The Heart Decides
March 2006
We’ve been led to believe that an economic agent’s ideal transaction is one that results in the most profit. Based on this hypothesis, economists have developed a set of formulas to explain how markets actually work. However, there is one problem: although they are rigidly accurate, these formulas do not always seem to apply to real life. In fact, the theory would be perfect… in a world of robots, a world where logic is the only driving force in the decision-making process. But experience has demonstrated - surprised? - that men and women are not perfectly rational beings who seek only to maximize their assets. Duh! How could we forget? Men and women have feelings. They may be jealous, angry, vengeful, altruistic, generous and all of this, obviously, can influence decisions. Thus, economists are starting to become interested in this phenomena and to document it. Experiences are multiplied and are often based on the game theorem, but the results basically serve to illustrate the old adage: what the mind wonders, the heart decides! Allow me to illustrate with an example.

It is called the ‘ultimatum’ game. In fact, it is not really a game, it is an experience. Let’s say that I give you one hundred $1 coins. You have to offer a portion of these coins to another player, whose identity remains unknown to you and vice versa, but who is aware of the amount involved . This other player may choose to accept or refuse your offer. If the player accepts, the coin distribution takes place according to your suggestion. If the player refuses, I take back my $100; neither one of you gets anything and no appeal is possible, the game is categorically over. According to the logic of capitalist markets, you must tell me: “I would offer $1. The other player may either accept $1 or get nothing at all, so the latter will accept the $1 offer”. And yet… are you sure that this is what you would propose?

For about twenty years now, economists and theorists have been reproducing this experience, in various situations and with actual money. Results are convincing. The average proposal is somewhere around 44 % of the cash at hand and, in half of the cases, offers of 20 % or less were systematically refused. It seems that those who have the money to share feel that a too low offer will not be accepted. And in fact, from a player’s perspective, those proffering a meagre sum will be punished for their selfishness, even if it means personal sacrifice! So, in reality, it is as if a certain moral propensity actually guides the decision-making process, rather than a simple and logical analysis.

This game, which appears trivial, reminds us of how the human spirit is complex and encourages us to define a market that is not capitalistic and better responds to human nature. A market where wealth would be better divided. There are already a few primers: there is fair trade, which aims to redistribute to southern farmers a more equitable portion of profits generated by the sale of their products to industrialized countries. Let’s not forget that, until now, cooperatives have been the most interested parties. First, there was fair trade coffee, then came chocolate, rice, tea, sugar, bananas, cotton…. and on and on! It is a market that is developing as people are becoming more aware. But there are several ways fair trade can be viewed. It is applied here, in Quebec, when cooperatives are downstream from agricultural production and return to farmers a better portion of their products’ added value. This too corresponds to the concept of fair trade.

It is said that the word economy comes from the Greek oikonomia, which means “administration of the house”. Could we, inspired by this etymology, impart a new lustre to the economic science and finally find formulas that describe a world where each is responsible for administering the house’s affairs with dignity. There would be no need to talk about the social economy, because we will have understood that economy, as it relates to men and women, must undoubtedly be social. Because we are not robots. And the heart decides…
 

Colette Lebel, agr.
Director of Cooperative Affairs
La Coop fédérée
Email: colette.lebel@lacoop.coop
Fax: (514) 858-2025
 



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