Friday, October 12, 2007

Persisting underclass explained

Students (and many others), when asked whether a hypothetical doubling of all incomes that would practically end poverty but would increase inequality is OK with them, turn thumbs down. This perplexes many professors (like this writer) who apparently don't get it. It turns out that it's in the genes. Most of us are so wired to demand "fairness" that we will let the poverty persist. Robert Lee Hotz summarizes recent neuroeconomic research on the matter in today's WSJ (excerpted below).

Is this how and why we get welfare state policies that sustain an underclass?

Charting the AgonyOf a Brain as It Struggles to Be

At the Canaan Children's Home in southern Uganda, the orphans
had no idea that a woman inside a brain scanner 9,400 miles away was playing
mind games with their food.

The children were the focus of a brain experiment under way at
the California Institute of Technology to explore the neural anatomy of
indecision. With the push of a button, the woman in the Caltech scanner could
distribute meals at the orphanage more fairly, but only by taking food off the
table, not by serving more portions.

While she pondered, the 12-ton fMRI scanner at the
university's brain-imaging center traced the synaptic patterns of equity,
remorse and reward in her brain. In these riptides of neural currents, the
researchers sought clues to human variables missing from the mathematics of
conventional economics.

The quirky experiment exemplifies the new field of
neuroeconomics. Behavioral economist Ming Hsu and his Caltech colleagues
combined financial-decision theories and medical brain-imaging tools to analyze
the brain as a living engine of economics, one fine-tuned by evolution through
eons of foraging for scarce resources. These scientists studied hard choices,
documenting how competing networks of neurons unconsciously shape the way we
buy, sell, risk and trust.

During this test, the scientists wanted to see how synapses
valued fairness against the desire to avoid harming others. The dilemma can
arise when a limited resource is distributed unequally, and the only way to help
one person comes at another's expense -- whether in profit sharing, setting
affirmative-action policy, or rationing health care.

In the summer of 2006, when they organized the test, Dr. Hsu
and his colleagues could imagine no more agonizing choice, within the
constraints of medical ethics, than to ask people to take food away from orphans
in a war-torn African country.

An online search led them to the Web site for the Canaan
Children's Home, a one-story green building with a clinic next door, set amid
the trees and chicken coops a half hour's drive from Jinja, Uganda. As of April,
100 children were living there, many of them orphaned by AIDS, said Frank P.
Crane in Richmond, Va., chairman of the Uganda Missions Action Committee, which
monitors the home's finances.

It was the winsome faces of those children -- whose
photographs had been posted on the Web site to solicit charitable donations --
that caught Dr. Hsu's science eye. Here was the perfect experimental device for
stirring the turmoil of indecision, the researchers agreed.

The team next contacted Tom Roberts, an attorney in Richmond,
who created the Web site. He gave consent for the photos to be used. Because
there would be no contact with the children and no actual consequences of the
experiment to the orphanage, "I said help yourself," Mr. Roberts

Dr. Hsu wanted the pictures to heighten the realism of the

In the scanner, each volunteer could equalize how a fixed
amount of donated meals was shared between orphans -- but only by taking away
meals from those who had more than others and thereby reducing the total number
of meals given to the orphanage. The allocation of meals was sometimes fair,
sometimes not. "We manipulated the allocations and how much could be taken
away," Dr. Hsu said.

To trigger the brain behavior, the 26 volunteers had to
believe their decisions really would affect orphans being denied their seat at a
groaning board of plenty where others feasted. So, the experimenters made them
all study a 10-page brochure with pictures of 60 orphans.
In 36 rounds of testing, each subject had 10 seconds to choose the lesser of two evils:
Allow some children to keep more than their fair share of meals or take away their
food to eliminate inequity.

It was a measure of the economics of morality. Dr. Hsu made
the inequities more or less severe by changing the number of meals donated to
different groups of children. That provoked patterns of neural activation that
revealed the brain's distaste for injustice and its willingness if the disparity
was wide enough -- in one case, one child receiving five times more than another
-- to punish the rich by putting them on short rations. To redress the extremes,
people were willing to confiscate meals even when it hurt the orphanage as a
whole, ...