Naughty or Nice

Why are people nice to each other?

A recent study offers some clues. A group of subjects were divided up into pairs, with an “allocator” and a “receiver” in each. The allocator had the authority to divide $10 between the two of them. The receiver had no control over the split.

In one set of experiments, the allocators just divided the money and the exercise was over. Interestingly, on average only 15% of the money was given to the receivers under these conditions. Then the researchers added communication. When the allocators were allowed to explain their decisions, giving fell to only 6%. Then the communication became two-way. When the receivers were allowed to communicate with the allocators, either before or after the division, 25% of the cash was donated.

Asking is powerful. Knowing you can explain your decision, though, and the recipient can’t talk back actually encourages more selfishness. When the conversation is one-sided, people are more self-serving. But when communication is a two-way street a more equitable division is likely. Accountability can lead to a more just outcome.

Amid all the celebration and gifts and family gatherings it’s good to know that there are people who love and care for us. And some of the most caring actions are to hold us accountable for how we share the gifts that we have been given.

Something to think about during this holiday season.

Douglas R. Tengdin, CFA
Chief Investment Officer
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