PCI2024-155035-2

In the recent decades, a large number of scandals involving fraud and individual greediness in the financial sector have sparked a widespread view of economic decision-makers as selfish agents capable of inflicting any damage on others for personal gain (e.g., Cohn, Fehr, and Maréchal, 2014). This has been acknowledged at the highest levels, from the coining of the term “predatory capitalism” (Raubtierkapitalismus) by former German Chancellor Helmut Schmidt (Schmidt, 2003) or the statement by Nobel-Prize winner Paul Krugman that “[Americans have] lost confidence in the integrity of our economic institutions,” to the U.K. government’s official statement that “alongside a widespread failure of competence in the banking industry, there was a failure of professionalism and ethics” in the financial industry (U.K. Government, 2013).

On the other hand, humans are not hopelessly selfish. The limits of self-interest and the importance of inequity in human motivation (Adams, 1965) have been systematically exposed in experiments using stylized games as the Ultimatum Game (Güth, Schmittberger, and Schwarze, 1982), the Dictator Game (Forsythe, Horowitz, Savin, and Sefton, 1994), and the Trust Game (Berg, Dickhaut, and McCabe, 1995). This evidence has led to the development of models incorporating “social preferences,” which encompass fairness concerns, prosociality, and reciprocity (Fehr and Schmidt, 1999; Bolton and Ockenfels, 2000; Charness and Rabin, 2002; Dufwenberg and Kirchsteiger, 2004; Falk and Fischbacher, 2006). Studies on the psychology of dishonesty, e.g. Mazar, Amir, and Ariely (2008), have argued that most people will help others, refrain from actively damaging them, and, if given opportunity, cheat only a little. Similar studies on dishonesty have found few differences across countries (Mann, Garcia-Rada, Hornuf, Tafurt, and Ariely, 2016).

Although these two views have long been intuitively at odds, there is no actual contradiction. In a recent contribution coauthored by the Spanish cooperator for this Lead Agency application, Alós-Ferrer, García-Segarra, and Ritschel (2022), it has been shown that prosocial behavior in the small is fully compatible with morally-outrageous behavior in high-stakes, high-impact decisions where a decision maker can obtain a large personal gain at the expense of significantly damaging a large number of other people. This work showed that people display standard levels of generosity toward individual strangers in bilateral interactions while at the same time stealing as much as possible from a large group of people for personal gain.

In the “Big Robber Game”, a decision maker can take a significant amount of money from a large group of other participants. The setting is hence closer to managerial settings and to the phenomena sparking public-opinion concerns in recent years. In the experiment in Alós-Ferrer et al. (2022), participants (German university students) in the “Robber” role overwhelmingly appropriated as much as possible from 16 other participants (the “Victims”), giving in to the temptation of walking out of the lab with around 100 Euro. This result, which found wide resonance in the media (having been covered by around a hundred media outlets so far, from Frankfurter Allgemeine Zeitung to New Scientist), is important for two reasons.

First, it demonstrates that the roots of corporate scandals are in all of us. There was no difference in behavior between genders or between economics and business students and students with other majors (contradicting arguments that selfishness is induced by self-selection into or indoctrination in these fields).

Second, it demonstrates that there is no contradiction between prosocial preferences observed in psychology and behavioral economics laboratories around the world and the public perception of greed and selfishness among economic actors. Both can coexist within the same individual and depend on the situation: low-stakes decisions affecting a small group vs. large-stakes decisions affecting a large group.