Irrationality in the Acts of Humans, as Well as Bees

On May 21^st 2011, Robert Aumann, Nobel laureate in economics and Professor at the Hebrew University of Jerusalem, spoke at the HSE on ‘Rule Rationality vs. Act Rationality’. The lecture was organized by the HSE together with the Embassy of Israel in Russia.

Yisrael Robert John Aumann is a renowned Israeli and American mathematician, one of the leading researchers in game and equilibrium theory who has been awarded by several prizes for his work in economics. Professor Aumann headed the Game Theory Society for a long time and specializes in ‘repeated games’ and analysis of the development of conflict over time. It was ‘for having enhanced our understanding of conflict and cooperation through game-theory analysis’ that he was awarded the Nobel Prize in economics in 2005.

In his lecture entitled ‘Rule Rationality vs. Act Rationality’, Robert Aumann spoke about the problem of rationality in the scheme of behavior and everyday activities of living creatures, particularly, humans. ‘An economic system, be it on a world, country or a household level, - is a very complex system, and for centuries, economic analysis was based on the idea that the people act rationally’, professor Aumann explained, ‘During the last ten or fifteen years this approach has been questioned by representatives of such field as behavioural economics, and according to them, put simply, human behavior is systematically irrational. I would like to compare these two approaches’.

What does ‘Act Rationality’ mean? People always do what is best for them in each specific situation, considering the potential profits and losses. In the case of ‘Rule Rationality’, people do not optimize each of their actions separately, but instead they rely on rules and behavior patterns developed for general cases – inherited from previous experience or even evolution.

To illustrate this contradiction, professor Aumann spoke about an experiment with bees which was conducted by Andreas Bertch in 1985. A colony of bees was released into a specially created space with artificial flowers: blue and yellow. A special mechanism delivered nectar to the blue flowers, and through trial and error the bees understood that they should fly to the blue flowers. After that Bertch changed the conditions, and only the yellow flowers started giving nectar. Nevertheless, the bees, acting according to their accumulated experience (Rule Rationality), continued to look for nectar in the blue flowers and eventually died of hunger. This means that their behavior, which was rational, based on experience and rules, turned out to be irrational in the new context.

One might say that we should not expect bees to be rational. But professor Aumann believes that rationality is a feature of any evolutionary mechanism. Only the strongest and the best adapted should survive, and rational behavior improves the chances of survival.

Another experiment, conducted by a team of German researchers in the early 1980s, illustrates human behavior that might be considered ‘strange’, from an economic point of view. Two people, who do not know each other and have never met, are placed in different rooms. One of them gets one hundred deutschmarks and, according to the terms of the experiment, should offer a certain share to the second participant. If the offer is accepted, both of them get the agreed shares. If the second participant refuses the offer, both get nothing. It would seem rational and logical for second participant to accept any offer. But during repeated experiments with different people it became clear that the second participant would only accept the offer if it was relatively ‘fair’ and ‘not humiliating’. Offers with the proportion 65/35 or more generous ones were accepted in most cases, while offers with proportion 80/20, let alone 90/10, usually were declined since they were perceived as insulting.

Though the experiment participants were incognito, they acted as if they were afraid that other people would find out about their ‘compliance’. In a usual, open situation, if they would accept a 10 or 20% share from the offer, they would gain the reputation of people who are easy to trade with, who could be ‘bought for cheap’. In this case, their concern about their reputation would be strategically reasonable and rational. If they refused such a deal, they might hope that next time they would be given a better offer. But in the context of this specific experiment, refusing the small share was irrational: it could not affect their reputation.

But there is no unsolvable contradiction here. While decision-making is based on following traditional rules or the optimization of a specific action, we act according to utilitarian, egoistical reasons. And rationality, according to professor Aumann, is an expression of evolutionary powers, which work ‘according to rules and not by exceptions or artificial situations’.

Oleg Seregin, HSE News Service

Photos by Nikita Benzoruk