Martha Gill

Irrational Animals: a neuroscience take on the news

Bank like there’s no one watching

Martha Gill's Irrational Animals Column.

By Martha Gill Published 04 July 2012 15:25

Shadowy figures. Photograph: Getty Images

As Barclays prepares for an inquiry into its practices, 15 banks lined up behind it, Bob Diamond must be haunted by what he said at last year’s BBC Today business lecture: “Culture is difficult to define, I think it’s even more difficult to mandate – but for me the evidence of culture is how people behave when no one is watching.”

Well, we’re all watching now. Most of us are watching with the cynical view that sharp practice is fairly inevitable and that we’ll probably find more as the investigation unfolds. But perhaps we should all be more shocked. After all, we naturally treat others surprisingly fairly, even when given the power not to. What went so wrong here?

Economists first started playing the ultimatum game back in the 1980s. In this experiment, people are partnered off and one of them is given $10. This person must then decide how much to offer the other. If the second person turns the offer down, both walk away with nothing.

Now, the logical, rational, selfish-gene response would be to offer the smallest possible amount of money – one dollar, according to the terms of the experiment. The second person would have to accept it or leave.

Armed with this resigned view of humankind, the experimenters assumed the response would be fairly consistent, and that their guinea pigs would all walk away either $1 or $9 richer. They were surprised to note that instead most people got annoyed when they were offered $1. Instead of accepting it, they rejected the offer – preferring to get nothing rather than collude in such an unequal outcome. But more interestingly, their partners tended not to offer this paltry amount. Most of them gave out roughly $4.

What made them so generous? The researchers concluded that it was empathy – they were able to imagine how the other person would

feel if they had made an unfair offer, and they wanted to avoid an angry rejection.

But what happens when the respondent’s power is taken away? A slight alteration to the ultimatum game turns it into the dictator game. Here, one partner can simply dictate how much the other receives. Studies show that such states of absolute power tend to diminish our sympathies for others, yet in this game the dictators were still surprisingly generous, giving away a third of their money. Despite the heady influence of power, they were still reined in by their empathetic instincts.

See no evil

Only one change drastically altered the players’ commitment to fairness. When put in a separate room from their partners, with no access to their reaction, the dictators started handing out tiny amounts – the smallest they could get away with. The lethal combination of power and isolation seemed finally to put paid to their sympathetic instincts. When no one was watching, they just didn’t care.

Back to the bankers, then: we can’t expect people to act fairly or even legally if they are given a large amount of power in isolation from those affected by their decisions. A culture where no one is watching is a culture doomed to corruption.

Tags: banking culture Irrational Animals