operationalization was already described above (Sect. 3.2). Table 4 details the results of these regression models. Though interesting (e.g., effects of objective road traffic and aircraft noise), I will not comment on the results pertaining to the control variables, because they do not constitute the main impetus of this contribution. The crucial independent variable, homeownership, shows a significant effect on protest participation both in Mainz and Zurich, i.e., also after controlling for other influences, homeowners participate significantly more often in environmental protest activities than renters. Again, this is in accordance with the protest hypothesis. In supplementary analyses, the models of Table 4 were run for each of the protest items separately (binary logistic regressions). The results, not shown here, can be summarized as follows: In Mainz, the homeowner variable yields six positive regression coefficients, four of them significant. In Zurich, all regression

264 Table 4 Factors influencing participation in environmental protest activities (OLS-regressions)

P. Preisendörfer

Mainz

Zurich

Gender (0 = male, 1 = female)

−0.045 (0.80)

0.030 (0.81)

Age in years/10 (1.8 to 7.0)

0.102* (4.50)

0.031* (1.99)

Education (0 = low, 1 = high)

0.256* (3.90)

0.124* (2.84)

Environmental concern (1 = low to 5 = high)

0.379* (9.18)

0.315* (12.06)

Left political orientation (0 = right to 10 = left)

0.041* (2.56)

0.070* (7.04)

City attachment (1 = weak to 5 = strong)

0.043 (1.42)

0.035 (1.68)

Objective road traffic noise (35 dB to 80 dB)

−0.004 (1.20)

−0.003 (1.02)

Objective aircraft noise (40 dB to 55 dB)

0.052* (6.48)

−0.006 (1.16)

Green outlook from windows (0 = no, 1 = yes)

0.010 (0.17)

−0.045 (1.14)

Homeowner (0 = no, 1 = yes)

0.216* (3.33)

0.149* (2.32)

Coop-Renter (0 = no, 1 = yes)

0.063 (1.05)

Constant

−3.954* (8.41)

−0.869* (2.67)

Adjusted R2

0.13

0.19

No. of cases

1461

1639

Notes Dependent variable of the two OLS-regressions is the additive protest index (range 1–6). Unstandardized regression coefficients. t-values in parentheses. *significant at 5% level.

coefficients are also positive, but only one coefficient is significant at the 10% level (participation in noise protest rallies).

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265

Conclusions

Taken together, the findings of this study mainly support Fischel’s homevoter hypothesis in its application to participation in protest against local environmental bads. The proposed protest hypothesis was confirmed in both cities, albeit more clearly in Mainz than in Zurich, probably because the level of environmental bads (specifically, exposure to aircraft noise) is higher in Mainz. Two findings, however, that do not correspond to the originally formulated hypotheses are of note: First, in both cities exposure to aircraft noise is not lower for homeowners than for renters; indeed, in Mainz it is even higher. And, this is evidently viewed by homeowners as an especial source of annoyance and offense stimulating their engagement in protest. Second, homeowners react to objective road traffic noise not with more, but with less subjective annoyance. The reason for this is probably the fact that they have more and better possibilities to shield themselves indoors against this type of noise pollution. Generally, road traffic noise seems to be less protest inducing than aircraft noise. Like most studies, the present study has some weaknesses and limitations. The two most evident are that it rests on correlational data and that it is confined to just two cities. Future research should try to capture the dynamics of protest activities and the involvement of homeowners by gathering longitudinal data. Based on longitudinal data, we could also better rule out alternative explanations of the positive relationship between homeownership and protest participation (in particular, homeowners have more protest resources and capabilities). Empirical studies in further cities could help to better separate context-specific findings on the one hand and more general regularities on the other. Furthermore, the dependent variable of Fischel’s hypothesis is broader than participation in protest activities. It pertains to all kinds of political engagement and, in particular, also to more conventional political activities (such as active membership in political parties or community organizations) not considered in the present study. Finally, the guiding motive of homeowners according to Fischel, namely, the asset value of their private property, was not directly captured in the present study. Although survey questions targeting the motives of individual behavior directly have to be taken with care, future studies could nevertheless try harder in this direction. In general, the Fischel hypothesis deserves more scientific attention—both for theoretical and practical reasons. Theoretically, the hypothesis implies that private property in the form of homeownership promotes efficiency and sustainability not only with regard to the handling of private goods protected by property rights themselves, but also of local public goods. The qualifier “local” is essential, because only in local contexts can be expected that actors will withstand the

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free-riding incentive to abstain from participating in public activities and political protest. In an earlier article that undeservingly did not receive a great deal of notice, Raub and Voss (1986) specify—referring to insights from game theory—a couple of socio-structural conditions, particularly in contexts where actors frequently meet each other and are socially interconnected, which stimulate cooperative behavior and prevent free riding also for strict rational actors. To follow this general line of structural reasoning may be theoretically more fruitful than a recourse to wide versions of rational choice models that assume a broad range of preferences and motivations from the outset (such as the above mentioned collective interest model of political protest). Practically, the group of home and apartment owners constitutes a potential reservoir for local environmental mobilization which, up until now, has not been paid much attention in environmental politics. When processes of an owner-driven environmental upgrading of a neighborhood unfold, a serious political challenge is to protect underprivileged groups of the population. They face the risk of being displaced, i.e., forced to leave their neighborhood. When such displacement effects become a widespread social phenomenon, urban segregation processes will deepen and environmental justice may heat up as an issue on the political agenda. Acknowledgments Research for this paper was funded by the German Research Foundation DFG (projects PR 237/7-1 and KU 1926/3-1) and the Swiss National Science Foundation SNSF (project 100017E-154251). I would like to thank Josef Brüderl, Claudia Diehl, Ivar Krumpal, Werner Raub, and Felix Wolter for helpful suggestions and comments.

References Ahlfeldt, Gabriel M., and Wolfgang Maennig. 2011. Homeownership and NIMBYism: A spatial analysis of airport effects. SERC Discussion Paper 85. London: London School of Economics. Ahlfeldt, Gabriel M., and Wolfgang Maennig. 2015. Homevoters vs. Leasevoters: A spatial analysis of airport effects. Journal of Urban Economics 87:85–99. Berger, Johannes. 2020. Capitalism. On the past and future of an economic system. In Handbook of Economic Sociology for the 21st Century, Ed. Andrea Maurer (forthcoming, Palgrave Macmillan). Brink, Mark, Beat Schäffer, Reto Pieren, and Jean M. Wunderli. 2018. Conversion between noise exposure indicators Leq24h, LDay, LEvening, LNight, Ldn and Lden: Principles and practical guidance. International Journal of Hygiene and Environmental Health 221:54– 63. Bruderer Enzler, Heidi, Andreas Diekmann, Jörg Hartmann, Lucie Herold, Katharina Kilburger, Karin Kurz, Ulf Liebe, and Peter Preisendörfer. 2019. Dokumentation Projekt

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“Umweltgerechtigkeit – Soziale Verteilungsmuster, Gerechtigkeitseinschätzungen und Akzeptanzschwellen.” Zurich: ETH-Zurich. Brunner, Eric, and Jon Sonstelie. 2003. Homeowners, property values, and the political economy of the school voucher. Journal of Urban Economics 54:239–257. Dehring, Carolyn A., Craig A. Depken, and Michael R. Ward. 2008. A direct test of the homevoter hypothesis. Journal of Urban Economics 64:155–170. Devine-Wright, Patrick. 2013. Explaining ‘NIMBY’. Objections to a power line: The role of personal, place attachment and project-related factors. Environment and Behavior 45:761– 781. Diekmann, Andreas, and Peter Preisendörfer. 2003. Green and greenback: The behavioral effects of environmental attitudes in low-cost and high-cost situations. Rationality and Society 15:441–472. Dillman, Don A. 2007. Mail and internet surveys. The tailored design method, 2nd ed. Hoboken: Wiley. Finkel, Steven E., Edward N. Muller, and Karl-Dieter. Opp. 1989. Personal influence, collective rationality, and mass political action. American Political Science Review 83:885–903. Fischel, William A. 2001. The homevoter hypothesis. Cambridge: Harvard University Press. Gould, Kenneth A., David N. Pellow, and Allan Schnaiberg. 2008. The treadmill of production. Boulder: Paradigm Publishers. Guski, Rainer. 1999. Personal and social variables as co-determinants of noise annoyance. Noise and Health 3:45–46. Hellbrück, Jürgen, Rainer Guski, and August Schick. 2008. Schall und Lärm. In Enzyklopädie der Psychologie (Bd. 2), Eds. Volker Linneweber, Ernst-Dieter Lantermann, and Elisabeth Kals, 3–44. Göttingen: Hogrefe. Hirschman, Albert O. 1970. Exit, voice, and loyalty. Cambridge MA: Harvard University Press. Johnson, Renée J., and Michael J. Scicchitano. 2012. Don’t call me NIMBY: Public attitudes toward solid waste facilities. Environment and Behavior 33:410–426. Klaeboe, Ronny, Astrid H. Amundsen, Aslak Fyhri, and Sigurd Solberg. 2004. Road traffic noise – The relationship between noise exposure and noise annoyance in Norway. Applied Acoustics 65:863–912. Klandermans, Bert. 2004. The demand and supply of political participation: Socialpsychological correlates of participation in social movements. In The blackwell companion to social movements, ed. David A. Snow, Sarah A. Soule, and Hanspeter Kriesi, 360–379. Oxford, UK: Blackwell. Marquis-Favre, Cathrine, D. Aubrée, and Marc Vallet. 2005. Noise and its effects – A review on qualitative aspects of sound. Acta Acustica United with Acustica 91:613–625. Miedema, Henk M. E. 2007. Annoyance caused by environmental noise: Elements for evidence-based noise politics. Journal of Social Issues 63:41–57. Mohai, Paul, David Pellow, and J. Timmons Roberts. 2009. Environmental justice. Annual Review of Environment and Resources 34:405–430. Olson, Mancur. 1965. The logic of collective action. Cambridge: Harvard University Press. Opp, Karl-Dieter. 2009. Theories of political protest and social movements. A multidisciplinary introduction, critique, and synthesis. London: Routledge.

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Preisendörfer, Peter. 2014. Umweltgerechtigkeit. Von sozial-räumlicher Ungleichheit hin zu postulierter Ungerechtigkeit lokaler Umweltbelastungen. Soziale Welt 65:25–45. Quaranta, Mario. 2017. Political protest in Western Europe. Heidelberg: Springer. Raub, Werner, and Thomas Voss. 1986. Die Sozialstruktur der Kooperation rationale Egoisten. Zeitschrift für Soziologie 15:309–323. Rohrschneider, Robert. 1988. Citizens’ attitudes toward environmental issues. Selfish or selfless? Comparative Political Studies 21:347–367. Van der Horst, Dan. 2007. NIMBY or not? Exploring the relevance of location and the politics of voiced opinions in renewable energy siting controversies. Energy Policy 35:2705–2714. Voss, Thomas. 1985. Rationale Akteure und soziale Institutionen. München: Oldenbourg. Walker, Gordon. 2012. Environmental justice. New York: Routledge. Wolch, Jennifer R., Jason Byrne, and Joshua P. Newell. 2014. Urban green space, public health, and environmental justice: The challenge of making cities ‘Just Green Enough.’ Landscape and Urban Planning 125:234–244. World Health Organization WHO. 2018. Environmental noise guidelines for the European region. Executive summary. Copenhagen: WHO Regional Office for Europe.

Peter Preisendörfer, Prof. (em.) Dr., Johannes Gutenberg-Universität Mainz, Institut für Soziologie, Jakob-Welder-Weg 12, 55128 Mainz; [email protected]; current research interests: organization research, entrepreneurship, environmental sociology, quantitative research methods.

How Can Employers Signal Trustworthiness to Job Seekers? Determinants of Employer Reputation Martin Abraham, Jan Gniza, and Kerstin Ostermann Abstract

Reputation is often seen as a mechanism for solving problems of incomplete information in matching job seekers and employers. We conducted our study on this matching process from the job seeker perspective and analyze how job seekers use perceived firm reputation to assess its attractiveness as a possible employer. Our theoretical framework is based on the idea that job seekers use available information on firms’ behavior toward society and customers as a reputation signal to perform the best possible assessment of how employers treat their employees. We conducted a factorial survey with a sample of 183 employed respondents to analyze the attractiveness of different hypothetical job offers. Our results show that higher firm engagement in corporate social responsibility (CSR) and more generous warranty policies enhance the attractiveness of such firms as employers; such attractiveness can also be affected by the salary and degree of the firm’s publicity. The results are also stable if we consider only cases of unknown employers. This shows that respondents consider employers’ good behavior, even if others are not aware of it. We therefore conclude that the motive of impressing others with a good employer M. Abraham (B) · J. Gniza Friedrich-Alexander-Universität Erlangen-Nürnberg, Nürnberg, Deutschland E-Mail: [email protected] J. Gniza E-Mail: [email protected] K. Ostermann Institut für Arbeitsmarkt- und Berufsforschung, Nürnberg, Deutschland E-Mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 I. Krumpal et al. (eds.), Rationality in Social Science, https://doi.org/10.1007/978-3-658-33536-6_13

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is less important for our respondents. Our hypothetical job seekers also seem to use employers’ good behavior to assess how they treat their employees. Keywords

Reputation • Employment relationship • Trust • Factorial survey

1

Introduction

It is one of the commonly shared assumptions in the labor market literature that the matching process is plagued by incomplete information. Employees and employers have to decide with whom to match, and this decision has to be made with incomplete information. This means that both sides do not know the characteristics of their potential partner since the relevant information—employees’ productivity and motivation on the one hand and employers’ future behavior on the other—is private. Consequently, we observe—at least theoretically—suboptimal matches in the labor market (Jovanovic 1979; Mortensen 1986). However, this theoretical argument also leads to the idea that both sides should try to reduce this problem by seeking the missing information. There is a fast-growing stream of the literature on the role of occupational certificates and other signals in employers’ decisions, showing that employers use those signals for productivity to enhance the quality of matches (Arkes 1999; Damelang et al. 2019; Dengler et al. 2016; Solga and Konietzka 1999). However, the literature has focused mainly on the employer side, probably because the dissolution of an inefficient match is easier for the employee than for the employer. However, employees also incur substantial transaction costs if they choose the “wrong” employer. Hence, employees’ strategies for reducing the information problems of matching are an important issue. This question is often addressed within the network approach, which assumes that an important source of information is employees’ social contacts (Granovetter 1973; Montgomery 1992; Preisendörfer and Voss 1988). Network theory assumes that an employer’s reputation plays an important role in overcoming information problems on the employee side. This information is passed on by members of the network, who are the main source of information for this type of reputation. However, this classical approach neglects the role of publicly available information, e.g., information from the internet and other media sources. These sources have the advantage of job seekers not relying on the chance that someone in their personal network coincidentally has information about a potential employer with

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a job vacancy. This type of reputation is a global, temporally stable, evaluative judgment about an organization (Highhouse et al. 2009). This reputational judgment is based on various pieces of information, and our empirical knowledge about the mechanisms that lead to this specific judgment is still restricted. In this paper, we answer the question of whether job seekers use available information on the organization’s behavior in fields other than employment relationships to gather information about the firm’s reputation as a “good” employer. In other words, we analyze whether firms can enhance their attractiveness to job seekers by investing in behavior that is observable to outsiders. To deal with this question, we will derive hypotheses from reputation models based on a general rational choice perspective (Diekmann and Voss 2004; Voss and Abraham 2000). We argue that general information on a firm’s policy—such as activities signaling corporate social responsibility (CSR) or general warranty policies—may be used by potential employees to form a reputation of a firm as an employer who is able to build trust. Hence, our analysis can be seen as a specific application of an idea that is at the core of Thomas Voss’ oeuvre: rational actors are able to achieve cooperative outcomes by implementing and assigning mechanisms on a structural level (Raub and Voss 1986; Voss 2003, 2020). To test our hypotheses, we employ a factorial survey answered by 183 participants of an access panel. We asked them to evaluate hypothetical employers and experimentally varied firms’ policy signals. We can show that respondents assess an employer as more attractive if it engages more in CSR and has a more generous policy toward product guarantees. The paper is structured as follows. We will first review the literature on the role of reputation in employees’ matching behavior and then develop our theoretical argumentation, resulting in three hypotheses. Subsequently, we describe our research design and the sample used in our study. After presenting the results of our multilevel regression models, we conclude with a discussion.

2

Literature Review

The literature agrees that a firm’s good reputation has positive effects in many respects. A good reputation attracts more clients, business partners and investors (Raithel and Schwaiger 2015; Pfarrer et al. 2010). Furthermore, employees are more intrinsically motivated to work for such a firm (Argenti and Druckenmiller 2004), and companies with good reputations attract more qualified applicants (Brown and Matsa 2016; Grobe 2003; Turban and Cable 2003). Even though the overall positive effect of a good reputation is well proven, the literature is less

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consistent and fairly scarce as to why job seekers consider employers’ reputation and under which conditions they perceive a good reputation. Studies have identified several aspects that increase perceived employer attractiveness (see Lievens and Slaughter (2016) for an overview). Job seekers perceive firms as more attractive if they know the firm better (Lohaus and Rietz 2015; Turban 2001) and consider information about commitment to employee well-being, work-family policies (Wayne and Casper 2012), job security (Brown and Matsa 2016), company innovativeness, perceived competence (Lievens and Highhouse 2003), and expected salary level (Rynes et al. 2004). Further studies suggest that firms’ behavior in fields other than human resource management also influences their perceived attractiveness to job seekers. Job seekers value CSR activities in the local community (Backhaus et al. 2002; Jones et al. 2014; Sen et al. 2006; Klimkiewicz and Oltra 2017) or as environmental protection measures (Backhaus et al. 2002; Behrend et al. 2009; Greening and Turban, 2000). However, these study designs have a strong focus on CSR by only varying the extent of CSR activities or the very detailed descriptions of the activities. Moreover, the literature shows that job seekers are influenced by the source and presentation of information. Lyons and Marler (2011) show that website aesthetics can have stronger effects on attractiveness than can actual information about a job. The results are mixed if a “good employer” certification can enhance attractiveness. Lohaus and Rietz (2015) were unable to prove any positive effects. Love and Singh (2011), however, speak of a competitive advantage but also suggest that “best employer” awards partly lose their status due to their overuse by too many different employers. The literature on reputation in online markets also indicates that the credibility of online information depends on factors such as the author’s anonymity and the content objectivity (Bozoyan and Vogt 2016). These results indicate that job seekers might not trust every piece of information they find online about an employer. There are two theoretical explanations as to why job seekers or employees are attracted by a better reputation in the first place (e.g., Turban and Greening, 1997). The first explanation is that social identity theory indicates that job seekers hope to transfer employers’ high reputation to themselves through organizational membership (Albinger and Freeman 2000; Highhouse et al. 2009; Lohaus and Rietz 2015). The second explanation is that job seekers interpret employers’ reputation as a signal of their treatment of their employees (e.g., Jones et al. 2014; Turban and Cable 2003). Jones et al. (2014) are one of the few studies that empirically tested several mechanisms and showed that both theoretical explanations apply to a certain extent. They showed that the positive effect of firms’ community activities on perceived attractiveness is mediated by the anticipated pride of

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being affiliated with the firm, perceived value fit, and expectations of how the firm treats its employees. However, such mediations cannot explain the positive effect of firms’ environmental activities. These results indicate that the details of firms’ behavior trigger mechanisms to varying degrees and that further research is needed to disentangle these mechanisms (e.g., Lievens and Slaughter 2016). Regardless of the exact underlying mechanism, studies argue that job seekers use reputation information to make the best possible assessment of what it might be like to work for a firm (Benson et al. 2020; Polachek and Xiang 2006; Turban and Cable 2003). Benson et al. (2020) is one of the few studies with a focus on job seekers’ benefits considering employer reputation instead of employers’ benefits (such as attracting more applicants). They conducted an online experiment on Amazon Mechanical Turk, where a reputation system enables previous workers to rate their employers’ behavior in terms of paying them on time and the payment being fair in relation to the work required. The results show that workers who use reputation ratings to screen jobs earn more in the same amount of time and more often work for small well-paying employers. We conclude that the jobseeker perspective in labor market matching processes has been comparably less investigated, whereas the incomplete information of the employer has inspired specific theories—such as principal agent theory (Stiglitz 1989)—as well as numerous empirical studies (e.g., Hwang et al. 1992; Taber 2001). Specifically, how an employer’s behavior toward society works as a reputation signal when job seekers also receive other information about the employer and the job offer is still underdeveloped.

3

Theory and Hypotheses

In labor market theory, it is usually assumed that employers and employees have to match under situations of incomplete information. Employers do not know the future productivity of a potential employee, and employees usually have incomplete information about the conditions that will be relevant for performing their jobs. Moreover, they will not know whether an employer will stick to the informal parts of the labor contract, such as promises for promotions or wage increases. Formal labor contracts are no solution to this problem since these conditions cannot be fixed—if at all—without enormous transaction costs. This is especially a problem for employers since institutional regulations make layoffs difficult. One could argue that employees may be less interested in reducing uncertainty ex ante since they may quit any time if the employer does not meet their expectations. Nevertheless, since unemployment or transaction costs from a job change

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may lead to “lock-in situations” (see, e.g., Manning 2003), employees are usually interested in reducing their information deficiencies. Moreover, we know that most employees are interested not only in wages but also in working conditions because such conditions are known to influence work satisfaction (Böckerman and Ilmakunnas 2006), health (Cottini and Lucifora 2013) and performance (Kahya 2007). At this point, the literature often refers to reputation mechanisms as a solution to this problem (see Holmstrom 1981; Parsons 1986 p. 800 ff.). If the information provided by other actors enables a potential employee to discriminate between “good” and “bad” employers, then he/she can avoid the latter. In “perfect” markets, that is, no transaction costs from information transmission and matching, this will lead to the disappearance of bad employers in the long run. Theoretical models now assume that employers are able to invest in their reputation by engaging in costly behavior that is suitable for signaling the desired characteristics to potential employees (Carmichael 1984). For example, can an employer abstain from layoffs in a crisis? If the answer is yes, then this can be seen as a costly investment since it reduces profits but may signal to future employees that the firm is a reliable employer for long-term contracts. Hence, reputation signals provide information on general trustworthiness or cooperative preferences as long as (a) they are credible, which is sufficiently costly; (b) related to the relevant behavior, which is, in our case, to treat employees fairly in the future; and (c) the signal is received by potential employees and interpreted as a credible commitment in this sense (for a more detailed discussion, see Estreicher 2009). Often, it is assumed that behavior toward existing personnel—such as the tendency toward layoffs—is important reputation information. This is certainly true, but this strategy is hampered by several problems. First, firms may not emit these signals permanently, such as committing to keeping the staff employed. This is only a credible commitment during severe crises—which are rare events. Second, the fair treatment of personnel is difficult to communicate since fairness depends on many factors that are not public. A firm cannot promote every employee, and whether promotions are handled fairly will mostly be judged differently by winners and by losers in this tournament. Hence, the dimensions that are most relevant to future employees are often difficult to communicate credibly to the public. Due to these difficulties, we assume that firms use other determinants that signal specific characteristics more indirectly (Spence 1973; Zerbini 2017). Often, these signals may also be a by-product of behavior targeted at other objectives (Zerbini 2017, p. 17). One instrument may be investments in CSR activities. We

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define CSR as the “social responsibility of the business [which] encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point of time” (Carroll 1979, p. 500). Hence, firms spend money on measures that do not directly increase their productivity or profits. However, they expect that this behavior will signal to various actors—such as customers, business partners and employees—the favourable characteristics of the firm. In our case, we assume that spending firm money for CSR is a costly commitment that signals to potential employees that the firm has a preference for fairness and social responsibility. Behind this rationale is the assumption that the firm’s routine investments in CSR measures will only work if they are not thwarted by uncooperative behavior in other domains—such as the treatment of personnel. Hence, a rational job seeker will believe in CSR as a credible signal because these costly measures lose value if employees are treated badly. Consequently, we hypothesize the following: H1:

Firms with higher CSR spending will be seen as more attractive employers than will those with no or lower CSR spending.

Zerbini (2017) reports that CSR activities may have multiple goals, e.g., attracting financiers as well as customers. We follow this idea that an organization’s actions in one field may serve as a signal in another field by focusing on fairness in trade. Here, we assume that the way unsatisfied customers are treated is a signal of the firm’s general preferences or culture toward all stakeholders of the firm. Thus, goodwill toward customers is surely an investment in reputation in the product market, but it is easily observable to the public and hence may be interpreted by potential employees as a signal of general fairness toward employees. H2:

Firms engaging in extensive goodwill policies toward customers will be seen as more attractive employers than will those with no such policies.

Until now, we assumed that job applicants prefer a firm investing in those reputation signals because they assume that it will treat its personnel and hence future employees fairly. However, employees may have a preference for firms with a good reputation because they will be treated better by others outside the firm. It can be easier to find housing because landlords prefer tenants from “good” firms since their unemployment risk will be lower. Alternatively, employees will find better jobs when quitting a job at a firm with a high reputation. To investigate this effect, we distinguish between firms with high and low publicity and argue

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that employees should be more interested in job offers of the first type if the third-party effect of the employer’s reputation is important. H3:

4

The effect of reputational investments on attractiveness is stronger for firms with high publicity.

Research Design

We simulated the search process for attractive job offers using a factorial survey.1 With a factorial survey, one can incorporate experimental logic into a classical survey, as respondents rate a set of hypothetical descriptions of situations or objects (so-called vignettes) rather than answering item-based questions (Auspurg et al. 2014). Each situation or object description contains the same attributes (dimensions) but on different, randomly varied levels. Due to this experimental variation in the provided information, effects of single dimensions as well as interaction effects between these dimensions can be measured (Abraham et al. 2019). Furthermore, one can analyze interpersonal and intrapersonal variation since each respondent usually rates more than one vignette. In addition to the possibility of exploiting experimental variation to determine the causal effect of employers’ reputation on the job-seeking behavior of employees, there are additional advantages of the usage of factorial surveys in our setting. The vignette setup allows us to provide contextual information and combinations of different dimensions at the same time in one question (Jasso 2006). In the case of the job-search process, contextual information such as the salary or the qualification requirements of the job may be important. By including such information, the factorial survey creates a more realistic setting and employer description compared to those of most laboratory experiments. However, one should focus on the theoretically most important dimensions and contextual information to keep the vignettes as cognitively feasible as possible for respondents (Beck and Opp 2001). Another advantage of factorial surveys is that the responses are less biased due to social desirability (Wallander 2009). Due to the combined presentation of several dimensions in one vignette, it is also possible to disentangle third-party effects 1 An alternative experimental design would have been a choice experiment (Auspurg and Hinz

2015, p. 105). However, we decide to employ a factorial survey design to mimic the first job search stage as precisely as possible. The factorial survey presentation of a single employer and job description is more realistic because most online job advertisement portals present a single job and employer on one webpage. A choice experiment would rather mimic the final decision between the “two best job offers”.

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such as the effect of publicity in our case. Since the degree of reputation and publicity varies randomly across vignettes, we can test whether the effect of reputation significantly differs between firms with high publicity and those with low publicity. One shortcoming of factorial surveys is that the repeated presentation of long and very similar descriptions can be cognitively challenging for participants. Therefore, it is important to keep the number and length of vignettes feasible. As a rule of thumb, Beck and Opp (2001) recommend a maximum of 20 vignettes to be evaluated by each participant, and Auspurg and Hinz (2015) recommend 10 vignettes with a maximum of seven dimensions. Moreover, vignette experiments can easily fail because vignettes appear too mechanic and unrealistic. To circumvent this obstacle, it is important to construct the vignettes as realistically as possible. This can be achieved by excluding implausible situation descriptions or choosing an explicit wording and framing of the dimensions (Auspurg and Hinz 2015). In the end, of course, we are only able to analyze hypothetical behavior. Although some findings indicate that there is a correlation between these hypothetical decisions real behavior (e.g., Hainmüller et al. 2015), vignettes should be corroborated through an analysis of real behavior in future research. Following a short preface, which introduces the factorial survey and explains the attractiveness rating scale, we present each respondent with a random selection of nine vignettes. Each vignette describes the result of an online search of employers’ reputation. In addition to the information about employers’ observable reputation signals, the vignette contains additional information about companies’ publicity and the expected salary to create a more realistic job offer situation. By mentioning that the job offer matches the requirements and competences of respondents in all vignettes, we eliminate uncertainty about the fit between respondents’ qualifications and the job requirements. Table 1 provides a summary of the provided information about the employer that varies experimentally across vignettes. To test H1 and H2, we introduce the vignette dimensions “CSR management” and “Fairness in trade”. Both reputation dimensions vary from a baseline reputation (0) to a strong reputation signal (2). We use the dimension “Publicity” to test H3, the levels of which vary from “The employer is unknown among acquaintances” to “The majority knows the employer”. Additionally, the salary of each job offer differs across vignettes to create a realistic variety of job offers for respondents. Based on the provided information, we ask respondents to rate the attractiveness of the employer on a scale from 1 (“Highly unattractive”) to 7 (“Highly attractive”). In Fig. 1, we display a translated example of a vignette that was originally displayed in German.

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Table 1 Summary of all vignette dimensions and corresponding levels Vignette dimension Level CSR management

(0) No further information (1) Financial support for smaller charitable projects (2) Active implementation of sustainability and financial support for charitable projects

Fairness in trade

(0) Warranty only within legal framework (1) Voluntary guarantee (2) Voluntary guarantee and goodwill in disputed cases

Publicity

(0) Employer unknown among acquaintances (1) Some know employer (2) Majority knows employer

Salary

(1) + 5% (0) ± 0% (corresponds exactly to expectations) (-1) −5% (-2) −10%

Fig. 1 Example of a vignette

Combining all levels of all dimensions creates a universe of 108 possible vignettes (3 * 3 * 3 * 4 = 108). Since there are no implausible combinations, we end up with twelve decks consisting of nine randomly assigned vignettes. Referring to the rule of thumb of Beck and Opp (2001) and Auspurg and Hinz (2015), the number of vignettes and dimensions in our setting are cognitively feasible. To further reduce the amount of reading, we highlight the variation in the levels

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of each vignette, as shown in Fig. 1. In a pre-test of our final vignette experiment, we received positive feedback about the amount and length of the vignettes. Moreover, the vignettes were accompanied by a survey including questions on, e.g., sociodemographic information, which allowed us to control for potentially confounding determinants of employees’ decision-making process. Since we conduct an experimental test of theoretically derived hypotheses and representative data are not available, we employ a convenient sample based on a commercial access panel for our experiment. The survey took place online from November to December 2018. The respondents were drawn from the German online access panel of Norstat Germany Ltd.2 The employment of an online access panel make a careful investigation of data quality necessary because participants receive monetary incentives for answering and finishing surveys. To guarantee high-quality data for our experiment, we follow previous research and introduce a test vignette into our experiment (Stumpf et al. 2020). In using a test vignette as the third vignette of our experiment, we ensure that only individuals who read the whole vignette and do not just click through the vignette battery as fast as possible are included in the sample.3 If a respondent did not follow the instructions in the test vignette, we flagged him/her in the data and did not consider him/her as a reliable participant for our experiment. Respondents could only respond to the survey once. We stopped the sampling process as soon as all decks were answered at least ten times by high-quality participants. To ensure that every respondent is closely attached to the labor market or will enter it soon, only employees or students between 18 and 68 years were sampled. In total, we rely on an analysis sample of 183 respondents, which is equal to 1647 (183 * 9 vignettes) answered vignettes.4 Table 2 summarizes the 2 Norstat

Germany Ltd. is one of the largest providers of online access panels for the social sciences in Europe. For more information, see https://norstat.de/ 3 To keep the quality of respondents for our experiment high, we employ a test vignette to identify such persons. In contrast to regular vignettes, the test vignette advised respondents in the second and third paragraph to select “unattractive” on the attractiveness rating scale. 4 When using incentivized access panels, it is important to control the response quality since participants may rush through a questionnaire simply to receive bonus points. For our questionnaire, we obtained 390 responses, 78 of which were screenouts who did not meet ex ante fixed requirements (such as minimum age). Due to the incorporated quality checks, we then identified 129 respondents during the sampling process who did not meet our high quality requirements. The typical procedure is to drop these respondents (Stumpf et al. 2020). However, we are able to compare their sociodemographic characteristics and the response behavior with those of the high-quality respondents. In extensive robustness checks, we found that both groups do not differ significantly in their characteristics. Moreover, the results do not change in sign and significance when we include low-quality respondents. However, the coefficients,

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Table 2 Socio-demographic characteristics of respondents Respondents

N

Education

183

Percent/Mean

No degree

21

11.48

Vocational degree

89

48.63

University (of applied science) degree

73

39.89

Gender

183

Female

95

51.91

Male

88

48.09

Age

183

40.22

Below 30 years

47

25.68

Above 30 years

136

74.32

Region of origin

183

Born in West Germany

134

73.22

Born in East Germany

40

21.86

Not born in Germany

9

4.92

Net income per month in EUR

183

No income information

19

10.38

Below 1000 EUR

38

20.77

1000–3999 EUR

116

63.9

Above 3999 EUR

10

5.46

socio-demographics of these respondents. In total, our sample is slightly more highly educated than the total German population. A total of 11.5% of respondents have no educational degree, 48.6% have a vocational degree, and 39.9% have a university or university of applied science degree, which results in higher net income reports. In addition, our sample is nearly gender-balanced and has a mean age of 40.2 years. Regarding the region of origin, 73.2% of respondents were born in West Germany, and 4.9% are first-generation immigrants.

which are biased against zero, and the lower mean processing time indicate that low-quality participants did not read the vignettes properly. Therefore, we exclude them from our main analysis sample for a more precise estimation.

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Fig. 2 Distribution of the dependent variable “Attractiveness”

5

Results

Figure 2 shows the distribution of the employer attractiveness rating, which is the dependent variable in our analysis and ranges from 1 “Highly unattractive” to 7 “Highly attractive”. Respondents made use of the total range of the attractiveness scale, even though the distribution is slightly skewed to the right, with a mean attractiveness rating of 4.76. The intraclass coefficient indicates that 7.6% of the overall variation can be attributed to the respondent level, which leads us to a random intercept (RI) model being the preferred specification.5 Table 3 shows the results of RI analyzes. Model 5 The literature has shown that models, which neglect a multilevel structure, can deliver biased

estimates as soon as the ICC is above 5% (e.g., Julian 2001). We also run ordinary least squares models with respondent-clustered standard errors. The estimates are similar in size and significance but show slightly smaller coefficients and power than those of the RI model. This is in line with the considerations of Auspurg and Hinz (2015), who state that neglecting the multilevel structure in factorial survey data leads to underestimated coefficients.

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Table 3 Results of random intercept estimation, main models Predicted sign

Model Ia:

Model Ib:

DV Attractiveness rating: 1 Highly unattractive; 7 Highly attractive Sustainability management, ref. no further information Financially supports smaller projects

+

0.5377*** (0.066)

0.5364*** (0.066)

Shows full social responsibility

+

0.7686*** (0.066)

0.7670*** (0.066)

Fairness in trade, ref. warranty only within legal framework Voluntary guarantee

+

0.4962*** (0.062)

0.4956*** (0.062)

Voluntary guarantee and goodwill

+

0.4797*** (0.063)

0.4806*** (0.063)

Publicity, ref. unknown among acquaintances Some know employer

+

0.1895** (0.065)

0.1898** (0.065)

Majority knows employer

+

0.1243* (0.063)

0.1240* (0.063)

Income information, ref. above or equal to income expectations 5% below income expectations

−1.1728*** (0.065)

−1.1716*** (0.065)

10% below income expectations

−1.7396*** (0.065)

−1.7365*** (0.065)

Control variables No degree, ref. university degree

0.3182 (0.203)

Vocational degree, ref. university degree

0.0730 (0.117)

Male, ref. female

0.0276 (0.114)

Born in East Germany, ref. West Germany

0.1760 (0.131)

Not born in Germany, ref. West Germany

0.0492 (0.251)

Age of respondent

0.0068 (0.005) (continued)

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Table 3 (continued) Predicted sign

Model Ia:

Model Ib:

No income information, ref. 1000–3999 EUR

−0.1311 (0.180)

Below 1000 EUR, ref. 1000–3999 EUR

0.1150 (0.146)

Above 3999 EUR, ref. 1000–3999 EUR

0.0765 (0.237)

Constant

4.6175*** (0.086)

4.2042*** (0.242)

−0.4515*** (0.067)

−0.4770*** (0.068)

0.0084 (0.018)

0.0084 (0.018)

Residual level-2 variance Constant Residual level-1 variance Constant Number of vignettes

1647

1647

Number of respondents

183

183

Degrees of freedom

8

17

Significance

0.000

0.000

Standard errors in parentheses Significance levels: *p < 0.05, **p < 0.01, and ***p < 0.001 Source: Own data collection via Norstat. Own calculations.

Ia does not consider any control variables, whereas Model Ib considers respondents’ education, gender, region of origin, age, and net monthly income. Although no control variable has a significant effect on the attractiveness rating, we proceed with Model Ib. The residuals of Model Ib vary symmetrically around a mean of zero and are visually close to a normal distribution (see Fig. 3). Both highly significant coefficients of the CSR variable show positive signs. Compared to companies that do not have any further standardized information on their sustainability management, companies that financially support smaller projects are rated more attractive by, on average, 0.54 scale points. Based on the second coefficient of sustainability management, it can also be stated that respondents assess higher expenditure on CSR more positively on average. If a company also actively implements social responsibility, then it is rated more

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Fig. 3 Distribution of residuals in Model Ib

attractively by, on average, 0.77 scale points than companies without further information on the CSR measures implemented (see Table 3, Model Ib). A Wald test confirms that the coefficient of social responsibility is significantly higher than that of financial support for smaller projects. We can therefore confirm H1: employers with higher CSR spending are more attractive to job seekers than are those with no or lower spending. The second reputation signal, fairness in trade, shows positive and significant effects which supports H2 (see Table 3, Model Ib). If a company voluntarily provides a guarantee beyond the legal requirements, respondents rate it, on average, 0.50 scale points more attractive than an employer that offers guarantees exclusively within the legal requirements. Whether the company shows fairness in trade has explanatory power, but the degree of fairness does not, since the coefficient of “Voluntary guarantee and goodwill”, with a value of 0.48, does not differ significantly from 0.50 at the 10% level. To illuminate the mechanisms of the positive and significant relationship between an employer’s reputation and attractiveness, we introduce two models, where each interacts one reputation dimension with the publicity of the firm.

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The interaction terms should be positive and significant if the employees are also interested in the third-party effect of the employer’s reputation (H3). Table 4 shows the results of the interaction models (Model II and Model III). The reputation coefficients, which measure the effect of CSR and fairness in trade for unknown companies, remain positive and significant for both models in table 4. This indicates that employees acknowledge positive reputation signals, even if their acquaintances do not know the employer. Regarding publicity-interaction effects, neither the CSR model (Model II) nor the model considering the interaction with fairness in trade (Model III) show significant coefficients. As a further check, we dichotomize the CSR, fairness in trade and publicity variables in combining the highest and medium levels and rerun the random intercept regressions of Models II and III. However, the interaction terms remain insignificant for both reputation dimensions. Therefore, we reject H3. We cannot find evidence for a third-party effect. Employees do not seem to prefer firms with a good reputation because they expect to profit from good publicity outside of the firm.

6

Discussion and Conclusions

Job seekers and employers have to match in terms of labor markets under situations of incomplete information. To date, the literature has mainly focused on employers’ problem screening applicants rather than job seekers’ problem finding a “good” employer (see, e.g., Benson et al. 2020). Our study focuses on job seekers’ perspective of the matching process and analyzes how job seekers use the perceived reputation of a firm to assess its attractiveness as a possible employer. Our theoretical framework is based on the idea that job seekers use available information about firms’ behavior toward society and customers as reputation signals to perform the best possible assessment of how employers treat their employees. We conducted a factorial survey with a sample of 183 employed respondents of an access panel to analyze the attractiveness of hypothetical job offers from different employers. We experimentally varied the characteristics of the job offers and employers according to how many acquaintances know the employer, salary, extent of corporate social responsibility (CSR) activities and generosity of warranty policies. We used a factorial survey because it allows us to present simultaneously multiple treatments and to isolate the effect of each varying characteristic while controlling for all other characteristics. Our results show that higher firm engagement in CSR and more generous warranty policies enhance their attractiveness as employers; this attractiveness

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Table 4 Results of random intercept estimation, publicity interaction Predicted sign

Model Ib:

Model II:

Model III:

DV Attractiveness rating: 1 Highly unattractive; 7 Highly attractive Sustainability management, ref. no further information Financially supports smaller projects

+

0.5364*** (0.066)

0.4344*** (0.112)

0.5427*** (0.066)

Shows full social responsibility

+

0.7670*** (0.066)

0.8246*** (0.110)

0.7701*** (0.066)

Fairness in trade, ref. warranty only within legal framework Voluntary guarantee

+

0.4956*** (0.062)

0.4921*** (0.063)

0.5544*** (0.107)

Voluntary guarantee and goodwill

+

0.4806*** (0.063)

0.4704*** (0.063)

0.5093*** (0.109)

Publicity, ref. unknown among acquaintances Some know employer

+

0.1898** (0.065)

0.1283 (0.110)

0.2803** (0.108)

Majority knows employer

+

0.1240* (0.063)

0.1268 (0.112)

0.1182 (0.108)

Income information, ref. above or equal to income expectations 5% below income expectations

−1.1716*** (0.065)

−1.1740*** (0.065)

−1.1702*** (0.065)

10% below income expectations

−1.7365*** (0.065)

−1.7308*** (0.065)

−1.7379*** (0.065)

Interactions Financially supports smaller projects # Some know employer

+

0.2231 (0.159)

Financially supports smaller projects # Majority knows employer

+

0.0824 (0.155)

Shows full social responsibility # Some know employer

+

−0.0700 (0.160)

Shows full social responsibility # Majority knows employer

+

−0.1083 (0.156) (continued)

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Table 4 (continued) Predicted sign

Model Ib:

Model II:

Model III:

Voluntary guarantee # Some know employer

+

−0.1932 (0.158)

Voluntary guarantee # Majority knows employer

+

0.0043 (0.151)

Voluntary guarantee and goodwill # Some know employer

+

−0.0962 (0.154)

Voluntary guarantee and goodwill # Majority knows employer

+

0.0009 (0.153)

Constant

4.2042*** (0.242)

4.2226*** (0.247)

4.1851*** (0.247)

−0.4770*** (0.068)

−0.4769*** (0.068)

−0.4748*** (0.068)

0.0084 (0.018)

0.0071 (0.018)

0.0075 (0.018)

Residual level-2 variance Constant Residual level-1 variance Constant Control variables

Yes

Yes

Yes

Number of vignettes

1647

1647

1647

Number of respondents

183

183

183

Degrees of freedom

17

21

21

Significance

0.000

0.000

0.000

Standard errors in parentheses Significance levels: *p < 0.05, **p < 0.01, and ***p < 0.001 Source: Own data collection via Norstat. Own calculations.

can also be affected by salaries and the degree of publicity. The results are also stable if we consider only cases of unknown employers among acquaintances. This shows that respondents consider employers’ good behavior, even if others are not aware of them. We therefore conclude that the motive to impress others with a good employer is not the main driver for our respondents. Our hypothetical job seekers also seem to use employers’ good behavior to assess how they treat their employees. From these results, we derive two implications. First, firms should make existing CSR activities and generous customer policies visible for job seekers, e.g., by

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publishing their activities on recruitment sites and events. Second, online platforms, which make employers’ behavior more visible, can improve matching in the labor market and discipline employers. Such platforms enable especially smaller firms to send signals to qualified applicants. Furthermore, visible firms have stronger incentives to behave in a “good” manner and not to externalize costs to society. Thus, employer reputation can also help to reduce misbehavior, such as exploiting workers, offering intentionally bad products, violating compliance rules, or polluting the environment. If, and how, job seekers consider online reputation platforms and if bad ratings can change a firm’s behavior, however, are interesting fields for future research. Although our experimental design has the great advantage that we can interpret our findings in a causal way, our study does not come without limitations. As already discussed, we looked at hypothetical behavior assuming that respondents will behave similarly in a “real world situation”. Moreover, we are unable to finally disentangle the several conceivable motives as to why job seekers use reputation signals. In addition to assessing how employers treat their employees, such reputation signals can also be interpreted by job seekers as opportunities to increase their own reputation or as information about a firm’s financial situation and therefore job security. Even if more research is needed to precisely determine the exact motives, our study makes an important contribution by showing that job seekers use firms’ behavior toward society and customers to assess their attractiveness as a place to work. With our experimental vignette design, we can show that a firm’s behavior matters even if further information, such as salary and firm publicity, attracts job seekers attention simultaneously. Although this survey was conducted in Germany, we think that our findings and implications are valid for many modern societies characterized by marketbased labor markets and freely available information about employers. However, further research based on representative or international data will surely help validate our findings.

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Martin Abraham, Prof. Dr., Friedrich-Alexander-Universität Erlangen-Nürnberg, Fachbereich Wirtschafts- und Sozialwissenschaften, Findelgasse 7/9, 90402 Nürnberg; [email protected]; current research interests: labor markets, organizations, economic sociology, households. Jan Gniza, M.Sc., Friedrich-Alexander-Universität Erlangen-Nürnberg, Fachbereich Wirtschafts- und Sozialwissenschaften, Findelgasse 7/9, 90402 Nürnberg; [email protected]; current research interests: regional inequalities, acceptance of redistribution, reputation. Kerstin Ostermann, M.Sc., Institut für Arbeitsmarkt- und Berufsforschung, Regensburger Str. 104, 90478 Nürnberg; [email protected]; current research interests: quantitative sociology, neighborhoods, regional mobility.