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Book Summary: Superfreakonomics Global Cooling, Patriotic Prostitutes and Why Suicide Bombers Should Buy Life Insurance

Authors: Steven Levitt and Stephen Dubner

Substory: Altruism – Lab vs Real World

In 2005, thanks largely to his field experiments, List was offered a tenured professor position at the University of Chicago, perhaps the most storied economics program in the world. This wasn’t supposed to happen. It is a nearly inexorable law of academia that when a professor lands a tenured job, he does so at an institution less prestigious than the one where he began teaching, and also less prestigious than where he received his Ph.D. John List, meanwhile, was like a salmon who swam downstream to spawn, into the open water. Back in Wisconsin, his family was unimpressed. “They wonder why I’ve failed so miserably,” he says, “why I’m not still in Orlando, where the weather is really great, instead of Chicago, where the crime is really high.”

By now he knew the literature on altruism experiments as well as anyone. And he knew the real world a bit better. “What is puzzling,” he wrote, “is that neither I nor any of my family or friends (or their families or friends) have ever received an anonymous envelope stuffed with cash. How can this be, given that scores of students around the world have outwardly exhibited their preferences for giving in laboratory experiments by sending anonymous cash gifts to anonymous souls?”

So List set out to definitively determine if people are altruistic by nature. His weapon of choice was Dictator, the same tool that created the conventional wisdom. But List had a few modifications up his sleeve. This meant recruiting a whole bunch of student volunteers and running a few different versions of the experiment.

He began with classic Dictator. The first player (whom we’ll call Annika once again) was given some cash and had to decide whether to give none, some, or even all of it to some anonymous Zelda. List found that 70 percent of the Annikas gave some money to Zelda, and the average “donation” was about 25 percent of the total. This result was perfectly in line with the typical Dictator findings, and perfectly consistent with altruism.

In the second version, List gave Annika another option: she could still give Zelda any amount of her money but, if she preferred, she could instead take $1 from Zelda. If the dictators were altruistic, this tweak to the game shouldn’t matter at all; it should only affect the people who otherwise would have given nothing. All List did was expand the dictator’s “choice set” in a way that was irrelevant for all but the stingiest of players.

But only 35 percent of the Annikas in this modified, steal-a-dollar-if-you-want version gave any money to Zelda. That was just half the number who gave in the original Dictator. Nearly 45 percent, meanwhile, didn’t give a penny, while the remaining 20 percent took a dollar from Zelda.

Hey, what happened to all the altruism?

But List didn’t stop there. In the third version, Annika was told that Zelda had been given the same amount of money that she, Annika, was given. And Annika could steal Zelda’s entire payment—or, if she preferred, she could give Zelda any portion of her own money.

What happened? Now only 10 percent of the Annikas gave Zelda any money, while more than 60 percent of the Annikas took from Zelda. More than 40 percent of the Annikas took all of Zelda’s money. Under List’s guidance, a band of altruists had suddenly—and quite easily—been turned into a gang of thieves.

The fourth and final version of List’s experiment was identical to the third—the dictator could steal the other player’s entire pile of money—but with one simple twist. Instead of being handed some money to play the game, as is standard in such lab experiments, Annika and Zelda first had to work for it. (List needed some envelopes stuffed for another experiment, and with limited research funds he was killing two birds with one stone.)

After they worked, it was time to play. Annika still had the option of taking all of Zelda’s money, as more than 60 percent of the Annikas did in the previous version. But now, with both players having earned their money, only 28 percent of the Annikas took from Zelda. Fully two-thirds of the Annikas neither gave nor took a penny.

So what had John List done, and what does it mean?

He upended the conventional wisdom on altruism by introducing new elements to a clever lab experiment to make it look a bit more like the real world. If your only option in the lab is to give away some money, you probably will. But in the real world, that is rarely your only option. The final version of his experiment, with the envelope-stuffing, was perhaps most compelling. It suggests that when a person comes into some money honestly and believes that another person has done the same, she neither gives away what she earned nor takes what doesn’t belong to her.

But what about all the prizewinning behavioral economists who had identified altruism in the wild?

“I think it’s pretty clear that most people are misinterpreting their data,” List says. “To me, these experiments put the knife in it. It’s certainly not altruism we’ve been seeing.”