What’s fair?


Bus Stop: Museumstraße  

What do you think is fair?

The saga of Frau Hitt is a story that tells us about (economic) inequality. While the beggar doesn't even have anything to eat, the queen lives in abundance together with her son. Is that fair? The Faculty of Business and Management also conducts research into the distribution of wealth. The bench at this stop shows what that looks like in Austria today (diagram below).

distribution of wealth

The bench shows the distribution of wealth in Austria. One dot represents 10% of the population. Therefore, the richest 10% own two thirds of the total assets; the poorest half of the population only 2.5%. Online you can redistribute wealth to society. What would be fair in your eyes?

Behavioural economics is another branch of research at the Faculty of Business and Management. It investigates the behaviour of people in economic situations. Using experiments, certain phenomena are repeatedly tested on humans. What happens, for example, if person A receives 10 euros and is given the task of dividing the money between him or herself and an unknown person B? How much will he or she give to this other person, and when does person B accept the money offered or reject the proposal? According to research, offers below 40 percent are regularly rejected. People would rather not receive anything themselves than allow the others to keep 80 per cent for themselves. In this case, person A is punished by person B for their unfair behaviour. The saga of Frau Hitt can illuminate other behavioural economic phenomena as well:

social comparison

Why do we compare our income with that of others? (Example: social comparison)

According to the saga, Frau Hitt ruled over a realm of fields and forests. But she was arrogant and hard-hearted. She was a very rich queen, but her subjects were very poor. In many areas of life we are concerned with having more or being better than others. This goes back to anthropological mechanisms according to which having high social status was already important for our ancestors many thousands of years ago. This provided advantages in terms of reproduction and nutrition. In experiments, people take greater risks and behave more dishonestly when they lag behind in social comparison. This is even the case when high social status does not entail a higher monetary reward than a lower rank. This pursuit of high status also explains the success of many consumer and luxury goods industries and the pursuit of power in business and politics.


Does it pay to be nice? (Example: reciprocity)

In a version of the saga, Frau Hitt offers the beggar a stone to eat. The beggar curses her, and Frau Hitt is then turned into stone as an eternal punishment. An experiment has shown that being nice can pay off in business life. Imagine working in an ice cream parlour. Would you be happier about receiving a lot of tips from your customers or praise and recognition for your work? And what would have greater impact on your work? A study by researchers at the Department of Banking and Finance found that more ice cream was handed out when the purchase was accompanied by tips and praise or compliments. If you only gave tips and even if it was for several days in a row, the amount of ice cream would level off. If you gave praise and compliments, however, the portions continued to grow bigger and bigger over time! The anthropological and behavioural mechanisms behind this phenomenon are rooted in reciprocity (we want to give something back to people who do us good). Recognition was important for our ancestors, since it meant advantages in terms of nutrition and reproduction. We still respond strongly to such incentives today - in modern economic life, for example, it may manifest itself in larger portions. See this video for additional background. 



Does it pay to control oneself? (Example: self-control)

In a version of the saga of Frau Hitt, her son tears a young fir tree out of the ground despite a warning from the ranger. The spoiled prince has no self-control and is unable to resist temptations. Experiments have shown the positive effect of self-control: a marshmallow was placed in front of small children. Those who could control themselves and didn't eat it immediately got a second one 10 minutes later. The children who showed more self-control went on to enjoy more success and lead healthier lives as adults. This experiment demonstrates on a small scale the ability to forego immediate gratification in exchange for a greater reward in the future. In everyday life this principle can be observed at school, at work, or in the tension between consuming/shopping (immediate gratification) and saving (investment in the future).

availability heuristic

Why do we overestimate the likelihood of plane crashes, terrorist attacks and lightning strikes? (Example: availability heuristic)

In the saga of Frau Hitt the sky darkened and an enormous rock and mud avalanche roared down the mountain slopes as her servant began to clean her son with bread crumbs. When the storm was over, the blossoming empire had become an empty wilderness, and Frau Hitt and her giant son were transformed into grey rock figures. The probability of such a storm is, of course, objectively almost zero. Studies have shown, however, that we do have problems with estimating probabilities. For example, we tend to overestimate low probability events (which also explains why people go to the casino or play the lottery). The availability heuristic explains why. Tragedies like plane crashes, terrorist attacks and lightning strikes generate a lot of media coverage and much talk. Because accounts of these rare events are readily available, we believe such incidents to be much more likely than they actually are. For example, in 2016 only 150 people died in plane crashes in the entire EU, while over 25,500 perished in traffic accidents. By way of comparison, the number of fatalities from terrorist attacks in the EU in 2017 was 61.

  Faculty of Business and Management

Illustrations: © Tobias Haller

Nach oben scrollen