Thursday, March 31, 2016

Fairness = tendency to maximize entropy?

File under speculation.

I re-read one of my old posts and it had this quote (from this post by Mark Thoma):
Max Burton-Chellew ... said: 'Game theory can be used to predict how a self-interested and rational person will behave in social situations. However, economic games, in which people have to make decisions on how to allocate money to themselves and others, have consistently shown that these predictions fare poorly. In particular, it seems that people are overly generous and altruistic, and appear to be primarily motivated by concerns of fairness rather than maximising income. ...'
This "fairness" leads to these games resulting in outcomes that are closer to the entropy optimum than the game theory solution.

Maybe humans evolved a sense of fairness because uniform distributions can help to maximize entropy? Not only does this improve the functioning of markets, but it can have other benefits.

Maybe markets are a "hack" of the human sense of fairness? Since we have a sense of fairness, markets can work well. In the past, our sense of fairness has overcome the natural propensity for markets to create e.g. wildly unequal distributions of income though social norms and other human behaviors (religion, wars).

Anyway: speculative.

7 comments:

  1. Now that is an interesting thought: behavioral information transfer economics! Time for a new sub-speciality of ITE.

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  2. We know that other primates have a sense of fairness, so I expect that we humans inherited ours. :)

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    Replies
    1. Thanks, Tom. :)

      What is worse than beating a dead horse? Beating a zombie horse. ;)

      Looking back, I see that you addressed several notes to me. I apologize for not following up on them, the reasons being illness in the family, my own illness, and my being sick of this discussion. I feel like a high school English teacher. :(

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    2. Ha!... Well I wish you all well. I saw your comments and wondered if you imagined the same world I described to Jason in that comment.

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    3. As the the world of SIM, I think that there are no firms. As G&L say, it is a labor economy. As for taxes, the initial $20 government spending is taxed immediately, and then that spending ripples through the economy, causing consumption, saving, and taxation, until equilibrium is reached by the end of the time period. The details are sketchy. They seem to assume that the reader is already familiar with the process from earlier macroeconomics study of the Keynesian multiplier.

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    4. So many extra words are needed to make sense of those equations!

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