Final Activity and Management Report Summary - MONINT (Evolution and fairness in the theory of monetary integration)
The project investigated the literature on fairness and reciprocity, as well as data regarding monetary integration in several European countries, in particular the most appropriate class of games permitting to investigate at best the issue, i.e. games which could serve as basis for the monetary integration question. It also concentrated on approaches to fairness and reciprocity in games. Investigating trust and ultimatum games with existing concepts of fairness and reciprocity did not reveal completely satisfying, due to mainly two reasons: (1) there is a multitude of concepts proposed and it is difficult to select one among them; (2) there is not an obvious link with data regarding behaviours of countries already integrated or those having refused to participate to the monetary union.
From these primary findings, two new avenues have been defined: (1) the evolution of possible preferences (a way of selecting one type of preference among a fixed set using evolutionary selection) and (2) the attempt to introduce directly 'emotions' into the analysis. In a context of full integration, reputation effects support Pareto-efficient outcomes in the ultimatum game but not in the trust game (both classes of games are traditionally used for analysing reciprocity). This means that reciprocity is an important issue when a country has the choice to integrate or not. In the trust game, reciprocity does not seem to play an important role in the decision integration process Regarding (2), i.e. to directly introduce emotions into the analysis, the project followed a rather original way, Almost all existing analysis of fairness, altruism and reciprocity postulate that subjects have, for example, altruism or inequity-aversion preferences. Acting in an altruistic manner is triggered by one or several emotions, as shame, guilt or even, more paradoxically, envy).
Envy is universal and possesses particular and then relatively well documented features very useful for the analysis. Firstly, envy is agreed to be a form of pain or botherment; so the feeling of envy is inherently unpleasant, so it naturally triggers psychic mechanisms or actions to eliminate it. Secondly, envy has a local character ("neighborhood-envy"): 'not all persons with enviable attributes are equally envied' (J. Elster); 'we envy those who are near of us in time, place, age or reputation' (Aristotle); in a group of qualitatively similar individuals (people in the same occupational category). Using these two main features of envy, the project proposed a behavioural rule called the 'Envy-reduction' rule, in which subjects not only maximise the material payoff but also try to reduce their own envy (relative to those earning locally more) as well as the envy of those earning less locally.
It turns out that the 'envy-reduction' rule gives the same utility formalisation as the inequality-aversion preference in two-player games, but differs in contexts with more players. This provides an interesting way to solve problems related to the inequality-aversion criterion. The results obtained in those very simple game structures seem satisfying as regard to results of experiments conducted on the same games.
From these primary findings, two new avenues have been defined: (1) the evolution of possible preferences (a way of selecting one type of preference among a fixed set using evolutionary selection) and (2) the attempt to introduce directly 'emotions' into the analysis. In a context of full integration, reputation effects support Pareto-efficient outcomes in the ultimatum game but not in the trust game (both classes of games are traditionally used for analysing reciprocity). This means that reciprocity is an important issue when a country has the choice to integrate or not. In the trust game, reciprocity does not seem to play an important role in the decision integration process Regarding (2), i.e. to directly introduce emotions into the analysis, the project followed a rather original way, Almost all existing analysis of fairness, altruism and reciprocity postulate that subjects have, for example, altruism or inequity-aversion preferences. Acting in an altruistic manner is triggered by one or several emotions, as shame, guilt or even, more paradoxically, envy).
Envy is universal and possesses particular and then relatively well documented features very useful for the analysis. Firstly, envy is agreed to be a form of pain or botherment; so the feeling of envy is inherently unpleasant, so it naturally triggers psychic mechanisms or actions to eliminate it. Secondly, envy has a local character ("neighborhood-envy"): 'not all persons with enviable attributes are equally envied' (J. Elster); 'we envy those who are near of us in time, place, age or reputation' (Aristotle); in a group of qualitatively similar individuals (people in the same occupational category). Using these two main features of envy, the project proposed a behavioural rule called the 'Envy-reduction' rule, in which subjects not only maximise the material payoff but also try to reduce their own envy (relative to those earning locally more) as well as the envy of those earning less locally.
It turns out that the 'envy-reduction' rule gives the same utility formalisation as the inequality-aversion preference in two-player games, but differs in contexts with more players. This provides an interesting way to solve problems related to the inequality-aversion criterion. The results obtained in those very simple game structures seem satisfying as regard to results of experiments conducted on the same games.