Thursday, July 05, 2007

Variation as the ultimate   posted by Razib @ 7/05/2007 12:31:00 PM

Many of you have heard of the Ultimatum Game:
The ultimatum game is an experimental economics game in which two parties interact anonymously and only once, so reciprocation is not an issue. The first player proposes how to divide a sum of money with the second party. If the second player rejects this division, neither gets anything. If the second accepts, the first gets his demand and the second gets the rest.

In theory a "rational" player should accept whatever is offered when there isn't a repeated iteration. Reality is different. From The Economist:
...Those results recorded, Dr Burnham took saliva samples from all the students and compared the testosterone levels assessed from those samples with decisions made in the one-round game.

As he describes in the Proceedings of the Royal Society, the responders who rejected a low final offer had an average testosterone level more than 50% higher than the average of those who accepted. Five of the seven men with the highest testosterone levels in the study rejected a $5 ultimate offer but only one of the 19 others made the same decision.

What does this tell us? That physiological variables which are under biological (and ultimately genetic) control can affect the typical behavior a given individual exhibits, and, that that behavior can vary despite the same inputs across the population. There isn't any one H. economicus, there are many different ways humans interact and their propensity for a particular strategy might be conditional upon biological parameters.

But of course this doesn't mean that a given individual practices a fixed strategy even for the same inputs over time, just as strategies are mixed throughout the population so they are often mixed over time for any given individual. There is both population level and temporal variation which must be taken into account here; the flat uniform world of older economic imaginations were painted in shades of gray despite the multi-colored nature of reality.

Additionally, as I have noted before, even genetically close groups which are culturally distinct can exhibit wildly different modal responses to these various experimental economic games. This suggests that variation is not just extant on the biological level (e.g., tracking testosterone variation within the population), but also on the cultural level as the social parameters shift and reshape the landscape of gene-environment interaction. In other words, the behavioral economic biases can be likened to norms of response of particular genotypes in various cultural environments. Though the median value may shift, the distribution remains the same (e.g., if a particular individual is high testosterone it is likely that their response to the ultimatum game in one iteration will always lay at one end of the distribution across cultures though the range and shape of the distributions may vary quite a bit).

Reality is complex. I'm alluding here to the interaction of genetic parameters with various cultural norms. Additionally, the current work in relation to various small scale societies where the "nominal" sums offered by economists is non-trivial implies that analogical reasoning plays a strong role in determining how the typical individual will respond. It seems that most peoples don't conceive of utility maximization, they simply resort to analogies with transactions in their conventional life which can be mapped onto the games they are being forced to play. So there are innate parameters that result in a central tendency as well as variation, but there are also cultural parameters which modulate the range and constrain the scale, and, these often express themselves general intelligence operating through analogical (as opposed to deductive) reasoning. This turns rationality into a whole new beast altogether, not only is it bounded, it is nearly eviscerated as we understand it.

But why this variation in the first place? First, I am implying that the conditional responses that an individual gives has an expectation which is determined in large part by their genetic inheritance. Imagine for example that the ratio of "aggressive" to "passive" responses in a given game that an individual gives over time as a ratio, and that this ratio is placed upon a graph. I suspect that in many cases you would generate some sort of normal distribution (you might have to transform it though). There would be a median modal ratio; there would be those rare players who engage in "fixed" strategies where they were invariant. In this way you can re-conceptualize the behaviors documented in experimental economics as continuous quantitative traits. We know from population genetic theory that such traits have not been subject to powerful directional selection for long periods of time. Otherwise, the underlying genetic variation would have been exhausted as one behavioral morph comes to dominate the population of strategies (the range of basal testosterone should be very small and predominantly environmental/non-heritable). The reality of polymorphism might imply that the "rationality landscape" (to borrow a term) is characterized by multiple optima. Balancing selective forces such as frequency dependence and environmental variation might also result perpetuation of the mix. Layered on top of this evolutionary biological level is the flux of cultural inputs which serves as the background environment in which the predispositions develop into lifelong typical strategies. We've come a long way from reciprocal altruism.